European Union Updates and German Market Outlook
Submitted by: Anke Goebel, Director, Iowa European Office
EUROPEAN UNION UPDATES
New VAT rules for e-commerce go into effect July 1, 2021
The European Union is introducing new customs regulations on July 1, 2021, which will mainly affect business-to-consumer (B2C) sales and online marketplaces. The new regulation will remove the value-added tax (VAT) exemption for shipments below EUR 22. These shipments must now also comply with VAT rates in the destination country. All shipments must be cleared through customs. To facilitate VAT declarations for non-EU businesses, the EU is introducing a new digital platform called Import-One-Stop-Shop (IOSS). The IOSS provides the advantage of registering once for all EU countries instead of registration for each European country that a business is selling in. For more information about the new regulations, visit: at the following website: https://ec.europa.eu/taxation_customs/business/vat/vat-e-commerce_en.
Brexit – EU issues: Open Northern Ireland Question
Since the United Kingdom decided to leave the European Union in 2016, the two sides have been trying to work out how to deal with post-Brexit trade and the British province, Northern Ireland, which has a land border with EU member Ireland. During talks at the recent G7 summit, UK Prime Minister Boris Johnson threatened to invoke emergency measures in the Northern Ireland protocol of the Brexit deal if no solution is found. That protocol essentially kept Northern Ireland in the EU’s customs union and adhering to many of the single market rules, creating a regulatory border in the Irish Sea between the British province and the rest of the United Kingdom. The EU does not want Northern Ireland to be a backdoor into its single market and neither side wants border checks between the province and the Republic of Ireland which could stir political unrest and threaten the 1998 peace deal that brought an end to three decades of violence. Instead, the two sides agreed to the protocol, which provides for checks between the province and the rest of the United Kingdom, though Britain now says these are too cumbersome and divisive. If the UK keeps delaying some of the protocol provisions, ultimately this could lead to EU penalty duties on British goods and services and cause a trade war that neither party wants.
GERMANY: MARKET OUTLOOKS
Electronics Industry – June 2021 report:
The German Electronics Industry Association (ZVEI) just released the latest data on the electronics industry – sales in 2020 amounted to EUR 181.9 billion. The industry makes up 10 percent of total German industrial output and contributes about 3 percent to Germany’s gross domestic product (GDP). It is a driver of innovation in Germany – 3 out of 4 firms regularly present product or process innovations. The sector covers a broad-based product portfolio: 79 percent industrial goods (automation, energy technology, medical engineering), 13 percent intermediate goods (semiconductors), 8 percent consumer goods (household appliances, consumer electronics, lighting).
Industry 4.0 Opportunities
Germany is a global leader in Industry 4.0, referring to ‘intelligent, networked production’. There are four major sectors that offer a variety of opportunities:
- Automotive and Lightweight Technologies: According to McKinsey consultants, vehicle manufacturers will need to increase lightweight component levels from 30 percent to 70 percent by 2030 to compensate for electric drive weight increases and more efficient engine technology. Annual value-added potential of 1.5 percent – or EUR 15 billion – through to 2025 is forecasted by Bitkom (Germany’s digital association) as a result of the integration of real-time data at the design-production interface and the use of more versatile production systems.
- ICT and Software: Industry 4.0 provides significant market potential for ICT providers whose products support new business and service models based on intelligent networking of objects and actors in a value chain. Around 90 percent of all industrial production processes are supported by ICT and set to rise as production processes and ICT hardware merge with each other on the Internet of Things (IoT). Strongest segments include IT services, software engineering and development, and hardware. According to an International Data Corporation (IDC) study, the European Union data economy value was forecast to grow to EUR 430 billion in 2020, with Germany accounting for more than one quarter of market volume. Opportunities are perceived to exist in data protection, security and compliance concerns of companies active in the data economy.
- Machinery and Equipment (M&E): Gross value added in this sector amounted to around EUR 77 billion seven years ago and is expected to rise to around EUR 100 billion by 2025 – a direct effect of the IoT and cyber-physical systems entering the factory space. The robotics and automation (R&A) industry is one of the most innovative in the M&E sector. Advanced robotics and human-robot collaboration (HRC) technologies are a perfect example of increased automation and connectivity levels, with automation and electrification linked to intelligent control systems directing new product development in many M&E segments – creating enormous market potential for the future.
- Microelectronics: Microelectronics and microsystems are central to the implementation of the broad array of Industry 4.0 scenarios and may contribute to achieving objectives of flexibility, increased productivity and reduced costs. As key enablers in industrial automation, electronics and sensors help transform production systems and products into cyber-physical systems (CPS).
[Source: GTAI – Germany Trade and Investment, www.gtai.de]
Food Supplements Market
Increased consumer health awareness and the pursuit of a balanced lifestyle has created a boom in Germany's food supplements market. Sales of over-the-counter (OTC) remedies have increased in response to the COVID-19 pandemic, with food supplement sales up by almost eight percent in the first half of 2020, to EUR 1.2 billion.
The sector, however, was already strong prior to the pandemic and total food supplement sales in Germany grew by 5 percent to EUR 2.6 billion in 2019. Pharmacies are the main distribution channel. Germany also represents the largest healthcare market in Europe. Health spending is growing continuously and exceeded EUR 400 billion in 2019.
According to the German Federal Office of Consumer Protection and Safety (BVL), almost 8,000 new food supplement products were registered in Germany in 2018. All segments showed increases, including probiotics, OTC self-medication and prescriptions, and nutraceuticals.
Food supplements are covered by the provisions of the German Food and Feed code of Law (LFGB), as well as all other food law legislation of the EU. Food supplements are not subject to mandatory approval regulations. Pursuant to the German Food Supplements Regulation (NemV), they must be registered with the Federal Office of Consumer Protection and Food Safety (BVL). Responsibility for the safety of products and compliance with food law provisions lies with manufacturers and distributors.
[Source: GTAI, BfR]