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Documents considered by the Committee on 3 April 2019 Contents

2Market surveillance

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested

Document details

Proposal for a Regulation of the European Parliament and of the Council laying down rules and procedures for compliance with and enforcement of Union harmonisation legislation on products and amending Regulations (EU) No 305/2011, (EU) No 528/2012, (EU) 2016/424, (EU) 2016/425, (EU) 2016/426 and (EU) 2017/1369 of the European Parliament and of the Council, and Directives 2004/42/EC, 2009/48/EC, 2010/35/EU, 2013/29/EU, 2013/53/EU, 2014/28/EU, 2014/29/EU, 2014/30/EU, 2014/31/EU, 2014/32/EU, 2014/33/EU, 2014/34/EU, 2014/35/EU, 2014/53/EU, 2014/68/EU and 2014/90/EU of the European Parliament and of the Council

Legal base

(a) Articles 33 (customs co-operation), 114 (internal market), and 207 (common commercial policy) TFEU; ordinary legislative procedure; QMV; (b)—

Department

Business, Energy and Industrial Strategy

Document Number

(39394), 15950/17, COM(17) 795

Summary and Committee’s conclusions

2.1The Committee has taken issue with the Government’s recent poor engagement with scrutiny of this proposed Regulation, which would strengthen the enforcement of EU goods rules through a wide range of measures including the creation of a Union Compliance Network, a system of pre-export checks and controls, and the introduction of a requirement for there to be an authorised representative in the Union who is responsible for compliance.

2.2The Government has been particularly concerned about this last requirement (the requirement for there to be an authorised representative in the Union) throughout the negotiations. In the Minister’s (Kelly Tolhurst MP) update on 9 January 2019,30 she informed the Committee that the informal mandate to begin trilogues, which was adopted by the Committee of Permanent Representatives to the European Union (COREPER) on 23 November 2018, did not remove the requirement entirely, but did however better target the provisions towards those products which represented a risk to the consumer. The Minister added that, despite some improvements to the text, there remained substantial differences between the Council and Parliament positions, and that she was therefore awaiting further detail on the compromise text agreed by the Parliament and the Council before taking a definitive view on whether to oppose the Regulation or merely to abstain.

2.3On the basis of this update, in its report on 16 January 2019,31 the Committee declined to grant the Government a scrutiny waiver due to the lack of detailed information about how Article 4 of the proposal—mandating the presence of a person in the EU responsible for compliance—was revised by COREPER, insufficient information regarding the detailed implications of a number of aspects of the proposal for the UK in the context of EU exit, and because trilogue negotiations had not yet fully concluded.

2.4The Committee asked the Government to provide it with:

2.5The Committee also asked for information relating to the Withdrawal Agreement, in particular the scope of the ‘backstop’ in relation to market surveillance. The Committee asked whether the Government considered the proposed Regulation to be potentially within the scope of the Protocol on Ireland/Northern Ireland and therefore liable to be added to the relevant Annex (5), as well as whether, in light of the Government’s publication ‘UK Government Commitments to Northern Ireland and its integral place in the United Kingdom’,32 which stated that the Government will “ensure there would be no divergence in practice between the rules in Great Britain and NI covered by the Protocol in any scenario in which the backstop took effect”, the Government intended for Great Britain to unilaterally align with the market surveillance rules referenced in Annex 5 of the Protocol.

2.6The Committee also asked the Minister to ensure that her officials “liaise[d] closely with our clerks to ensure that we can report again on the proposal in advance of its adoption in Council.”

2.7Detailed official-level exchanges subsequently took place and arrangements were made regarding how this would be achieved, and it was arranged that the Committee would receive an update by 21 February 2019. When the Committee did not receive any update by this date, the Minister’s staff provided reasons why the Minister had not been able to sign the letter to the Committee the previous week, and undertook to provide us with an update as early as possible in the following week, so that the Committee could consider it at its final meeting before the prospective adoption of the proposal for a Regulation at TTE Council on 4 March 2019.

2.8The Committee did not receive the anticipated letter in advance of its meeting (or indeed any time thereafter). It therefore wrote a letter to the Minister on 27 February 2019 expressing its frustration with this sequence of events, and stating that:

We retain considerable concerns about this proposal. We understand that the compromise text agreed in trilogue negotiations continues to require a substantial range of businesses based in third countries exporting goods to the Union (including the UK, post-exit) to have an authorised representative in the Union who is responsible for compliance. Although the range of products to which this provision is applicable has been reduced, we understand that it is still substantial. Furthermore, we understand that the obligations of the responsible person have been substantially expanded.

As such, we conclude that the final text of the proposal contains provisions which are clearly detrimental to UK stakeholders.

As you failed to write to us as agreed to provide a clear account of the final compromise text, and given that the final compromise text contains provisions which would have material negative implications for UK exporters targeting the EU market, we decline to grant the Government any form of scrutiny waiver to participate at Council and, exceptionally, specifically request that the Government vote against this proposal if it is brought forward for adoption at TTE Council on 4 March 2019, or in any other subsequent Council formation.

We also ask you to consider putting in place contingency arrangements for circumstances where you do not have the capacity to correspond with us in a timely manner, such as enabling a duty minister to handle correspondence. This is an important step in order to enable scrutiny to continue to function effectively.

2.9On 1 March 2019 the Minister provided a written response to the Committee’s letter,33 offering her apologies for not having responded to the Committee in time. The Minister makes reference to “challenging timescales”, however given that the Committee had identified these challenging timescales and asked for cooperation with officials to meet them, and officials had made the necessary preparations to meet these timescales, we do not consider timing to be a reasonable excuse. The Minister also mentions unforeseen circumstances, which we accept, but we were assured that she would be in the office from 25 February 2019, and therefore had at least two days before the Committee met to sign the letter and send it to the Committee, which she did not do.

2.10The Minister provides the Committee with detailed information in response to its questions. Regarding the key UK concern about the introduction of a requirement for there to be an authorised representative in the Union who is responsible for compliance (Article 4), the Minister provides a detailed account of the obligations this representative would have to fulfil, which include:

2.11The Minister states that, although this provision will apply to a smaller range of products compared to the Commission’s original proposal (17 product directives applying to products for which harmonised Union legislation exists are covered, as opposed to the 70 directives covered by the original proposal), “the Government remains of the view that it is not sufficiently risk-based and will create a disproportionate burden on small and medium businesses”. The Minister also acknowledges that the strength of the article has been increased: “For example, the original Commission proposal was limited to a person responsible for compliance information whereas the current proposal has the person responsible for compliance committed to undertaking a larger range of activity e.g. assisting with product recalls”. In the context of EU exit, and subject to the caveat that the future relationship could remove this requirement, the Minister states that “If subject to the provisions as a third country, complying with this requirement will increase the cost for UK businesses conducting business in the EU”. Nonetheless, as set out below, the Minister indicates a preference to abstain on the proposal, because she believes that “it is important that the Government take a position based on the whole proposal” and that there are other elements of it which will strengthen market surveillance, increase protections for consumers, and facilitate international cooperation in some cases.

2.12The other key provision that is particularly relevant to the UK is Article 35 (International cooperation), which provides measures aimed at increasing cooperation between the Union, its Member States, and international partners. The Minister states that the mutual exchange of information permitted by this provision could be of potential benefit for UK market surveillance post-exit. The Minister notes that the article also provides for a system of pre-export controls to be carried out by third countries on products immediately prior to their export into the EU, adding that “when the third country satisfies a risk-based approach (based on audits within the EU and pre-existing verification systems inside the third country), products may be granted an approval by the Commission that replaces or reduces import controls”. This too is potentially beneficial.

2.13In response to the Committee’s request for the Government to provide an assessment of the extent to which the proposal would affect the volume of checks for industrial goods which would have to take place at the EU’s external borders, the Minister states that the Commission’s impact assessment does not cover the impact on third countries or make an assessment of any additional checks that might be undertaken at its external borders as a result of changes included in the proposal. The Minister acknowledges that there are a number of factors that would affect the volume of checks that take place, and states that through Article 26 there is the potential for the Commission (in consultation with the Network) to adopt implementing acts to determine “benchmarks and techniques for checks on the basis of common risk analysis at the Union level”, which could be detrimental or beneficial, depending on the measures, but that Article 35 allows for agreements to be made which would replace or reduce import controls when “the third country possesses an efficient verification system of the compliance or products exported to the Union and the controls carried out in that third country are sufficiently effective and efficient”. In addition, the Minister notes that the impact on the UK depends on the nature of the future relationship, which remains to be negotiated.

2.14As to whether the Regulation would fall within the scope of the EU rules applicable in the territory of Northern Ireland contained in the Protocol on Northern Ireland/Ireland in the Withdrawal Agreement, the Minister expresses the view that, as the proposal amends Articles 15 to 29 of Regulation (EC) No 765/2008 (which set out the Community market surveillance framework and controls of products entering the Community), which is contained in Annex 5 of the Protocol, “our view is that this proposal would therefore fall under the provisions of Article 15(4) of the Protocol” and that “it is our view that the proposal falls under Article 15(4) of the Protocol and would therefore be incorporated into Annex 5”.

2.15In response to the Committee’s other questions about the backstop, the Minister states that the Government’s recent publication “UK Government Commitments to Northern Ireland and its integral place in the United Kingdom” reiterated the Government’s commitment “to preserving Northern Ireland’s place in the UK internal market were the Protocol ever to come into effect”, and to establish that “Northern Irish businesses would have unfettered access when placing goods on the rest of the UK market” in this scenario. In terms of the practicalities of how this would work specifically in relation to market surveillance, the Minister states that “my officials are working to identify how this would be delivered in legislation”. The Minister reiterates that “both the UK and the EU agree that the Protocol should not need to come into effect and have committed to use best endeavours to take the necessary steps to conclude a final deal that supersedes it in full by the end of the implementation period”.

2.16In conclusion, the Minister states that, while she does “appreciate the Committee’s concerns about the proposal and particularly the impact on UK exporters”, and the Government’s concerns over Article 4 “prevent the Government from supporting the proposal”, “there is much to support in the proposal that will strengthen market surveillance and increase protections for consumers”. The Minister highlights Article 35 on international cooperation which would enable pre-export checks and intelligence sharing with trusted partners, as well as the improvements made to Article 5 (Requirement for manufacturers to have a declaration of conformity on their website) and Article 14 (Powers and duties of market surveillance authorities). The Minister states that she believes that voting against the proposal “could risk undermining confidence in the UK’s approach and commitment to robust market surveillance, which is particularly important as we look to build future trade partnerships.” She therefore expresses the hope that the Committee “will be able to reconsider its recommendation to vote against the proposal in light of that”.

2.17We have taken note of the Minister’s update regarding the progress of the negotiations in relation to this proposal, including her helpful, detailed summary of its key provisions.

2.18From a UK perspective, the requirement for there to be an authorised representative in the Union who is responsible for compliance (Article 4), has been a key concern throughout the negotiations because of its implications for UK stakeholders post-exit. Although the final version of this provision will apply to a substantially smaller range of products compared to the Commission’s original proposal, the Minister considers that the proposal “is still not sufficiently focused on each product’s level of risk” and that the responsible person is now also made responsible for a wider range of activity than merely providing compliance information.34 The Minister acknowledges that when the UK has left the EU, depending on the nature of the future relationship, “if subject to the provisions as a third country, complying with this requirement will increase the cost for UK businesses conducting business in the EU”.

2.19In response to the Committee’s request for an assessment of the extent to which the proposed Regulation would affect the volume of checks for industrial goods which would have to take place at the EU’s external borders, the Minister states that the Commission’s impact assessment does not extend to the impact on third countries and that it will be difficult to predict the impact on the UK until the future relationship has been concluded. The Minister notes that Article 35 allows for agreements to be made which would replace or reduce import controls when “the third country possesses an efficient verification system of the compliance or products exported to the Union and the controls carried out in that third country are sufficiently effective and efficient”, however we note that it is not automatic that the UK will benefit from these provisions post-exit. The Minister also notes that Article 26 creates the potential for the Commission (in consultation with the Network) to adopt implementing acts to determine “benchmarks and techniques for checks on the basis of common risk analysis at the Union level”; however, this provision is ambiguous in its effects, and could be employed in ways that were beneficial or detrimental to UK interests.

2.20Regarding the backstop, the Minister confirms that as the proposal amends Articles 15 to 29 of Regulation (EC) No 765/2008 on market surveillance, which is in the scope of Annex 5 of the Protocol, it is the Government’s assessment “that the proposal falls under Article 15(4) of the Protocol and would therefore be incorporated into Annex 5”, and would therefore apply to the territory of Northern Ireland—although the Minister cautions that the Protocol is a safeguard which would only be used in the event that “there is a gap between the end of the implementation period and the start of our future trading partnership with the EU” and that “both the UK and the EU agree that the Protocol should not need to come into effect”. The Minister states that the Government’s commitments in the 9 January publication UK Government commitments to Northern Ireland and its integral place in the United Kingdom “are to ensure that, were the Protocol to come into effect and for the duration of its effect, Northern Irish businesses would have unfettered access when placing goods on the rest of the UK market, and that the integrity of the UK single market is preserved”.

2.21The Minister assures the Committee that she appreciates its concerns about the proposal, particularly the impact on UK exporters, and states that her concerns over Article 4 prevent her from voting for the proposal; however, she states that there is also “much to support in the proposal that will strengthen market surveillance and increase protections for consumers” and that she believes that voting against the proposal “could risk undermining confidence in the UK’s approach and commitment to robust market surveillance, which is particularly important as we look to build future trade partnerships.” She therefore expresses the hope that the Committee “will be able to reconsider its recommendation to vote against the proposal in light of that”.

2.22We have reviewed our recommendation that the Government vote against the proposal and consider that it remains the right recommendation, as it is the Government’s own assessment that the Regulation will create disproportionate obligations for stakeholders from third countries exporting to the EU market and that the Regulation will “create a disproportionate burden on small and medium businesses”, including UK businesses exporting to the EU post-exit. We therefore recommend once again that the Government vote against the proposal at any forthcoming Council at which it is proposed for adoption. If the Government is concerned to avoid undermining confidence in the UK’s approach and commitment to robust market surveillance, the Minister could table a minute statement in order to clarify the reasons for its negative vote. We retain the proposal under scrutiny. In the meantime, we ask the Minister to provide us with a final update on the outcome of any vote in Council in due course.

Full details of the documents

Proposal for a Regulation of the European Parliament and of the Council laying down rules and procedures for compliance with and enforcement of Union harmonisation legislation on products and amending Regulations (EU) No 305/2011, (EU) No 528/2012, (EU) 2016/424, (EU) 2016/425, (EU) 2016/426 and (EU) 2017/1369 of the European Parliament and of the Council, and Directives 2004/42/EC, 2009/48/EC, 2010/35/EU, 2013/29/EU, 2013/53/EU, 2014/28/EU, 2014/29/EU, 2014/30/EU, 2014/31/EU, 2014/32/EU, 2014/33/EU, 2014/34/EU, 2014/35/EU, 2014/53/EU, 2014/68/EU and 2014/90/EU of the European Parliament and of the Council: (39394), Article 33 TFEU (customs co-operation), Article 114 TFEU (internal market), Article 207 TFEU (common commercial policy); ordinary legislative procedure; QMV.

Previous Committee Reports

Fifty-first Report HC 301–l (2017–19), chapter 1 (16 January 2019); Forty-fifth Report HC 301–xliv (2017–19), chapter 1 (21 November 2018); Twenty-seventh Report HC 301–xxvi (2017–19), chapter 2 (9 May 2018).

30 Letter from the Minister to the Chair of the European Scrutiny Committee (9 January 2019).

31 Fifty-first Report HC 301–l (2017–2019), chapter 1 (16 January 2019).

32 HM Government, UK Government commitments to Northern Ireland and its integral place in the United Kingdom (9 January 2019).

33 Letter from the Minister to the Chair of the European Scrutiny Committee (1 March 2019).

34 Their tasks will include: ensuring the declaration of conformity and technical documentation has been drawn up and is made available upon request from a market surveillance authority (MSA) in a language easily understood by that authority; informing MSAs when there is reason to believe a product presents a risk; cooperating with MSAs to make sure corrective action is taken to resolve any non-compliance or when this is not possible the risk is reduced as required by MSAs; ensuring the name, registered trade name or mark, contact details, including postal address of the economic operator is on the product or packaging.



Published: 9 April 2019