EU-Mercosur Agreement: Legal Advice for Businesses in Germany

The EU-Mercosur Agreement represents a landmark shift in global trade — one with direct, practical consequences for businesses operating in or through Germany. For companies based in the United States, Canada, the UK, Brazil, Argentina, and beyond, Germany sits at the center of European commerce, and understanding how this agreement reshapes the German legal and regulatory landscape is essential.

At Schlun & Elseven Rechtsanwälte, we advise international businesses and investors on the legal dimensions of EU-Mercosur trade from our base in Germany. Whether you are a European company expanding into Latin America, a Mercosur-based business entering the German market, or an international enterprise managing supply chains that touch both regions, our team provides targeted legal guidance grounded in German and EU law.

The agreement is not yet in force — but its contents are known, and the time to plan is now.

Mercosur — founded in 1991 and comprising Brazil, Argentina, Uruguay, and Paraguay — is one of Latin America’s most significant economic blocs. Germany is Mercosur’s largest bilateral trading partner within the EU. German exports to the region include machinery, vehicles, chemicals, and high-value industrial goods, while Mercosur supplies agricultural products, raw materials, and industrial inputs that are deeply integrated into German and European supply chains.

The EU-Mercosur Agreement aims to reduce trade barriers, increase legal certainty, and improve market access on both sides — making it directly relevant to any business with a foothold in Germany or a commercial relationship with a German counterparty.

The agreement is not simply a tariff-reduction instrument. It is a comprehensive trade and investment framework with multiple areas of regulation that directly affect businesses operating under German law.

The majority of tariffs on industrial goods are to be phased out gradually, with significant implications for sectors including machinery, automotive parts, chemicals and pharmaceuticals — all areas of core German export strength. Agricultural products are subject to quota arrangements or transitional provisions. The agreement also opens service sectors to greater competition, grants EU companies access to public procurement in Mercosur countries, and facilitates the cross-border deployment of personnel.

Businesses can only benefit from reduced tariffs if their goods satisfy the applicable rules of origin and are supported by correct documentation. Errors in preference certificates are already among the most common causes of customs delays, additional duties and compliance problems. German customs authorities — and the broader EU customs union — apply these rules strictly.

The agreement provides for alignment of technical regulations and conformity assessment procedures, aiming to reduce duplicate testing while preserving European and German consumer protection standards. For businesses importing goods into Germany or the EU, this has direct implications for product compliance strategies.

A central and contested element of the agreement relates to environmental, climate and labor standards. The agreement includes sustainability provisions whose practical effects will depend on accompanying EU and German legislation. Companies should anticipate increased scrutiny of their supply chains, production conditions and ESG documentation — with potential legal and liability consequences under German law, including under the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz).

On 9 January 2026, EU member states voted by majority in the Council in favour of signing the association agreement. The agreement was officially signed on 17 January 2026 in Asunción, Paraguay, by the EU and the Mercosur states. Despite the signing, the agreement concluded under Articles 207 and 218 TFEU has not yet entered into legal force and remains in the ratification process.

The EU-Mercosur Agreement is divided into two institutional and legal components. The first is the Interim Trade Agreement (ITA), which contains exclusively trade-related provisions – in particular on tariff reduction, rules of origin, services, public procurement and intellectual property rights. These matters fall entirely within the exclusive competence of the European Union under Article 207 TFEU. The ITA is therefore an EU-only agreement that can be approved by a Council decision pursuant to Article 218(6) TFEU following the consent of the European Parliament. Ratification by the national parliaments of the member states is not required for this purpose.

Article 23.3 ITA also provides for the possibility of provisional application. This means the trade component of the agreement can take effect once the internal EU procedures have been completed, without waiting for the conclusion of the comprehensive partnership agreement.

The second component — the Partnership Agreement — extends to political dialogue and sectoral cooperation, making it a mixed agreement. This requires ratification by all 27 national parliaments. In Germany, this requires an approval act (Zustimmungsgesetz) passed by the Bundestag. Once the Partnership Agreement enters into force, it supersedes the ITA.

On 21 January 2026, the European Parliament voted by a narrow majority to refer the EU-Mercosur Agreement to the Court of Justice of the European Union for a legal review. This review may delay the EU-level approval process by approximately 16 to 24 months. For as long as the review is ongoing and parliamentary consent has not been granted, the ITA cannot be provisionally applied.

Note: The agreement is not yet applicable. Nevertheless, its contents are known and can already be incorporated into strategic planning – particularly with a view to the potential short-term effects of a future provisional application of the ITA.

Cross-border trade between the EU and Mercosur already involves extensive customs compliance obligations under EU customs law as administered by German authorities. The EU-Mercosur Agreement will not eliminate these requirements — in some respects, it will initially add complexity, as new preferential rules operate alongside existing customs regulations.

Delays and blockages regularly occur when import or export documents are incomplete, contradictory, or submitted late. Incorrect customs tariff classifications or disputed customs valuations often result in goods being held. Preference certificates that fail to meet formal or substantive requirements — or where the underlying rules of origin have been misapplied — are a particularly common source of problems.

With newly introduced preference systems, there is a heightened risk that businesses underestimate or incorrectly implement these requirements, especially when dealing with German customs authorities for the first time.

A central element of the EU-Mercosur Agreement is the rules of origin, which determine when goods qualify as “originating” and can therefore benefit from tariff concessions. These rules are frequently detailed, technical, and sector-specific.

Incorrect or insufficiently documented preference certificates can result in:

• Tariff benefits being withdrawn retroactively,
• Substantial additional customs payments becoming due,
• Fines or punitive tariffs being imposed,
• Goods being detained at ports or borders.

In particularly serious cases, goods may even be destroyed – for example, in the event of violations of safety, health, or labelling regulations.

Customs problems are rarely isolated incidents. Detained shipments generate storage and demurrage costs, trigger contractual penalties with customers, disrupt production and supply chain timelines, and cause reputational damage with German and European business partners. Early legal preparation — rather than reactive crisis management — is the more cost-effective approach.

Market entry into Mercosur states — or into Germany — is frequently structured through local commercial agents, distributors, or exclusive sales partners. These models offer commercial advantages but carry significant legal risk if not properly structured under the applicable law.

German law (including the German Commercial Code, HGB) provides specific protections for commercial agents, including mandatory compensation claims upon termination. Companies establishing distribution arrangements with or through Germany need to be aware that these provisions constitute mandatory law and cannot be contracted away. Comparable issues arise in the Mercosur jurisdictions, where applicable frameworks may differ substantially from German or US norms.

Critical issues include commission and compensation entitlements, exclusivity and territory arrangements, minimum purchase obligations, non-compete clauses, and post-termination consequences.

Without clear contractual provisions, businesses may find themselves before courts whose jurisdiction they did not anticipate, subject to legal frameworks whose implications are difficult to assess. Choosing the correct governing law and jurisdiction clause — particularly when one party is German or the performance occurs in Germany — requires careful analysis.

Beyond classic agency and distribution arrangements, increasingly complex contractual structures are gaining in importance – such as joint ventures, licensing models, and long-term supply relationships tied to exclusive procurement, distribution, or cooperation obligations. These require careful coordination of:

• Liability provisions,
• Payment and currency matters,
• Warranty and product liability risks,
• Exit scenarios.

Where cross-border trade takes place, conflicts will arise sooner or later. These may stem from delivery delays, payment disputes, customs decisions or contractual breaches. The EU-Mercosur Agreement currently does not provide for investor-state dispute settlement (ISDS), but instead relies on state-to-state dispute resolution.

Legal disputes with a Mercosur dimension raise complex questions around:

• Jurisdiction of national courts,
• Recognition and enforcement of foreign judgments,
• Taking of evidence across national borders,
• Differences in language and procedural rules.

Enforcing claims is often time-consuming and costly, particularly when assets are located abroad.

For this reason, many international contracts contain arbitration clauses. Arbitration proceedings offer advantages such as greater neutrality, international enforceability of arbitral awards, and greater procedural flexibility.

At the same time, they require in-depth experience in international arbitration rules and close coordination with the applicable local legal framework.

In many cases, cooperation with lawyers on the ground is indispensable – for example, in connection with the taking of evidence, enforcement measures or regulatory proceedings. Coordinating such proceedings makes significant demands on strategic planning and legal alignment.

For Mercosur-based businesses looking to establish a presence in Germany — or for international businesses structuring their EU operations through Germany — the agreement creates new commercial momentum. Key legal questions include:

• The appropriate corporate structure for a German subsidiary or branch office,
• Joint ventures with German partners, including governance and exit provisions,
• Shareholding arrangements and the regulatory framework for foreign investment in Germany,
• Liability exposure under German law.

Each of these decisions carries long-term legal and tax consequences that are best addressed at the planning stage rather than after incorporation.

Germany has been at the forefront of legislative supply chain due diligence requirements. The Lieferkettensorgfaltspflichtengesetz (LkSG), in force since 2023, imposes obligations on companies of a certain size with operations in Germany to conduct due diligence across their supply chains — including those in Mercosur countries. Violations can result in significant fines and exclusion from public procurement.

The EU-Mercosur Agreement’s sustainability provisions, alongside the EU Corporate Sustainability Due Diligence Directive (CSDDD), are set to increase these obligations further. Businesses trading between Germany and Mercosur should begin aligning their compliance frameworks now.

The legal requirements associated with the EU-Mercosur Agreement are multifaceted and frequently interconnected in practice. Customs law questions can rarely be considered in isolation from contractual, corporate law or dispute prevention considerations. In international trade, individual legal issues often form part of a broader context that calls for a coordinated and forward-looking approach.

Businesses regularly face the challenge of having to respond at short notice to urgent situations – for example, when goods are detained at customs, deadlines are running or significant financial consequences are at stake. Added to this is the need to put in place sound contractual structures for new markets and to prepare early for potential disputes, in order to keep legal and commercial risks manageable.

The EU-Mercosur Agreement opens up economic opportunities, but it does not replace careful legal planning. On the contrary, it initially increases complexity and demands a sound understanding of the interconnections between customs, trade and contract law. Businesses that engage with these questions early and in a structured manner are better placed to take advantage of the agreement’s benefits while keeping legal risks under control.

We support businesses in the EU-Mercosur context both in addressing urgent legal situations and in the long-term structuring of cross-border commercial activities.

Our services encompass:

• Legal assistance with customs law matters,
• The drafting and review of international contracts,
• The structuring and protection of distribution and commercial agent arrangements, and
• The enforcement or defence of claims in international disputes.

Our support ranges from targeted legal advice on specific questions to ongoing assistance with complex business models in trade between the European Union and the Mercosur states.