New legislation on market surveillance with Regulation 2019/1020
As of 16 July 2021, Regulation (EU) 2019/1020 regarding market surveillance and the conformity of harmonised products came into force. In this Regulation a number of loopholes in the legislation are solved and tightened.
Why a new Regulation?
Many products offered on the European market do not comply with product legislation. Also, as a result of ongoing digitalisation, new services and roles have arisen in the product chain that had no fixed legal place. Furthermore, market supervisors have insufficient powers to carry out effective supervision. Regulation (EU) 2019/1020 attempts to remedy these shortcomings.
What is the background to this?
As a result of the increasingly digital society, we can order products from all over the world. These suppliers do not always produce products that comply with European 'product legislation'. In addition, market participants are not sufficiently aware of the product legislation that applies to their products. The result is, for example, products that are dangerous for children, products that can cause fire or cause damage to DNA through radiation. On 'Safety Gate' (link: https://ec.europa.eu/safety-gate-alerts/screen/webReport) a website of the European Commission you can always find up-to-date examples of such products.
Products that do not comply can therefore be dangerous and costly to society. One example is cheap chargers for mobile devices that are a fire hazard, sold directly to consumers on large Asian websites (See for example: https://www.london-fire.gov.uk/safety/the-home/electrical-items/batteries-and-chargers/). The consequences of the fires caused by this are financially covered by society through insurance premiums. Not to mention personal suffering.
In the EU, all products placed on the market must comply with product legislation. It is - thus - forbidden to place on the market products that do not comply with product legislation. All documents proving that a product is safe must be collected in a dossier; a so-called 'technical dossier'.
Does Regulation (EU) 2019/1020 apply to all product legislation?
No, for Regulation (EU) 2019/1020 to apply, a product must fall under one, or more, of the Union harmonisation legislation listed in Annex I of the Regulation. Specific obligations apply for the following 'sector-specific' product groups (see Article 4(5)):
- electrical equipment;
- radio equipment;
- electromagnetic compatibility (EMC);
- restriction of hazardous substances in electrical and electronic equipment ("ROHS");
- ecodesign requirements for energy-related products ("Ecodesign");
- gas appliances;
- construction products;
- equipment for outdoors use ("noise emissions outdoors")
- equipment for use in potentially explosive atmospheres (ATEX);
- pressure equipment;
- simple pressure vessels;
- pyrotechnic articles;
- recreational craft and personal watercraft;
- measuring instruments;
- non-automatic weighing instruments;
- personal protective equipment (PPE) and
- unmanned aircraft systems
In all Member States, market surveillance authorities check whether economic operators and products comply with the requirements set out in product legislation. In the Netherlands for example, this is commonly the Nederlandse Voedsel en Warenautoriteit (NVWA), the Agentschap Telecom (AT) and the Inspectie Leefomgeving & Transport (IL&T).
What are the roles in the product chain?
- Manufacturer: means any natural or legal person who manufactures a product or has a product designed or manufactured, and markets that product under its name or trademark;
- Importer: means any natural or legal person established within the Union who places a product from a third country on the Union market;
- Distributor: means any natural or legal person in the supply chain, other than the manufacturer or the importer, who makes a product available on the market means any natural or legal person in the supply chain, other than the manufacturer or the importer, who makes a product available on the market;
Newly added to this list is the role of 'fulfilment service provider’:
- Fulfilment service provider: means any natural or legal person offering, in the course of commercial activity, at least two of the following services: warehousing, packaging, addressing and dispatching, without having ownership of the products involved (postal services, parcel delivery services and freight transport services are excluded).
The definition of 'economic operator' has thus become:
- Economic operator means the manufacturer, the authorised representative, the importer, the distributor, the fulfilment service provider or any other natural or legal person who is subject to obligations in relation to the manufacture of products, making them available on the market or putting them into service in accordance with the relevant Union harmonisation legislation;
What new competencies have been introduced?
Before the new Regulation came into force, it was not always possible for market surveillance authorities to take action against suppliers based outside the EU for products that did not comply with product legislation. The introduction of the role of fulfilment service provider makes it always possible for market supervisors to enforce due to the fact that there is always a party that bears responsibility for a product.
Toy 'slime' is manufactured in Bangladesh and offered for sale via the website AliExpress to consumers in the EU. The product is shipped by post directly to the consumer. The suspicion of the market surveillance authority in the Netherlands is that the product does not comply with the chemical legislation applicable to the product and will therefore cause health damage to the young users.
Previously, the manufacturer was located outside the EU and there was no importer or distributor (because the product is not placed on the market, but is directly addressed). This made it de facto possible to sell cheap products that did not comply with product legislation directly to the consumer. Besides the harmful effects of non-compliant products, this also disturbs the 'level playing field'. This is because: European manufacturers make products, at higher costs, that do comply with product legislation.
To remedy this, a product may only be marketed in the EU when an economic operator is responsible for the product. If no EU-based manufacturer, importer or authorised representative can be identified, the fulfilment service provider is responsible, if applicable. The starting point is that an economic operator is always responsible for the product. Therefore, a product may not be placed on the market if there is no economic operator.
Information on the economic operator
The name and contact details of the economic operator must be given at least in one of the following places
- the product
- the packaging of the product
- the package
- an accompanying document (e.g. the CE declaration).
In addition to these details, it is also permitted to mention a web address, e-mail address or telephone number.
N.B. For manufacturers or importers, even more stringent sector-specific obligations may apply.
Tasks of the economic operator
When an economic operator commences his activities or places a new product on the market, a number of tasks must be performed. These include checking that the CE declaration has been drawn up and that it is kept for at least 10 years after the last product has been placed on the market. Furthermore, it must be checked whether a technical file has been drawn up and it must be ensured that it can be made available to the market surveillance authorities. Certificates and other technical documentation must also be available.
But even with this, not all obligations are fulfilled. You also have a 'duty of follow-up'. This means that if you suspect that a product poses a risk, you must take action. For example, you must inform the market surveillance authorities in each Member State where the product is marketed and ensure that immediate corrective action is taken (e.g. a recall), or if that is not possible, take risk-reducing measures.
On many products you will see the terms 'manufactured by', 'imported by', or 'represented by'. This is allowed, but not obligatory. It is also permitted to include multiple contact details. When the roles of the economic operators are not specified, it is up to the market surveillance authorities to determine them. However, each market participant must be able to prove its role.
When are you a fulfilment service provider?
As indicated above, you have the (new) role of fulfilment service provider when you, as a non-owner with respect to a product, as a trading activity, offer at least 2 of the following services:
Fulfilment service providers often store products in the EU so that they can be delivered quickly to consumers in the EU as soon as they are ordered. Fulfilment service providers thus provide services to other market participants. Think for example of a company that offers warehousing and shipment of products to small internet companies. But also companies that only store and package a product (shipment by another company) are fulfilment service providers.
Tip: For companies that are (also) fulfilment service providers, it is important to check what role they have in the product chain (see the diagram). Ask whether there is already another economic operator such as importer, distributor or other fulfilment service provider who is already responsible.
It is important to note that the term fulfilment service provider does not yet appear in sector-specific product legislation. This is a role in the product chain introduced in Regulation (EU) 2019/1020. It is therefore advisable to stipulate contractually that the conditions can be met.
One of the problems identified in the past was that market surveillance authorities often had to incur high costs to demonstrate non-compliance of products. The more a market surveillance authority had to check, the higher the costs became for the authorities. Ergo: market supervision was restricted because of the costs that had to be incurred. A kind of vicious circle, because the less internal capacity, the more external (expensive) capacity is often hired.
In the case of product non-conformity, market surveillance authorities can now supervise in a 'cost-neutral' manner. This is because the total costs of supervision can be recovered from the market participants concerned. This may include costs for testing, costs for taking measures, costs for storage of products, costs for activities related to corrective measures that may be taken.
Higher risk of surveillance?
Market surveillance authorities check 'on an adequate scale and in an appropriate manner the characteristics of products by performing a verification of the documents and, if necessary, physical and laboratory checks on the basis of suitable samples'. Every 4 years, they shall draw up a national market surveillance strategy for this purpose, describing the probable presence of non-compliant products, setting out priorities, planned enforcement activities and an assessment of cooperation with other enforcement authorities. A summary shall be made available to the public.
After market surveillance authorities have determined which products they want to check, the supervisor may request the technical file of the product from an economic operator.
Products arriving from outside the EU are checked based on risk analysis and policy plans of the joint supervisors. If products fall under see Article 4(5) of Regulation (EU) 2019/1020, a market surveillance authority can easily check whether the name and contact details are mentioned on the product, package or accompanying document (see above).
If the information or documents are not present, or there are other reasons to believe that a product is not in conformity, they must suspend the release for free circulation. This gives the economic operator concerned the opportunity to take corrective action.
If no corrective action (can) be taken, it is up to the market surveillance authority to take 'appropriate measures'.
What powers do market surveillance authorities have?
In addition to the powers described above, market surveillance authorities have in any case the following powers:
- Request relevant documents to assess conformity;
- Request data on the (previous) supply chain;
- Request data to determine ownership of websites;
- Perform unannounced on-site inspections;
- Authorisation to enter premises, land and means of transport to detect non-conformity;
- Carrying out investigations to detect non-conformity;
- Power to prohibit, restrict, order the withdrawal of a product from the market or recall it;
- Imposing sanctions;
- Obtain product samples to determine non-compliance. If this requires a false identity, this is also permitted;
- If no other effective means are available, market surveillance authorities have the power to order the removal of an online interface (e.g. a website or an app). If even that proves insufficient, there is even the power to restrict access to the online interface (e.g. block a website).