EUROPEAN COMMISSION Brussels, 19.12.2017 SWD(2017) 475 final COMMISSION STAFF WORKING DOCUMENT REFIT EVALUATION Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the mutual recognition on goods lawfully marketed in another Member State {COM(2017) 796 final}

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Contents 1.Context 2.Background to the mutual recognition principle and Regulation 2.1Baseline 2.2Objectives of the mutual recognition principle and Regulation 2.3Description of the mutual recognition principle and Regulation 2.3.1The mutual recognition principle and its tools 2.3.2The Mutual Recognition Regulation 3.Evaluation questions 4.Method 4.1External studies 4.2Desk research 4.3Stakeholders consultation 5.Limitations and assessment of robustness of findings 6.Implementation state of play 6.1Implementation of the mutual recognition principle 6.2Application of Regulation (EC) No 764/2008 6.3Compliance with the Regulation (EC) No 764/2008 7.Answers to the evaluation questions

7.1Effectiveness: Evaluating to what extent mutual recognition achieved its objectives 7.1.1Facilitating free movement of goods in the non–harmonised area through mutual recognition 7.1.2Increasing awareness of the mutual recognition principle 7.1.3Ensuring legal certainty when using the mutual recognition principle 7.1.4Improving administrative cooperation between national authorities (Mutual Recognition Regulation) 7.1.5Conclusion on effectiveness 7.2Efficiency: Measuring the cost effectiveness of the mutual recognition principle and Regulation 7.2.1Costs for public authorities 7.2.2Costs for businesses 7.2.3Some practical illustrations at sectorial level 7.2.4Costs for the Commission 7.2.5Benefits for national authorities 7.2.6Benefits for businesses 7.2.7Benefits for consumers 7.2.8Comparing costs and benefits 7.2.9Conclusion on efficiency 7.3Coherence: how mutual recognition fits in the other EU policies 7.4Relevance: assessing the continuous need for mutual recognition 7.5EU added value: Evaluating what mutual recognition brings to the EU 8.Conclusion

Annex 1: Procedural Information Annex 2: Stakeholder's Consultation 1.OBJECTIVES OF THE CONSULTATION 1.1Consultation methods and tools 2.RESULTS OF THE CONSULTATION ACTIVITIES 2.1Meetings of the Mutual Recognition Consultative Committee 2.2Stakeholder conference of 17 June 2016 2.2.1Main meeting 2.2.2Workshops 2.3Public Consultation 2.3.1How stakeholders see mutual recognition and its potential shortcomings 2.3.2Functioning of the Mutual Recognition Regulation 2.3.3Assessment of communication when using Mutual Recognition 2.3.4Priorities to improve Mutual Recognition 2.3.5Options 2.4Surveys carried out by the external contractors 2.5Other contributions received (position papers or e-mail) 3.FEEDBACK TO STAKEHOLDERS Annex 3: Methods And Analytical Tools Used In Preparing The Evaluation 1.Literature review and analysis of publicly available statistics

1.1The macro context 2.Exploratory interviews with Commission officials and representatives of European business associations 3.Surveys targeting different stakeholders affected by the mutual recognition principle 3.1National business and sector organisations (umbrella organisations targeting a broad range of sectors) 3.2Companies 3.3National product contact points 4.Qualitative interviews Annex 4: Overview of the assessed literature and case law 1.Literature 2.Recent case law of the CJEU on mutual recognition Annex 5: Results of the public consultation 1.TYPE OF RESPONDENTS 2.HOW STAKEHOLDERS SEE MUTUAL RECOGNITION AND ITS POTENTIAL SHORTCOMINGS 3.FUNCTIONING OF THE MUTUAL RECOGNITION REGULATION 6.ASSESSMENT OF COMMUNICATION WHEN USING MUTUAL RECOGNITION 7.PRIORITIES TO IMPROVE MUTUAL RECOGNITION Annex 6: Case studies 2016 1.Manufacture of other food products: food supplements 1.1Introduction 1.2Background

1.3Stakeholders involved 1.4Practices and trends identified and main issues related to the application of Mutual Recognition 1.5Conclusions 2.Products in contacts with drinking water 2.1Introduction 2.2Background 2.3Stakeholders involved 2.4Practices and trends identified and main issues related to the application of Mutual Recognition 2.5Conclusions 3.Food Contact Materials 3.1Introduction 3.2Background 3.3Stakeholders involved 3.4Practices and trends identified and main issues related to the application of Mutual Recognition Annex 7: Overview of notifications 1.Overview notifications Regulation (EC) No 764/2008 2.Overview of Member States annual reports 3.Overview inquiries received by PCPs Annex 8: RESULTS OF THE EXTERNAL EVALUATION PERFORMED BY DTI, TECHNOPOLIS, E&Y AND VVA CONSULTING (2015) 1.Stakeholder’s views on whether the Mutual Recognition principle has achieved its objectives

2.Awareness of the principle among enterprises, strategies concerning mutual recognition, and cost of insufficient application of the principle 3.Awareness and application of the principle by the Member States 4.Markets and sectors with the most problems 5.Typology of obstacles 6.Conclusions: effectiveness and efficiency 7.Recommendations Annex 9: SHORT COMPANY CASES Annex 10: Overview of directive EU 2015/1535 (TRIS) Executive summary PART I: STANDARDISATION 1.Introduction 2.Information procedure 2.1Operation of the procedure from 2011 to 2012 2.2Conclusion 3.Mandates 3.1Operation of the mandating process 2011-2012 3.2Trends in mandates 3.3Conclusion 4.Formal objections 4.1Operation of the procedure from 2011 to 2012

4.2Conclusion 5.New Legislative Framework PART II: TECHNICAL REGULATIONS 1.Developments 2011-2013 1.1Use of the procedure within the context of “Better regulation” 1.2Use of the procedure to improve competitiveness 1.3Improvements in managing the 98/34 procedure 2.Application of the 98/34 procedure 2.1 Effectiveness: general overview 2.3 Use of the urgency procedure 2.4Notification of ‘fiscal or financial incentive measures’ 2.5Follow-up to Commission reactions 2.6Follow-up to the notification procedure 2.7Dialogue with the Member States 2.8Requests for access to documents issued under Directive 98/34 2.9 Conclusion Annex 11: Summaries of the meetings of the Consultative “Mutual Recognition Committee” 1.Minutes of the first meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 4 March 2009 2.Minutes of the second meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 19 November 2010 3.Minutes of the third meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 30 November 2011

4.Minutes of the 4th meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 7 December 2012 5.Minutes of the 5th meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 6 December 2013 6.Minutes of the 6th meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 5 December 2014 7.Minutes of the 7th meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 2 December 2015 8.Minutes of the 8th meeting of the Consultative ‘Mutual Recognition Committee’ held in Brussels on 25 October 2016 Annex 12: Study of the Danish Business Association 1.Executive summary 2.Introduction 3.Methodology 4.Main findings 5.Case examples 6.Policy recommendations – The way forward…



1.Context Obstacles to the free movement of goods within the single market can be eliminated by harmonising national legislation or through the principle of mutual recognition. Mutual recognition is seminal for the proper functioning of the single market for goods. It consists of a principle, embedded in Articles 34 and 36 of the Treaty on the Functioning of the European Union (TFEU), and further elaborated on in the case law, and in a legal act, Regulation (EC) No 764/2008 (the Mutual Recognition Regulation), defining the practical modalities of its implementation. If a business is lawfully selling a product in one Member State, it should be able to sell it in other Member States without adapting it to the national rules of that Member State, even when there are no common European rules on how the product has to be manufactured (rules on i.e. characteristics of the product, size, composition, etc.). The right to sell a product lawfully marketed in another Member State can be refused only when the Member State of destination has diverging product requirements whose mandatory imposition is justified by the need to protect a certain public interest, and those requirements are necessary and proportionate for achieving that objective. This is the principle of mutual recognition in the field of goods. Annex 4 contains an overview of the relevant case law on the basis of which the principle was elaborated.

The practicalities of how mutual recognition works in practice are defined by the Mutual Recognition Regulation. The Regulation introduces procedural guarantees to ensure on one hand that businesses can easily invoke their right to mutual recognition, and on the other hand that Member States use their right to deny mutual recognition in the light of the proportionality principle. In December 2013, the Conclusions on Single Market Policy, adopted by the Competitiveness Council, recalled that to improve framework conditions for businesses and consumers in the Single Market, all relevant instruments should be appropriately employed, including harmonisation and mutual recognition . The Commission was therefore requested to report to the Council on the sectors and markets where the application of the principle of mutual recognition is economically most advantageous, but where its functioning remains insufficient or problematic. In response to the indications that the functioning of the principle might not be optimal, and taking into account the request of the Council, the application of the principle of mutual recognition was subject to an external evaluation , part of the REFIT agenda in 2014 . Its objective was to assess the functioning of the principle, in terms of efficiency and effectiveness. Among the shortcomings identified the external evaluation pointed out the limitations of the Mutual Recognition Regulation and recommended several ways forward to improve its application. These conclusions triggered the need to evaluate the Mutual Recognition Regulation, and to complement the evaluation of the mutual recognition principle. This evaluation will assess the functioning of mutual recognition in the field of goods, i.e. the mutual recognition principle and the Mutual Recognition Regulation. According to the 'Better Regulation Guidelines, evaluations are an essential step to managing and revising the existing body of EU legislation and policies and should precede the impact assessment, in line with the "evaluate first" principle. This evaluation will assess to what extent mutual recognition has achieved its original objectives in term of effectiveness, efficiency, relevance, coherence, and EU value-added. Its findings should feed into the impact assessment of the planned initiative on achieving higher and better mutual recognition, called upon in the Single Market Strategy, Upgrading the Single Market: more opportunities for people and business, adopted on 28 October 2015 , and one of the main objectives of the 2017 Commission Work Programme . This initiative, called "the Goods package", aims to give citizens and businesses the assurance that the Single Market protects and empowers them. People need to be confident that products available on the market can be trusted, their rights as consumers are not undercut, and businesses need to be confident that they can sell their products throughout the EU and that competition is fair. Therefore, the Commission is proposing, on the one hand, to strengthen the implementation of EU harmonisation legislation by supporting compliance and enforcement and on the other, to give a major boost to mutual recognition in the area of goods. The initiative has been linked to the REFIT programme due to the impacts the malfunctioning of mutual recognition has on the functioning of the internal market. The evaluation will therefore examine the extent to which the legal framework for mutual recognition is fit for purpose and delivers its intended benefits while avoiding undue costs. 2.Background to the mutual recognition principle and Regulation 1.1Baseline The principle of mutual recognition, stemming from Articles 34-36 TFEU and elaborated on the basis of case law, requires that, notwithstanding technical differences between the national rules that apply throughout the EU, the Member State of destination may not prohibit the sale on its territory of products that are lawfully marketed in other Member States, even if those were manufactured in accordance with different technical rules. The only possibility for Member States to deny market access for products lawfully marketed in another Member States is on the basis of overriding interests linked to the protection of public interest such as protection of health, consumers, environment, etc. Therefore, the application of mutual recognition is not automatic. It can be lawfully denied if Member States demonstrate that, by not complying with its own national rules, a product lawfully marketed in another Member State would endanger the protection of a given the public interest. Mutual recognition aims to facilitate the free movement of goods, where there are no EU harmonised rules governing the marketing of products or parts thereof, while maintaining a high level of protection of public interests. It is particularly relevant for innovative products, where businesses need to rely on existing national rules or deal with the absence of such rules in order to launch new products on the market. Applying the mutual recognition principle also consists of scrutinising national technical rules, in order to identify those undermining free movement of goods. This was done mainly by: ·Requiring the insertion of a so called "mutual recognition clause" in the new national technical regulations, when those are notified to the Commission via Directive (EU) 2015/1535 ·Dealing with complaints and infringements of free movement of goods as guaranteed by Articles 34-36 TFEU Yet, the application of the mutual recognition principle in practice was challenging since its introduction by the Court of Justice in 1979. Already in 1996, the Commission highlighted in a communication to the Parliament and the Council the difficulties of applying the mutual recognition principle in practice. These concerns were reiterated again in a Commission Working Document in 1998, and in a communication from 1999. Furthermore, the surveys carried out in 2002 for the second biennial report on the functioning of mutual recognition indicated that about 35% of businesses reported problems with mutual recognition, and about 50% of them decided to adapt their products to the rules of the Member State of destination. Furthermore, about 25% of the complaints received in the area of free movement of (non -harmonised) goods related to mutual recognition, and market access for products constituted one of the most important problems registered by SOLVIT. The Commission analysed the reasons for this in 2007 and reached the following conclusion: The lack of awareness about the mutual recognition principle, the legal uncertainty about the scope of the principle and the burden of proof, the risk for enterprises that their products will not get access to the foreign market or that they will have to be withdrawn from the market of the destination Member State, and the absence of a dialogue between competent authorities in different Member States prevents the achievement of free movement of goods in the non-harmonised area. Following this analysis, it was estimated that, depending on the product, the differences between technical rules in different national markets, combined with the need for multiple testing and certification, may constitute between 2% and 10% of overall production costs. However, the 2007 analysis was based on a very theoretical methodology to estimate macroeconomic impacts, such as estimates as a percentage of increase in GDP. As these estimates could not be verified ex post, the findings of the 2007 analysis were not considered reliable enough to be used as a basis for the evaluation. The adoption of Regulation (EC) No 764/2008 (‘the Mutual Recognition Regulation’) was a response to the suboptimal application of the principle of mutual recognition in the field of goods, mainly aimed at addressing the issues identified and establishing a procedural framework to minimise the possibility that national technical rules create unlawful obstacles to the free movement of goods between Member States. 1.2Objectives of the mutual recognition principle and Regulation The objective of the mutual recognition principle is to guarantee free movement of goods in the internal market, in the absence of harmonised rules. The principle allows goods to move freely, despite the existence of different and potentially divergent national technical rules. As for the Mutual Recognition Regulation, it aimed to increase awareness of the mutual recognition principle, ensuring legal certainty for national authorities and businesses and improving administrative cooperation between national authorities. 1.3Description of the mutual recognition principle and Regulation This section describes the different components of mutual recognition. 1.3.0The mutual recognition principle and its tools The mutual recognition principle applies in the area of products that are not subject to EU common rules (non - harmonised products) or to aspects of products falling outside the scope of such legislation (partially harmonised products). It allows a product lawfully marketed in a Member State to be sold in other Member State, despite the fact that this product complies with different technical rules. Exceptions to this principle are justified on grounds of the protection of public morality or public security, the protection of health and life of humans, animals or plants, provided for under Article 36 TFEU or on the basis of overriding requirements of general public importance recognised by the case law of the Court of Justice, and also that they are proportionate to the aim pursued. The mutual recognition principle would apply in the area of childcare articles, textiles, decorative articles, furniture, lighters, cooking accessories, etc. The principle applies to the marketing of the whole product, or to aspects of it, if it is a partially harmonised product. For example, textiles: the content of chemicals that may be present in textiles is harmonised, but the lengths of the cords for children's textiles (to avoid strangulation risks) is left to national discretion (and thus subject to mutual recognition). Mutual recognition also applies to a number of non-consumer products. For example, while certain measuring instruments such as taximeters or water meters are subject to EU harmonisation legislation, others such as radars for speed measurement or breathalysers for estimating blood alcohol content are not. ·The mutual recognition clause The clause is one of the tools allowing for the correct application of the mutual recognition principle. In its 2002 Communication on the application of the mutual recognition principle, the Commission recommends the insertion of a mutual recognition clause in national technical rules notified under Directive (EU) 2015/1535, to give the concerned economic operators a precise and clear understanding of their rights and obligations with regards to the application of that rule to their products lawfully marketed in other Member States. In practice, the clause refers to the mutual recognition principle and procedural guaranties of the regulation; it expressly mentions that products lawfully marketed in other Member States are allowed to enter the market despite not fully complying with this national technical regulation.

·Complaints and infringements related to Articles 34-36 TFEU The Commission monitors whether Member States comply with the EU law and whether their national rules undermine the free movement of goods. To ensure that internal market rules are respected and applied correctly in the area of non-harmonised goods, the Commission follows up complaints based on alleged breaches of Article 34 which cannot be justified. 1.3.1The Mutual Recognition Regulation The Regulation lays down the rules and procedures to be followed by the national authorities of a Member State when taking or intending to take a decision, in accordance with the national technical rules, which would hinder the free movement of a product lawfully marketed in another Member State and subject to Article 34 TFEU. Therefore, the Regulation only applies when national authorities intent to restrict market access, and not before. It applies when: a.national authorities intend to take an administrative decision, b.concerning a product lawfully marketed in another Member State, c.concerning a product or aspects of a product which are not subject to harmonised EU legislation, d.addressed to economic operators, e.based on a national technical rule, and f.has a restrictive effect on the product, namely that it will be: I.prohibited from being placed on the market, II.modified or subject to additional testing before it can be placed or kept on the market, or III.withdrawn from the market This means that the Regulation does not apply to prior authorisation procedures, as the requirement that the placing of a product on the market is subject to prior authorisation is not a technical rule within the scope of the Regulation. However, the decision to deny prior authorisation merely because the product does not comply with the national rules in the Member States having the prior authorisation procedure is a decision within the scope of the Regulation. ·Assessment by Member States of the need to apply a technical rule and information to the economic operator The mutual recognition principle is not automatically applied. It is not an obligation on Member States, but a right which can be invoked by economic operators wishing to trade their products in the internal market. Member States may decide that the application of a national technical rule, to the detriment of mutual recognition, is necessary, based on the need to protect a given public interest. However, the Regulation places the burden of proof on the national authorities intending to deny market access. A written notice has to be sent to the economic operator, informing him about their intention to deny market access, and specifying the technical rule on which the decision is based, and the supporting technical or scientific evidence which makes the decision justified and proportionate. The economic operator has the right to submit comments. Any decision denying market access taken after receiving comments from the economic operator shall be notified to him, and shall state the grounds on which it is based, the technical or scientific evidence supporting the decision and, when applicable, the reasons for rejecting the economic operator's arguments. The decision shall also indicate the remedies available under national law in order to challenge the decision. ·Product Contact Points Economic operators may wish to know about the applicable national rules before entering a market. The Regulation contains the obligation on Member States to establish Product Contact Points in their territories. The Product Contact Points provide, upon request, information on the technical rules applicable to a specific product, the contact details of the competent authorities in charge of supervising the implementation of the technical rule in question and the remedies available in case of dispute between the economic operator and the competent authority.

·The list of products which might be subject to mutual recognition Mutual recognition does not apply to products fully or to those aspects partially covered by EU harmonisation legislation. To facilitate the identification of products to which the mutual recognition principle may apply, the Regulation introduced an obligation for the Commission to put in place a non-exhaustive list of products which are not subject to EU harmonisation legislation. ·Reporting obligations Under the Regulation, every decision denying market access, as well as the grounds on which it is based, has to be individually notified by the Member States to the Commission, in addition to notifying the economic operator. Additionally, Member States have to send the Commission on a yearly basis a report on the application of the Regulation. Table 2-1: Intervention logic mutual recognition NEEDS ACTIONS OBJECTIVES GENERAL AND SPECIIFC OUTCOMES IMPACTS EXTERNAL FACTORS Remove barriers to trade of products lawfully marketed in one Member State Mutual recognition principle Mutual recognition clause Complaints and infringements Free movement of goods in the non-harmonised area Products lawfully marketed in one Member States can be more easily sold in another Reduction of information costs Avoid duplication of tests/ additional testing Better functioning of the internal market More choices for consumers at lower prices More opportunities for businesses Decentralized national administrations impeding the functioning of the product contact points network Perception of some national authorities that their own national rules are generally better than those of other Member States Perception of businesses that national rules must apply regardless of mutual recognition Tendency of businesses to avoid any problems by complying with national rules without questioning them Regulation 764/2008 Procedures for assessing and denying / restricting market access Product Contact Points List of products to which mutual recognition may apply Reporting Complementary actions Guidance documents on the application of the mutual recognition principle to specific sectors Conferences, seminars and round tables on the application of the principle Awareness about mutual recognition Legal certainty Administrative cooperation 3.Evaluation questions In order to assess the functioning of mutual recognition in the field of goods and to evaluate whether the mutual recognition principle and the Regulation are, in effect, on course to achieve their objectives, the following questions were used to guide the analysis: ØEffectiveness: To what extent have the mutual recognition principle and the Regulation been effective in meeting, or moving towards, the defined objectives (i.e. to what extent have they contributed to facilitating free movement of goods? To what extent has the Regulation contributed to achieving its objectives such as increasing awareness on the mutual recognition principle? To what extent has legal certainty been increased for businesses and authorities as a result of the Regulation? To what extent has the administrative cooperation been improved as a result of the Regulation? What are the factors that influenced the achievements and to what extent?) ØEfficiency: What are the costs of the mutual recognition principle and of the Regulation? What are the benefits of the mutual recognition principle and of the Regulation? To what extent are the regulatory costs (including administrative burden) proportionate to the benefits achieved? ØCoherence with other policies: To what extent is mutual recognition consistent with other policy actions at EU and national level? ØRelevance: To what extent is the mutual recognition principle and of the Regulation still relevant to its stakeholders? How well do the objectives (still) correspond to the current needs within the EU? ØEU added value: What is the additional value resulting from the Regulation, compared to what could be achieved by Member States at national and/or regional levels? To what extent do the issues addressed by the Regulation continue to require action at EU level? What would be the most likely consequences of repealing the Regulation? 4.Method The approach was designed in several steps, in order to ensure collection of both qualitative and quantitative data from the relevant audience. First, a study on the functioning of the mutual recognition principle was carried out by an external consultant. On the basis of its results, an evaluation of the functioning of the mutual recognition principle and Regulation was conducted by the Commission's services, using the evidence from the above mentioned external evaluation and complemented by desk research, stakeholders consultation and a study on the impacts of revising the Mutual Recognition Regulation. The evaluation covers the time period between the entry of the Regulation into force on 13 May 2009 and 31 December 2016. In terms of geographical coverage, the evaluation covers the EU Member States and the EFTA states that are contracting parties to the Agreement on the European Economic Area (EEA). 1.4External studies

The application of the principle of mutual recognition was subject to an external evaluation . Its aim was to evaluate the application of the mutual recognition principle by Member States, in order to identify shortcomings and to present possible ways of enhancing the application of the principle. Thus, the study did not evaluate the Regulation specifically, but looked from a broader perspective at the impacts of an insufficient application of mutual recognition on economic operators and the internal market. Furthermore, the study focused on the effectiveness and efficiency aspects only, as these are the most relevant with regard to the mutual recognition principle, which stems directly from the Treaty and the jurisprudence. The evaluation was based on a combination of data sources and data collection tools, which included a literature review, statistical data, web-based surveys among different target groups and in-depth interviews with Member States and relevant stakeholders. Additionally, a study was launched in 2016 in order to estimate the market value of current intra-EU trade in non-harmonised products falling under the mutual recognition principle. Furthermore, the study looked into the magnitude of the problem triggered by the potentially suboptimal functioning of mutual recognition and its significance. This was done by analysing the intra-EU trade for harmonised goods compared to non-harmonised goods and their evolution over the last 10 years. The study was conducted between September 2016 and March 2017. 1.5 Desk research Desk research was conducted for the purpose of the evaluation of the mutual recognition principle and Regulation, by the contractors in the framework of the external studies mentioned under 4.1 and by the Commission's services. Available literature on the topic, annual reports from the Member States as well as all notifications received between 2009 and 2016 were scrutinised. Also, the Commission services examined the complaints received from economic operators concerning a malfunctioning of mutual recognition and the draft national regulations notified on the basis of Directive (EU) 2015/1535. The desk research involved case studies in sectors where the application of mutual recognition is problematic. The literature review comprised a review of existing business and academic literature on the non-harmonised areas in the EU internal market. Annex 4 contains a full overview of the assessed literature, and a summary of the notifications and annual reports received. 1.6Stakeholders consultation Stakeholders consultation performed by the consultants In the framework of the external study mentioned under 4.1, four different surveys were launched on 9 October 2014 and completed on 5 January 2015. These were a company survey (199 participants), a survey of national business associations and of national sector associations (20 participants), and a product contact point survey (26 participants). Following the survey, qualitative interviews with national business associations and Product Contact Points in each Member State were also carried out. The objective of the qualitative interviews was to shed more light on the implementation of the mutual recognition principle in the Member States, in particular with respect to ‘sensitive’ areas such as notification practices (or lack thereof). The interviews were conducted with the same person who responded to the survey, to the extent possible. For the purposes of the second study mentioned under 4.1, an online survey was launched between December 2016 and January 2017. 100 respondents accessed the survey (40 businesses, 38 national authorities, and 22 business associations). In parallel with the launch of the survey, the research team started contacting selected stakeholders for in-depth interviews on the application of the mutual recognition principle across Europe. The team carried out 25 interviews in order to gather more fine-grained and detailed information about the implementation of mutual recognition. Annex 2 provides a full overview of the stakeholders' consultation performed by the consultants. Stakeholders consultation performed by the Commission During the 8th meeting of the Consultative Committee on mutual recognition which took place on 25 October 2016, the preliminary findings on the functioning of mutual recognition were presented and discussed with Member States representatives. An online public consultation was carried out from the 1st of June until the 30th of September 2016. 153 replies were received, representing 91 companies, 45 national authorities and 17 citizens. The consultation was made available to the general public, and aimed to gather data on how stakeholders perceive mutual recognition and its potential shortcomings, on the functioning of the Mutual Recognition Regulation (effectiveness, efficiency, coherence, relevance and EU added value), on the communication between mutual recognition users and on the possible options of achieving an increased and better mutual recognition. The results of the public consultation can be found in Annex 5. A stakeholders' event was organised on 17 June 2016, to identify the main issues relating to the functioning of mutual recognition and to identify possible ways forward. 144 participants attended the event, representing businesses (62), national authorities (60) and others (22). The minutes of the event can be found in Annex 2. 5.Limitations and assessment of robustness of findings Assessing the magnitude of the difficulties linked to the functioning of mutual recognition and its actual and potential impacts on stakeholders is not straightforward. Indeed, several factors are making the evaluation of the application of mutual recognition a difficult exercise. First, mutual recognition, when it is working properly, is invisible; this is because it is impossible to monitor when and how many times goods are allowed to enter a market on the basis of the mutual recognition principle. Only the number of products for which market access has been denied can be estimated, on the basis of the monitoring tools in place by the Regulation (notification of administrative decisions denying market access and annual reports). However, this doesn't represent the full picture of the situation, as only 6 Member States are notifying decisions to deny market access. The complaints received and the divergences noticed between the annual reports and notifications show that not all decisions taken are being notified to the Commission. It is possible to estimate, based on intra EU trade statistics, the number of non-harmonised products lawfully marketed in one Member State and placed on the market of other Member States. However, this doesn't show how many products were marketed on the basis of the mutual recognition principle. This is because businesses may decide, on commercial grounds, not to use mutual recognition, and to align their products with the existing national rules in the Member States where they want to market their products. Some large companies choose to design and produce products fitting the highest requirements, and thus complying with all national technical rules. Second, the results of the stakeholders' consultation might need to be treated with caution, as the consultations, targeted or opened, were not representative of different sectors, Member States and company types. The surveys carried out in 2014-2015 by the external consultant registered a low rate of responses. 199 businesses and 20 national or sectoral associations participated in the survey. The businesses survey did not result in a representative sample. There was a significant geographical bias with respect to the geographical coverage. Companies from Portugal (36), the UK (22) and Lithuania (21) were significantly overrepresented, while there were no responses from 9 EU Member States or from any of the EEA countries. Also, large companies were overrepresented in the survey, while small companies were underrepresented. 29% of the participating companies were large companies with more than 250 employees, while they represent around 1% of the EU's company population. 26% were medium-sized companies with 50 to 250 employees and 27% are small companies with 10 to 49 employees. Micro companies with less than 10 employees accounted for 18%. Also, the business associations had generally not put a high priority on responding to the survey, which can be either because they don't monitor issues related to mutual recognition, or because their members don't approach them in relation to these issues. Only a minority of sectors and Member States were represented in the survey. As regards the survey targeting PCPs, its main limitation came from the fact that PCPs are only the interface between business and national authorities in charge of applying the mutual recognition principle. Thus, they are not always familiar with the practicalities of the application of the mutual recognition principle, and they don't always have insight as regards the denial of market access for certain products. Furthermore, not all PCPs across the EU participated in the survey. PCPs from Austria, Bulgaria, France, Germany, Italy and Spain did not submit any responses to the survey, but, with the exception of Italy, they were subsequently interviewed. PCPS from Portugal and Romania were represented twice (as they have several PCPs), and out of the EEA/EFTA countries, Liechtenstein and Norway participated. More details are provided in the synopsis report. As regards the public consultation carried out by the Commission, it gathered 153 replies only. Businesses actively participated (91) but without reaching a representative sample; large companies were overrepresented (19%), while, as mentioned previously, they only represent 1% of the EU's company population. Also, when asked to quantify the costs and benefits of the Regulation, most businesses indicated that such estimation is impossible. Only a few replied (between 11% and 26% depending on the questions), and the replies contain considerable variations. This is why case studies were used in order to complement the lack of accurate information on costs and benefits. Member States were represented in the consultation by both PCPs (13) and other authorities (32), but without reaching a good geographical balance: no replies were received from Cyprus, Denmark, Finland, France, Greece, Ireland, Luxembourg, Malta and UK.

The overview of the notifications of draft national technical rules for the assessment of their compatibility with EU law by the Commission under Directive 2015/1535 provides some insight on the sectors where a high regulatory activity at national level can be observed, and where the use of mutual recognition is more relevant. From 2011 to 2013, 2114 notifications were received (675 in 2011, 734 in 2012 and 705 in 2013). The construction sector saw the highest number of notifications, with many measures related to energy efficiency of buildings and concrete structures, road pavements and constituent materials, fire safety of buildings. Construction was followed by agricultural products, foodstuffs and beverages (food hygiene, the composition and labelling of foodstuffs and beverages, food packaging, minimum price for alcoholic beverages, composition and marketing of alcoholic and non-alcoholic beverages). Notifications were also received in the telecommunications sector (radio equipment and telecommunications terminal equipment, radio interfaces, hardware and software for the collection, management and use of data gathered by electronic mechanisms installed on board vehicles (black box)) and in the environment sector (packaging and packaging waste, recyclable products, processing of biodegradable waste). This information was used in order to identify sectors where numerous national technical rules exists or were introduced, in order to see if market access problems can be linked with important regulatory activity. However, the use of this information is limited and should be treated with caution, as many issues related to compatibility with EU law are solved before the adoption of the national rule, during the stand still period. Furthermore, the assessment performed under this Directive links to the compatibility of the national rule with EU law, while the Mutual Recognition Regulation covers the application of a national rule to a specific individual case. Thus, while the national rule is compatible with EU law, its application in a specific individual case may be incompatible. Therefore, the notifications alone cannot be used as a good proxy for estimating the number of market access denials in specific sectors. All these factors make the precise measuring of the mutual recognition principle and Regulation's effect quite challenging. The contributions received following the various surveys and consultations carried out did not allow a statistically representative result to be reached. However, the stakeholders' consultation was very wide, and, together with the multitude of information sources used, it allows a strong indicative picture of the functioning of mutual recognition to be gathered, reliable enough to be used as a basis for further decision making. Furthermore, it is necessary to draw lessons from the lack of reliable data on mutual recognition in order to be able, in the future, to better assess the impacts of the functioning of the principle on free movement of goods. In order to do so, is it appropriate to reflect on more reliable monitoring tools, such as a better information collection tool, preferably an IT tool, to facilitate the collection of data, as well as relying on existing surveys at EU level such on which the Commission could rely to collect data on how well the mutual recognition principle performs. 6.Implementation state of play 1.7Implementation of the mutual recognition principle In addition to the Regulation, two main tools were used for facilitating the implementation of the mutual recognition principle: the mutual recognition clause and the management of complaints. The mutual recognition clause It has been a longstanding Commission policy to insist on the insertion of a mutual recognition clause in the technical rules of Member States. During 2012 and 2014 for example, 2168 draft national rules were notified, and only 205 contained a mutual recognition clause. When inserted, the clause is often unclear or not very detailed. This shows that national authorities are reluctant towards mutual recognition, or that they lack awareness in particular regarding the benefits it could achieve. Therefore, they tend not to follow the Commission's recommendations in this area. Complaints Between 2009 and 2016, economic operators complained 195 times about a misapplication of the mutual recognition principle. Member State 2010 2011 2012 2013 2014 2015 2016 Total Austria 1 1 1 3 Belgium 1 1 1 3 Bulgaria 2 2 Czech Republic 1 1 Denmark 1 3 1 1 6 Estonia 1 1 Finland 1 1 1 1 4 France 1 6 7 4 7 3 28 Germany 1 2 1 1 5 Greece 4 4 Hungary 2 1 3 Italy 7 7 3 2 1 3 2 25 Latvia 1 1 Lithuania 2 2 1 5 Malta 1 1 2 The Netherlands 1 1 2 4 Poland 16 10 10 1 1 38 Portugal 3 1 4 Romania 2 1 2 2 1 8 Slovenia 1 1 2 Slovakia 5 5 Spain 4 1 4 3 2 3 17 Sweden 2 1 2 1 1 1 8 UK 1 1 1 6 5 3 17 The sectors where most of the complaints were registered are food, construction products, labelling and precious metals. Most concerned sectors Food (e.g. food supplements, vitamins) 30 Construction products 17 Labelling (including food labelling) 21 Precious metals 6 1.8Application of Regulation (EC) No 764/2008 This section describes the implementation of the different components of the Regulation, since its entry into force on 13 May 2009. The effects of the implementation are further assessed in section 7. Establishing Product Contact Points (PCPs) PCPs have been established in all EU Member States. Their list was initially published in the OJ and is regularly updated and available online on the Commission's website. The Regulation left the set-up of PCPs to the discretion of Member States, thus, their organisation and function vary significantly. Most Member States have a single PCP, responsible for all inquiries related to non-harmonised products. In a few Member States , the PCP is split between a general one and a construction products specific one. Other Member States have PCPs in 6-7 different ministries. In almost all Member States, the PCP (or the co-ordinator, where there are several PCPs) is located within the ministry responsible for industry/business and the internal market, often as part of a group or team dealing with internal market policy. Only in Slovenia the PCP is located in an independent institute (the Slovenian Institute for Standardisation). A few PCPs handle queries (or part of queries) themselves. In Malta, the PCP is responsible for all communication with companies. However, this setup is unique to Malta (and difficult, if not impossible, to handle in a larger Member State), and in most cases queries from economic operators are passed on to the responsible ministry, department or directorate or, occasionally, the relevant local authority. In Italy, there is an appointed PCP, however, economic operators must contact the relevant ministry in charge of their product and receive their answer from this authority – without the PCP being involved. The way replies are being provided to economic operators also varies from one Member State to another. Very often, the responsible authority replies directly to the company making the query. Thus, the PCP has little insight on the outcome of the queries. Sometimes, national authorities provide answers to companies via the PCP. Establishing the list of products to which mutual recognition may apply Article 12 (4) required the publication of a non-exhaustive list of products which are not subject to EU harmonisation legislation by the Commission. This task proved to be very challenging, as there is no correspondence between the nomenclature under which products are classified in the different existing databases and the scope of the different pieces of harmonised legislation. On the basis of the existing Commission's Export Helpdesk database it was possible to extract an indicative, non-exhaustive list of products not covered by any piece of EU legislation. This list is available online on the Commission's website on mutual recognition. However, the list was not regularly updated, thus does not take into account repealed or newly adopted legislation since 2009. Furthermore, it does not provide any information on those products which are only partially covered by harmonisation legislation, and where mutual recognition may apply with respect to those aspects not covered by the harmonisation legislation.

Notifications from Member States According to the Regulation, Member States shall notify the Commission every time they take an administrative decision denying or restricting market access. In the period between the entry of the Regulation into force on 13 May 2009 and 31 December of 2016, the Commission has received 3918 notifications, originating from 6 notifying Member States. The number of notifications received in 2015 amounts to 447, in line with the activity registered the year before (466 notifications in 2014). For 2016, the number of notifications increased: 646 notifications were registered. The measures notified relate mainly to precious metals. Some notifications concern food supplements, fertilisers, energy drinks and vitamins. Annex 7 contains an overview of all notifications received. The yearly reports from Member States The Regulation requires Member States to submit a report every year on the application of the Regulation. However, despite the Commission's efforts to insist on the fulfilment of this obligation, not all Member States are communicating the reports as requested by the Regulation. For example, in 2016, only 23 Member States submitted annual reports, while 20 reports were received in 2015 and 21 in 2014. Identifying recurrent problems and monitoring the application of the Mutual Recognition Regulation on the basis of the annual reports is not straightforward. This is because the data received is not homogeneous or comprehensive enough to be considered as usable input. The Regulation sets out minimum information to be provided in the annual reports, i.e. the number of decisions denying or restricting market access and the grounds on which they are based, and leaves to the discretion of Member States the additional information they might consider useful to report. This leads to considerable variations as regards the content of the reports received. The Commission suggested a template to be followed by Member States but this template is not widely used. The reports highlight the main issues encountered by Member States when applying mutual recognition, in particular with regards to the lack of awareness, the poor administrative cooperation and the difficulties related to the concept of "lawfully marketed". As regards awareness, almost all Member States highlighted in their annual reports the need for additional awareness raising campaigns and trainings, as many economic operators are not aware of mutual recognition and how it functions. Training and information campaigns are also considered useful and suggested for officials within Member States dealing directly with national technical rules, as this could have a positive impact on the way they apply mutual recognition with regard to products lawfully marketed in other Member States. The lack of administrative cooperation is also a recurrent issue most Member States reported on. It is difficult to identify, within a Member State, the responsible authority responsible for a specific product. Difficulties are underlined also with regards to communication with authorities in other Member States. Some Member States report that they receive late and unclear answers. Even when not reporting on specific problems encountered, Member States are calling for more administrative cooperation. The reports also underline the limitations encountered by PCPs when exercising their activities. Often, they receive questions which are not within their remit, such as questions related to affixing the CE marking, which relates to the application of harmonisation legislation. They are also affected by the complexity of the questions they receive, the variety of products covered by mutual recognition and language limitations. The sectors where the application of mutual recognition is reported as being more problematic for both Member States and businesses are fertilisers, food labelling, food supplements (interpretation of various national authorisation procedures), construction products (role of autonomous certifying bodies, gold-plating, national quality marks and standards) and hallmarks (recognition of certificates). Annex 7 contains an overview of all the annual reports received. The telematic network Article 11 of the Regulation foresees that the Commission may establish a telematics network concerning the exchange of information between PCPs and/or the competent authorities of the Member States. The possibility of establishing this telematic network was discussed for the first time during the meeting of the Mutual Recognition Consultative Committee in 2014. The Commission suggested, for facilitating notifications and communication among PCPs, the use of the Internal Market Information tool (IMI). During the 2015 meeting of the Consultative Committee, they agreed on launching a pilot project for testing the use of IMI. However, this decision was postponed in the light of the adoption of the Single Market Strategy calling for higher and better mutual recognition by revisiting the Mutual Recognition Regulation. Member States considered that the choice of the IT tool for supporting notifications and communication should be made after the revision of the Regulation, and in line with the changes to be made, in order to be able to choose the most appropriate IT tool. Meetings of the Consultative Committee on Mutual Recognition A Consultative Committee, established under the Regulation, assists the Commission. There is no obligation as regards how many times the Committee should meet. Usually, one meeting per year is organised. During the 8th meetings held, the Commission and the representative of the Member States and from EEA/EFTA (since 2011) have discussed matters relating to the application of this Regulation. The main topics discussed have been the guidance documents, the role of Product Contact Points, and ways forward in improving the application of the mutual recognition principle. Member States also raised the difficulties encountered during the application of the Regulation, such as the problematic concept of "lawfully marketed", the lack of awareness about mutual recognition and the lack of appropriate communication among PCPs. Annex 12 provides an overview on the functioning of the Committee and issues discussed. Guidelines, awareness raising campaigns and information A series of guidance documents offering practical information on the application of the Regulation to particular issues (e.g. the concept of "lawfully marketed", hallmarks, food supplements, etc.) have been prepared by the Commission with the input of the members of the consultative committee. These guidance documents are indicative, not legally binding, and have been made public on the Commission's website on mutual recognition. Annex 4 contains an overview of all guidance documents published. Since 2009, the Commission has organised or taken part in numerous seminars on mutual recognition in the internal market and the application of the mutual recognition principle. The main participants were businesses from areas most often impacted by mutual recognition and academia. 1.9Compliance with the Regulation (EC) No 764/2008 During the period covered by this evaluation, no formal infringement procedures specifically related to the application of the Mutual Recognition Regulation were yet launched. Issues related to the lack of notifications or submission of annual reports where addressed with Member States during the meetings of the Consultative Committee.

7.Answers to the evaluation questions 1.10Effectiveness: Evaluating to what extent mutual recognition achieved its objectives The general objective of the mutual recognition principle and Regulation was to facilitate free movement of goods in the non-harmonised area. Over the period from 2008 and 2014, around 0.89 million enterprises were operating within non-harmonised sectors, representing more than 50% of the total number of active enterprises in the manufacturing economy . Around 87% of the enterprises operating within the non-harmonised sectors are micro enterprises (i.e. with less than 9 employees) and around 11% are small and medium enterprises (i.e. with a number of employees between 50 and 250) . In terms of turnover, non-harmonised sectors represent a significant contribution to the economy, i.e. enterprises operating within non-harmonised sectors contribute to around 20% of the total value of market sales of manufacturing sectors. Furthermore, the value on intra EU exports of non-harmonised products represented the 18% of the value of intra EU exports. Additionally, the Regulation had the following specific objectives: ·To increase awareness about the mutual recognition principle , ·To ensure legal certainty when using the mutual recognition principle, ·To improve administrative cooperation among national authorities when applying the mutual recognition principle 1.10.0Facilitating free movement of goods in the non–harmonised area through mutual recognition The results of the public consultation carried out between June and September 2016 show that the mutual recognition principle and the Regulation had limited effects in facilitating free movement of goods in the non-harmonised area. In general, the majority of companies wishing to sell products in another Member State check the applicable rules in that Member State. If these rules prevent them from selling their product as such, most of them adapt it. Several situations make businesses adapt their products. First, they can decide to do so immediately after the examination of the applicable national rules in the Member State where they want to sell their product, either because the business is not aware about the possibility of invoking mutual recognition to enter the market without adapting the product, or because the business don't trust mutual recognition, and prefer not to use it at all. Secondly, they can decide to adapt the product after receiving an administrative decision denying market access, mainly because it's too long and costly to challenge such decision. Lastly, the choice of not using mutual recognition can also be solely based on strategic reasons, thus unrelated to awareness or trust in mutual recognition. For example, certain businesses prefer designing a product which fits all existing requirements in all Member States, and have the guarantee that they can penetrate any market without further modifications. Furthermore, the 2016 public consultation shows that 68% of the respondents tried to use mutual recognition to enter a new market, but half of them faced market access denial. More specifically, 75% of micro enterprises, 80% of small enterprises and 71% of medium enterprises tried to use mutual recognition, and, respectively, 62%, 53% and 71% of them had their market access denied. In principle, national authorities can deny market access only when they have diverging product requirements whose mandatory imposition is justified by the need to protect a certain public interest, and those requirements are necessary and proportionate for achieving that objective. In practice, the stakeholders' feedback shows that market access denial is automatic, because national authorities are not aware of mutual recognition or they find that applying it to the detriment of their own rules results in legal uncertainty. Thus, they feel more confident in applying their national rules and ignore mutual recognition. Only 15% indicated that market access was not denied. A recent study carried out by the Danish Business Association also confirms the findings of the 2016 public consultations. This study shows that businesses are still experiencing barriers to free movement of products in the Single Market. 24 out of the 35 businesses interviewed by the association experienced problems with the application of the mutual recognition principle and Regulation, especially in certain sectors, such as construction products, food contact materials, products in contact with water and innovative products. According to this study, this is due to the fact that Member States apply national requirements on products characteristics, including requirements relating to product testing and documentation, to the detriment of mutual recognition. This results in businesses having to retest or modify the products or giving up on marketing the products in certain cases.

Example: Upholstered furniture– a well-known obstacle for exports to the UK Special requirements in the UK for upholstered furniture – even for garden furniture – require that a special range of products have to be developed for the UK. Due to fire protection public interests, foam and textiles must be treated with flame resistant chemicals. These flame resistant chemicals, for environmental public protection reasons, are restricted in entering other markets. The consequence for one specific company is that they need to have a double stock of furniture (binding capital of abt. 150,000 euro). There are extra initial costs for each product (abt. 50,000 euro per type), for which reason they have been forced to reduce the product range in the UK by abt. 25 p.c. Example: Export of environmentally friendly, innovative product hindered by national regulation Some years ago, a small Danish manufacturer developed an intelligent solution for efficient pest control, completely without the use of poison. Since then, the products are in demand by an increasing number of countries around the world. The system monitors rodent activity and protects against rats entering the building or gaining a foothold in the area. The product nevertheless meets many national obstacles in the form of national legislation aimed at animal protection (e.g. in Sweden and Germany). These national rules banning the use of electricity on animals de facto block the marketing of the products, even if they are proved to be both efficient and better than poison which remains in nature. The findings of the surveys carried out during 2014-2015 are similar and point in the same direction. One third of the respondents among businesses believe that mutual recognition doesn’t work well in practice. The reasons identified during the interviews are related to additional tests that national authorities require, to the detriment of mutual recognition. One of the examples provided relates to water taps, where in 2014 several companies stated that additional different national tests are required, to the detriment of mutual recognition, in 17 Member States; the differences related not only to the testing required, but also to what needed precisely to be tested: in certain Member States components needed to be tested, while in others the testing referred to the whole product. Source: Questionnaire survey among companies, running from 9 October 2014 to 5 January 2015, carried out by DTI The survey among national business and sector associations showed that 25-35% of the respondents perceive the objectives to be partly reached (see Figure 7-4), because mutual recognition functions better in certain areas than in others. For example, a Belgian company with less than 10 employees in the precious metals sectors explained that mutual recognition functions in an average way, and that it contributed to lowering trade barriers for certain categories of goods which can be sold without any further adaptations. A small company active in the construction area (with 40% of its exports falling into the scope of mutual recognition) considered that mutual recognition works "badly" and that it did not lower trade barriers at all. This company gave up entering a market 3 times, due to the additional costs triggered by the request to modify or retest its products. Figure 7-4: Business and sector association survey: To what extent has the mutual recognition principle achieved its objectives? Source: Questionnaire survey among national business and sector associations, running from 9 October 2014 to 5 January 2015, carried out by DTI The perception of businesses that mutual recognition doesn't function properly is confirmed by the replies provided by national authorities during the 2016 public consultation. When national authorities check if products available on their market and coming from another Member State comply with the national rules they are enforcing, only 46% verify if they are already lawfully marketed in the Member State of origin, meaning that they take into account the potential application of mutual recognition of these products. The others directly conform to the applicable national rules, without looking into the potential application of the mutual recognition principle and Regulation. This can be because they are not well aware of the practicalities of applying mutual recognition, or because they simply prefer applying their own national rules, with whose cultural and historical backgrounds they are well acquainted. The input submitted in the annual reports on the application of the mutual recognition Regulation goes in a similar direction: while Member States recognise the potential of the principle and Regulation in terms of achieving their objective, they also believe that in practice many difficulties stop these objectives being fulfilled. These difficulties, which mainly refer to the lack of awareness and understanding about how the principle should be applied and legal uncertainty, will be further assessed in the following sections. The perception of PCPs in the surveys carried out during 2014-2015 was more positive. Around half of them indicated in the survey that the objectives have been either completely reached or close to completely reached. The other half perceived the objectives as being partly reached, and a few PCPs said that there is quite a long way to go in terms of lowering trade barriers in the internal market. However, these results have to be treated with caution, as the PCPs, depending on how they are organised at national level, are mostly the interface between businesses invoking their right to mutual recognition and national authorities exercising their right to apply their own national rules. Most of them are only providing information to a specific request, and/or establish a contact between the business and the competent authority; they don't monitor the application of the mutual recognition principle, and don't have a lot of knowledge about the outcome of a case once it has left the remit of their competence. This is also supported by the number of complaints received relating to the application of the mutual recognition principle. Since 2010, 195 complaints relating to a misapplication of the mutual recognition principle were registered. With regards to the Regulation specifically, the results of the public consultation carried out in 2016 show that very few economic operators consider that it is easier to sell products in other Member States since the Regulation entered into force. The majority consider that the Regulation has not improved the situation in terms of facilitating free movement of goods, or don't know, either because they don't use mutual recognition or they don't sell products abroad. Figure 7-5: Public consultation 2016 The 2016 public consultation, the stakeholders' consultation performed in 2014 and the evidence submitted by the Danish business association all point to the same direction. Overall, stakeholders consider that despite the existence of the principle and the adoption of the Regulation, free movement of goods in the non-harmonised area still remains problematic. Businesses are still facing difficulties with regards to market access, despite the fact that their products are already lawfully marketed in other Member States. Thus, they often adapt their products or give up entering on a new market.

1.10.1Increasing awareness of the mutual recognition principle One of the specific objectives of the Regulation was to increase awareness about the mutual recognition principle. The stakeholders' consultation and the desk research performed by the Commission services show that there are businesses and national authorities still unaware about the mutual recognition principle and Regulation. Lack of awareness about the principle triggers lack of awareness about how this principle should be applied or the conditions under which mutual recognition could be denied. It also triggers lack of awareness about the Regulation as well; as the Regulation enters into play once mutual recognition is denied, by issuing an administrative decision and notifying it to the economic operator and to the Commission. Figure 7-6: Public consultation 2016 Surveys carried out in 2004 and 2014 show a low level of awareness about mutual recognition among businesses. In 2004, 46% of the respondents declared awareness about mutual recognition; 54 % of the companies interviewed in 2014 declared not knowing about it or having heard of it but not being familiar with the details. The public consultation carried out in 2016 shows however a significantly higher level of awareness; 7% of the respondents declared being aware of mutual recognition. The differences in the declared level of awareness can be explained by the fact that the consultation process was different (targeted surveys versus open consultation). The level of awareness about mutual recognition among national authorities is mixed. The results of the public consultation carried out in 2016 shows that when national authorities check if products available on their market coming from another Member State comply with the national rules they are enforcing, 53% verify if they are already lawfully marketed in the Member State of origin while 46% don’t. Thus, those not checking if products are already lawfully marketed elsewhere take for granted the fact that their national rules are applicable, and take measures against economic operators, asking them to align their products. Some Member States organised at national level such campaigns, mostly for authorities, and considered them very useful. In order to increase awareness of the mutual recognition principle, the Regulation put in place Product Contact Points (PCPs). Most of the businesses (73%) replying to the 2016 public consultation declared that they have never contacted a PCP in order to obtain information about the applicable national rules and the mutual recognition principle, mostly (46%) because they are not aware of them. In the period between the entry into force of the Regulation on 13 May 2009 and today, the Product Contact Points received 8024 questions from economic operators. 2010-2011 2012 2013 2014 2015 1402 1439 1826 1793 1564 The PCPs that were most contacted are France and the Czech Republic, followed by Slovakia. Figure 7-7: Most contacted PCPs However, the number of questions indicated above is only indicative and does not constitute an accurate picture of all questions received or treated by the PCPs. This is because not all Member States are indicating in their annual reports the number of questions received and treated by the PCPs. In 2010-2011, 2012 and 2014, 17 Member States indicated the number of questions received by the PCPs. 19 Member States supplied this information in 2013 and 16 Member States supplied this information in 2015. Also, with regard to the number of questions received, it is not certain that the number indicated covers questions related to mutual recognition only. Some Member States are reporting those questions related to mutual recognition only, while others are reporting all questions received, even when outside the remit of the PCPs. A few Member States conducted national surveys on the usefulness of the PCPs, and the results show that economic operators are globally satisfied with the services provided by the network, which are considered useful. In general, the main issues underlined by economic operators in relation to PCPs are the long delays for receiving an answer, the quality of the answer or even the absence of it. These issues are also highlighted by the Member States in their annual reports. Some Member States indicated that the 15 day deadline set out by the Regulation is difficult to meet, although most of the time respected. According to the information submitted in the annual reports, these delays are caused by the wide range of products (or aspects of) falling under the scope of mutual recognition as well as the increasing number of applicable national rules, which makes it difficult to easily identify the responsible persons having the necessary expertise. The decentralisation of certain Member States administration and the fact that most often the necessary competences are distributed between different ministries add to these difficulties. Very often, the PCPs have to send the inquiry to the local responsible officer. Last but not least, language issues, especially when technical language is involved, add further delays and contributes to the sometimes low quality of the answers provided. Some good practices were also highlighted by Member States in their annual reports as regards the functioning of PCPs. Slovakia for example indicated that an expert network was put in place to support the work of the PCP. Furthermore, the PCP is located in the same department dealing with Directive (EU) 2015/1535, thus aware of all national regulations notified to the Commission and subject to the application of the mutual recognition principle. Overall, the PCPs network is considered by Member States in their annual reports as a useful tool, having the potential to help economic operators in obtaining information about the applicable national rules and the mutual recognition principle. Member States consider however that it needs to be further strengthened. In their annual reports, they call on enhancing administrative cooperation, and integrating the PCPs into a wider network, in order for them to gain the expertise and to reply more efficiently to the inquiries they received. This view is also shared by businesses, as 58% of the respondents indicated in the 2016 public consultation that PCPs are a useful tool, despite the fact that only 7% of them considered their experience with PCPs as satisfactory. The Regulation had a limited effect in increasing awareness about the mutual recognition principle, mainly due to the suboptimal functioning of the PCPs. This makes it difficult for businesses to know when mutual recognition can be used for entering a market and what their rights are. Most stakeholders agreed however that PCPs are a very useful tool, with a lot of potential. They need however to be strengthened in terms of administrative cooperation and network, in order to be efficient as regards their objectives. Additionally, one of the objectives of the mutual recognition clause referred to in section 2.3.1 was to make authorities and economic operators aware of the mutual recognition principle. During the PCPs survey carried out in 2014, only 28% of the respondents indicated that a mutual recognition clause is included systematically in all relevant national rules . The overview of the draft national technical regulations notified between 2012 and 2014 shows a poor use of the mutual recognition clause: 2012 2013 2014 Total MRC inserted Total MRC inserted Total MRC inserted 755 69 728 79 685 57 When inserted, the clause sometimes lacks clarity or is not properly implemented. Many of the comments and detailed opinions the Commission issued, when assessing draft national regulations in the framework of Directive (EU) 2015/1535, relate to a wrong wording of the mutual recognition clause:

Table 7-1: Overview of comments and detailed opinions in the framework of Directive (EU) 2015/1535- 2015 and 2016 2015 Total Absence of MRC MRC wrongly worded Non related to the MRC Comments 27 6 12 9 Detailed opinions 11 4 2 5 2016 Total Absence of MRC MRC wrongly worded Non related to the MRC Comments 35 18 11 6 Detailed opinions 14 3 8 3 Therefore, the mutual recognition clause has not shed sufficient light on when mutual recognition is applicable. Despite the regular recommendations by the Commission to insert the clause in draft national legislation notified following Directive (EU) 2015/1535 , or to redraft it in order to ensure clarity, its use is still poor. 1.10.2Ensuring legal certainty when using the mutual recognition principle Another specific objective of the Regulation is to ensure legal certainty when using the mutual recognition principle. The Regulation tried to address the lack of legal certainty by: (1) Introducing the principle according to which the burden to demonstrate that the product does not meet the necessary requirements relies with the national authorities (2) Establishing a non-exhaustive list of products to which mutual recognition might apply (3) Introducing an obligation to notify administrative decisions denying market access Clarity of the concept "lawfully marketed" The main value of the Regulation was to place the burden of proof on the national authorities that intend to deny market access. This was justified by the uncertainties regarding who has to demonstrate that a product lawfully marketed in a Member State can be marketed in another Member State. The objective was to reduce the risk of seeing market access denied, by allowing communication between the businesses and the national authorities in order to prevent problems of free movement of goods. In practice, however, the outcome is not very positive. Placing the burden of proof on Member States did not have any added value as regards the lack of clarity in the concept of "lawfully marketed", which triggers the possibility for economic operators to invoke the mutual recognition principle to sell their products in other Member States. This is because the Regulation only indicates who has the burden of proof, without defining the concept of "lawfully marketed", nor the kind of evidence needed to demonstrate that a product was lawfully marketed. Furthermore, there is no jurisprudence from the Court of Justice on this concept. Thus, businesses report that Member States have different requirements as regards the evidence to be submitted in order to demonstrate that a product is "lawfully marketed". The Commission has provided guidance on this topic, explaining the meaning of the "lawfully marketed" concept and what type of evidence can be requested or accepted in order to demonstrate it. According to this guidance, any piece of evidence such as a product invoice, product label, catalogue with evidence of a date, sale or tax records, registrations, licences, notifications to/from the authorities, certifications, extracts from public records, etc. should be deemed suitable to demonstrate the actual marketing of the product in another Member State. Despite this guidance, Member States in their annual reports and businesses in their contributions report that the concept remains problematic. Economic operators declared for example that if a product invoice is sufficient in one Member State, very often it will not be considered as sufficient evidence in another Member State, who will require additional evidence. The first report on the application of the Regulation underlines that the difficulty of demonstrating that a product has been lawfully marketed in another Member State is one of the issues where close and regular monitoring is necessary. National authorities need a stronger and clearer framework for being able to determine whether or not a product is lawfully marketed and to allow market access to products coming from other Member States despite the fact that they do not fully comply with their national technical rules. The difficulties raised by the concept of "lawfully marketed" were also discussed during the stakeholders' event held in June 2016 "Single market for products: fresh ideas to unleash full potential". A specific workshop was dedicated to a more practical approach for proving and assessing lawful marketing of products in other Member States. During this workshop, business representatives described the problems they often encounter when trying to demonstrate that a product is lawfully marketed in a Member State, especially in terms of what is understood and accepted as evidence. In order to bring more clarity and facilitate market access, the participants focused on what is really needed as evidence to demonstrate the lawfulness of the marketing of a product and listed those elements considered necessary (e.g. name of the manufacturer and contact details, the market(s) where the product is marketed, and the regulations and standards it complies with. Participants concluded that standardising the type of information to be provided to national authorities in support of the demonstration of the lawfulness of the marketing of the product would have positive impacts on legal certainty when using mutual recognition. Businesses replying to the 2016 public consultation identified the difficulty of demonstrating the lawfulness of a product as an obstacle to mutual recognition. Table 7-2: Public consultation 2016 – Ranking of obstacles –Businesses Ranking of obstacles by order of importance Difficult for businesses to challenge a national decision denying market access 62% Insufficient communication between national authorities of different Member States 46% Lack of awareness about mutual recognition 35% Difficult to obtain information about whether mutual recognition applies to a specific product and thus to assess if mutual recognition can be used or not for a specific product 32% Other 29% Slow/inefficient communication between businesses and national authorities 27% Difficult to demonstrate to authorities in other Member States that a product is lawfully sold in a Member State 26% Insufficient communication between national authorities within the same Member State 21% Stakeholders predominantly agreed that standardising the type of information to be provided would facilitate demonstrating that a product is lawfully marketed in a Member State. Clarity concerning the products to which mutual recognition apply Before the adoption of the Regulation, it was difficult for both economic operators and national authorities to know with certainty when a product falls into the scope of mutual recognition. The Regulation required the Commission to publish a non-exhaustive list of products which are not subject to EU harmonisation legislation and to which mutual recognition might apply, as a mean to improve legal certainty when trying to use the mutual recognition principle. More information on the list is available in section 6.2. In 2015, for example, the web-page hosting the product list received 2655 visits, and 59% of them left the page immediately, without trying to use the list. However, during the public consultation carried out in 2016, 68% of Member States and 51% of businesses declared that the list is useful and necessary, but needs to be updated and made more user-friendly. These findings point to the fact that stakeholders agree with the usefulness of having such a list, but that the list in its current state is not reliable. Transparency of administrative decisions The obligation to notify every administrative decision denying market access was also intended to bring more legal certainty for economic operators when invoking their right to mutual recognition. In the period between the entry into force of the Regulation on 13 May 2009 and today, the Commission has received 3918 notifications. All notifications received come from 6 Member States, and one Member State, namely Portugal, accounts for around 80% of the notifications received. Most of notifications refer to precious metals, and some relate to foodstuff, fertilisers, food additives and electrical equipment. This doesn't mean that the precious metals area is the only area where the obligation to notify is respected by Member States. The fact that most of notifications relate to one category of products, i.e. precious metals, could be explained by the reluctance of Member States to apply the mutual recognition principle in an area where many of them have permanent and long-time established control bodies specifically devoted to assessing hallmarking and control of precious metals. This generated several infringement procedures, and the Court of Justice underlined in several rulings that Member States have to respect the free movement of precious metals on the basis of the mutual recognition principle. Because of the abundant jurisprudence of the Court on these issues, national authorities became over time well acquainted with the application of the principle in this area, and with the obligation to notify contained in the Regulation. Additionally, there are discrepancies between the number of notifications received by the Commission and the number of administrative decisions indicated by Member States in the annual reports. For example, some Member States are indicating in their annual reports that a certain number of administrative decisions have been taken, while these have never been notified to the Commission. Other Member States are reporting that no administrative decisions have been taken, while complaints received show the contrary. This points to the fact that Member States are not always notifying the Commission administrative decisions denying or restricting market access. This issue has been often addressed in the Mutual Recognition Consultative Committee; representatives from Member States considered that the lack of notifications could be justified by the fact that inspectors performing controls on the market and taking these decisions lack awareness about the Regulation and its obligations and thus don't know that the decisions they are taking should be notified to the Commission. Some Member States reported that information campaigns and trainings have been organised in order for their staff to get familiar with the Regulation; however these are more isolated cases, and don't allow drawing a conclusion of the effectiveness of these initiatives in terms of complying with the obligations of the Regulation.

Difficulty to challenge administrative decisions denying market access The Regulation foresees that when an administrative decision denying or restricting market access is notified to the economic operator, it shall mention the legal remedies available at national level allowing challenging this decision. Economic operators reported that national remedies usually consist in long and costly court proceedings. During the 2016 public consultation, they ranked this as the main obstacle to relying on mutual recognition: Table 7-3: Public consultation 2016 Ranking of obstacles by order of importance Difficult for businesses to challenge a national decision denying market access 62% As court proceedings are very time consuming and expensive for businesses, they prefer adapting their products or renouncing to enter the market. This is supported by the 2016 public consultation, which shows that when market access (and mutual recognition) is denied, businesses rely rarely on the national remedies available to them: Figure 7-8: 2016 Public consultation: Did you challenge the decision denying market access? To further underline this issue, during the 2016 public consultation, one business association indicated that in the area of drinking water installations they are aware of more than 100 cases where national authorities denied market access and required the products to be adapted to the different national requirements; one company tried to challenge the administrative decisions denying market access, which resulted in a two years lawsuit (still ongoing); another indicated that because the only way to challenge these decisions is having a long and costly lawsuit in their national law, they prefer to adapt the product or give up entering the market. Beyond the Regulation, the insertion of mutual recognition clauses in the draft notified national regulations also aimed to increase the level of legal certainty. However, the impacts of this policy in terms of legal certainty are limited. The tools put in place by the Regulation had a limited effect on increasing legal certainty when using the mutual recognition principle. The lack of legal certainty appears to remain a major obstacle to unleashing the full potential of the principle, and the main reason why Member States and businesses are reluctant towards mutual recognition. 1.10.3Improving administrative cooperation between national authorities (Mutual Recognition Regulation) Before the adoption of the Regulation, dialogue between the national authorities of different Member States was very difficult, mostly due to the lack of a common address book /network. The Regulation tried to remedy to this problem by introducing the Product Contact Points and the telematic network . Despite this, administrative cooperation remains suboptimal, for various reasons. Many Member States highlighted, in their annual report, the difficulties PCPs have to identify and contact the responsible authorities in their own administration in order to reply to requests received from economic operators. Some Member States managed over the years to put in place a network of experts, but the variety of products covered by mutual recognition and national legislation involved, as well as the different internal organisation in certain Member States make this task very difficult. Also, there is a lack of administrative cooperation between PCPs. The absence of a network, allowing rapid communication and exchange of information delays the work of the PCP when replying to a request from economic operators. Many are complaining about the absence of reply from their colleagues from other Member States, or about long delays to receiving an answer. Often, the answers received are of low quality as regards the information transmitted. During the survey carried out in 2014, the interviewed PCPs indicated the main problems with regard to administrative cooperation: Figure 7-9: 2016 public consultation One PCP indicated that sometimes the delay for receiving a reply is 40-50 working days. Another indicated that the intervention of the Commission was necessary in order to obtain a reply. Additionally, the administrative cooperation between PCPs is also undermined by the difficulty of communicating in a common language, especially when technical terms are involved. This issue is almost unanimous among PCPs, and was raised in the surveys, interviews, in the annual reports as well as during the meetings of the Consultative Committee on mutual recognition. The majority of those economic operators who contacted a PCP preferred not to assess if their experience was satisfactory or not.

Figure 7-10: Public consultation 2016 Member States consider communication with authorities within their own country as good, while communication with authorities from other Member States is rather average or poor. As regards communication between national administrations and businesses, the assessment by authorities is quite mixed between good, average and poor. The main reasons for poor communication are related to the lack of knowledge about mutual recognition, language issues and the absence of an appropriate IT tool to facilitate communication. Figure 7-11: Public consultation 2016 As regards the telematic network foreseen by the Regulation, its creation was discussed several times with representatives from Member States during the meetings of the Mutual Recognition Consultative Committee without being finalised. 1.10.4Conclusion on effectiveness Overall, the findings of the evaluation show that the principle and the Regulation did not meet their objectives. Businesses are still encountering numerous obstacles to the free movement of products lawfully marketed in another Member States. During the 2016 public consultation, they ranked as the main obstacle in difficulty to challenge administrative decisions denying market access, followed by insufficient administrative cooperation and lack of awareness about mutual recognition. The tools put in place by the Regulation in order to ensure awareness, i.e. the PCPs, had a limited effect, mainly due to their suboptimal functioning. Businesses still don't know when mutual recognition can be used for entering a market and what their rights are. Furthermore, the mutual recognition clause has not shed sufficient light on when mutual recognition is applicable. Despite the regular recommendations by the Commission to insert the clause in draft national legislation notified following Directive (EU) 2015/1535 , or to redraft it in order to ensure clarity, its use is still poor. The tools put in place by the Regulation had also a limited effect on increasing legal certainty when using the mutual recognition principle. The lack of legal certainty appears to remain a major obstacle to unleashing the full potential of the principle, and the main reason why Member States and businesses are reluctant towards mutual recognition. As regards administrative cooperation, it still needs to be enhanced in order to facilitate the application of the mutual recognition principle. The weak use of the principle of mutual recognition and the limited impacts the Regulation had in achieving the foreseen objectives of ensuring free movement of goods in the Single Market points to the fact that there is a lot of potential to be unleashed. Estimating accurately the magnitude of this unleashed potential is not straightforward, due to the complex nature of mutual recognition and the wide variety of products to which it applies. However, several elements indicate that the suboptimal use of mutual recognition triggers significant costs and that improving its functioning would bring significant benefits. The comparison of the value of the intra EU exports with domestic consumption shows that for harmonised products the value of intra EU exports is 55% of domestic consumption, while for the non-harmonised and partially harmonised goods it represents only 35%. A study done for the European Parliament tried to estimate the magnitude of the impact that non-tariff barriers to trade have on the internal market. It concluded that a reduction of such barriers could lead to an increase in intra-EU trade of more than 100 billion EUR per year. Therefore, in terms of priorities for the Commission to remedy to the ineffectiveness of the regulation, national authorities and citizens ranked first the need to increase awareness of the mutual recognition principle, while businesses stressed their need for effective remedies to take action against decisions denying market access. If the consultation did not result in a representative sample of sectors, company type and Member States, it provides however a good indication of areas where the scope of mutual recognition can be improved. Furthermore, the difficulties in terms of gathering useful data on the functioning of mutual recognition needs to be addressed, in order to get a clearer picture of how the principle functions and its impacts on the free movement of goods. Table 7-4: 2016 public consultation Ranking of priorities by businesses Ensure that businesses have effective remedies at their disposal to take action against decisions denying mutual recognition when needed 72% Increase legal certainty for businesses when using mutual recognition to sell products abroad 67% Ensure that the procedures are duly followed when decisions denying market access are taken by national authorities 65% Increase effectiveness of mutual recognition to facilitate access to the internal market 64% Facilitate communication between all actors involved in mutual recognition (business, national authorities, European Commission) 54% Increase general awareness of the mutual recognition principle 52% Table 7-5: 2016 Public consultation Ranking of priorities by Member States Increase general awareness of the mutual recognition principle 51% Ensure that the procedures are duly followed when decisions denying market access are taken by national authorities 42% Ensure that businesses have effective remedies at their disposal to take action against decisions denying mutual recognition when needed 40% Increase effectiveness of mutual recognition to facilitate access to the internal market 35% Increase legal certainty for businesses when using mutual recognition to sell products abroad 33% Facilitate communication between all actors involved in mutual recognition (business, national authorities, European Commission) 31% Table 7-6: 2016 public consultation

Ranking of priorities by citizens Increase general awareness on the mutual recognition principle 64% Increase legal certainty for businesses when using mutual recognition to sell products abroad 52% Ensure that businesses have effective remedies at their disposal to take action against decisions denying mutual recognition when needed 47% Increase effectiveness of mutual recognition to facilitate access to the internal market 41% Ensure that the procedures are duly followed when decisions denying market access are taken by national authorities 35% Facilitate communication between all actors involved in mutual recognition (business, national authorities, European Commission) 23% 1.11Efficiency: Measuring the cost effectiveness of the mutual recognition principle and Regulation One of the Commission's priorities is to make EU law simpler and to reduce administrative burdens. These objectives refer specifically to costs associated with reporting and administrative burdens, and costs related to the implementation of the mutual recognition principle and Regulation. Measuring the efficiency of the principle and Regulation means evaluating to what extent the costs generated by using the principle and the Regulation are proportionate to the benefits it achieved. Relevant stakeholders were consulted on this topic. 1.11.0Costs for public authorities The Regulation, by nature, is directly applicable; thus, no particular costs were incurred for transposing or integrating the requirements in national law. The PCPs generated specific costs for Member States. With regards to the principle, the main costs are generated by its incorrect application. The analysis below therefore looks into specific costs generated particularly by the PCPs, and at costs linked to the activity of national authorities other than PCPs, involved in the implementation of the principle and Regulation. Costs related to the implementation and functioning of the PCPs National authorities incurred costs related to implementing their obligation to establish PCP (putting them in place and having them functioning on an annual basis). Most of the time, the PCP has been integrated in an already existing department dealing with internal market issues. Based on the annual reports, one person on average is fulfilling the task of PCP. This is the case for example in France, Sweden, Ireland, Greece, the Netherlands, Bulgaria and Poland. In cases where the function of PCP is available in several ministries, such as in Romania or Portugal, several persons (5-8) have PCP related tasks among their portfolio. Estimates of labour costs for PCPs can be made by taking into account the costs of Full Time Equivalents (FTEs) necessary to perform the required tasks every year. As detailed information on the salary costs of administrative staff employed PCP is not available, an estimate has been made based on the Eurostat data (period 2010-2011) on the gross annual salaries for employees in n