EU Chile free trade agreement modernization: about to enter into force

On 18 March 2024 the EU Council relased the following communiqué: “…EU-Chile: Council gives final endorsement to bilateral trade agreement The Council today adopted the decision on the conclusion of the Interim Agreement on trade (iTA) between the European Union and Chile. This decision marks the end of the internal ratification process within the EU and paves the way for the entry into force of the deal…”. It means that the iTA only requires ratification by the EU and not by individual member states. Therefore, now that the Council has validated the iTA, it can enter into force as soon as the Chilean side completes its internal ratification process.

Apart the chapters on the preferential origin and other standard topics, it is interesting to recall the ones on the access to:

Clean energies/fuels;
Critical raw materials extracted and exported from Chile.

the capter 8 “energy and raw material” of the ITA at its article 8.1 underlines that “…the scope is to promote dialogue and cooperation in the energy and raw materials sectors to the mutual benefit of the Parties, to foster sustainable and fair trade and investment ensuring a level playing field in those sectors, and to strengthen the competitiveness of related value chains, including value addition…”.

The achievement of this purpose is based on the following principles:

EU and Chile retain the sovereign right to determine whether areas within its territory, as well as in the exclusive economic zone, are available for exploration, production and transportation of energy goods and raw materials;
EU and Chile reaffirm their right to regulate within their respective territories in order to achieve legitimate policy objectives in the areas of energy and raw materials;
EU and Chile can’t impose a higher price for exports of energy goods or raw materials to the other Party than the price charged for such goods when destined for the domestic market, by means of any measure, including licences or minimum price requirements;
EU and Chile ensure that appropriate grid and market-related operational measures are in place in order to minimise the curtailment of electricity produced from renewable energy sources;
EU and Chile promote the standards on raw materials, renewable energy generation and energy efficiency equipment, including product design and labelling, if appropriate, through existing international cooperation initiatives;
EU and Chile promote: renewable energies, electromobility, energy efficiency, responsible mining practices and sustainability of raw materials value chains, including the contribution of raw materials value chains to the fulfilment of the UN Sustainable;
EU and Chile promote important contribution of renewable fuels, inter alia, renewable hydrogen, including their derivatives, and renewable synthetic fuels, in reducing greenhouse gas emissions to address climate change.
Chile may introduce or maintain measures with the objective of fostering value addition by supplying raw materials to industrial sectors at preferential prices so that they can emerge within Chile.

While, it referes to the following definitions:

“raw materials“: “…substances used in the manufacture of industrial products, including ores, concentrates, slags, ashes and chemicals; unwrought, processed and refined materials; metal waste; scrap and remelting scrap…”;
“renewable energy” means energy produced from solar, wind, hydro, geothermal, biological or ocean sources or other renewable ambient source;
“renewable fuels” means biofuels, bioliquids, biomass fuels and renewable fuels of non-biological origin, including renewable synthetic fuels and renewable hydrogen.

It is important, to read the words “critical raw materials” in the light of

the “…proposal for a regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020…” [COM(2023) 160 final] lists the next guidelines:

Ensure a comprehensive approach with coordinated EU policies to provide regulatory certainty for investments;
Coordination with EU social policies: support EU-wide capacity in terms of skills for extractive industries;
Include other materials crucial for green tech/cleantech sectors and ensure consistency with other policies;
Address unfair trade practices and restrictions;
Prioritise critical and strategic raw materials in recycling and waste legislation and support the secondary raw materials markets;
Economic and environmental studies on the pollutant impact of critical raw material extraction: coordination with State aid provisions

The regulation of the European Parliament and of the Council concerning batteries and waste batteries, amending Directive 2008/98/EC and Regulation (EU) 2019/1020 and repealing Directive 2006/66/EC will apply to:
all categories of batteries placed on the market or put into service within the Union, regardless of whether they were produced in the Union or imported;
regardless of whether a battery is incorporated into appliances, light means of transport or other vehicles or otherwise added to products or whether a battery is placed on the market or put into service within the Union on its own;
regardless of whether a battery is specifically designed for a product or is of general use and regardless of whether it is incorporated into a product or is supplied together with or separately from a product in which it is to be used.

Its purpose is to prevent and reduce adverse impacts of batteries on the environment and ensure a safe and sustainable battery value chain for all batteries, taking into account, for instance, the carbon footprint of battery manufacturing, ethical sourcing of raw materials and security of supply, and facilitating re-use, repurposing and recycling.

Moreover, it states that: “…Some of the raw materials used in battery manufacturing, such as cobalt, lithium and natural graphite, are considered to be critical raw materials for the Union, as indicated by the Commission in its communication of 3 September 2020 on ‘Critical Raw Materials Resilience: Charting a Path towards greater Security and Sustainability’, and their sustainable sourcing is required for the Union battery ecosystem to perform adequately…”.

The AEO approach based on high knowledge of free trade agreements, rules of origine, preferential origin, monitoring of the internal processes and ongoing risks analysis, is the main way to manage the coming obligations of this new legal framework.

The regulation of batteries imposes due diligence obligations on economic operators placing batteries on the market or putting them into service.

It covers:

all categories of batteries (portable batteries, starting, lighting and ignition batteries, SLI batteries, light means of transport batteries, LMT batteries, electric vehicle batteries and industrial batteries, regardless of their shape, volume, weight, design, material composition, chemistry, use or purpose.
The batteries that are incorporated into or added to products or that are specifically designed to be incorporated into or added to products.

The key principles are: sustainability, safety, labelling, marking and information to allow the placing on the market or putting into service of batteries within the Union, extended producer responsibility, the collection and treatment of waste batteries and for reporting.

The AEO approach based on high knowledge of free trade agreements, rules of origine, preferential origin, monitoring of the internal processes and ongoing risks analysis, is the main way to manage the coming obligations of this new legal framework.