Coalition plans fundamental reforms in all areas of supply chain law

On April 9, 2025, the CDU, CSU, and SPD presented their coalition agreement for the upcoming legislative period. The SPD membership had already approved it on April 30. The new government plans fundamental reforms in all areas of foreign trade law and sustainability regulations. We provide an overview of the key proposed changes. Strengthening EU competences in free trade agreements: The incoming federal government is committed to a rules-based trading system. The EU aims to advance free trade and investment protection agreements already under development (for example, with Chile, Mercosur, and Mexico) and supports the negotiation of new agreements (e.g., the ongoing negotiations with India, Australia, and the ASEAN states). In the medium term, a free trade agreement with the USA is also to be concluded, while in the short term, the trade conflict is to be de-escalated. According to the coalition agreement, trade agreements should in future be concluded exclusively by the EU, without requiring separate ratification by the individual member states (the so-called EU-only principle). National ratification has historically been the decisive hurdle in concluding new agreements and in discussions at the EU level (known as the "German Vote"). The EU-only principle would not be possible for mixed free trade and investment protection agreements due to the investment protection component, for which the EU lacks the necessary competences. This will be particularly relevant for the planned agreement with the Mercosur states. Paradigm Shift in the Foreign Trade and Payments Act – Elimination of Export Licenses? The coalition is planning another amendment to the Foreign Trade and Payments Act (AWG) under national law. This is intended to generally accelerate and simplify review procedures and implement the announced paradigm shift for goods exports. According to the plan, review procedures will only be carried out on a random basis in the future. This should eliminate the requirement for a prior export license. However, in light of Germany's obligations under European law, this plan is unlikely to be feasible for all categories of goods. This is also recognized in the coalition agreement. The coalition reaffirms its commitment to the consistent implementation of sanctions against Russia. It supports EU plans to introduce tariffs on fertilizer imports from Russia and Belarus. Planned New Regulations on Supply Chain Responsibility – National and European According to the coalition agreement, corporate responsibility in global supply chains is to be fundamentally revised. The German Supply Chain Due Diligence Act (LkSG) is not only to be "abolished," but violations of due diligence obligations – with the exception of massive human rights violations – are no longer to be sanctioned. This will likely also eliminate the current reporting obligations of companies under Section 10 of the LkSG. Although the coalition agreement speaks of an "abolition" of the LkSG, what is ultimately meant is its replacement by the implementing legislation for the EU Supply Chain Directive (CSDD). Until the implementation of the CSDDD, simplifications are to apply, although much is expected to remain the same: For example, the possibility of filing complaints against companies by affected parties or their representatives will remain, meaning that companies will continue to have to deal with information procedures from the Federal Office for Economic Affairs and Export Control (BAFA). The German government must then implement the CSDDD by July 26, 2026 (or July 26, 2027) at the latest – the "stop-the-clock directive" postponing the implementation deadline to July 26, 2027, was published on April 4, 2025, and must be implemented by the member states by December 31, 2025. The coalition plans to introduce a new "Law on International Corporate Responsibility" to implement the CSDDD, in which the CSDDD will be transposed into national law in a way that is "as bureaucratic and easy to enforce as possible." For companies, however, the due diligence obligations under the State Data Protection Act (LkSG) remain in effect for the time being. Furthermore, the coalition agreement also addresses sustainability regulations at the EU level with the aim of preventing excessive bureaucracy. Specifically, the EU Deforestation Regulation (EUDR) is not to be applied through the introduction of a "zero-risk variant." The attempt to add a fourth "zero-risk category" to the EUDR benchmarking system was already the subject of the trilogue negotiations in November and December 2024 and repeatedly failed. In light of the FAQs published by the European Commission on April 15, 2025, and the information that the implementation of the benchmarking system is currently on schedule, the non-application of the EUDR or the implementation of a "zero-risk variant" seems unlikely. Furthermore, the coalition aims to prevent excessive regulation through sustainability reporting (CSRD), the EU Supply Chain Directive (CSDDD), the Carbon Border Adjustment Mechanism (CBAM), the regulations on sustainable investments (taxonomy), and corresponding implementing acts. Germany thus supports the amendments to European sustainability standards recently proposed in the omnibus procedure. Conclusion and Outlook: The announced reform projects are far-reaching but remain vaguely formulated. Naturally, the coalition agreement often leaves the precise details of the changes unclear. It should be borne in mind that the German government's influence at the European level is not unlimited, particularly with regard to EU regulations already in force, such as the EUDR. Companies should keep an eye on developments, but act on the basis of the applicable legal framework – this applies specifically to the LkSG (Law on the Protection of Victims of Crime) and the EUDR. The fundamental aim of the coalition agreement, to relieve companies of excessive bureaucracy without losing sight of the responsibility for sustainable and socially responsible business practices, is to be welcomed.