(Somewhat) Advancing ‘EU Preference’ In The IAA’s Public Procurement Rules

The Commission’s proposed Industrial Accelerator Act (IAA), published on 4 March 2026, would introduce a new layer of “EU preference” into public procurement, by conditioning eligibility on (i) who the bidder is and (ii) where the content comes from.

The proposal, which aims at strengthening the competitiveness and resilience of the EU manufacturing base by targeting strategic sectors, would introduce EU‑origin requirements in public procurement as well as foreign investment controls (see dedicated client alert).

The introduction of EU‑origin requirements is expected to increase EU demand, foster EU manufacturing capacity and, thereby, enable the emergence of lead market for key industrial products and technologies. In doing so, the IAA fits in a range of instruments leveraging increasingly restrictive conditions to public procurement access in the EU in furtherance of trade and industrial policy objectives.

GROWING TREND OF LEVERAGING ACCESS TO PUBLIC PROCUREMENT FOR EU RESILIENCE

Public procurement (which represents around 15% of the EU’s GDP) is increasingly seen as a potentially powerful industrial policy lever. Through specific procurement conditions, (EU) demand and investment decisions may be shaped across supply chains to strengthen the EU’s industrial base. Several EU instruments lay down such access conditions. The trend is towards increased restrictions on (i) the type of content offered, (ii) the origin of the bidders, and (iii) the origin of the content offered.

• Public procurement framework: Directives 2014/23/EU (concessions), 2014/24/EU (public procurement) and 2014/25/EU (procurement in the water, energy, transport and postal services sectors) lay down value thresholds, thereby excluding all procurements whose value falls below those thresholds.

In terms of content, under Directive 2014/25/EU, tenders may be excluded where the proportion of products originating in third countries that have not concluded an agreement with the EU exceeds 50% of the total value of the products constituting the tender.

• Net‑zero technologies: Under the Net Zero Industry Act (NZIA), public procurement procedures, public support schemes, auctions and Member State support to construction or manufacturing of net‑zero technologies are subject to sustainability and resilience conditions.
• Batteries: Regulation (EU) 2023/1524 introduces the so‑called “green public procurement”. Batteries or products containing batteries, procured in procedures under the public procurement framework must meet specified sustainability and recycling conditions.
• Defence: Newly adopted defence‑related financial assistance instruments introduce more restrictive conditions:
• Under SAFE, only (sub)contractors established in the EU, in an EEA EFTA State, in Ukraine, in an acceding or (potential) candidate country or in a third country with which the EU has entered into a Security and Defence Partnership can access common procurements.
• Under EDIP, only legal entities established in the EU or an associated country are eligible for financial support. To be eligible for the Programme, the cost of components originating outside qualifying countries must not exceed 35% of the estimated cost of the end-products’ components. Content originating in third countries that contravene security and defence interests of the EU is also excluded.
• Industrial Accelerator Act: In line with these types of restrictions, the IAA lays down restrictive conditions for public procurements falling within the scope of the EU “public procurement framework”.

Following the NZIA and Batteries Regulation approach setting out sustainability conditions regarding the content, the IAA introduces content-of-origin requirements: the product must be made in the EU or a third country with which the EU has concluded an agreement. The IAA provides for the exclusion of bidders owned or controlled by a third country entity that has not concluded an international agreement with the EU guaranteeing access to procurement in the EU.

The IAA’s content-of-origin requirements are expected to be furthered through the public procurement framework revision (expected Q2/26). The revision should enable “preference to be given to European products in public procurement for certain strategic sectors”. While the IAA defines what is considered “Made in the EU”, the public procurement framework addresses how procurement should be conducted.

The IAA thus characterises a significant shift in EU rules, moving progressively from the “how to buy” (relevant thresholds and procedures), to “what to buy” (sustainability/resilience criteria), and lately towards “where it must come from” (origin and control tests).

A LIMITED SCOPE OF STRATEGIC SECTORS

The IAA’s public procurement rules will only apply to three strategic sectors: energy‑intensive industries, the automotive industry and net‑zero technologies. Future extensions remain possible.

• Energy‑intensive industries (EIIs) cover six industries that are essential for the EU’s resilience and strategic autonomy. They are, however, under particular strain because of high energy prices, important decarbonisation investment needs and unfair global competition.

The IAA proposes to introduce restrictive requirements on steel, concrete and mortar and aluminium used in buildings, infrastructure and motor vehicles for civil purposes (only steel and aluminium in the latter case). By targeting these specific products, the IAA complements existing EU instruments, such as the Critical Raw Materials Act (2024) which supports projects that contribute to reducing dependencies on strategic raw materials, including aluminium.

These products are often subject to trade defence measures. In principle, both instruments should not be exclusive. Given the explanation for not requiring steel to fulfil EU-origin requirements – the EU’s steel industry would be sufficiently protected by the currently negotiated post-safeguard mechanism, which aims to impose tariff quotas on steel following the expiry of the global steel safeguards on 30 June 2026 –, it is for now unclear to what extent, the Commission will be willing to impose such trade defence measures on products covered by the IAA. However, TDIs could, for instance, address cases in which products would benefit from the EU-origin equivalence on a fraudulent basis. Restrictive access conditions could, for their part, complement duties imposed on the basis of TDIs, which generally do not cover the entire prejudice caused.

• Automotive industry. The manufacturing of vehicle components is decreasing. To address dependency risks in the supply chain, the IAA sets EU‑origin requirements on electric vehicles^[1]. The resilience of the manufacturing base in the EU is to be strengthened through conditions on the assembly and value of vehicles.

The Automotive Package, presented on 16 December 2025, conditions eligibility for super-credits for small affordable electric vehicles to origin requirements. Likewise, financial support for zero/low‑emission corporate vehicles will suppose the fulfilment of such origin requirements. The IAA is, therefore, presented as complementing the Automotive Package by defining the “Made in the EU” requirement for those vehicles and extending such criteria to electric vehicles in public procurements.

• Net‑zero technologies. The IAA amends the NZIA, which entered into force in 2024. In addition to the sustainability and resilience conditions laid down by the NZIA , EU‑origin requirements would apply to public procurement and other forms of public intervention relating to these technologies.

The IAA covers six net‑zero technologies, namely battery energy storage systems^[2], solar PV technologies, hydronic heat pumps, onshore and offshore wind technologies, nuclear fission technologies (new‑build nuclear power plants, including small modular nuclear reactors) and hydrogen (electrolysers).^[3]

• Possible extension to other sectors. Though currently limited to three sectors only, the Commission plans for a progressive extension of the scope of sectors covered.

The IAA sets out that, if needed, the scope of the origin requirements should be extended to the transport sectors, especially the building of rail rolling stock and ships,^[4] “critical to the Unions’ economic security”. Some sectors, such as space and advanced semiconductor technologies, alongside biotechnologies and AI and quantum technologies, were identified as “sectors critical to the Union’s economic security” in an earlier, leaked, version of the IAA and points to sectors that could be included in the scope by priority.

The IAA is also referenced in the EU’s December 2025 Communication on Economic Security, among a list of other economic security tools, such as the Dual-Use Export Controls Regulation, recently amended to cover quantum technologies and semiconductor manufacturing equipment. This Communication further identified high‑risk dependencies in critical raw, processed and advanced materials, clean tech, semiconductors, financial services, pharmaceuticals, aeronautics, and digital and space technologies. The scope of net‑zero technologies under the NZIA is also larger than the IAA’s as the former covers sustainable biogas, biomethane technologies or CCS technologies, which are not covered in the latter. All of these sectors are candidates for a possible future extension of the IAA’s sectoral scope.

A SOFT EUROPEAN PREFERENCE INCLUDING THE EU’S TRUSTED PARTNERS

The IAA introduces a series of obligations and restrictions for public procurement in EIIs, the automotive industry and net‑zero technologies.^[5] Rules will apply to procedures launched from 1 January 2029 insofar as EIIs are concerned. No date has yet been determined for the start of application for the automotive industry or net-zero technologies.

1. NARROW SCOPE OF PUBLIC PROCUREMENTS

The restrictive conditions laid down by the IAA only apply to certain public procurement procedures.

• First, the public procurement must fall within the scope of the “public procurement framework”:
  • The procurement’s value must equal or exceed the thresholds set in the directives.
  • The exclusions foreseen under the “public procurement framework” would remain applicable. The IAA-requirements would then not, for example, apply when the application of EU-public procurement rules has been set aside by the a Member State for the protection of its essential security interests.
• Second, the IAA’s content-origin requirements may be set aside in cases where the tenders’ estimated cost differences between the qualifying EU-origin offer and the one that does not fulfil the requirements, exceed 25% (or where there is only one supplier, not satisfying the conditions).

This could severely undermine achieving the IAA’s objectives. Trade defence investigations routinely show price difference levels between EU/non-EU products to reach levels of up to 50-250+%. The sales price of some non-EU end-products also increasingly enters the EU market at levels below EU producers’ costs of production (or even raw materials). Therefore, and given that strengthening the EU’s industrial base requires the ability for EU producers to cover their costs with a reasonable profit margin that would allow further investments, the exemption, while aimed at limiting the burden on already strained public spending, could actually further more aggressive foreign trade practices by removing the IAA’s application in those cases where foreign competition is most severe.

2. THE IAA’S TWO-FOLD CONDITIONNALITY

The IAA’s public procurement rules are structured around a two-fold conditionality: (1) the economic operator must have a right to access the EU’s public procurement market and (2) the content procured must qualify for EU (assimilated)-origin thresholds.

• Conditions of access
  • First, tenders submitted by economic operators owned or controlled by an entity established in a third country that has not concluded an agreement with the Union are per se excluded from EU public procurement.

This goes beyond the current “public procurement framework”, which does not exclude operators from third countries that have not concluded an agreement with the EU, but merely provides for “no less favourable treatment”.

• • Second, in line with the EU’s commitments under the GPA and FTAs, businesses established in third countries that have concluded an international agreement with the EU may submit tenders only where that agreement obliges the EU to grant access to public procurement (see Annex), if no exception grounds therein apply.

Some contention in interpretation may arise between tenants of a more open approach according to which the mere existence of an agreement is enough and those advocating for a more textual approach, in keeping with the IAA’s objectives, requiring reciprocal commitments. Economic operators from countries such as South Korea or New Zealand could submit tenders, provided that their FTAs with the EU grant access to the specific procurement concerned and, depending on the interpretation, that EU businesses have equivalent access in the public procurement procedures in those third countries. Operators established in Australia or Canada, would, in principle, be admitted on the basis of the EU’s obligations under the GPA.

The EU’s obligation to grant access to its procurement procedures hinges, first, on the fact that the EU must have committed to admit third country operators to the specific public procurement at issue: the procurement should be conducted by a covered contracting authority in a covered sector and reaching the corresponding value threshold. Given the numerous possible combinations, a case‑by‑case assessment is required. The Commission itself notes that “the Union’s procurement commitments do not confer uniform or comprehensive access to all partners, and it is not possible to establish a single list of third countries with fully secured access to the entire EU procurement market.”^[6]

• Conditions of content. When established that the economic operator qualifies for access to the market, the goods supplied must meet certain content-of-origin requirements:
  • First, qualifying content is not limited to content of EU‑origin but includes content from all “reciprocal origins”, in line with the EU’s international commitments. The IAA thus adopts a “Made with the EU” rather than a strict “Made in the EU” approach. As with the condition of access, some consider that the mere existence of an agreement may be sufficient, while a more textual reading requires that the agreement in question should provide for reciprocity of commitments in matters of liberalisation concerning the procurement at issue: in an equivalent procedure in the third country, EU content would be granted national treatment. As a result, an entity supplying content from, for example, Japan, should benefit from EU‑origin equivalence on the basis of the EU-Japan FTA, provided that agreement guarantees national treatment for content of EU origin in equivalent Japanese public procurement procedures.

The Commission may adopt delegated acts to exclude countries that do not provide reciprocal treatment to EU content. Conversely, establishing a positive list of countries that would per se be granted access to public procurement within the EU seems more complex given the structure of GPA and FTA procurement commitments. It is also unclear whether the Commission will exclude third countries that do not live up to their commitments to liberalise access to their public procurement markets.

The IAA could be used as a means of responding faster and more effectively to a lack of reciprocity, compared to other instruments which first require formally finding a breach. The Trade Enforcement Regulation, for example, enables the Commission to retaliate in case a dispute settlement body has found an economic partner to be in breach of international trade rules. Through the Trade Barrier Regulation, the Commission can also respond to unlawful (tariff or non-tariff) barriers imposed by non-EU countries.

Finally, as the benefit of EU‑origin equivalence relies on the existence of an agreement between third countries and the EU guaranteeing reciprocity, the per se exclusion of content from countries that have not concluded an agreement with the EU could be an incentive for third countries to conclude such agreements. The EU’s International Procurement Instrument (IPI), adopted in 2022, which allows the Commission to exclude tenders from third countries that have not concluded an agreement with the EU and that restrict EU businesses’ access to their public procurement, was already such an attempt. Thus, rather than fundamentally reshaping the current state of play, the IAA appears to be a negotiation leverage towards third countries.

• • Second, treating third‑country content as being of EU-origin should not create dependencies that could threaten the security of EU’s supply chains (see below). No list of dependencies has been published yet.
  • Sector-specific thresholds determine what is needed for a product to fulfil the Union origin requirement:
    • Energy‑intensive industries: Respectively 5% and 25% of the total volume of concrete and mortar, and of aluminium intended for use in buildings, infrastructure and motor vehicles for civil purposes should at least be (low‑carbon and) of EU-origin. For steel, only a 25% low‑carbon requirement is foreseen, as it is put forward that the steel post-safeguard mechanism (in negotiations) would provide sufficient protection to the EU steel industry through the combination of quotas and tariffs.
    • Automotive industry: The vehicle must have been assembled within the EU and its traction battery must contain at least three main specific components of EU origin, including the battery cells. This is expected to benefit not only EU automotive manufacturers, but also their suppliers, as further conditions, for example, require the value ratio between the total ex‑works price of vehicle components (excluding the battery) originating in the EU and the total ex‑works price of all components (excluding the battery) to be of at least 70%.^[7]
    • Net-zero technologies: Depending on the specific technology at issue, different conditions apply. Broadly speaking its main component should originate in the EU (e.g. for hydronic heat pumps, the pump must originate in the EU).

• Enforcement and circumvention of origin requirements. Several issues are noted in relation to the IAA’s origin requirements which could be either bypassed or undermined (to which the self-declaration of satisfaction of origin conditions is not foreign), without the instrument specifically addressing these risks.
  • First, the transshipment of content from non‑qualifying countries to qualifying countries and/or other forms of origin fraud could be addressed by invoking the non preferential rules of origin applicable under the IAA. According to these, the origin of a good depends on the country where the good was “wholly obtained” or “where [the good] underwent [its] last, substantial, economically justified processing or working”. Thus, transshipment or similar operations in circumvention of the EU‑origin requirement would not affect the origin of the products which would maintain their non‑qualifying origin. While for steel, the “melted and poured”-rule renders origin fraud rather difficult, no similar method exists for other products covered by the IAA and which remain at risk. In addition, if products may be excluded in such cases, it would, however, need to be proven for action to be taken. The enforcement falls within the competence of the national customs authorities, with the possible involvement of the OLAF.
  • The establishment and subsidisation of manufacturing capacities in qualifying countries by non-qualifying countries and/or entities is another issue gaining momentum. In this case, the goods would have actually been produced in a qualifying country. Circumvention action under the EU Customs rules can be initiated. Such does however, pose a more systematic question of enforcement and scope of the IAA with respect to content of non-EU origin and whether such can be assimilated to EU-origin content for the purposes of reaching defined thresholds in public procurement.

Similarly, products from qualifying third countries that are subject to trade defence measures are not excluded; it is, however, noted that the distortions are not fully captured by the duties (often imposed well below the level of price undercutting). For those products to qualify as EU-content would incentivise trade-distortive practices.

The dependency threat would likely be the only avenue, under the current version, to address such issues.

NEXT STEPS

• The Commission’s proposal will now be negotiated in the Parliament and the Council, with the European Council calling for fast adoption (by end‑2026). Divergences voiced from within the Commission before the adoption of the proposal are expected to emerge in the course of the legislative procedure. While certain Member States such as France have been supportive of a strict European preference, others such as Germany or the Netherlands prefer a more lenient and flexible “Made with the EU”-approach.
• In September 2025, the Parliament adopted a report advocating for European preference to be included in public procurement. The competent committees are yet to be announced, but the ITRE, IMCO and INTA committees might jointly be leading the negotiations, with the ENVI and BUDG committees issuing opinions.
• A public consultation is open until 26 May 2026 (available here), with regular extensions to the deadline provided. Businesses are invited to share their feedback to ensure that the IAA effectively strengthens the EU’s industry and thus its resilience and economic security.
• Companies active in the relevant value chains need to map out exposure and to assess regulatory risks and opportunities.

Gide’s International Trade & EU Regulatory teams in Brussels continue monitoring the next steps of the proposed IAA.
Our teams will gladly assist in case of any questions or need for legal assistance in assessing potential impacts of the instrument or in advocacy actions throughout the legislative process.

[1] New pure electric vehicles (PEV), off‑vehicle charging hybrid electric vehicles (OVC‑HEV) and fuel cell vehicles (FCV).
[2] The inclusion of batteries within the scope of EU‑origin requirements complements the sustainability requirements under the Batteries Regulation and is part of the Battery Booster Strategy presented by the Commission on 16 December 2025, which aims to address the EU’s net-importer status.
[3] Hydrogen is only subject to such requirements with regards to auctions and Member State support to construction or manufacturing.
[4] The Industrial Maritime Strategy, also published on 4 March 2026, suggests that such origin requirements might be extended to the maritime sector.
[5] For public support schemes, auctions and Member State support for the construction and manufacturing, economic operators from third countries, that have not concluded an agreement with the EU are eligible, the content at issue must originate in the EU or a third country with whom the EU has an agreement. Under Member State support for the construction and manufacturing of net-zero technologies, only strictly EU content is eligible.
[6] The Procurement for buyers tool (Access2Markets) is expected to provide detailed information on procurement commitments and supplier eligibility.
[7] Concerning public schemes and more specifically small affordable electric vehicles and corporate vehicles made in the EU as regulated by the Automotive Package, only vehicles actually assembled within the EU would be considered as “Made in the EU”.