The European Commission proposed a new emergency tool to defend supply chains in moments of crisis. EU executive could be given additional powers, such as forcing essential commodities stockpiling and ordering corporations to prioritize particular orders.

According to the Commission, the new Single Market Emergency Instrument intends to ensure that vital commodities can move inside the European Union during an emergency, such as the previous pandemic that severely disrupted some supply chains.

Executive Vice President Margrethe Vestager stated that the proposed tool would provide the EU with an inclusive, transparent and quick means to deal with future crises.

Powers

Some organizations are worried that the proposed regulations could compel them to violate commercial contracts. Vestager tried to ease worries by stating that the powers do not override transactions subject to third-country authorities, as opposed to those regulated by European contractual laws.

BusinessEurope, a lobbying organization, expressed its worries in a document released before the EU announcement. According to POLITICO, the document scrutinises export prohibitions within the EU.

Under the proposal, the Commission will be empowered to compel EU member states to stockpile crucial commodity reserves. Firms will be required to reveal specific information about their production capacity and stockpiles of crisis-relevant items and prioritize orders for critical commodities. Companies that fail to comply will face sanctions.

Too far

This device is the opposite of a planned economy, according to Internal Market Commissioner Thierry Breton, who added that its objective is not to continually monitor economic actors. Breton called the proposal fair, balanced and transparent. 

EU members are concerned that the proposal goes too far in permitting the Commission to take emergency measures. Businesses that give inaccurate or misleading information may face fines of up to €300,000. Failure to follow an order to prioritize critical items may result in periodic penalties of 1.5 percent of average daily turnover.

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