On 4 March 2026, the European Commission presented its Proposal for a Regulation on establishing a framework of measures for accelerating industrial capacity and decarbonization in strategic sectors, which aims at “improving the functioning of the internal market by establishing a framework to support the development, competitiveness and resilience of the Union’s manufacturing sector, with a focus on selected strategic sectors”, in order to contribute to the EU’s “climate objective, economic security and the creation, retention of, and transition into high-quality jobs." 

Among other things, the Industrial Accelerator Act would establish a framework for the application of EU origin and low-carbon requirements for certain products and services within strategic sectors in the context of public procurement and public support schemes. Such an approach, also seen critically within the Commission and among certain EU Member States, is poised to have significant implications for business sourcing or producing outside of the EU.

This article provides an overview of the proposed Industrial Accelerator Act, focusing on the proposed EU origin criteria and the implications for businesses and EU trading partners.

Revitalising the EU’s declining manufacturing sector

The Commission frames the proposal against the declining manufacturing base in the EU, with its share of the EU’s gross domestic product (GDP) having decreased from 17.4 per cent in 2000 to 14.3 per cent in 2024, and the numerous challenges that it is currently facing, including high energy prices, global overcapacities, and costs associated with decarbonization. The Industrial Accelerator Act, therefore, aims at reversing this trend and at ensuring that manufacturing represents 20 per cent of the EU’s GDP by 2035.

This overarching objective would be effectuated by, inter alia, creating demand for EU-origin industrial products through EU public procurement and public support schemes. Given that public procurement amounts to around 15  of the EU’s GDP, the Commission views it as a key lever to “foster economic security and resilience of supply chains," notably by stimulating demand in strategic products and technologies. 

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The proposed EU origin requirements

The Commission’s proposal foresees the introduction of quantitative EU origin thresholds for concrete, mortar, and aluminium used in specific downstream sectors, namely “buildings, infrastructure and transport”, from 1 January 2029, as well as EU origin requirements for electric vehicles, which would apply at a date still to be determined. According to Recital 23 of the proposed Regulation, those requirements would apply to “public supply contracts and in public works, public services contracts and concessions, where those products will be used for activities conducted under those contracts”. The measures would operate as local content requirements (hereinafter, LCRs), conditioning access to certain public procurement contracts, and/or to subsidies or other advantages, to be conferred by EU Member States on meeting minimum thresholds of EU origin materials. 

Article 11 of the proposed Industrial Accelerator Act would require contracting authorities to apply the thresholds laid out in its Annexes II and III in their public procurement procedures. For example, contracting authorities would need to ensure that “aluminium, and any product the performance of which depends mainly on aluminium” has “at least 25 per cent of the total volume of aluminium used” from EU origin. With respect to “Public procurement procedures of electric vehicles”, EU originating status would be obtained by, inter alia, assembling the vehicle in the EU or ensuring a “ratio of at least 70 per cent between the total ex-works price of vehicle components (excluding the vehicle battery) originating in the EU and the total ex-works price of all components (excluding the battery)”. 

Article 12 of the proposed Industrial Accelerator Act would require EU Member States to design and implement public support schemes intended to contribute to the objective of strengthening the EU’s “strategic industrial value chains” through EU origin requirements for the covered products. The thresholds set out in Annexes II and III would be applied with respect to the eligibility for the public support schemes.

EU origin is defined in Article 7 of the proposed Industrial Accelerator Act by reference to the Union Customs Code and its non-preferential rules of origin (i.e., specific rules delineating the “economic nationality” of goods not subject to preferential treatment), meaning that origin would be determined based on where goods were produced, manufactured, or substantially transformed.

Consideration of EU commitments in international agreements

The Proposal attempts to reconcile EU origin requirements with the EU’s international obligations by introducing an “equivalence” mechanism. Pursuant to Articles 8(1) and 9(1) of the proposed Industrial Accelerator Act, content originating in third countries that are parties to EU preferential trade agreements (PTAs) or to the World Trade Organization Agreement on Government Procurement (GPA) and where the EU has undertaken commitments under those agreements to grant access to its public procurement market for the products covered by the proposed Industrial Accelerator Act, shall, in principle, be treated as equivalent to EU origin. In practice, businesses sourcing content from EU PTA partners would need to meet the preferential rules of origin set out in the respective PTA. 

However, a third country may be excluded from the scope of application of these provisions based on any of the following criteria: “(a) that third country has failed to provide national treatment related to Union products or entities; (b) such exclusion is justified to avoid dependencies or any other developments that may threaten the security of supply in the Union of the products in question; (c) such exclusion is justified under any other exception under the applicable agreement." As a result, eligibility for “equivalence” could hinge on the Commission’s assessment of countries’ reciprocal treatment of EU products or entities, supply chain reliability, and broader economic security considerations.

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Consistent with WTO rules? 

In general terms, LCRs imposed in the context of procurement intended for public purposes could be challenged as a violation of the national treatment obligation under Article IV of the GPA, which requires the signatories, including the EU and its Member States, to provide goods, services, and suppliers from other GPA Parties treatment no less favourable than that accorded to domestic counterparts. 

The same obligation would apply to advantages conferred by governments to private entities conditioned on the use of local inputs vis-à-vis foreign inputs under Article III:4 of the WTO General Agreement on Tariffs and Trade 1994 and Article 2 of the WTO Agreement on Trade-Related Investment Measures. While the proposed “equivalence” mechanism foresees extending favourable treatment to products from GPA Parties, the exclusion of certain countries and the related apparent discretion of the Commission might limit effective compliance with the GPA national treatment obligations.

Financial incentives granted to private entities, which are “contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods," could also be considered as prohibited subsidies under Article 3.1(b) of the WTO Agreement on Subsidies and Countervailing Measures. These considerations underscore the legal complexity and potential risk of legal challenges that the EU could face under both multilateral and bilateral trade commitments, depending on how the EU member states would ultimately design and implement the public support schemes foreseen in Article 12 of the proposed Industrial Accelerator Act.

Implications for global supply chains

The proposed Industrial Accelerator Act would represent a significant evolution in the EU’s approach to industrial policy by setting EU origin requirements in public procurement and public support schemes. The introduction of such origin requirements raises complex legal and commercial questions, particularly in light of the EU’s WTO and bilateral commitments. Notably, the broad discretion afforded to the Commission to exclude third countries would add a layer of uncertainty for businesses seeking to access the EU public procurement market.

The Proposal will now be considered by the European Parliament and the Council of the EU before inter-institutional trilogue negotiations are launched. Reactions by EU member states have so far been diverse, with some, notably France, already proposing to expand the scope, while others, including Germany, have warned about its protectionist approach. These divisions reflect broader tensions between the EU’s objective of strengthening its manufacturing base and the need to preserve open trade.

The next phase of the legislative process is crucial for interested stakeholders, who should actively engage with policymakers to ensure that policies and market access conditions are structured in a legally sound and commercially viable manner.