Stay Ahead: Customs Law Updates for Germany in 2025

Donald Trump's inauguration as President of the United States will take place on 25 January. The introduction of tariffs was already part of Trump's economic policy strategy during his first term of office. In the run-up to his 2025 inauguration, Trump once again announced the introduction of significant tariffs on imports into the USA, namely basic tariffs of 10-20% on imports from the EU and 60% on imports from China. Due to existing trade relations, protectionist measures have an impact on Germany and the European Union (EU). As the USA is one of Germany's most important trading partners, German companies should take this as an opportunity to analyse their supply chains. We discuss the expected developments in customs law under the Trump administration as well as other recent changes to customs law below.

 

Combined Nomenclature Update

A new version of the Combined Nomenclature (CN) will come into force from January 2025. The Combined Nomenclature (CN) is a standardised EU eight-digit goods nomenclature for foreign trade. The applicable customs tariff can be determined by classifying goods in the Combined Nomenclature. A change can have an impact on the classification of the products concerned, which is why companies should check their product records for changes to the classification. Companies may need to update their master data and adjust customs authorisations to ensure that customs declarations are submitted correctly.

 

Trade Agreements in 2025

Rules of origin in the Pan-Euro-Mediterranean Convention (PEM Convention)

The Pan-Euro-Mediterranean Convention (PEM Convention) is being modernised. From 1 January 2025, new rules of origin between the contracting parties of the PEM Convention - such as the EU, Switzerland, Norway and Turkey - will come into force. The new rules are intended to simplify and accelerate trade between the contracting parties.

The system of pan-Euro-Mediterranean cumulation of origin enables the application of diagonal cumulation between the contracting parties. The system is based on a network of free trade agreements with identical origin protocols. These origin protocols are replaced by a reference to the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin (PEM Convention).

The revised PEM Convention will enter into force for all free trade agreements that already contain a dynamic reference to the PEM Convention.

As not all free trade agreements will have a dynamic reference to the PEM Convention by 1 January 2025 and therefore no identical rules of origin will exist throughout the PEM area, transitional rules have been adopted.  The rules of origin applicable from 1 January up to and including 31 December 2025 depend on the free trade agreement in force between the trading partners:

• Free trade agreement with dynamic reference and ratified transitional provisions
  • Application of the old or revised rules
  • Diagonal accumulation possible according to the revised rules
  • Diagonal accumulation possible according to the old rules
  • Permeability from old to revised rules
• Free trade agreement with dynamic reference, but without ratified transitional provisions
  • Application of the revised rules
  • Diagonal accumulation possible according to the revised rules
• Free trade agreements without dynamic reference and without ratified transitional provisions
  • Application of the old rules
  • Diagonal accumulation possible according to the old rules

Economic operators therefore have the option of choosing between the two sets of rules in force on the basis of their supply chains. The transitional provisions also ensure the principle of permeability between the two sets of rules of origin. Goods that are considered originating products under the 2012 rules can also be considered originating products under the 2023 rules for the purposes of cumulation, provided certain conditions are met.

 

EU-Mercosur Agreement

The EU-Mercosur trade deal between the European Union and the countries of MERCOSUR - Argentina, Brazil, Paraguay and Uruguay - is also scheduled to enter into force in 2025 after more than 20 years of negotiations. The last negotiations on strengthening sustainability aspects were concluded in December 2024. The agreement will now be legally scrutinised by the European Commission and then translated into the official European languages. The agreement will then be submitted to the Council of the European Union and the European Parliament for approval. Following approval by the Council of the European Union and the European Parliament, all national parliaments must approve the agreement as part of the ratification process.

The conclusion of the negotiations on the agreement is of great economic and strategic importance for German companies, as the agreement sends a positive signal against protectionist tendencies and in favour of a rule-based and value-based trade policy.  The agreement is intended to create one of the world's largest free trade zones with over 715 million inhabitants. Argentina, Brazil, Paraguay and Uruguay are important markets for the German economy. 

The aim of the EU's largest trade agreement to date is to dismantle trade barriers. Customs duties on various EU products are to be reduced and standards harmonised. According to calculations by the European Commission, the reduction in customs duties could result in annual savings totalling four billion euros for European exporters and therefore also for German companies.  The agreement will also give companies greater legal certainty in their business activities.

 

Countervailing Duties on Goods of Chinese origin

In 2024, more and more Western countries imposed tariffs on products of Chinese origin. In addition to steel and aluminium products, electric cars were particularly affected. This spiral of punitive tariffs against China could gain further momentum in 2025.

In October 2024, the European Commission concluded its anti-subsidy investigation into imports of battery-powered electric vehicles from China and imposed definitive countervailing duties. The countervailing duties will apply for a period of five years. Electric vehicles from China are not subject to flat-rate countervailing duties, but to graduated countervailing duties. These are between 7.8 and 35.3 per cent, depending on the manufacturer.

In addition to Chinese manufacturers, however, German companies may also be affected. German companies produce some models in China and then export these vehicles to Europe and elsewhere. It is not yet possible to predict how much the prices for electric cars from China will rise and to what extent the higher costs will be passed on to customers.

The background to the punitive tariffs is the fear of a distortion of competition on the European electric vehicle market due to Chinese state subsidies for Chinese manufacturers of electric vehicles, for example in the form of financial subsidies for the production processes through to extremely low costs for energy, raw materials and infrastructure. The EU Commission has seen increasing evidence of a rapid rise in low-priced imports of electric vehicles from China in recent years.

On the other hand, there are fears that China could take countermeasures and that German car manufacturers and other German and European companies operating in China could be penalised by the introduction of higher tariffs on the import of large-displacement combustion engines from the EU to China.  As the world's largest car market, China is one of the most important markets for German industry. German companies, however, produce their cars in China not only for the Chinese market, but also for export.

China has already challenged the legality of the countervailing duties at World Trade Organisation level. The EU and China are continuing to negotiate in order to find alternative solutions that are compatible with WTO rules.

Companies should review their supply chains in light of countervailing duties and especially reconsider the location of factories.

 

Expiry of the CBAM Transition Phase

The transition phase of the Carbon Border Adjustment Mechanism (CBAM) expires at the end of 2025. A system changeover on the company side should already take place in the course of 2025 in order to meet the requirements applicable from 1 January 2026. CBAM aims to prevent carbon leakage. This means that companies operating in CO2-intensive industries should be prevented from relocating their activities to countries outside the EU where less stringent climate protection requirements apply. To this end, the companies concerned must apply for authorisation as CBAM applicants and comply with reporting obligations.

 

Tariffs under the new US administration

German companies, for which the USA is the largest market outside the EU, must expect significant losses if the US government realises the announced tariffs of 10-20% on imports from the EU. This would primarily affect the German pharmaceutical industry, machinery exports and the automotive industry. According to calculations by the Ifo Institute for Economic Research, a considerable economic loss of EUR33 billion would be incurred in Germany alone. According to estimates by the same institute, German exports to the USA could fall by around 15%. In addition, the institute estimates that exports to China would fall by 10% because Chinese exports to the USA would also fall massively.

It remains to be seen whether the future US government will implement the announced tariffs. In any case, German exporters should make the best possible preparations for higher import tariffs and greater restrictions on international trade. Firstly, it is important to keep an eye on the possible introduction of tariffs and to examine alternatives, particularly with regard to supply chains and, of course, sales markets. Should the US government realise its tariff plans, supply chains will have to be adapted to the new framework conditions and production sites will have to be relocated or newly opened if necessary.

 

Key Takeaways

• New version of the Combined Nomenclature (CN)
  • Check whether changes to CN are relevant for product range
  • Adjustment of product master data, customs authorisations, if necessary
• Rules of origin in the Pan-Euro-Mediterranean Agreement (PEM Agreement)
  • Assess applicable rules of origin during the transition period
• EU-Mercosur agreement
  • Opportunity for (German) companies to tap into new markets
• Countervailing duties on goods of Chinese origin
  • Effects on the market for electric vehicles not conclusively clarified
    • In combination with higher tariffs in other countries, possible increase in electric vehicle imports to Europe
  • Possible impact on German automotive companies
    • Examination of alternative production sites
  • Expiry of the CBAM transition phase
    • Conversion of company-owned systems by the end of the transition phase
    • Application for an "authorisation as CBAM applicant"
    • Collection of relevant data for the 2026 reporting year
  • Tariffs under the new US administration
    • Review of supply chains
    • Adaptation of supply chains, if necessary

DLA Piper's customs law team will be happy to answer any further questions you may have in this context. Give us a call or send us an e-mail.