EU Goods Package: What does it mean for cross-border e-commerce?
On June 20, 2019, the European Parliament and the Council of the EU established a new regulatory framework on the compliance of products entering the EU single market. We have collected the main facts, the possible impact on cross-border e-commerce, as well as the next steps to take.
The Regulation (EU) 2019/1020 is part of the large-scale “Goods Package”. This aims to strengthen the internal market and ensure health and safety, by reducing the number of non-compliant goods crossing EU borders. The “Goods Package” also contains the mutual recognition of goods lawfully marketed in another member state, which was adopted in March 2019.
The rapid increase in online cross-border sales directly to end customers created new challenges, along with the challenges posed by global markets and complex supply chains. Hence, the Market Surveillance Regulation will be tackling the posed tasks by (1) laying down rules and procedures for economic operators, (2) strengthening market surveillance of products covered by EU harmonization legislation, and (3) providing a framework for controls at the EU border. The regulation will be applicable to a variety of products, including construction products, machinery, toys, electrical and electronic equipment, medical devices, chemicals, and waste. Find the full list of EU legislation covered here in the annexes of the Regulation.
New obligations for EU economic operators
New rules demand new responsibilities: A significant role in this matter is attributed to the so-called “economic operators”. For all products that are subject to the new regulations, an economic operator has to be identified, who is responsible for ensuring the availability of the conformity documentation. The person will be accountable for cooperating with market surveillance authorities and informing them, when they have reason to believe that a product presents a risk.
The responsible person can be: (1) the manufacturer of the goods, (2) the importer (when the manufacturer is not based in the EU, (3) an authorized representative (acting on the manufacturer’s behalf, or (4) a fulfilment service provider established in the EU (when none of the above are based in the EU).
What’s new in this case, is the possible extended role of the fulfilment service provider (4). Due to the rising number of direct sales to private end customers and complex supply chains, they will close gaps in future. These arose, because e-customers are theoretically “importing” goods from third countries when ordering single items from China, for example. Obviously, in practice, their abilities to ensure that these products comply with EU law, are limited. Here, fulfilment service providers are called into action to confirm the compliance of the goods. Identity and contact details of the responsible person must be publicly accessible (e.g. on the website) as well as on the parcel, supporting documents or packaging.
Furthermore, products offered for sale online, or through other means of distance sales, are presumed to be made available on the EU market, if the offer is targeted at end customers in the EU, i.e., if the economic operator directs its activities to an EU member state, by any means.
What are the provisions of the market surveillance?
The Market Surveillance Regulation gives additional powers to the national market surveillance authorities to ensure the rules are followed. Thus, they can require the economic operators to provide relevant documents (access to software, information on supply chain and ownership of websites), take samples, and enter any premises. Additionally, they can demand the economic operators to take appropriative action in the vent of non-compliance (including withdrawals, recalls, or destruction), take proportionate measures if they fail to do so, and impose penalties. Ultimately, they may remove content from websites or restrict access to the online interface.
Impact on online sales
The greatest impact of the new regulation will undoubtedly be on B2C cross-border e-commerce. When appointing a responsible person, the costs for compliance and information are considered relatively steep for SMEs from outside the EU, highlighted in this article. Therefore, a reduced number of goods is expected from Asian companies with low value products, that are not designed to comply to EU standards and requirements. To ease the burden, large logistics service providers or the marketplaces themselves could offer compliance and responsible person to third country manufacturers at lower cost.
What needs to be done?
As of January 1, 2021, the setup of the network for coordination and cooperation between enforcement authorities and the commission will go into operation. All other provisions of the regulation will enter into force on July 16, 2021. Thus, companies selling products into the EU should prepare the next steps and anticipate the new market conditions. This implies appointing an EU based responsible person, where needed.
Due to the impending Brexit, businesses who have appointed an economic operator established in the UK, should reassess their options as well and get in touch with their fulfilment service provider to discuss the next steps (and have a look at our article). Don’t fret, until July 16, 2021, it’s still time to act and be prepared for the changes lying ahead.