DiversifyEU – The EU plans to monitor supply chains and reduce reliance on China. Could businesses face new obligations?

The European Commission is preparing the DiversifyEU initiative to reduce the European economy’s strategic dependence on suppliers in non-EU countries, particularly for critical raw materials, components and technologies. The measures under consideration may include new trade instruments, support for supply diversification and expanded supply chain monitoring. The Commission is also assessing whether it could obtain more detailed information directly from businesses. What do we know about the measures under consideration, and when might new rules be proposed?

Two initiatives shaping EU economic policy

The European Union is taking further steps to reduce the risks arising from European industry’s heavy reliance on foreign suppliers.

In our earlier article of 2 November 2026, we discussed a French and German initiative to create a new instrument that would allow the European Commission to restrict access to the single market quickly in the event of serious distortions of competition.

That proposal focuses primarily on protecting European industry from the adverse effects of unfair competition, excessive subsidies and import pressure.

At the same time, the European Commission is preparing a separate initiative, DiversifyEU, to reduce the risks associated with sourcing strategic products and raw materials from a single country.

Both initiatives form part of a broader shift in EU economic policy that gives greater weight to security of supply and the resilience of value chains.

What is DiversifyEU?

On 29 September 2026, the European Commission published document Ares(2026)9192077 on the initiative “Critical products – supply chain diversification (DiversifyEU)”.

In the document, the Commission points out that the European economy relies too heavily on a limited number of countries for products and raw materials essential to strategic industries.

This includes critical raw materials, processed materials, components used in clean technologies and products important to energy, defence, cybersecurity and critical infrastructure.

The Commission considers that steps taken so far, including trade agreements and the development of alternative sources of supply, have reduced strategic dependencies too slowly.

DiversifyEU therefore aims to make it easier for businesses to switch suppliers and to create tools that support and accelerate that process.

The options under consideration include trade measures that could extend to customs measures, financial support for alternative sources of supply, the development of EU production capacity and mechanisms to pool demand for critical products.

The Commission wants to monitor supply chains more closely

One of the main elements of DiversifyEU is the plan to strengthen monitoring of the European economy’s strategic dependencies.

In its document of 29 September 2026, the Commission states that a comprehensive assessment is still needed to determine whether existing data collection tools are sufficient to monitor critical risks to EU supply chains.

This opens the way to expanding existing mechanisms for collecting and analysing information on supplies of strategically important products.

In practice, closer monitoring could cover several areas.

Geographic concentration of supply

The Commission could assess how heavily European manufacturers depend on particular countries for raw materials, components and technologies.

Relevant factors would include the volume of imports from each country, the availability of substitute products and the potential consequences of a supply disruption.

Identifying indirect dependencies

Tracing where inputs actually come from across multiple tiers of a value chain could become particularly important.

A company may buy a component from a supplier in another EU country, while the raw materials or key parts used to make it come from China.

For economic security purposes, identifying the country where the direct supplier is based may therefore provide only part of the picture.

Monitoring circumvention of trade measures

The Commission also highlights practices such as rerouting trade through non-EU countries, using foreign subsidiaries, changing ownership structures and changing the tariff classification of goods.

These practices can reduce the effectiveness of EU protective instruments and make it harder to diversify supply in practice.

Early detection of risks

Expanded monitoring is also intended to identify disruptions earlier, particularly export restrictions, shortages of critical products and other events that could interrupt production in European industry.

A new system for sharing economic security information

DiversifyEU should also be seen in the context of the Commission’s broader strategy for strengthening EU economic security, set out in its communication JOIN(2025) 977 final of 3 December 2025.

In that communication, the Commission announced the creation of an Economic Security Information Hub to collect and analyse information relevant to the Union’s economic security.

The hub is intended to bring together information from existing market monitoring systems, Member State authorities and other available public and private sources.

The strategy also envisages monitoring trade flows in sectors covered by diversification measures.

Tools being developed as part of the reform of the EU customs system may also play a role, particularly the EU Customs Data Hub, which would enable wider use and sharing of trade data.

These mechanisms form part of a broader economic security framework whose development may support DiversifyEU. Some may be established separately from the initiative.

Will businesses have to disclose information about their suppliers?

This is one of the most important questions for businesses.

In its economic security communication, the Commission announced that it would assess whether the Internal Market Emergency and Resilience Act (IMERA) could be used to obtain supply chain information from businesses operating in high-risk sectors.

The assessment was due by the third quarter of 2026. The Commission also indicated that it might consider additional instruments if existing measures proved insufficient.

One possibility is that a wider range of information could be collected from businesses.

Depending on how future rules are drafted, companies could have to identify their sources of supply in greater detail, assess supply concentration, document dependencies on particular countries or submit information to public authorities.

Whether DiversifyEU will introduce any such obligations remains open.

A draft specifying which businesses would have to provide information, what data they would have to report, how often they would have to report it and what penalties could apply for non-compliance has yet to be published.

The material published to date provides no basis for assuming that all businesses operating in the EU market will have to disclose every supplier.

Will businesses be required to diversify their sources of supply?

Another open question is whether the EU will introduce measures to encourage businesses to reduce the share of their purchases sourced from a single country.

The Commission’s documents indicate that it is considering trade instruments to encourage the use of alternative sources of supply.

Measures to support European production and sourcing from suppliers in other countries are also possible.

Whether future rules will impose direct diversification obligations or focus on economic instruments and incentives remains open.

The distinction matters for businesses.

Direct obligations could require businesses to take specific steps to reduce risk. With incentives, decisions to switch suppliers would mainly reflect changes in trading conditions, import costs or available support.

The final approach can be assessed once the proposal is published.

Which industries should pay closest attention?

The documents published so far suggest that priority will go to sectors using strategic raw materials, technologies and components essential to European industry.

DiversifyEU may be relevant to the automotive, chemicals, electronics, machinery, energy and defence industries, as well as to manufacturers of batteries and equipment that use critical raw materials.

Whether particular businesses in these industries will face new obligations depends on the scope of the future measures.

The Commission has yet to publish a definitive list of the sectors, products or Combined Nomenclature (CN) codes that the future instrument would cover.

The degree of strategic dependence in each supply chain will be an important factor alongside the industry in which a business operates.

When might new rules be proposed, and will they take the form of a regulation?

According to the Commission’s document of 29 September 2026, the DiversifyEU initiative was tentatively scheduled for the fourth quarter of 2026.

The Commission has announced plans to publish the package in December 2026.

The package is expected to include a new trade diversification instrument. The Commission identified Article 207 of the Treaty on the Functioning of the European Union (TFEU) as its legal basis and pointed to the possibility of adopting customs measures under Article 31 TFEU.

The Commission is also considering internal market measures for which Article 114 TFEU may provide the legal basis.

The Commission is preparing an instrument in the form of an EU regulation, while the consultation document leaves the legal structure of the package as a whole open.

DiversifyEU could therefore consist of several complementary instruments, including legislative and non-legislative measures.

As of 10 November 2026, the final draft rules and their date of entry into force had yet to be announced.

The call for evidence, which closed on 27 October 2026, was part of the preparatory work for the initiative. The legislative process was still pending.

What could the new approach mean for Polish businesses?

DiversifyEU signals a possible further shift in EU economic policy towards actively managing strategic supply chain dependencies.

For businesses that rely on imported raw materials, components and equipment, information about where products actually originate, how their supplier networks are structured and what alternatives are available could become more important.

Under future rules, the ability to identify dependencies across both direct suppliers and earlier tiers of the value chain could become particularly important.

New trade instruments could also affect purchasing costs, the availability of certain products and the commercial viability of particular sourcing models.

For some EU manufacturers, diversification could open up business opportunities as European production capacity expands.

Other businesses, particularly those that rely on imported components that are difficult to replace, may incur costs as they adjust their operations.

Much will depend on which products are classified as critical, whether future rules impose direct obligations on businesses and how far any such obligations extend.

Publication of the DiversifyEU package in December 2026 should make it possible to assess the planned measures, their scope and their potential implications for Polish industry in greater detail.

Contact

Krzysztof Wiński
Managing Partner, T&P Advisory | Thedy & Partners
Email: krzysztof.winski@thedy.pl
Tel. +48 519 506 434

Łukasz Pamuła
Senior Manager, T&P Advisory | Thedy & Partners
Email: lukasz.pamula@thedy.pl
Tel. +48 519 504 779

This article is for information purposes and reflects the status of the DiversifyEU initiative as of 10 November 2026. It draws on European Commission documents, in particular Ares(2026)9192077 of 29 September 2026 and JOIN(2025) 977 final of 3 December 2025. The possible obligations discussed here are still under consideration and do not constitute current legal requirements.

Sources

• European Commission – DiversifyEU, document Ares(2026)9192077
• European Commission – Strengthening EU economic security, JOIN(2025) 977 final
• Polish Ministry of Economic Development and Technology – Consultation on DiversifyEU