EUROPEAN COMMISSION Strasbourg, 17.4.2018 SWD(2018) 104 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document proposal for a Regulation of the European Parliament and of the Council on the marketing and use of explosives precursors, amending Annex XVII to Regulation (EC) No 1907/2006 and repealing Regulation (EU) No 98/2013 on the marketing and use of explosives precursors {COM(2018) 209 final}

{SWD(2018) 105 final}



Table of Contents 1.Introduction: Political and legal context 2.Problem definition 2.1.What are the problems? 2.1.1.Explosives precursors continue to be misused for the manufacturing of HMEs 2.1.2.Economic operators face unnecessary obstacles to the free movement of explosives precursors in the internal market 2.2.What are the problem drivers? 2.2.1.The level of access to restricted substances for non-professional use is no longer adequate 2.2.2.New and evolving threats 2.2.3.Insufficient awareness along the supply chain 2.2.4.Restrictions and controls are not applied and enforced by public authorities in a sufficient or fully effective manner 2.2.5.Fragmentation of the system of restrictions and control across the EU 2.2.6.Certain provisions in the current Regulation are not clear 2.3.How will the problems evolve? 3.Why should the EU act? 3.1.Legal basis 3.2.Subsidiarity: Necessity of EU action 3.3.Subsidiarity: Added value of EU action 4.Objectives: What is to be achieved?

4.1.General objectives 4.2.Specific objectives 5.What are the available policy options? 5.1.Description of the policy options 5.1.1.Policy Option 0 – Baseline 5.1.2.Policy Option 1 – Reinforce the application of the Regulation with non-legislative measures 5.1.3.Policy Option 2 - Strenghten and clarify the restrictions and controls of the Regulation 5.1.4.Policy Option 3 – Introduce further controls along the supply chain 5.2.Measures discarded at an early stage 6.What are the impacts of the policy options? 6.1.Effectiveness 6.2.Economic impacts 6.3.Social impacts 6.4.Environmental impacts 6.5.Impact on fundamental rights 7.How do the options compare? 8.Preferred option 8.1.Advantages and proportionality of the preferred option 8.2.REFIT (simplification and improved efficiency) 9.How will actual impacts be monitored and evaluated?

Annex 1: Procedural information Annex 2: Synopsis report of the stakeholder consultation Annex 3: Evaluation of Regulation EU 98/2013 on the marketing and use of explosives precursors INTRODUCTION Purpose of the evaluation Scope of the evaluation BACKGROUND TO THE INITIATIVE Description of the initiative and its objectives Baseline METHOD IMPLEMENTATION STATE OF PLAY Security and market context Compliance and implementation measures Overall effect of the Regulation Key challenges arising from the application of the Regulation ANSWERS TO THE EVALUATION QUESTIONS Relevance Effectiveness Efficiency Coherence

EU Added Value CONCLUSIONS Annex 4: Market analysis Annex 5: Analytical models used in preparing the impact assessment Annex 6: Who is affected by the initiative and how? Annex 7: Discarded options Annex 8: Monitoring and evaluation indicators Annex 9: Map of the different regimes in the EU for the marketing and use of restricted explosives precursors Annex 10: Description of the proposed Commission recommendation setting out guidelines for licensing and registration regimes (measure under policy option 1) Annex 11: Table with overview scores assessment criteria ANNEX 12: SENSITIVITY ANALYSIS..................................................................186 Glossary ANFO Ammonium nitrate / fuel oil DG HOME Directorate-General for Migration and Home Affairs

ECTC European Counter Terrorism Centre EEA European Economic Area EU European Union EU INTCEN EU Intelligence and Situation Centre FTE Full Time Equivalent HME Homemade Explosive HMTD hexamethylene triperoxide diamine IASG Impact Assessment Steering Group IED Improvised Explosive Device NACE Nomenclature des Activités Économiques dans la Communauté Européenne NCA National Competent Authorities NCP National Contact Points REACH Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals RSB Regulatory Scrutiny Board SCP Standing Committee on Precursors SME Small and medium-sized enterprises TATP Triacetone Triperoxide TE-SAT Terrorism Situation and Trend Report TFEU Treaty on the Functioning of the European Union TNT Trinitrotoluene





1.Introduction: Political and legal context Explosives precursors are chemical substances that can be misused to manufacture homemade explosives (HMEs). These substances, or mixtures containing them, serve a variety of purposes. Lower concentrations of explosives precursors can be found in printer ink cartridges, disinfectants, fuels, pesticides, shampoos, carpet cleaners and nail polish removers. High concentrations are used in industrial settings to treat metal surfaces, coat products and produce pharmaceuticals. In the European Union (EU), substances and mixtures containing certain explosives precursors above specific limit values are in principle not available to the general public, because their potential use in the illicit fabrication of HMEs poses a threat to security. Professional users, who need access to these chemicals for their trade, business or profession, can use higher concentration levels. At the same time, HMEs have been used in the vast majority of terrorist attacks in the EU, including those in Madrid in 2004, London in 2005, Paris in 2015, Brussels in 2016, and Manchester and Parsons Green in 2017. HMEs have also been been responsible for the vast majority of victims of such attacks in the last decades. Regulating the availability of explosives precursors on the market was identified as a policy priority in the 2008 EU Action Plan on Enhancing the Security of Explosives. Following the adoption of the Action Plan, the European Commission established a Standing Committee on Precursors (SCP), an expert group that brings together experts from Member State authorities and stakeholders from the chemicals industry and retail. Based on the recommendations of the SCP and the outcomes of an impact assessment of the possible options, the Commission adopted a proposal for a Regulation on explosives precursors in 2010. Regulation (EC) No 98/2013 on the marketing and use of explosives precursors ("the Regulation") entered into force on 1 March 2013 and became applicable on 2 September 2014. The Regulation establishes a system of restrictions and controls aimed at limiting the availability of an agreed list of explosives precursors to the general public and ensuring appropriate reporting of suspicious transactions through the supply chain. The substances concerned are divided in two categories, listed in the Annexes to the Regulation. The making available, introduction, possession and use of the precursors listed in Annex I, either on their own or in mixtures or substances including them, is regulated by one of the three regimes described in the Regulation (i.e. a ban for the general public, licensing or a registration regime) or a combination of these regimes. The substances in Annex II are only subject to an obligation to report suspicious transactions. The importance of such restrictions and controls for disrupting the activities of terrorist networks by make it more difficult to attack targets and to access and deploy dangerous substances was again emphasised in the European Agenda on Security, adopted by the Commission in April 2015 After the attacks in Paris on 13 November 2015 and in Brussels on 22 March 2016, the Commission highlighted in the Action Plan against illicit trafficking in and use of firearms and explosives and the Communication on delivering on the EU agenda on security to fight against terrorism that explosives precursors remained too easily available and that existing controls should be reinforced. In February 2017, the Commission adopted a report on the application of the Regulation. The report outlined a series of challenges faced by Member States and the supply chain to implement the Regulation and the need to increase the capacity of all those involved in implementing and enforcing the restrictions and controls. Limitations of the legislation relating to awareness in the supply chain, and the multiplicity of different regimes across the EU, which creates important security gaps and challenges for the supply chain actors which conduct business across the EU were brought forward. A Commission recommendation on immediate steps to prevent misuse of explosives precursors was adopted in October 2017. Member States were urged to take all necessary measures under the existing Regulation to prevent terrorists from accessing restricted substances and invited to carry out a thorough assessment of the prohibition, licensing or registration systems they had put in place. The Council of the European Union welcomed the recommendation in the Council conclusions of 7 December 2017and called on Member States to limit the availability of explosives precursors to the general public. The European Parliament also expressed its concern about the wide availability of firearms and explosive precursors on hidden networks and growing links between terrorism and organised crime. ·Substances and mixtures that can be used to manufacture illicit explosives are also subject to several other EU acts, which aim to ensure the functioning of the internal market. They mostly concern public health, the environment and safety aspects of chemicals At present, there are provisions on ammonium nitrate in both Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) and the Regulation on the marketing and use of explosives precursors. Under REACH, ammonium nitrate containing nitrogen above a certain concentration is prohibited to be placed on the market except for the supply to downstream users, distributors, farmers for the use in agricultural activities and natural or legal persons engaged in professional activities. The Regulation on explosives precursors subjects the supply of ammonium nitrate to a mechanism for reporting suspicious transactions, and also enables Member States, via a safeguard clause, to put in place further restrictions if there are reasonable grounds for doing so. ·Regulation (EC) No 1272/2008 on classification, labelling and packaging of substances and mixtures (CLP Regulation). A substance or a mixture fulfilling the criteria relating to physical hazards, health hazards or environmental hazards, laid down in Parts 2 to 5 of Annex I of Regulation (EC) No 1272/2008 is hazardous and shall be classified in relation to the respective hazard classes provided for in that Annex. In certain cases, the classification of a chemical is harmonised at EU level. The list of harmonised classification and labelling is included in Annex VI to the CLP Regulation. ·Regulation (EC) No 2003/2003 relating to fertilisers lays down precise rules concerning safety and control measures for ammonium nitrate fertilisers. ·Regulation (EC) No 1259/2013 and (EC) No 273/2004 respectively address the trade in drug precursors between the EU and third countries, and within the EU. Several explosives precursors can also be used as drug precursors. These different acts are complementary, to the extent that they have a different focus in terms of scope and substances/products concerned. The evaluation (see Annex 3) concluded that there are no major inconsistencies and overlaps between the Regulation and other relevant EU initiatives. 2.Problem definition 2.1.What are the problems? Following the analysis of the implementation of the Regulation, the Commission has carried out a broader evaluation as part of this impact assessment in order to analyse more thoroughly the effectiveness, efficiency, relevance, coherence and EU added value of the Regulation (Annex 3). This analysis demonstrated that the Regulation has achieved a number of results but also showed a number of limitations in the Regulation and challenges which are impacting its added value and are causing security risks. They can be linked to two main problems. On the one hand, the existing access restrictions do not prevent explosives precursors to be accessed and misused for the manufacture of HMEs, while on the other hand, economic operators are facing a number of seemingly disproportionate obstacles in operating in the EU internal market.

This impact assessment report cannot provide detailed information on incidents and attacks involving explosives precursors, as this risks exposing vulnerabilities in Member States and may jeopardise ongoing investigations and prosecutions. 2.1.1.Explosives precursors continue to be misused for the manufacturing of HMEs As reported by the Global terrorism Database, the share of attacks in the EU which used explosives has been on average increasing since 1970. Numbers decreased at the end of the 1990’s until 2012 and then started to increase again. The share of deadly attacks was about 60% at the beginning of the 1970’s but increased to reach 100% and since 2000, all terrorist attacks using explosives killed at least one person. The total number of deaths in terrorist attacks using explosives has dramatically increased in 2015 and 2016. Figure 1 - Number of terrorist attacks using explosives in the EU from 1970 to 2016 Source: National Consortium for the Study of Terrorism and Responses to Terrorism (START). (2017) Global Terrorism Database Source: National Consortium for the Study of Terrorism and Responses to Terrorism (START). (2017) Global Terrorism Database The human and social consequences in terms of lives lost and persons injured are considerable. The economic impact is also deemed to be very important. Although there is no way to provide a fully reliable quantification of these costs, there are methods which are used and illustrate their importance. For example, the Institute for Economics and Peace uses the Global Terrorism Database to calculate the global costs of terrorism with regard to lives lost, injuries and damage to property and infrastructure. The figure below presents the cost inflicted by terrorist attacks using explosives in the EU by year (the increase in 2015 and 2016 - up to EUR 778.8 million in 2015 and 586.3 million in 2016 - reflect the increased number of deaths in these two years). Source: Institute for Economics and Peace based on GDT database HMEs have been the most common type of explosive used in recent terrorist attacks and continue posing a much higher threat in Europe than other types of explosives. They are relatively easy to make, fairly simple to use and rather effective. The availability of explosives precursors has facilitated their use . Although recent attacks and incidents have mostly involved Triacetone Triperoxide (TATP), the threat concerns a wider range of HMEs and explosives precursors. a)Dangerous substances remain accessible to illegitimate users As evidenced by the evaluation, the amount of explosives precursors available on the market has decreased following the entry into force of the Regulation. Reports from national authorities indicate that some economic operators withdraw products containing restricted substances from the market. In some Member States, in which restricted explosives precursors remain available to the general public, but are subject to licencing, reports show that consumers face significant difficulties in finding restricted substances on the market, which has led to lowering the illegal use of them. In addition, in some Member States, a significant decrease in the number of police cases involving explosives precursors has also been reported in the years following the entry into force of the Regulation. Nevertheless, regulated substances continue to be diverted and used for the illicit manufacture of HMEs. In a number of investigated cases, terrorists have obtained explosives precursors covered by the Regulation legally or at least without having to resort to any form of theft. This suggests that under the current framework a number of dangerous substances remain accessible to the general public. This is evidenced notably by recent attacks involving HMEs between 2015 and 2017, as well as by a number of foiled attacks, and by a number of additional incidents reported by national authorities, where HMEs and related materials have been found and seized by the police. The most commonly used HMEs in attacks in the EU have been TATP and Hexamethylene triperoxide diamine (HMTD), created from hydrogen peroxide, a substance to which access to members of the general public has been restricted by the Regulation, and acetone or hexamine, which are subject to a reporting of suspicious transactions obligation. Interviews from consulted stakeholders and feedback from the national assessments by the Member States raise additional concerns in relation to online sales. In one of the recent terrorist attacks in the EU, explosives precursor substances that are currently not restricted but subject to the reporting obligations under the Regulation, have been successfully acquired by the perpetrators through online purchase from different addresses. The Regulation’s aim is to restrict and control all substances proportionally to the threat they pose. The fact that explosives precursors continue to be accessed and misused in terrorist attacks suggests that tighter restrictions and controls on substances already covered by the Regulation are necessary.

b)Detection of threats is not sufficiently effective throughout the EU Reporting practices have overall contributed to improving detection across Member States of potential threats and misuse of available explosives precursors. Large stocks of explosives precursors intended to manufacture HMEs have been discovered and seized in different Member States and reports of suspicious transactions from economic operators have contributed, in several cases, to thwarting terrorist attacks. A known case in Germany, in 2015, of a planned terrorist attack targeting the Frankfurt bike race, has been thwarted by the police with the help of a report from a retail store of a suspicious purchase of explosives precursor substances. However, the evaluation has demonstrated that the level of reporting varies significantly between Member States. Recent attacks also showed that explosives precursors used for the preparation of HMEs have been purchased in physical shops, in some cases, through false claim of professional use or through online retail. Changes in the acquisition methods over the last years raise additional challenges. For example, information received suggests that a number of attempts to acquire explosives precursors for illicit purposes have been done at different times and through different methods, quantities and concentration levels, in order to avoid traceability and reporting. 2.1.2.Economic operators face unnecessary obstacles to the free movement of explosives precursors in the internal market One of the main objectives of the Regulation is to create a level playing field for economic operators in the internal market while ensuring a high level of protection of the security of the general public. However, the evaluation has shown that operators face difficulties implementing the Regulation in their business activities. Obstacles related, among others, to the complexity of the framework or insufficient clarity on rules and obligations limit the freedom of movement of these substances. This causes market distortion and overcoming these hurdles is time-consuming and adds in some cases extra costs. a) Barriers to competition within the EU As confirmed in the course of the evaluation and stakeholder consultations, the different regimes in each Member State and the variety of requirements applicable across the EU are raising challenges for economic operators that conduct business throughout the EU. Furthermore, differences may also create situations of unfair advantage and distorted competition, in particular in relation to registration regimes, when companies benefit from locating themselves or being located in Member States were the level of restrictions and controls is more lenient. If the rules differ or are not applied in the same way, there is no longer a level playing field for economic operators. In addition, the lack of clarity of the Regulation also affects competitiveness. Most importantly, it is not clear how the verification of professional use should be done. Whereas for some economic operators, dealing mostly with other economic operators, this does not pose a problem; for other economic operators, dealing mostly with consumers, the assessment of whether a customer is a member of the general public or not generates uncertainty because there is no clear definition of what is professional use. Moreover, different Member States may have different approaches to this. In that regard, non-EU economic operators selling to consumers in the EU also have an advantage in comparison to EU-based economic operators, as they are not held responsible for verifying professional use. b)Restrictions and controls are not always applied by online marketplaces Feedback from consulted stakeholderssuggests that a shift towards online sales of explosives precursors have been observed. This shift stems from the rise of the online commerce in general, but is also related to the weaker controls applied to online marketplaces and limited reporting of suspicious online transactions of explosives precursors as compared to physical shops. Such a shift poses security concerns with regard to possible misuse of explosives precursors, but also raises concerns as regards possible distortion of competition between physical stores and online retail. Online suppliers being not always considered to be bound by the Regulation rules, they sometimes sell explosives precursors without verifying if the buyer is a member of the general public and without verification of licences and proper registration of the sale. This gives them a competitive advantage over conventional suppliers who are bound by the obligations in the Regulation. 2.2.What are the problem drivers? The core problems mentioned above can be linked to the following drivers. Illustration 1 - Problem tree 2.2.1.The level of access to restricted substances for non-professional use is no longer adequate The evaluation confirmed that the Regulation covers substances that pose a security threat to the public but it also showed that the level of restriction applied to certain substances is not necessarily proportionate to the security concern they raise. Some substances that are widely used for the production of HMEs in the EU are currently only subject to reporting of suspicious transactions, and remain widely available to the general public, including in high concentrations. With regard to licences, the absence of a common set of minimum requirements for granting or refusing a licence leads to different rules and practices across the Member States with regard to type of information requested, reasons for refusal, rate of refusals, duration of validity, price of the service. Some Member States take the view that requests for a licence should be granted unless there is a stated reason not to, while others apply the opposite approach, refusing licences unless there is a specific reason to grant them. With regard to registration, actual cases show that terrorists, especially those that are planning suicide attacks, have no problem identifying themselves when purchasing explosives precursor substances. The registration regime is then neither an obstacle in accessing to precursors, nor is effective in alerting national competent authorities (NCAs) if the registration list is not timely made available to law enforcement. Reportedly, there are a lot of cases where post-attack investigations discovered that the terrorists had been registered buying precursors on different locations with their real identity. 2.2.2.New and evolving threats Existing threats have evolved and new security threats have appeared since the Regulation was adopted and entered into force in 2013. Terrorists are using new tactics and develop new recipes and bomb-making techniques, which are – at least in part – intended to circumvent existing restrictions and controls.

As a consequence, several substances which are not restricted under the Regulation pose a significant security threat. For example, sulphuric acid can be misused to manufacture TATP. Currently, it is listed in Annex II of the Regulation which means that it can be bought by members of the general public, without needing a license or registering the sale. The same is true for acetone and ammonium nitrate, which have been used to illicitly manufacture HMEs that were used to carry out attacks in the EU. Ammonium nitrate, which has also been illicitly used in this manner, was already restricted under Directive 76/769/EEC in 2008 and that restriction was transferred to Regulation (EC) No 1907/2006 in 2009. Other new threats are related to the transfer of terrorist tactics, techniques and procedures from conflict zones to Europe and the spread of bomb-making knowledge and instructions, including for HMEs, by terrorists via online communication channels and social media. According to Europol , some of the attackers involved in recent incidents had received information about and guidance on the illicit manufacture of HMEs via (in)direct contact with more experienced bomb-makers. The Internet also remains an important source of information on the fabrication of IEDs. In this evolving context, it is important that, in case of new or evolved security threats, new substances of concern can be quickly added to the scope of the Regulation. Article 12 and 14 of the Regulation allow the Commission to adopt delegated acts only to add substances to Annex II and to change the limit values in Annex I where it is necessary to accommodate developments in the misuse of substances as explosives precursors . However, if new substances have to be restricted or current restrictions have to be revoked, due to a change in the risk assessment, the Commission has to adopt a legislative proposal, which has to undergo the ordinary legislative procedure. This creates significant time delays, which do not allow the legal framework to respond in a timely fashion to a rapidly evolving threat picture. The criteria for determining which measures should apply to which explosives precursors are laid down in the Regulation (recital 20) and include: the level of threat associated with the explosives precursor concerned, the volume of trade in the explosives precursor concerned, and the possibility of establishing a concentration level below which the explosives precursor could still be used for the legitimate purposes for which it is made available. The criteria reflect the risk and threat level, whilst taking in consideration the economic importance and practical need of explosives precursors. 2.2.3.Insufficient awareness along the supply chain Because many of the substances concerned by the Regulation are widely used household products, the supply chain is significantly more diversified and complex than that of other products subject to specific control provisions at EU level, such as drug precursors. This poses a challenge for competent authorities to reach all economic operators in the supply chain to inform them of their duties. Competent authorities in some Member States have, in collaboration with chemical industry and retail sector associations, conducted awareness-raising campaigns and engaged with a wide range of operators — from manufacturers to retailers, big companies to small independent stores, and internet sellers to marketplaces. Nevertheless, the evaluation showed that some economic operators have very limited awareness of the Regulation and notably of their reporting obligations resulting in considerable variation in the level of effectiveness of reporting mechanisms and therefore significant security risks across Member States. The evaluation also showed different interpretations, and thereby uncertainty, along the supply chain as regards responsibilities for labelling and information exchange on product content. Retailers often consider economic operators in upper stages of the supply chain to be responsible for the identification and labelling of concerned products. In parallel, manufacturers do not consider themselves to be concerned by the labelling requirements of the Regulation as they do not make available restricted explosives precursors directly to the members of the general public. A recent market research performed in one Member State showed that an important number of retailers are not aware that they are selling explosives precursor substances. 2.2.4.Restrictions and controls are not applied and enforced by public authorities in a sufficient or fully effective manner The evaluation showed that the level of awareness about explosives precursors by relevant public authorities, such as customs, law enforcement, and first responders, is still not sufficient. As a result, a number of instances of misuse or illicit possession or sale might not be identified and the response to incidents involving explosives precursors might often not be sufficiently adequate. Inspections are still not systematically carried out in all Member States. As a result, non-compliance by economic operators might sometimes go un-detected and penalties do not have the deterrent effect they should have. Awareness-raising campaigns by public authorities have not reached the entire supply chain. Therefore, the quantity and quality of reports received by the NCPs still leaves much room for improvement. Information of cross-border relevance is still not systematically exchanged between National Contact Points (NCPs) and/or competent authorities, hindering effective investigations and enforcement. 2.2.5.Fragmentation of the system of restrictions and control across the EU The asymmetric application of the Regulation in different Member States affects the movement of regulated substances. When the Commission adopted its proposal in 2010, a Regulation was considered the most appropriate legal instrument as it would ensure the greatest degree of uniformity. However, the divergent restriction and control systems in Member States and their different interpretations of the Regulation have created uncertainties that affect the free movement of explosives precursor substances in the EU internal market and security gaps. The Regulation introduces a ban on substances above a certain concentration limit for members of the general public. Member States may, however, opt for a licensing or a registration regime to allow access of the general public to certain restricted substances. Twenty Member States have established bans for members of the general public to different restricted explosives precursors, of which twelve Member States apply a ban to all restricted substances under the Regulation and eight Member States apply a combination of regimes of a ban and registration (5), a ban and licencing (2) or a ban and registration and licencing (1). Another eight Member States have put in place a licencing regime for all restricted substances. Economic operators that conduct business across different countries have to adapt to the specific regime of each Member State in which they make a product available. If a substance or mixture is restricted, an economic operator will have to: -register the supply of the product to a member of the general public in Member States with a registration regime; -check the validity of the licence of the member of the general public in Member States with a licensing regime;

-refuse making the product available to the member of the general public in Member States with a ban. Ensuring compliance with the different regimes is a complicated, time-consuming and resource-intensive process. The majority of the respondents to the targeted consultation, more than 65%, are of an opinion that the issue of market distortion in the context of the Regulation of explosives precursors requires further action at EU level (see Annex 2). In addition, some Member States apply restrictions and controls to non-listed explosives precursors or tighter restrictions to substances that are listed. Five countries currently have additional restrictions in place. Member States are allowed to have stricter measures in place, if they have reasonable grounds to believe that the substances concerned could be used for the illicit manufacture of explosives and have notified the Commission. However, even if Member States have the same regime, procedures for obtaining licenses vary per country. For instance, the criteria for granting or refusing licenses differ per Member State, as do the length and type of validity of the licence. Notably, the existence of alternative substances or mixtures, which can be used for a same legitimate non-professional purpose but pose less security concerns, is taken into account to varying degrees in the assessment of licence applications.

The verification of criminal records is not done systematically in all Member States before granting licenses. Conditions to holding a licence, concerning storage and the reporting of thefts or disappearances, also vary. The fragmentation of the system of restrictions and controls across the EU raises also concerns as regards competition, making it easier and cheaper for operators to supply explosives precursors to the general public in Member States that have lower control levels or impose fewer restrictions. Finally, terrorists and criminals can also exploit these differences to obtain explosives precursors. The substances acquired, or HMEs manufactured with these substances, could potentially be used anywhere in Europe, lowering security across the Union. One Member State reported at least 6 examples where individuals based in countries with more restrictive regimes have acquired explosives precursors in that Member State. As these transactions were identified as suspicious, this led to investigations and arrests for the illicit manufacture of explosives. 2.2.6.Certain provisions in the current Regulation are not clear The evaluation has showed that many differences and shortcomings in the implementation of the Regulation were due to a lack of clarity in its provisions. There are different areas of uncertainties. The first relates to significant difficulties in identifying legitimate users, namely at the point of sale due to the lack of relevant definitions or the lack of clarity in the current definitions set out in the Regulation. Consultations of public authorities and economic operators have repeatedly shown that identification of legitimate users at the point of sale is one of the major problems faced by industry, notably the retail sector. The Regulation does not provide a definition of professional users, but it nevertheless requires economic operators to report suspicious transactions involving such users and to consider professional use in their assessment of whether a customer is a member of the general public or not. This lack of clarity in the Regulation poses both issues of compliance of economic operators as well as security concerns. Legal entities fall outside the scope of the general public, as defined in the Regulation. As a result, any legal entity is implicitly allowed to introduce, possess or use explosives precursors, regardless of whether the access to these substances is necessary for the conduct of the entity's professional activities. The lack of provisions as regards professional users creates legal uncertainties for both competent national authorities and economic operators and pose practical difficulties for the identification of such users, notably at the point of sale. Recent terrorist attacks in Europe have shown that restricted explosives precursors have been purchased through the general supply chain for illicit use with the false claim of professional use. The existing uncertainties are part of the problem because the lack of clarity and certainty has resulted in differences in the interpretation and application of the Regulation. If the rules differ or are not applied in the same way, there is no longer a level playing field for economic operators. A very concrete example of a case where uncertainty has led to an uneven playing field is the online sale of restricted substances. The Regulation applies to the off- and online supply of explosives precursors but it does not explicitly mention that the obligations on economic operators also apply to online sales, whereas online operators deliver products and services on the market just like offline economic operators do. Online suppliers are therefore not always considered to be bound by these rules, which means that they are selling explosives precursors without verifying if the buyer is a member of the general public and without verification of licences and proper registration of the sale. This is a very important security gap and also gives those online suppliers a competitive advantage over conventional suppliers who are bound by the obligations in the Regulation, as well as over online suppliers that correctly apply the Regulation. The lack of clarity regarding the scope of application of the Regulation hence causes market distortion The importance of exploring opportunities to ensure the unified application of the Regulation was highlighted in a REFIT platform opinion. The platform examined two suggestions, one concerning the national implementation of the Regulation and one regarding the many uncertainties related to Regulation’s implementation. The REFIT platform acknowledged the divergent application of the Regulation and recommended the Commission to look into this issue during the revision of the act. 2.3.How will the problems evolve? All things being equal, the Regulation would remain in force and would continue to be applied. As observed in the evaluation, the Regulation remains relevant to the current EU context and is addressing relevant and continuing needs. However, the identified problems, which have emerged in spite of the Regulation and have not been resolved within the existing framework and will continue to exist without the absence of EU intervention. As the unnecessary barriers and uncertainties faced by the supply chain will persist, the functioning of the internal market will continue to be hampered. Misuse of explosives precursors is also expected to remain a problem, if terrorists and criminals will continue to have access to these substances. It is hence more likely that the threat to security will increase rather than decrease. Several factors may affect the evolution of the identified problems: ·Technological developments could influence the identified problems in different ways. Firstly, there is a risk that social media and the Internet will be increasingly used to spread instructions to make HMEs. Europol has reported that terrorists are using online services, including social media platforms and file sharing sites, in diverse ways to communicate for this purpose. Various websites and platforms contain detailed instructions and recipes for the manufacture of HMEs. There also appear to have been transfers of terrorist tactics, techniques and procedures from conflict zones (e.g. Syria, Iraq) to Europe via online communication channels. If these trends persist and instructions for the manufacturing of HMEs from explosives precursors can be easily found and accessed, this will raise the security threat. Besides learning how to make HMEs, terrorists can also use the Internet and the dark web to acquire explosives precursors. A large proportion of the stakeholders interviewed for the preparatory study for this impact assessment expressed concerns about the online market and access to potentially dangerous substances. Currently, only a small percentages of explosives precursors online. A study from 2010 estimated the online sales of explosive precursor substances at 0.5% of the total sales to the public, yet the percentage is likely to have increased. A research project on the illicit trade of firearms, explosives and ammunition on the dark web examined concluded that the dark web has the potential to become the platform of choice for lone actors and small groups to obtain weapons and ammunition behind the anonymity provided by the dark web. An increased use of the Internet and online sales platforms, including for the purchase of restricted explosives precursors, could also further exacerbate problems with the enforcement of the Regulation. Various retailers supply explosives precursors to online customers internationally; including 56% in Italy, 45% in the UK and 27% in the Netherlands. If the scope of the Regulation is not clarified and the offer of restricted explosives precursors online grows, it will become even more difficult for conventional suppliers to compete. ·Scientific progress could also affect the evolution of the problems. Scientists could discover new products, whose chemical compounds would work in the same way as regulated explosives precursors, but could not be used to manufacture HMEs. Alternatively, already existing alternative substances could be further developed and improved. Inhibition (i.e. preventing or mitigating chemical reactions such as explosions by adding an inhibitor to a substance or mixture) could also help to reduce the security threat. A fair amount of research on these topics has already been carried out, but additional research efforts could result in the development of marketable solutions.

Advances in chemistry related to explosives and explosives precursors are for instance disseminated in scientific papers published in international scientific journals. The methodological/experimental sections of these articles contain detailed information which should allow the reproduction of the experiment. Some of the stakeholders who were interviewed for the preparatory study carried out in preparation of this impact assessment, expressed concerns about the potential misuse of developments in chemistry for the purpose of manufacturing HMEs. Some experts have therefore advocated restricting access to open-access scientific journals to avoid misuse of scientific developments. ·An evolution of the terrorist threat is likely to be reflected in the modus operandi and frequency of attacks. As such, an evolution of the terrorist threat could impact misuse of explosives precursors for the illicit manufacture of HMEs. In the EU, IEDs have been used by terrorists across the spectrum (i.e. jihadists, ethno-nationalists and separatists, anarchists and left-wing terrorists, and extreme right wing terrorists). However, most of the recent attacks involving IEDs, and particularly those aimed at soft targets, were carried out by jihadists. According to Europol, the threat posed by jihadist terrorism remains high and there are indications that the threat level in the EU will continue to increase. The return of foreign terrorist fighters from (former) conflict zones in Syria and Iraq might further exacerbate this trend. Returnees have been subject to prolonged ideological indoctrination, were often trained to use weapons and explosives and may have established links with other foreign fighters. Their return to Europe facilitates the transfer of tactics, techniques and procedures from conflict zones (which was already mentioned in the section on technological developments in reference to transfers via online communication channels) and the exploitation of current security gaps on restrictions of explosives precursors. This transfer is expected to lead to tactical and technological advancements, such as the use of (suicide) vehicle-borne IEDs, which are already used Syria and Iraq. 3.Why should the EU act? 3.1.Legal basis As Regulation (EC) No 98/2013 regulates the marketing and use of explosives precursors its legal basis is Article 114 of the Treaty on the Functioning of the European Union (TFEU), which concerns the functioning of the internal market. In accordance with Article 4(2) TFEU, the EU does not have exclusive competence in this area, and shares its competence with the Member States. The subsidiarity principle hence applies and needs to be assessed. 3.2.Subsidiarity: Necessity of EU action The need for EU action was already acknowledged in 2013 when the Regulation was adopted. Given the transnational nature of the problems described in the previous chapter, the need for EU action is even stronger today. As showed by the attacks involving HMEs carried out in several different Member States e.g. (Belgium, France, Germany, Spain, United Kingdom), while plots were thwarted in various other Member States, the threat posed by HMEs remains high across the EU. Different security levels resulting from the different interpretations that Member States provide on the current Regulation have an impact on the overall security of the EU. Different rules and practices may also be exploited to illegally acquire explosives precursors. If terrorist and criminals can obtain explosives precursors in Member States with fewer restrictions and/or lower control levels and use these substances to commit attacks in other Member States, this is impacting the security of each Member State and raise security concerns at EU level. EU intervention is necessary as this practice can only be prevented if Member States harmonise their control systems and enforce the rules uniformly. The differences in the practical application of the Regulation affect economic operators throughout the EU when they sell or buy products intra-EU. This is an internal market problem, which limits the freedom of movement of explosives precursors in the EU. The problem cannot be solved by unilateral actions of Member States, because the barriers and uncertainties stem from differences between Member States’ laws and procedures. Similarly, the uncertainties about the existing EU framework ask for an EU solution, as national measures would only lead to different interpretations of the Regulation. 3.3.Subsidiarity: Added value of EU action The evaluation showed the added value of the current Regulation in regulating the marketing and use of explosives precursors. According to the consulted stakeholders the strongest added value of a possible EU intervention in this area are: -Creating a level playing field for on and offline suppliers: whilst the Regulation applies to the on- and offline supply of explosives precursors, the rules are not always correctly applied to online transactions, which distorts competition. EU action could help to close this gap and create a level playing field for conventional and online suppliers. -Stimulating cooperation between public and private entities: more and better collaboration between public and private entities could improve reporting and help to raise awareness along the supply chain. Cooperation would help to strengthen controls along the supply chain and would provide for opportunities to exchange knowledge and experiences. -Facilitating cross-border exchange of information: Regulation 98/2013 has had a positive effect on cross-border information exchange, particularly through exchanges between national authorities within the context of the SCP. These exchanges are important, because the misuse of explosives precursors to fabricate HMEs is a cross-border issue. EU action could strengthen and facilitate information exchange across borders by encouraging information sharing and providing a forum to exchange information. Improving the capacity of Member State authorities to enforce the restrictions and controls that are in place, and to implement penalties where there are infringements, is key also to ensuring a good functioning of the internal market. In the absence of an appropriate level of enforcement in some Member States, others might judge it necessary to adopt measures at national level that go beyond the remit of this Regulation. This would have a negative effect on the free movement of people and goods and services across the Union. 4.Objectives: What is to be achieved? 4.1.General objectives

There are two general policy objectives: 1)Ensure high level of security through measures to prevent and combat crime 2)Ensure the functioning of the internal market, preventing distortion of competition or trade barriers 4.2.Specific objectives In light of the identified problems and the general objectives, the specific objectives are: ·Further restrict access to certain explosives precursors and strengthen controls; ·Align restrictions and controls with the evolving threat regarding explosives precursors; ·Increase enforcement by the competent authorities of the Regulation; ·Improve the transmission of information and compliance along the supply chain; ·Facilitate intra-EU trade and prevent distortion of competition ·To improve the clarity of the Regulation and ensure uniformity in its application. The Problem tree in section 2.2 presents a comprehensive overview of the problems, problem drivers and the general and specific objectives identified and their links. 5.What are the available policy options? The following policy options are available: ·Policy option 0 (baseline) – The Commission, in consultation with the SCP, will continue to monitor and facilitate the application of the Regulation; ·Policy Option 1 (Non legislative) – Reinforce the application of the Regulation with non-legislative measures; ·Policy Option 2 (Legislative) –Strengthen and clarify the restrictions and controls of the Regulation ·Policy Option 3 (Legislative) – Introduce further controls along the supply chain. These policy options were designed around an increasing level of intervention (i.e. no EU action, non-legislative measures, and legislative measures). After having defined the problems and problem drivers, for each policy option measures were identified that addressed all the issues and corresponded to the level of intervention and the level of restriction. It was ensured that each policy option includes a set of measures that address all the identified problems and problem drivers and that the different measures are consistent in their level of restrictiveness and overall approach to the problems. Each policy option and the related policy measures are described in the following sections.

5.1.Description of the policy options 5.1.1.Policy Option 0 – Baseline The baseline scenario would imply maintaining the situation under the current legal framework with no additional legislative or non-legislative EU initiatives. Under the status quo, the three-tiered system of regimes and controls of the marketing and use of explosives precursors, i.e. a ban, licensing and registration regime, will be maintained. Access of the general public to restricted explosives precursors will be possible for up to 7 substances from Annex I through licenses and for up to three substances from Annex I through registration. No additional explosives precursor substances will be restricted for the general public and an ordinary legislative procedure will be required for adding new threat substances to the list of restrictions. Member States may restrict or prohibit the marketing and use of an explosives precursor not listed in the Annexes, if they have reasonable grounds for believing that that substance could be used for the illicit manufacture of explosives. Since the entry into force of the Regulation, four Member States have notified additional restrictions to the Commission. How this will develop in the future depends on the substance, evolution of the threats and the manner in which the EU takes action. Without EU action, some Member States are expected to introduce national restrictions on sulphuric acid. Professional users will not be explicitly covered by the Regulation. The Commission, in consultation with the SCP, will continue to monitor and facilitate the application of the Regulation. 5.1.2.Policy Option 1 – Reinforce the application of the Regulation with non-legislative measures This policy option would entail the introduction of non-legislative measures aimed at reinforcing the application of the existing legal framework. A number of Member States and different actors in the supply chain have in the past undertaken voluntary efforts to exchange information, increase the level of awareness and engagement of the relevant economic operators and public authorities, and adopt codes of conduct and guidance. The Commission also co-organised a series of regional workshops for Member State authorities, in 2016-2017, and the SCP and SCP Members and Observers have produced guidance materials to facilitate compliance with the restrictions and controls and to strengthen important aspects of the security of explosives precursors on a voluntary basis. The consultation of stakeholders gives evidence that voluntary efforts have markedly contributed to the effectiveness and efficiency of the restrictions and controls in place. However, initiatives are now concentrated in a handful of Member States and supply chain actors. This policy option would involve EU action to promote and facilitate non-legislative measures across the Union, in a coordinated and targeted way. The following measures are foreseen: ·Establishing an SCP sub-group to regularly discuss the evolving threat posed by explosives precursors and identify security gaps as they arise. In accordance with Article 14 of the Commission Decision establishing horizontal rules on the creation and operation of Commission expert groups, the Commission may establish sub-groups for the purpose of examining specific questions. The mandate of the SCP is currently rather broad and includes: monitoring and implementing the enforcement of the Regulation, facilitating a harmonised implementation of the Regulation across the different competent authorities, exchanging views and preparing delegated acts and legislative proposals. The sub-group would focus specifically on new and evolving threats (e.g. changes in the substances used to manufacture HMEs, new methods to gain access to explosives precursors, shift to lower concentration levels, etc.) and exchange information to identify and address security gaps before terrorists can misuse them. The procedure for adding substances to the Annexes of the Regulation would remain unchanged. Both general and sector-specific trends would be taken into account, and special attention would be paid to operational and investigative developments and to the experiences of Small and medium-sized enterprises (SMEs). The group would involve both Member States’ representatives and supply chain actors, and could include individuals who are not participating in the SCP. Meetings would be organised in a classified setting if the topics discussed would require so. The sub-group’s work would feed into the work of the SCP and support the Commission. ·Tasking Europol and the EU Intelligence and Situation Centre (EU INTCEN) to regularly report to the SCP. Europol, the EU’s law enforcement agency, enables the exchange of crime-related information, gathers and analyses intelligence and provides threat assessments. The European Counter Terrorism Centre (ECTC), which operates within Europol’s regulatory framework and organisational structure, aims to provide an effective response to terrorism by providing operational and strategic support to Member States. EU INTCEN provides assessments and briefings and a range of products based on open sources and intelligence from Member States’ intelligence and secret services. The Commission would request Europol and EU INTCEN to prepare regular reports for the SCP on the evolvement of the threat posed by explosives precursors. Tasking Europol and EU INTCEN to provide such updates would improve awareness of new and evolving threats and facilitate information sharing between Member States. If necessary, the reports could be accompanied by presentations and/or discussions during the meetings of the SCP. ·Adopting a Commission recommendation setting out detailed recommendations for licensing and registration regimes. To reinforce the existing restrictions the Commission would issue a recommendation with guidelines through which Member States could make their licensing and registration systems more robust. The recommendation would be based on good practices and would go beyond the existing guidance documents produced by the Commission. An overview of the topics that would be addressed in the recommendation can be found in Annex 10. ·Organising dedicated workshops on enforcement for public authorities and develop guidelines. The Commission, in cooperation with Member States, would organise a series of dedicated workshops on the enforcement of the Regulation. The workshops would be targeted at national authorities such as law enforcement, customs, inspections, and first responders. The workshops would result in the adoption, where possible by consensus, of guidelines. Issues that could be addressed in these guidelines would include: oOverview of possible surveillance activities with concrete examples of good practices; oClarification of the role of customs and best practices for custom’s controls; oClarification of reporting obligations (incl. type of information, procedures, actors involved, format, etc.); oTraining and awareness raising targeted at first responders. ·Establishing an SCP sub-group for inspection authorities. Similarly, to the first measure described under this option, this action would entail the creation of an SCP sub-group. This sub-group would organise separate meetings specifically aimed at representatives of national inspections authorities. The focus of this group would be on reporting, surveillance and inspection activities. The group could serve as forum to exchange information as well as a platform to share best practices. ·Organising dedicated workshops for the different actors in the supply chain. Besides the workshops on enforcement for public authorities, the Commission with support of the Member States would organise a series of targeted workshops aimed at the different actors and sectors (e.g. pharmaceuticals, cosmetics, fertilisers, etc.) in the supply chain. The focus would be on challenges to compliance for supply chain actors and good practices. Based on the input and feedback received during the workshops, the Commission would prepare guidelines for the supply chain. Issues that could be addressed in the guidelines would include: oDifferences between professional users and members of the general public;

oCorrect implementation of the labelling requirement; oIdentification of suspicious transactions; oReporting of suspicious transactions, disappearances and thefts. ·Promoting public-private dialogue between public authorities and online operators. The Commission would support an initiative to regularly bring together public authorities and online companies and marketplaces, in an effort to build a self-sustaining public-private dialogue around the risks related to the internet availability of explosives precursors. The aims of the initiative would be to both increase the understanding of the threat and vulnerabilities relating to the online market of chemicals and identify good practices to support prevention and detection. Among other topics, key challenges to discuss are the identification of products of concern, the short timeframe from order to dispatching and acquisition, cross-border transactions, the criteria for identifying suspicious transactions online, strategies for detecting non-compliance, and strategies for detecting multiple purchases across different marketplaces. This measure would address the concerns raised about online sales of explosives precursors. 5.1.3.Policy Option 2 - Strengthen and clarify the restrictions and controls of the Regulation The measures in this policy option clarify and amend the existing legal framework. They do not touch upon the essential characteristics of the Regulation, but strengthen and clarify existing restrictions on making available explosives precursors to members of the general public. More details are provided on how the supply chain and competent authorities can improve compliance with the Regulation. The second policy option encompasses the following measures: ·Expanding the scope of restricted explosives precursors. The current Regulation restricts the access to, and use of, seven restricted explosives precursors by members of the general public. This measure aims to expand the list of restricted precursors in Annex I with two more chemical substances that are frequently used for the making of HMEs, such as TATP, namely ammonium nitrate and sulphuric acid. Sulphuric acid would be added to Annex I of the Regulation. Illicit explosives used in several terrorist attacks committed in the EU in the recent years have been manufactured with sulphuric acid. The placing on the market of sulphuric acid is already regulated in the Eu due to its hazardous properties as a skin corrosive chemical substance (Annex VI of Regulation (EC) 1272/2008). Below the concentration limit of 15% w/w set in column 2 of Annex I, it is significantly more difficult to manufacture illict explosives with sulphuric acid, while it could still be used for the legitimate purposes for which it is made availble. Although the volume of trade in sulphuric acid in the EU is signficant, it is estminated that only around 0,5% of the sold product is made available to members of the general public. ·Adopting a faster procedure to add restricted explosives precursors. In order to swiftly accommodate developments in the misuse of substances as explosives precursors the Commission would be given the power to adopt a delegated act to list additional substances that are not to be made available to the general public. The criteria for assessment would include the level of threat associated with the explosives precursor concerned, the volume of trade in the explosives precursor concerned, and the possibility of establishing a concentration level below which the explosives precursor could still be used for the legitimate purposes for which it is made available. The Commission currently already has the power to change the limit-values of these restricted explosives precursors. ·Discontinuing the use of registration regimes. Instead of banning the access and use of restricted explosives precursors by members of the general public, the Regulation allows Member States to set up a registration scheme for three of the seven restricted explosives precursors, namely hydrogen peroxide, nitromethane and nitric acid. By discontinuing the possibility for these regimes under the Regulation, the general public would no longer be allowed to access and use these precursors through a mere registration of their transaction. The discontinuation of licensing schemes was considered at an early stage under this option. However, licensing is seen as a proportionate measure, which provides a balance between legitimate use and the need to protect. The majority of Member States with a licensing regime consider licensing as effective and efficient in preventing and detecting misuse and encouraging a behavioural shift of consumers towards available alternatives or lower concentrations, without restricting the free movement of explosives precursors. Stakeholder views confirmed this assessment. It was therefore decided that including the discontinuation of licensing schemes as a measure under policy option 2 would be too radical. ·Reducing the scope of and set an upper concentration limit for licensing. Member States would be allowed to set up or have in place licensing regimes, but licenses could only be requested for a limited number of restricted explosives precursors for which there exists substantial legitimate use by members of the general public (i.e. only the already restricted hydrogen peroxide, nitromethane and nitric acid and the newly proposed sulphuric acid). Moreover, an upper limit will be set for those substances. Above that limit, no licence may be issued as there is no substantial legitimate use for it by the public. This is already reflected in the Regulation, which sets the same upper limits in registration regimes for acquiring the precusors concerned. That means that a complete ban for members of the general public without any exeption would be established for the four other substances currently listed in Annex I of the Regulation above the concentration limit set out therein. As described in the evaluation, these four substances are already banned in 20 Member States and have generated virtually no demand for use by members of the general public in the eight Member States, in which licenses can be requested. The table below provides a schematic overview of the measures explained above. Name of the substance and Chemical Abstracts Service Registry number (CAS RN) Limit value Upper limit value for the purpose of licensing Hydrogen peroxide (CAS RN 7722-84-1) 12 % w/w 35 % w/w Nitromethane (CAS RN 75-52-5) 16 % w/w 40% w/w Nitric acid (CAS RN 7697-37-2) 3 % w/w 10% w/w Potassium chlorate (CAS RN 3811-04-9) 40 % w/w N/A Potassium perchlorate (CAS RN 7778-74-7) 40 % w/w N/A Sodium chlorate (CAS RN 7775-09-9) 40 % w/w N/A Sodium perchlorate (CAS RN 7601-89-0) 40 % w/w N/A Ammonium nitrate (CAS RN 6484-52-2) 16 % by weight of nitrogen in relation to ammonium nitrate N/A Sulphuric acid (CAS RN 7664-93-9) 15 % w/w 40% w/w ·Harmonising the circumstances to be taken into account by the competent authorities when issuing licenses. The Regulation currently requires the competent authorities to take into account all relevant circumstances, and in particular the legitimacy of the intended use. This would be detailed by taking into account specifically the availability of lower concentrations or alternative substances that would achieve a similar effect, the proposed arrangements to ensure that the restricted explosives precursor is kept securely and the background of the individual applying for a licence, in particular his or her criminal records. A uniform template for national licences will be annexed to the Regulation to facilitate the mutual recognition of licences between Member States that apply a licensing regime. ·Addressing the definitions of "member of the general public" and "professional user". The concepts of member of the general public and that of professional user are meant to be mutually exclusive, because restricted explosives precursors can be made available to professional users. The Regulation only defines the concept of members of the general public to which restrictions apply. In this option, the definition of member of the general public will be extended to cover also legal persons when they are acting for purposes not connected with trade, business or profession. A definition of professional user would be inserted in the Regulation. ·Clarifying the labelling obligation. The labelling provision of the Regulation will be changed to make clearer on which economic operator the obligation to label applies. The provision will also be amended to clarify that this obligation applies irrespective of the regime that is applied in the Member State of sale. This measure would strengthen controls and transfer of information along the supply chain. ·Require retail to make personnel involved in sale aware of the obligations of the Regulation and perform checks. Retailers are to ensure that their personnel involved in the sale to members of the general public is aware of the products that it offers and that contain explosives precursors, and demonstrably instructed regarding the obligations of the Regulation at this point in the supply chain. The checks as to licences would be reinforced by an identity check and retail would also be required to verify that any new prospective customer is a professional user. ·Clarifying that the Regulation also applies to companies operating online and establish guidelines. The Regulation will clarify that its restrictions and controls, and obligations on the supply chain, including retail also apply to companies operating online. As such, it is clear that online sales of explosives precursors would be within the scope of the Regulation and that restrictions also apply to online supply of the concerned substances. Dedicated discussions in the SCP would result in the adoption, if possible by consensus, of guidelines on the issue. ·Requiring Member States to set up inspection authorities, training and awareness-raising. The Regulation will require Member States to set up inspection authorities that are competent to inspect and control the correct application of the Regulation. Member States will also be required to provide training for law enforcement, first responders and customs authorities to recognise explosives precursors during the course of their duties and to react in a timely and appropriate manner to suspicious activity. Member States will also be required to organise awareness-raising actions, targeted to the specificities of each different sector using explosives precursors. ·Requiring members of the general public and professional users to report significant disappearances and thefts. The Regulation will expand the duty to report significant thefts and disappearances of substances in their possession to professional users and members of the public who have access to restricted substances.

5.1.4.Policy Option 3 – Introduce further controls along the supply chain Under this policy option, the existing legal framework would be revised in a significant way through a legislative intervention that would modify the essential characteristics of the current Regulation. The revision would introduce new controls along the supply chain and create additional obligations for the different actors involved. Proposed measures would include: ·Revising Annexes I and II –taking a more proactive approach. At present, the Regulation covers eighteen explosives precursors: seven substances are restricted and eleven others are only subject to a reporting of suspicious transactions obligation. New substances can be added to the Annexes to accommodate developments in the misuse of substances as explosives precursors. This decision is taken on the basis of several criteria: the level of threat associated with the substance(s) concerned; the volume of trade in the concerned explosives precursor(s); and the possibility of establishing concentrations below which the substance(s) could still be used for the legitimate purpose(s). The criteria would remain the same under policy option 3, but the first criterion (threat level) weighs heavier than the other two. Moreover, instead of responding to incidents by adding substances that have been used in attacks, the list of regulated substances would be revised and substances that have not (yet) been misused in Europe but which could be used to manufacture HMEs and/or have been used for this purpose in other regions, would be added. As a result, the scope of the Regulation would be extended and more substances would be covered by the restrictions. Many potentially dangerous substances would be restricted and would no longer be available to members of the general public due to their potential misuse. Limit values would also be lower than currently is the case to minimise the risk. ·Requiring reporting of suspicious transactions of non-scheduled substances. On top of the revision of the two Annexes, the Commission would also extend the reporting obligation and require economic operators to report all suspicious transactions, including those that concern non-scheduled substances. By redefining the scope of the obligation this way, the requirement becomes a ‘catch all clause’. As such, it could help to prevent the misuse of substances that have (not) yet been identified as potentially dangerous explosives precursors. It would also encourage economic operators to monitor their transactions better and to ensure that they know exactly what they are selling, in which quantities, to whom. ·Introducing a full ban on restricted explosives precursors for members of the general public (including online sales). This measure would revoke the exemptions for Member States to set up and maintain licensing and registration regimes, in order to give members of the general public access to restricted explosives precursors above certain concentrations. The introduction of a full ban would end the three-tiered system that currently exists and harmonise Member States’ regimes. Whilst this change would not affect the Member States that already have a ban, it would represent a major change for the countries that have licensing or registration systems in place. The acquisition, possession and use of restricted explosives precursors above certain limit values would be limited to professional users, who need these substances for their profession, business or trade. Members of the general public, even if they intend to use the concerned products for legitimate purposes, would no longer be allowed to have access to restricted explosives precursors. This ban would equally apply to online sales of restricted explosives precursors. ·Requiring the registration of transactions involving professional users. To monitor the use and acquisition of restricted substances by professional users, a new obligation would be introduced which would require the registration of all transactions of restricted substances involving professional users. The procedure would be very similar to the system currently foreseen for the registration of transactions involving members of the general public. The register would have to be kept for five years from the date of the transaction and should be available at any time for inspection. The following information would be included in the register: the name, address and the VAT number of the users concerned; the name of the substance(s) or mixture(s) and the concentration(s), the amount of the substance or mixture concerned; the date and place of the transaction, and the signature of the professional user. ·Requiring electronic registrations of transactions involving professional users to be forwarded to the competent authorities in real time. In addition to introducing a requirement concerning the registration of transactions of explosives precursors listed in Annex I involving professional users, policy option three also foresees the real time transfer of the data concerned to the competent authorities. By forwarding information about transactions involving restricted substances to the competent authorities, relevant services would be aware of all transactions involving professional users that are taking place. In case of a suspicious transaction, the authorities could directly intervene and trace the professional user involved in the transaction. If necessary, the information could be shared with other Member States’ authorities. This requirement would probably require the creation of an IT system connecting economic operators to the competent national authorities and allowing real time exchanges of information or another solution to transfer the electronic information to the competent authorities. ·Requiring the registration of economic operators at national level. Economic operators who intend to manufacture, distribute or sell regulated substances (Annex I and/or Annex II) and/or mixtures/substances containing them, would be required to register in a national register. In order to be registered they would have to provide the following information: name, address, VAT number; contact details, and the activity for which they need the concerned substances/role in the supply chain. Such a register would not only provide a comprehensive overview of the different actors involved in the supply chain, it could also help the competent authorities to identify relevant economic operators and target them in their awareness campaigns. ·Requiring the labelling of Annex I and Annex II substances and mixtures. The current Regulation requires economic operators who intend to make restricted explosives precursors (Annex I) available to members of the general public to label their products. The label signals that the product concerned is subject to certain restrictions. Under policy option three, members of the general public would no longer have access to substances listed in Annex I. Nevertheless, economic operators would be required to label all regulated explosives precursors (Annex I and Annex II) and/or substances containing them. This would facilitate the identification of explosives precursors and help to raise awareness. The label for restricted substances would clearly indicate that the product should not be made available to members of the general public. The label for substances listed in Annex II would state that suspicious transactions involving the substance concerned should be reported. ·Requiring information on explosives precursors to be incorporated in bar codes. To improve the transmission of information along the supply chain, economic operators would be required to include information on the restriction and reporting obligations in the barcodes of substances and mixtures of concern. Bar codes are already used to transfer a variety of (product) information, such as: type of product, serial number, lot number, expiration date, etc. By transmitting information about the applicable requirements in the barcode, the different actors in the supply chain are automatically when they scan the code. This requirement would only apply to products that bear a bar code, it does not impose an obligation on economic operators to use bar codes, if they do not do so yet. Policy option 1 Policy option 2 Policy option 3 Establishing an SCP sub-group to regularly discuss the evolving threat posed by explosives precursors and identify security gaps as they arise. Tasking Europol and the EU Intelligence and Situation Centre (EU INTCEN) to regularly report to the SCP. Adopting a Commission recommendation setting out detailed recommendations for licensing and registration regimes. Organising dedicated workshops on enforcement for public authorities and develop guidelines. Establishing an SCP sub-group for inspection authorities. Organising dedicated workshops for the different actors in the supply chain. Promoting public-private dialogue between public authorities and online operators. Expanding the scope of restricted explosives precursors. Adopting a faster procedure to add restricted explosives precursors. Discontinuing the use of registration regimes. Reducing the scope of and set an upper concentration limit for licensing. Harmonising the circumstances to be taken into account by the NCAs when issuing licenses. Addressing the definitions of "member of the general public" and "professional user". Clarifying the labelling obligation. Require retail to make sales personnel aware of the obligations of the Regulation and perform checks. Clarifying that the Regulation also applies to online sales and establish guidelines. Requiring Member States to set up inspection authorities, training and awareness-raising. Requiring members of the general public and professional users to report significant disappearances and thefts. Revising Annexes I and II – taking a more proactive approach. Requiring reporting of suspicious transactions of non-scheduled substances. Introducing a full ban on restricted explosives precursors for members of the general public (including online sales). Requiring the registration of transactions involving professional users. Requiring electronic registrations of transactions involving professional users to be forwarded to the competent authorities in real time. Requiring the registration of economic operators at national level. Requiring the labelling of Annex I and Annex II substances and mixtures. Requiring information on explosives precursors to be incorporated in bar codes. 5.2.Measures discarded at an early stage The following measures were considered at an early stage but subsequently discarded: ·Extending the scope of the Regulation to cover pyrotechnic articles. ·Ban sales of restricted explosives precursors over the internet. ·Exempt inhibited substances from the restrictions. ·Introduce requirements on storage. ·Require economic operators to obtain a licence from the competent authorities before they may possess, use, or make available restricted explosives precursors.

·Introduce restrictions on exports. ·Develop a platform at EU level to exchange information on suspicious transactions, disappearances, and thefts, as well as licences granted and denied. At an early stage, it was also decided to examine and compare four different, separate policy options instead of combinations of sub-options. A detailed overview of the measures considered and the reasons why they were discarded can found in Annex 7. 6.What are the impacts of the policy options? The policy options have been assessed against their potential effectiveness, economic, social, environmental and fundamental rights impacts. 6.1.Effectiveness Effectiveness measures to what extent the different policy options contribute to the specific objectives described in section 4.2. The baseline scenario would make a limited contribution to the achievement of the specific objectives of the initiative. Under this scenario, some of the challenges that have emerged from the evaluation would persist and hinder the effective achievement of the specific objectives of the Regulation. Should the status quo be maintained, limited harmonisation among Member States would continue to exist, as differences in national implementing practices of the Regulation would remain. In the absence of EU intervention, unclear provisions of the Regulation would continue to be differently interpreted by Member States and economic operators would continue to face difficulties in identifying products of concern and legitimate users, and encounter challenges for compliance with the Regulation’s requirements. Costs to comply and information costs would therefore continue to be high. The level of enforcement could progressively increase over the years, since concerned national authorities would become more familiar with the punishable offences related to the Regulation and would improve their knowledge of the supply chain and identified the relevant actors to control. However, the framework would remain fragmented as Member States would continue to put different efforts in the enforcement of the Regulation and the complexity of the supply chain would continue to hinder the proper identification of relevant economic operators. Due to the difficulties encountered in reaching all actors of the explosives precursors supply chain, it is likely that awareness raising activities of NCAs would continue to cover only part of the relevant actors. Moreover, the voluntary nature of awareness raising activities of economic operators, together with the poor clarity of some Regulations’ provisions and difficulties to identify concerned products would continue to reflect in different implementing practices. Should the present situation be maintained, the level of reporting to the NCP could increase as practices and rules will be better known, but differences would continue to remain from one Member State to the other, and the level of reporting is expected to remain suboptimal, as awareness would likely continue to be uneven. Differences in the implementation of the EU Regulation would continue to generate security issues, such as limited traceability of transactions, insufficient levels of reporting and different practices and enforcement efforts in different Member States, and obstacles would remain as for the free movement of substances across Member States. Possible deterioration of the status quo may derive from the absence of certain threat substances in Annex I to the Regulation and from the insufficient level of attention given to internet sales. As for this latter, ambiguities on the application of the Regulation to online market places would remain therefore leaving security concerns and distortions in the market of chemical substances. Policy option 1 makes an overall positive contribution towards the achievement of all specific objectives. However, the impact level across these objectives varies significantly, between moderate and small, and could be deemed, as a whole and owing largely to the voluntary nature of the measures proposed, insufficient to address the current security context. The measures proposed under this option would be effective, to a moderate extent, in achieving two specific objectives: increasing enforcement capacity of the relevant public authorities and improving transmission of information and compliance along the supply chain. As for the former, workshops targeting the different public authorities with a role in implementing and enforcing the Regulation (notably, law enforcement, first responders, and customs authorities) would facilitate the exchange of different experiences and views, allow the identification of good practices, and increase the exchange of relevant cross-border information, all of which would contribute effectively towards increasing enforcement capacity. An SCP sub-group for inspectors could facilitate the setting up of dedicated inspections systems in Member States that do not already have them, and building a platform for dialogue with online operators would also provide tools to Member States who have not traditionally engaged internet companies and marketplaces. With regard to the second specific objective, bringing together the different actors and sectors of involved in the supply chain, in dedicated workshops, would increase the level of awareness and understanding and have a positive impact on the transmission of information along the supply chain. This would facilitate key aspects of compliance, such as the identification of products falling under the scope of the Regulation and the identification and reporting of suspicious transactions. Building a public-private dialogue on internet availability would similarly contribute to effectiveness in that very specific sector. In addition, measures aimed at Member States, like the workshops for public authorities and the SCP sub-group for inspectors, would indirectly contribute to improved compliance by the supply chain, as better enforcement practices would certainly bring about a more constructive approach to engaging the supply chain and working in partnership with businesses. To an important, but lesser extent, the measures would also allow the EU, Member States, and the supply chain, to align restrictions and controls with the evolving threats. The participation of competent authorities, NCPs, relevant stakeholders from the supply chain, as well as Europol and EU INTCEN to regular meetings dedicated to the threat posed by explosives precursors, would ensure all parties with a role in restricting and controlling have the latest information and can adjust their efforts accordingly. Law enforcement, in particular, would be able to focus their actions on the most urgent threats, including emergent threats. Competent authorities would gain a better understanding of the security context and factor this understanding into their decision-making process. The supply chain could adjust their criteria for identifying suspicious transactions and their strategies for knowing customers and verifying the intended use of the substances supplied. Europol and EU INTCEN would collect valuable data to analyse and cross-check at EU level, and the quality and relevance of their reporting back to Member States would improve over time. The Commission would be able to make sure of its delegated powers to add substances into Annex II and change the limit values of substances in Annex I, on the basis of the information received and in a relatively short time, although the addition of substances into Annex I would remain slow. Importantly, this option would help, over time, build trust over the sharing of sensitive but valuable information. However, this policy option would fall short of ensuring effectiveness in what concerns the three remaining specific objectives.

Regarding the strengthening of restrictions and controls, in the absence of legislative measures, the Commission’s Recommendation would contribute to making some of the current licensing and registration regimes more robust. However, Member States who do not take action on the basis of the Recommendation, and those maintaining a ban regime, would not strengthen the level of restrictions and controls in their territories since the legal framework would remain the same. The Commission would have to rely on a future legislative initiative to tighten security around explosives precursors in a significant way and across the entire Union. With regard to simplifying and clarifying the Regulation, dedicated workshops for the relevant public authorities and supply chain actors would shed some clarity on a limited number of issues, such as who is responsible for labelling and who is or is not a member of the general public. This would be mostly the result of discussing the meaning of certain provisions in the Regulation and agreeing on a common interpretation. On a number of issues, agreeing on a common interpretation might prove elusive, however, and therefore the impact on this specific objective would be at times null. This policy option would therefore not be as effective in simplifying and clarifying the Regulation as if the text of the Regulation itself was amended. As for facilitating intra-EU trade and preventing distortion of competition, the Recommendation for licensing and registration regimes and an SCP sub-group for inspection authorities would achieve some uniformity in the practical application of the Regulation. This would effectively reduce uncertainty for economic operators who conduct their business across EU borders, as they would face more similar approaches to the rules in the different regimes. As a result, their operations would gain in agility and competitiveness. The gain, however, would risk being minimal as the legal framework, and therefore the actual rules, would not change. The incentive for Member States to change their practices and adopt the Recommendation and the good practices identified in the SCP subgroup would be limited and adoption itself would likely be too slow to be effective in a reasonable timeframe. Despite the positive contribution of policy option 1 to effectiveness, across all specific objectives, the level of impact would be limited. The main reason behind this is the non-legislative nature of the measures. Because participating to the proposed sub-groups and workshops, and putting the recommendations, guidance, and codes of conduct into practice, would be ultimately voluntary, full coverage across the Union and along the supply chain is unlikely to be achieved. As a result, this policy option would most likely lead to Member States and different actors in the supply chain advancing at different speeds. In the context of the threat posed by explosives precursors, this would create opportunities for terrorists and criminals to exploit the weakest links and would therefore be detrimental to maximising the effectiveness potential of an initiative by the Commission. Policy option 2 would contribute equally to the security–oriented and internal market-related specific objectives. The list with restricted substances is extended in line with the evolving threat of HME, which shows that sulphuric acid has repeatedly been used to manufacture the most popular HMEs (TATP and HMTD) and with reportedly relative ease. The substance is already dangerous as such due to its corrosive nature and has been used to inflict injuries upon people in acid attacks. The concentration up to which nitromethane can be made available to the general public will be lowered, in line with a recommedation of a EU funded project that considers this would significantly reduce the threat and potential misuse of nitromethane. The transfer of the restriction related to Ammonium Nitrate from REACH will make the legal framework more coherent and hence the more likely to be complied with and enforced. By delegating the power to add substances for restriction to the European Commission, the Regulation will be more agile and adaptable to close security loopholes in a rapidly evolving threat environment. The possibilities for the general public to access precursors that are already restricted, but remain popular for the production of HME, will be further reduced. Explosives precursors will be completely banned above a certain concentration for which the general public has no need. For those explosives precursors for which the public has a need, they will only be able to access those explosives precursors through a licence, which would allow for background checks of the individual before a purchase is made. It will therefore no longer be possible to access highly concentrated hydrogen peroxide through a mere registration of the transaction. By contrast, experience demonstrates that licensing regimes can be very effective in restricting access of precursors above the concentration limit to the general public, while allowing for legitimate use by members of the general public. The cost of the licence and the burden of the procedure to apply the inconvenience of applying for a licence, seems to deter individuals from purchasing the above concentration threshold chemicals. The number of licence applications has decreased significantly every year since the Regulation is into force. Although licences can be provided for a period of up to three years, it also indicates that restrictions, such as a licensing regimes, have a limiting effect on the demand for precursors above the concentration limit. In most cases, it may be assumed that consumers would use products with lower concentrations, as they may be discouraged from applying for a license. Producers have anticipated and reacted to the decrease in demand by seeking to manufacture and market products containing alternative substances or containing lower concentration of restricted explosives precursors. The result is that precursors are less available to the general public and consequently, also to terrorists and other criminals. The establishment of minimum common criteria for granting or refusing licences would lead to more uniform security standards and will further restrict access to explosives precursors in those Member States which applied less stringent rules and strengthening controls, for example by making background checks compulsory. The positive impact on security will be strengthened by the addition of conditions on the acquisition of precursors, for example asking end-users to respect storage conditions and reporting of thefts and disappearances. The existence of common licensing criteria will create a more homogeneous playing field, and facilitate the work of companies active in different Member States. This measure will aid mutual recognition of licences, which would smooth the functioning of the internal market, favouring the movement of precursors that may be acquired for legal purposes in the same way in those countries applying licensing. In general, limiting exceptions to the ban for the general public will simplify the legal framework and make it clearer. Rules across the EU will be more homogeneous, facilitating intra-EU trade, competition and close forum-shopping. The clarification that online operators fall under the Regulation will also contribute to ensuring a level playing field among companies operating on- and offline, and closing a significant security gap which criminals and terrorist are currently increasingly exploiting. A majority of respondents to the OPC consider the lack of restrictions and controls applied to legal persons as posing a security concern. By being included in the definition of "members of the general public", legal persons would only be allowed to access precursors if they have a need for this following from their profession. This need would also be reflected in the newly defined concept of "professional user", clarifying who can and who cannot have access to restricted explosive precursors. These clarifications in the definitions will have a positive impact on uniformity in the application of the Regulation and reduce difficulties for companies. It will reduce the current subjectivity and uncertainties that leave room to unlawful transactions. The whole supply chain will be better informed through targeted awareness raising actions. By clarifying the labelling obligation, downstream actors of the supply chain will be supplied with the information needed to apply consistently the requirements of the Regulation. It will diminish current uncertainties of economic operators linked to the lack of clarity in the allocation of responsibilities along the supply chain and therefore ensuring similar types of costs for similar economic operators between MS. By clarifying that the label applies in all Member States, irrespective of what regime is applied, cross-border trade is facilitated and distortion of competition avoided. The staff involved in sale to final users will be trained on which product can only be made available after a check, leading to better compliance with the Regulation. This staff is responsible in the first instance to identify suspicious transactions. In doing so, this measure should improve the compliance of retailers to the Regulation's requirement and eventually ensure a wider a consistent assessment of suspicious transactions. This measure will also improve the functioning of the internal market by ensuring a level playing field where all retailers operating in the explosives precursors market will bear the same costs for training and ultimate contribute to ensuring equal conditions to sale transactions of professional users and members of the general public in all MS. A dedicated inspection authority in each Member State, and training for public authorities that may deal with explosives precursors, will increase the enforcement capacity across the EU. This will improve the awareness of LEAs, first responders and customs authorities on the requirements of the Regulation and on its "weakest links" (e.g. controls on internet sales, controls on imports from third countries) and eventually improve the quality of controls performed on products entering and circulating in the internal market. Similar controls applied in all Member States will likely create a more secure environment for businesses and limit potential market distortions linked to the existence of different enforcement systems at national level. By implementing training for law enforcement, first responders and customs authorities, this measure will also contribute to create a more secure environment for businesses and cross-border transactions. Policy option 3 would contribute more to the security –oriented specific objectives than those related to the internal market. Policy option 3's effectiveness is high for the objecti