Select Committee on European Scrutiny Eleventh Report


4 Free movement of products within the EU

(28374)

6313/07

COM(07) 36

+ ADD 1

+ ADD 2

Draft Regulation laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State and repealing Decision 3052/95/EC

Commission staff working document: Impact Assessment of the proposal

Executive summary of the Impact Assessment

Legal baseArticles 37 and 95 EC; co-decision; QMV
Document originated14 February 2007
Deposited in Parliament19 February 2007
DepartmentTrade and Industry
Basis of considerationEM of 23 February 2007
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

Background

4.1 The following provisions of the EC Treaty are relevant to this proposal:

  • Article 14, which provides that the EC's internal market is to comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaty.
  • Article 28, which (subject to Article 30) prohibits quantitative restrictions on imports between Member States and prohibits all measures having equivalent effect.
  • Article 30, which empowers Member States to impose restrictions on imports on certain specified grounds including public morality, public policy, public security or the protection of the health and life of humans, animals or plants.
  • Article 37, which provides for the establishment of the Community's common agricultural policy and authorises the Council to make regulations for that purpose.
  • Article 95, which authorises the Council to adopt measures for the approximation of national laws, regulations or administrative actions which affect the functioning of the internal market.

4.2 There is existing EC legislation which requires all Member States to comply with common requirements ("harmonised rules") for certain products, such as animal and human food and railway rolling stock. But most products are not subject to harmonised rules and each Member State is free to have its own "technical rules" about, for example, the weight, size, composition, labelling and packaging of products manufactured in its area.

4.3 The "principle of mutual recognition" applies to products manufactured in another Member State. The principle is based on Articles 28 and 30 of the EC Treaty and the case law of the European Court of Justice (ECJ). The principle of mutual recognition is that, unless there are exceptional reasons, a Member State ("the State of destination")may not forbid the sale of a product in its territory, even if it is manufactured according to technical rules that differ from those of the State of destination, if the product:

  • is lawfully marketed in one or more other Member States; and
  • is not subject to EC legislation creating harmonised rules.

Exceptionally, the State of destination may prohibit the import if it can show that restrictions on the sale are justified on the grounds specified in Article 30 or there are overriding requirements of general public importance recognised by the case law of the ECJ (such as the prevention of tax evasion or the protection of the environment).

The Commission's proposal

4.4 The document comprise an explanatory memorandum; a draft Regulation; an Impact Assessment (ADD 1) which provides detailed information about what the Commission sees as the defects in the present arrangements, an analysis of the policy options, the results of the Commission's public consultations; and a summary of the Impact Assessment (ADD 2).

4.5 In the Commission's view, there are fundamental weaknesses in the Community's present arrangements because:

  • many businesses and national authorities are unaware of the principle of mutual recognition ;
  • there is legal uncertainty about the products to which mutual recognition applies;
  • there is widespread uncertainty about the burden of proof — businesses and national authorities often believe that the onus is on the producer to show that the imported product affords a level of protection equal to that required for an equivalent domestic product, whereas the onus is on the national authority to prove that the restriction on the import is justified; and
  • it is difficult for businesses to find out in advance whether the national authority of another Member State will apply the principle of mutual recognition to a product.

4.6 In 2004, the Commission consulted Member States, businesses and consumer organisations about three choices:

  • continue the present arrangements without change; or
  • improve the arrangements without new EC legislation; or
  • have a new EC Regulation to clarify the position.

Over 60% of the respondents believed that a new Regulation is necessary.

4.7 ADD 1 contains the Commission's analysis of the following policy options:

  • Option 1 — do nothing.
  • Option 2 — the non-regulatory option (the Commission would develop a website containing a list of all the products to which the principle of mutual recognition applies. The Commission would also screen national technical rules to help determine how best the movement of goods might be organised through voluntary action by national authorities).
  • Option 3 — the regulatory option (a new Regulation would list the products to which mutual recognition applies; define the rights and obligations of national authorities and prospective exporters; place the onus on States of destination to justify any restrictions on import; and require Member States to provide readily available information about their technical rules through "Product Contact Points").
  • Option 4 — a combination of the regulatory and non-regulatory approaches (the only difference from option 3 is that the list of products to which mutual recognition applies would appear on a website, not in the Regulation.

The Commission's preference is for option 4.

The main provisions of the draft Regulation

4.8 Article 2 provides that the Regulation is to apply where a Member State decides, on the basis of a "technical rule", to ban or require the modification of industrially manufactured products or agricultural products or fish products which are lawfully marketed in another Member State. "Technical rule" is defined as a law, regulation or administrative provision of a Member State, compliance with which is compulsory for the marketing of a product in the territory of the Member State, and which specifies the characteristics required of the product or imposes any other requirement on the product for the purpose of protecting consumers or the environment.

4.9 Article 4 requires a national authority which intends to ban or require the modification of an imported product to send the producer a notice specifying the technical rule on which the decision would be based and giving evidence of why the intended decision is proportionate and why it is justified on the grounds listed in Article 30 of the EC Treaty or by reference to another overriding requirement in the public interest. The producer is given 20 days to comment. The national authority must then send the producer notice of a firm decision to ban or require modification of the product and tell the producer how to appeal against the decision.

4.10 Articles 7 and 8 require Member States to designate one or more "Product Contact Points". Product Contact Points would, on request, supply information about national technical rules; contact details of national authorities; available remedies in the event of a dispute between producers or distributors and the national authorities; and details of organisations (other than national authorities) which can give producers or distributors practical assistance.

4.11 Article 10 requires Member States, on request, to send the Commission a report on the implementation of the Regulation and information about any notices of intention or decision to ban or require the modification of products. (Article 12 repeals the existing requirement to report national technical rules.)[12] Article 10 also requires the Commission to make a report to the European Parliament and the Council on the implementation of the Regulation within five years of its commencement.

4.12 The Commission estimates that it would cost €400,000 to set up the website list of products to which mutual recognition applies; the running costs would be about €30,000 a year. The Commission also estimates that the Regulation would not add to the costs of producers or distributors and would increase the economic growth of the EC. Compliance with the Regulation would increase the administrative costs of Member States by an unquantified amount.

The Government's view

4.13 The Minister for Trade, Investment and Foreign Affairs at the Department of Trade and Industry (Mr Ian McCartney) tells us that:

"In principle, the Government supports any measure which aims to facilitate trade within the EU as this will lead to greater choice and value for consumers, and greater prosperity for businesses. The Government would like to see the Mutual Recognition principle being applied correctly and it is clearly preferable for businesses to have greater certainty about which national technical rules exist and how they are applied. The Government therefore supports the principles behind this Regulation.

"However, it is also important for Member States to be able to take action swiftly, especially when there is a genuine threat to public safety. Accordingly, more analysis will have to be carried out in order to ensure that this Regulation does not undermine these rights. At present, it is not clear how the provisions laid down in this Regulation, especially with regard to the procedure that must be followed by authorities and the twenty-day standstill period, will interact with national measures. This is an issue which will benefit from further analysis and from consultation with market surveillance authorities and other stakeholders. The Government therefore intends to consult on the proposal."

4.14 The Minister adds that the Government's consultations are just beginning. The Government's initial view is that the Regulation would impose no costs on business and should, indeed, provide substantial benefits to it. For this reason, the Government will not be completing a Regulatory Impact Assessment of the proposal. Finally, the Minister tells us that the German Presidency hopes to obtain agreement to the Regulation at the Competitiveness Council on 21-22 May.

Conclusion

4.15 We recognise the benefits of reducing uncertainty about the application of the principle of mutual recognition and removing unjustified obstacles to the free movement of goods within the internal market. We understand, therefore, why the Government supports this proposal in principle. We welcome the Government's intention of obtaining the views of businesses, consumers' organisations and others before it reaches conclusions. We also understand why it believes some aspects of the draft Regulation require further analysis.

4.16 Accordingly, we shall keep the draft Regulation under scrutiny pending information from the Minister on:

  • the results of the public consultations;
  • the conclusions of the Government's further analysis of the proposal;
  • the progress of the negotiations; and
  • information about who will be the national authorities and Product Contact Points in the UK.






12   Council Decision 3052/95/EC. Back


 
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