EUROPEAN COMMISSION Brussels, 27.1.2016 SWD(2016) 9 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the Proposal for a Regulation of the European Parliament and the Council on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles {COM(2016) 31 final}

{SWD(2016) 10 final}



EUROPEAN

COMMISSION Brussels, 27.1.2016 SWD(2016) 9 final PART 1/2 COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the Proposal for a Regulation of the European Parliament and the Council on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles {COM(2016) 31 final}

{SWD(2016) 10 final} COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the Proposal for a Regulation of the European Parliament and the Council on the approval and market surveillance of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles

1.Procedural issues and consultation of interested parties 1.1.Identification Lead DG: ENTR

Other involved DGs: SG, SANCO, CLIMA, MOVE, ENV, RTD Agenda Planning/WP Reference: 2011/ENTR/011 1.2.Organisation and timing Work on this impact assessment started in 2010 with the preparation of the Impact Assessment Roadmap and the setting up of the steering group to which representatives of following DGs were invited: SG, SJ, ECFIN, ENV, MOVE, SANCO, TRADE, RTD. The steering group met 3 times in September and October 2010 and in October 2011. This steering group also monitored the fitness check pilot project on the type-approval framework for motor vehicles, and was extended with a representative of DG CLIMA. In that capacity the Steering Group met 4 times in March, May, July and November 2012, and the DGs concerned were also consulted in July 2013 on the draft Commission staff working document on the fitness check. Another meeting of the IA Steering Group took place on 30 January 2014 to discuss the draft Impact Assessment Report. 1.3.Consultation and expertise A public consultation was held from 7 December 2010 to 16 February 2011. For this purpose, a dedicated consultation web-page was set up and the Commission services prepared a consultation document, which was discussed and agreed with the IA Steering Group. The aim of this public consultation was to verify whether the five areas identified by the Commission services as having a potential for improving the enforcement of EU type-approval legislation for motor vehicles would provide the right scope and focus for the envisaged review of Framework Directive 2007/46/EC. Forty relevant responses were received which, overall, indicated a strong support for the aims of the initiative. Whilst 74% of the respondents concurred that the current type-approval framework was already of fairly high quality, 57.6% of them considered that nonetheless more could be done to emphasise and properly focus the legal application of market surveillance principles, with 47% of respondents saying that existing market surveillance principles are ineffective, while just 2.9% agreed it was effective. This outcome clearly demonstrates that stakeholders share the view that more can and should be done to complement the ex-ante controls offered by the type-approval framework with ex-post market surveillance provisions. The Commission services also commissioned a number of external studies to accompany and feed in to the Impact Assessment process. An ex-post evaluation (EPE) study on the framework directive 2007/46/EC was carried out in the first half of 2011, followed by an impact assessment (IA) study in the second half of 2011. This study assessed the impact of the possible options developed for each of the five problem areas identified by the Commission services and which were confirmed to be relevant by the public consultation. Based on the results of the public consultation and the IA study, a preferred combination of policy options for these five areas has been identified. Further work on the impact assessment and the preparation of the review of the Framework Directive was put on hold in 2012/2013 when the regulatory framework for the type-approval of motor vehicles was selected by DG ENTR for running a fitness check (FC) pilot project. A study contract has been awarded for that purpose and the FC study has been finalised in March 2013. A Commission Staff working document reporting on the outcome of the fitness check pilot project was published in November 2013, highlighting the priorities for the envisaged revision of Directive 2007/46/EC. Finally, and in line with the commitments the European Commission made in its CARS 2020 Action Plan, a competitiveness proofing (CP) study has been run in the second half of 2013 to complement the above mentioned actions. The need for mitigating measures for SMEs has been considered in the context of this study, which demonstrated that for the options retained there would not be any significant impacts for the SMEs in the sector to the extent that mitigating measures would be necessary. Micro enterprises have not been considered as there is no evidence available that any such enterprises operating in these sectors would likely be affected by the envisaged measures. Stakeholders have been continuously informed and involved in all the above mentioned studies. High level involvement of stakeholders has taken place in the context of the CARS 21 High Level Group, resulting in a number of recommendations in relation to the type-approval framework that have been taken up by the Commission in its CARS 2020 Action Plan adopted in November 2012. In addition, specific exchanges with Member States' authorities have taken place during the entire impact assessment process at meetings of the Technical Committee Motor Vehicles (TCMV) and the Type-Approval Authorities Experts Group (TAAEG). Exchange of views with industry and user associations about the initiative have taken place in the framework for the Motor Vehicles Working Group (MVWG). All stakeholders have also been consulted by the external study contractors for the collection of data and views. This extensive consultation process has enabled stakeholders to express their positions, which have been taken into account for the identification, assessment, comparison and final selection of the preferred combination of policy options. It also enables to conclude that the Commission's minimum consultation standards have been met. 1.4.Scrutiny by the Commission Impact Assessment Board The Impact Assessment Board of the European Commission assessed a draft version of the present impact assessment and issued its opinion on 28 March 2014. The Impact Assessment Board made several recommendations and, in the light of the latter, the final impact assessment report: Has been redrafted to highlight that this impact assessment is mainly based on a qualitative rather than a quantitative approach. The main reason being that the data that could be collected to build a quantitative assessment were limited and not sufficiently robust to draw reasoned conclusions. The second reason is that the main objective of this initiative is to improve the effectiveness of the current legal framework by streamlining and enhancing procedures and processes, rather than to introduce new safety and environmental requirements to be complied with. It has proven difficult to quantify in a reliable manner the impact of such procedural changes, as no or very little data are available. Nevertheless an attempt for a quantitative assessment has been made to provide a rough idea about the order of magnitude of the benefits that could be generated by improving these processes and procedures. However, as these estimates are building on assumptions about the likely reduction of the presence on the market of non-compliant products and products that represent a serious risk, and are mainly based on stakeholders' views, they are not sufficiently precise to be used as a basis for comparison with the estimated costs the proposed changes to the framework may entail. For these reasons these quantitative estimates have been shifted to the Annexes of this Impact Assessment Report and are provided for information only. Clarifies better the causes of the problems and their impacts. It also describes more in detail the extent to which the proposed options are based on the provisions of existing horizontal legislation (New Legislative Framework) or provide tailor-made, sector specific, solutions. 2.Context

2.1.General political and regulatory context: See Annex 4 2.2.Specific regulatory context The legal framework for the type-approval of automotive products covers three categories of vehicles: motor vehicles and their trailers, motorcycles (two and three-wheelers as well as certain quadri-cycles), and agricultural or forestry tractors. The scope of this impact assessment is limited to the legal framework for the type approval of the first category of vehicles (motor vehicles and their trailers) since the legal framework for the two other vehicle categories has been the subject of a major overhaul in 2013. The legal framework for the type approval of motor vehicles aims at facilitating the free movement of automotive products in the internal market by laying down common requirements designed to achieve environmental and safety objectives which are specified in several separate legal acts. These legal acts deal with a multitude of detailed technical requirements for different vehicle systems and components and are frequently updated to adapt them to technical progress while at the same time minimising the regulatory burden on industry. The EU type-approval framework has been significantly revised over the recent years, mainly with the aim to achieving simplification and alignment with the international regulatory framework established by the United Nations’ Economic Commission for Europe (UNECE). Over time, also new requirements have been introduced to increase the level of safety, environmental protection and energy performance of motor vehicles. As a result, the EU type-approval legislation in place today is providing a coherent and robust framework fully adapted to the principles of better regulation and simplification, and providing an adequate response to the societal demands for protecting the citizens and the environment. The cornerstone of this type-approval legislation is Directive 2007/46/EC, which provides the framework under which the separate legal acts with specific safety and environmental requirements are operating. An ex-post evaluation, carried out in 2011, concludes that the Directive has proven its relevance. However, from the analysis also emerged that there are still problems with unsafe and/or non-compliant automotive products being placed on the market in the EU. The analysis pointed out that the effectiveness of the Directive relies significantly on the quality and the performance of technical services (TS) and also on their ability to ensure proper verification of the conformity of production (CoP) arrangements. These findings are particularly relevant for the envisaged review of Directive 2007/46/EC, since addressing these particular issues will contribute to the main objective of further enhancing the functioning of the internal market for automotive products. A more holistic ex-post evaluation was carried out in 2012 by means of a Fitness Check (FC) pilot project, in which not only framework directive 2007/46/EC has been assessed, but also all other main pieces of automotive internal market legislation which are closely interlinked with this Directive. The FC confirmed that the EU type-approval legal framework is appropriate for achieving the main goals of harmonisation, effective operation of the internal market and fair competition. However, differences in interpretation and strictness in application of the requirements across Member States (MS) are reducing the effectiveness of the framework. The Commission Staff Working document on the FC acknowledges room for improvement and singles out the review of Directive 2007/46/EC as a matter of priority, with as subjects of main focus: –the introduction of market surveillance provisions to complement the type-approval requirements; –the clarification of its recall and safeguard procedures; –the suitability of alternative type-approval schemes in providing appropriate flexibility for niche markets and SMEs; and –the need to harmonise and enhance the type-approval and conformity of production procedures applied by MS authorities and technical services, and to clarify their roles and responsibilities. 2.3.Scope of the initiative: The scope of this initiative is limited to the legal framework for the type approval of motor vehicles and their trailers, which is currently governed by Directive 2007/46/EC (See "basic directive" in the figure below). Under this framework seven separate Regulations have been adopted, which are the main technical acts setting out the relevant environmental and safety requirements automotive products have to comply with under this framework. 2.4.Purpose of this initiative: The main purpose of this initiative is to enhance the implementation and enforcement of the legislative framework for the free movement of motor vehicles. The introduction of market surveillance, based on the solutions offered by the NLF and adapted where necessary to take account of the specificities of the automotive sector, is considered to address the areas identified as having a potential for improvement. As explained in Annex 4 this approach will build - to the greatest extent possible – on the reference provisions of the NLF "toolbox" Decision 768/2008/EC and will aim to achieve the highest level of coherence with the recently revised type-approval legislation for L-category and T-category legislation, and in particular with the newly introduced provisions on market surveillance in these two new Regulations. These market surveillance provisions have also been based on the NLF, but have been adapted during the inter-institutional discussions to take account of the specificities of the automotive sector. In particular the fact that the current internal market legislation is based on a rigorous ex-ante control system before automotive products can be placed on the market requires an adaptation of the generic provisions on market surveillance, to ensure that ex-post controls carried out in the context of market surveillance activities take duly into account that automotive products must be type-approved before being placed on the market. This implies that clear provisions are necessary to ensure proper and efficient information exchange and co-operation between market surveillance authorities and type-approval authorities, and that the pivotal role and responsibilities of the type-approval authorities have to be recognised. The key driver for this initiative is therefore to provide tailor-made solutions for complementing the type-approval requirements (ex-ante controls) with market surveillance provisions (ex-post controls), whilst aiming at ensuring the highest level of coherence with the approaches that have been followed for introducing market surveillance provisions in the type-approval framework for motor cycles and tractors.

2.5Links with other initiatives: The NLF is currently being reviewed in the context of the Product Safety and Market Surveillance Package (PSMSP). Annex 4 provides more details why this initiative has not been taken into account for the review of the legal framework for the type-approval of motor vehicles. 2.6Key features of the sector concerned: The EU automotive sector has an annual turnover of around €800 billion, of which the part associated with “industrial activities” (excluding services and trading) is around €640 billion. Of this total for industrial activities, the manufacture of motor vehicles, trailers and semi-trailers accounts for around €440 billion, and the manufacture of parts and accessories accounts for around €200 billion. The latter amount can be further separated to distinguish the market share between original equipment parts and aftermarket parts (See figure below). (Source: IA study, based on analysis of EUROSTAT data (pp 10 + 11)) 3.Problem definition 3.1.The problem that requires action This initiative aims at addressing the problem of non-compliant or unsafe automotive products still found on the market, despite the existence of an EU legal framework based on an ex-ante control of the safety and environmental performance of automotive products before they can be placed on the market. 3.1.1.Stakeholders' views on the problems requiring action: The importance of the problem has been recognised in the context of the public consultation, as more than 75% of the respondents indicated to have knowledge of/or experience with non-compliant and/or unsafe automotive products on the EU market. More than 80% of the respondents consider that this problem is leading to a distortion of competition between economic operators, poses serious challenges to the enforcement of the current legislation and has significant negative impacts on our society (health and safety, environment). So respondents to the public consultation appear to have a commonly shared understanding of this regulatory failure (see table IPM.1 in Annex 1). With regard to the current legal framework and its procedures for taking actions against non-compliant and unsafe automotive products across the EU market, 47% consider these neither effective nor sufficient, against 41% considering them effective and sufficient. These results clearly indicate the acknowledgement of another regulatory failure, which is confirmed by the fact that more than 76% of respondents agree or agree fully on the need for increasing the focus on market surveillance, against 12% disagreeing. (see table IPM.2 in Annex 1) From the replies to the EPE study questionnaire appeared that the majority of respondents equally acknowledged that there exists a problem with unsafe automotive products being placed on the EU market, considering it to be serious or even highly serious. Only a minority of the national authorities consider this not to be a problem (see table EPE.1 in Annex 1). With regard to the estimated size of the problem with non-compliant and unsafe products, half of the national authorities responding to the to the ex-post evaluation study questionnaire and considering the problem of unsafe products to be serious, believe that unsafe automotive products account for less than 10% of automotive products on the market, while the other half believe that unsafe automotive products account for more than 25% of automotive products (see table EPE.2 in Annex 1). A similar pattern emerged with regard to the problem of non-compliant automotive products being placed on the market, with no single corresponding stakeholder considering this is not a problem (see table EPE.3 in Annex 1). As for the estimated size of the problem with non-compliant products the replies to the ex-post evaluation study questionnaire provided a similar pattern as for the problem of unsafe products (see table EPE.4 in Annex 1). 3.1.2.Possible reasons for the problems identified: Although the existence of the problem is widely recognised, there are no reliable data available that would enable to identify to which extent the presence of unsafe and non-compliant products on the market can be attributed to general irregularities (e.g. due to lack of awareness about the applicable requirements) or to genuine illegal activities (e.g. intentional trespassing of the rules or circumventing the requirements).

In view of this limitation, the approach followed for identifying the problem drivers and selecting policy options that could contribute to minimising the occurrence of such problems has been based on a detailed assessment of the current provisions of the legal framework and their effectiveness in avoiding such problems occurring (see § 3.1.7 for further details). The overall result of this assessment was that on the one hand a number of the type-approval procedures and requirements needed to be strengthened and on the other hand that these type-approval requirements needed to be complemented with market surveillance provisions to ensure that whenever problems with unsafe or non-compliant automotive products on the market occur, adequate remedial action can be taken. These relatively high percentages can be explained to a very large extent by the fact that the vast majority of recalls in the automotive sector are of a voluntary nature and are undertaken by the manufacturer to address quality issues, which not necessarily have a bearing on safety or environmental performance and therefore on the compliance of the product with the relevant requirements of the type-approval framework. As the problem drivers have been identified to select the policy options that would enable to enhance the type-approval framework, it is to be expected that still a large percentage of the automotive recalls will not be avoided by addressing the problem drivers. It is therefore important to ensure that the procedures for recalls are maintained in the type-approval framework and further clarified and strengthened to ensure that the recall procedures provide a meaningful and complementary tool to protect citizens from the safety risks that automotive products may represent despite the fact that they comply with the type-approval requirements 3.1.3.Problem drivers: The Commission services have – in consultation with the Member State authorities responsible for the enforcement of the type-approval legislation - singled out five problem drivers having a potential to correct the regulatory failures. Three of these problem drivers can be directly associated with the requirements of the type-approval legislation as such (areas C,D and E), whilst the other two relate to the overall need to enhance the implementation and enforcement of the type-approval framework, by means of complementary measures derived from a comparative analysis of the reference provisions of the NLF "toolbox" decision and taking into account the approach that has been followed for the introduction of market surveillance provisions in the parallel Regulations on the type-approval and market surveillance for motorcycles and tractors. (see areas A and B below). A)Difficulties to trace the origin of non-compliant and unsafe products encountered on the market and lack of clarity about the respective responsibilities of economic operators involved in the supply chain for such products: Currently, traceability is not ensured throughout the whole supply distribution chain. Directive 2007/46/EC requires only that for the purpose of type-approval the manufacturer or his authorised representative is identified, but there are currently no legal means available to identify the other economic operators in the distribution chain - such as importers and distributors - let be to hold them accountable for the safety and compliance of the products they are placing on the market. These operators are, however, important contact and information points for the enforcement authorities, in particular when the manufacturer is not established in the EU. This lack of information to identify and trace the origin of non-compliant and unsafe products on the market and the economic operators in the supply chain to be held accountable is detrimental for an effective enforcement strategy, as it hampers enforcement authorities in identifying and taking effective remedial action against non-compliant products and economic operators not respecting the rules. The difficulty to trace products and the responsible economic operators has also been recognised and highlighted in the Impact Assessment Report accompanying the proposals for the New Legislative Framework. Globalisation is mentioned as one the reasons why it has become increasingly difficult to determine how and by whom a product is manufactured or who has placed it on the market. The IA report for the NLF mentions that often enforcement authorities cannot find the economic operator from whom the necessary information about the safety and compliance of the product can be obtained and who could be held accountable for ensuring that mitigating measures are taken to remedy the non-compliance or the safety risk. B)Lack of clarity about the respective responsibilities of and the co-operation between the different national authorities that may be involved in the enforcement of the technical harmonisation legislation for the free movement of motor vehicles (in particular type-approval-, market surveillance- and border control authorities): The current type-approval legislation focuses mainly on pre-market control procedures for type-approval and the conformity of production, and therefore defines and refers exclusively to type-approval authorities and the competent authorities for the assessment and designation of technical services. However, for the purpose of addressing post-market problems with non-compliant and unsafe products, and in particular for the application of the procedures for safeguard measures and the recall of vehicles, the respective roles and responsibilities of other authorities which may be involved in the implementation and enforcement of the legislation are not clearly defined and streamlined. The lack of exchange of information and co-operation between enforcement authorities from the different Member States has also been highlighted in the IA Report accompanying the proposals for the NLF package. As the competence of the enforcement authorities is limited to their national territory, the functioning of the Internal Market in terms of ensuring that only compliant and safe products can be placed on the market is determined by the weakest link in the chain. Weaknesses in the organisation of enforcement in one single Member State can seriously undermine the efforts by others to keep non-compliant and unsafe products from the market. Where remedial action is needed beyond the national border, enforcement authorities must be able to rely on co-operation and exchange of information with their colleagues in the other Member States. The absence or poor functioning of such exchange of information and co-operation hampers an effective and uniform enforcement of automotive legislation across the EU. The existing fora for exchange of information between type-approval authorities of the Member States are mainly addressing issues related to the interpretation of the type-approval requirements and procedures specified in the legislation, but are not suited for exchange of information and co-operation between enforcement authorities on issues related to non-compliant and unsafe automotive products (as not all enforcement authorities are represented). C)Divergence in quality of the type-approval and conformity assessment tasks carried out by technical services: Technical services are a key player in the type-approval process and for verifying that manufacturers ensure an adequate level of conformity of production. Varying degrees of stringency and quality standards applied by technical services are issues that have emerged from the public consultation and the EPE study, and are considered to contribute substantially to hampering the harmonised implementation of the type-approval legislation. Around 50% of the technical services and national authorities responding to the ex-post evaluation study questionnaire considered that the effectiveness of refusal or withdrawal of type-approval has been reduced by ‘type-approval hopping’

(i.e. economic operators selecting more lenient type-approval authorities over more stringent authorities) and ‘selective selection of type-approval authority’ (i.e. automotive products for which type-approval has been refused or withdrawn being presented to other technical services and/or authorities to obtain type-approval). D)Lack of clarity and harmonisation in the post-market safeguard procedures and the provisions for the recall of vehicles: Currently the recall provisions in article 32 of the FWD refer in general terms to the General Product Safety Directive. The FWD however does not provide clarity on how the different authorities who could be involved in the procedure should co-operate. For instance, when a border control authority in one Member State would encounter a non-compliant product, there are no clear provisions in the type-approval legislation describing how and to which other concerned authorities in the same or other Member State(s) this should be reported. Under the GPSD, as well as under NLF Regulation (EC) No 765/2008, MS have an obligation to notify measures taken against products which pose a safety risk for the health and safety of consumers and other users, and/or to the environment. The IA report for the PSMS package reports that only 44% of MS fully comply with this obligation. It also refers to shortcomings in the practical implementation of the safeguard clause procedure. According to the NLF Regulation all compulsory safeguard measures taken by Member States against products which are covered by Union harmonisation legislation and which are presenting a risk have to be notified to the Commission. The data regarding the number of safeguard notifications under Directive 2007/46/EC indicate that the safeguard clause has never been invoked. In contrast, the RAPEX notifications concerning recalls in the motor vehicles sector indicated that all recalls, without exemption, were of a voluntary nature.

In addition, the post-market safeguard procedures and the information procedures provided for the recall of vehicles in the current motor vehicle type-approval legislation are specified in a general manner as obligations for Member States, without addressing the respective competences of the different national authorities that may be involved. As such, they do not take into account the involvement of market surveillance and custom authorities and the valuable contribution they can make to an effective enforcement of the relevant legislation to ensure that any remedial action undertaken will guarantee an adequate solution to the safety, environmental or compliance problem encountered. E)Shortcomings in the legal provisions for ensuring conformity of production: The procedures for ensuring conformity of production are an indispensable part of the overall type-approval process since they aim at ensuring that all vehicles are produced in accordance with the approved type and as such also comply with the applicable requirements. Therefore, they constitute a very important connecting link between the ex-ante type approval procedure and the ex-post market surveillance activities, and – if properly specified and implemented - a powerful tool in minimising the risk of non-compliant products being placed on the market and the need for restrictive post-market actions to remedy the problems associated with such products. The current CoP provisions, however, give too much room for diverging interpretation and application. In particular weaknesses in the criteria for the assessment of the quality assurance system to be set up by the manufacturer and for the frequency of periodical audits and the possibility of unexpected visits to the manufacturers' premises to verify the conformity of production arrangements result in a varying degree of rigour applied by enforcement authorities. As an example, the current provisions for establishing the frequency of periodical audits are based on "the climate of trust between the manufacturer and the approval authority". 3.1.4.Stakeholders' views on problem drivers: From the public consultation emerged that respondents acknowledge these five problem drivers as being relevant. Only for problem driver D concerning the procedures for safeguard measures and recalls this acknowledgement is less outspoken (see table IPM.3 in Annex 1). From the EPE study emerged that the majority of national authorities responding expected that developments or changes in the market for motor vehicles are likely to either increase or significantly increase the importance associated with four of the five problem drivers. (See table EPE.5 in Annex 1). The only exception is problem driver B ‘responsibilities of and co-operation between the different national authorities within the Member States involved in the enforcement of the legislation’, for which the majority of national authorities responding to this question believe that changes in the market will not affect the significance of this area. Specific issues raised by national authorities include: –concerns regarding the further opening of the global market for technical services. Conflicts between their role in conducting type approval testing and reporting on the one hand and competition between technical services to secure clients on the other could lead to some TS producing approval work of questionable quality; and –increased harmonisation through information exchange and co-operation,, which will mean that each national authority will get more cases to manage (including cases in other countries). Most technical services responding to the EPE study questionnaire indicated that expected developments or changes in the market for motor vehicles are likely to increase the importance associated with three of the five problem areas; the difference between these technical services expecting an increase and those that predict no change is, however, marginal (60:40). A marginal difference (60:40) in favour of no change can also be seen in the area of “quality and performance of technical services”. The clearest indication is in problem area A for which 80% of responding TS expects an increase or significant increase in importance due to market changes. Economic operators who responded to the questionnaire of the EPE study expect no changes to occur with regards to three of the five problem areas. However, for the quality and performance of technical services as well as for the traceability of products and responsibilities of operators, 33% of the respondents expect an increase in importance due to market changes. Consumer organisations replied that expected developments/changes in the market for motor vehicles are likely to increase the importance of each of the five identified problem areas. 3.1.5.Specific needs for action: In addition to these five problem areas identified and discussed above, some more specific issues may need to be addressed as well. Recent problems associated with the implementation of the MAC Directive (Directive 2006/40/EC) have revealed the need to bring greater clarity in the type-approval framework for motor vehicles with regard to the conditions for granting extensions to type-approvals for existing types of vehicles. Situations encountered such as the same vehicle model being approved at the same time as a "new type" and as an "existing type" through an extension of an existing type-approval result in legal confusion and could in some cases be perceived as a way to circumvent compliance with new requirements that have come into force for new vehicle types. Also the current safeguard procedures, which are designed on the assumption that the type-approval authority who issued the approvals for a type of vehicle would take timely and appropriate remedial action whenever the type of vehicle would be found not to comply with the requirements may need to be revised to address also those cases where no such appropriate and timely remedial action would have been taken by the issuing type-approval authority. In particular the rights and obligations of the other Member States and the role of the Commission in such cases may need to be clarified (this issue is linked to problem area D). 3.1.6.Link between policy objectives, problem drivers, problems and consequences: Annex 5 provides a schematic presentation of the links between the problem and its drivers, as well as the resulting consequences. It also provides an overview of the policy objectives that have been identified to remedy/reduce the problem and which will be described in more detail in the section s below. 3.1.7.Estimated size of the problem: For estimating the size of the problem it is important to make a distinction between non-compliant and unsafe automotive products.

Non-compliance refers to the situation where the automotive products covered under the FWD do not meet the safety or environmental requirements set out in the specific technical acts adopted under this framework legislation. Reference to unsafe automotive products is made in the context of recalls of automotive products which present a “serious risk to road safety, public health or environmental protection” (irrespective of whether they are compliant or not). The exact proportion of non-compliant and unsafe automotive products on the EU market is not known. However, the consultation of stakeholders in the context of the EPE study provided some estimates of the market share for non-compliant and unsafe products. These estimates have been used as a basis for attempting to quantify the possible benefits that could be generated by the envisaged policy options in reducing the market share of unsafe and non-compliant products. More details on this attempt for a quantitative assessment are provided in Annex 8. 3.1.8.Current tools and their shortcomings to address the problem: The current tools available are mainly based on ex-ante compliance verification through type-approval combined with conformity of production arrangements. They have been built on the mutual confidence between all stakeholders involved and may have been sufficient for an automotive market where the major players were mainly established in the European Union and hence compliance with safety and environmental requirements could reliably be ensured with this approach. However, the global automotive market is changing drastically: its centre of gravity is shifting to emerging countries, and the EU manufacturers are increasingly faced with fierce global competition. These developments have also an impact on the way the authorities in the Member States and the Commission services need to organise themselves to continue ensuring that automotive products placed on the EU market – and in particular those imported into the EU – comply with the safety and environmental requirements of the type-approval legislation. In addition, the fierce competition on the global automotive market is also having an impact on the way manufacturers are addressing safety quality control issues. Data from the RAPEX system indicates a rising trend in the number of notifications on recalls in the motor vehicle sector over the last decade. (See graph below) 2005 2006 2007 2008 2009 2010 2011 2012 A review of the RAPEX annual reports for the past 5 years indicates that motor vehicles (including motorcycles) account for between 8 and 15% of notifications of products presenting a serious risk as shown in the table below. Year No. of notifications of products presenting a serious risk No. of notifications of automotive products presenting a serious risk % Notifications associated with Motor Vehicles 2012 2278 149 8% 2011 1803 171 11% 2010 1963 175 9% 2009 1699 146 9% 2008 1545 160 10% 2007 1355 197 15% 2006 924 126 14% As such, motor vehicles are ranked in the top five of most frequently notified product categories in RAPEX. The problems that have prompted these recall actions indicate that automotive products which are placed on the market can give rise to some safety or environmental risks even when they comply with the applicable type-approval requirements. It should be noted that all of these recalls have been notified as being voluntary ones, which may raise the question about the efficiency of the Framework Directive’s provisions on mandatory recalls. The concern most commonly raised is that these provisions are not sufficiently clear and firm, resulting in different procedures and criteria being adopted by different Member States. For instance, it is reported that some vehicles may be recalled in some MS but not in others. Further to that, a number of MS consider that the process can be rather slow and complicated in situations where the type approval has been issued by another Member State. The recent problems arising from the implementation of the MAC Directive raise the question about the need to enhance the recall system in the legal framework with a view to better ensure common minimum levels of consumer protection and health and safety standards across the EU. The experience with recent recall actions has demonstrated so far that the procedure established by the automotive framework legislation for the exchange of information on the remedial measures taken appears to function properly. However, it has at the same time highlighted that the respective roles of the authorities and economic operators involved need to be better clarified and specified, and that in particular such problems could be better anticipated by increasing the focus on market surveillance. It should be noted that these problems and needs are not exclusive to the automotive sector but are common to most of the consumer and professional products covered by technical harmonisation legislation, and possible solutions for addressing them have been specified in the NLF. This impact assessment aims at exploring and providing adequate answers to these problems by assessing to what extent the approach followed in other product sectors and harmonised by the NLF could contribute to achieving this objective. There is however no evidence available that would indicate that the presence of non-compliant and unsafe automotive products on the market could be due to poor enforcement and/or weak administrative capacity in some Member States. From the experience gained and the evidence available emerges that there is rather a need to clarify and strengthen the procedures in the type-approval framework, so as to leave less room for divergence in interpretation and to enhance further harmonisation of the enforcement by the Member States. It should also be noted that there is no evidence so far that Member States would have failed to comply with their obligation to implement and enforce the FWD in their territory. Therefore it is unlikely that the presence of non-compliant and unsafe automotive products could be attributed to enforcement failures by Member States. Therefore the problem of non-compliant automotive products found on the market cannot be solved by using infringement procedures. 3.2.Who is affected, in what ways and to what extent?

A range of different groups are affected by the market failures and regulatory shortcomings resulting in the presence of non-compliant and unsafe automotive products on the EU market. –European citizens (vehicle users as well as other road users) are affected by poor safety and environmental performance of motor vehicles in those instances where unsafe and non-compliant automotive products are involved, which are contributing to road accidents and poor air quality, both resulting in harm to personal health. –Economic operators in the automotive supply chain suffer from an unlevelled playing field and unfair competition from those ignoring or not complying with the rules of the game. Especially EU automotive manufacturers and suppliers may be affected from the unlevelled playing field if the rules cannot equally enforced upon non-EU manufacturers and suppliers. –National enforcement authorities will be affected by the regulatory shortcomings, putting additional burden upon them to remedy these shortcomings by taking corrective actions against non-compliant and unsafe products on their markets. A lack of cross-border information exchange and co-operation will reduce considerably the effectiveness of such remedial measures, since the problem may be shifted to other Member States where no the same level of rigour against non-compliant and unsafe products is applied. –Technical services are operating in a competitive environment and are subject to economic pressure from operators in the automotive sector who are keen in obtaining type-approval for their products in the cheapest way possible. This pressure can only be countered if clear and effective criteria are established to safeguard the independence of technical services and to ensure the quality of their type-approval related inspection and testing activities. Otherwise bona fide technical services will suffer from the unlevelled playing field and lose market share to the advantage of those not respecting the criteria. –SMEs in the automotive sector are the most vulnerable to suffer from the market failures and regulatory shortcomings and particular attention is given to the potential impact the envisaged policy options may have on them. 3.3.EU right to act The FWD is based on Article 114 of the TFEU and contributes to the implementation of the internal market for goods. Although Member States are responsible for the enforcement of the legislation in their territory, a harmonised and co-ordinated approach based on commonly applicable criteria (such as those as offered by the NLF) and uniformly applied by Member States is essential for ensuring a level playing field across the EU. The differences in national organisation of type-approval and market surveillance may give rise to a non-harmonised enforcement when viewed in the framework of the European single market which no longer has internal borders and where controls at national borders have practically disappeared. To avoid that non-compliant products circulate on their territory, Member States depend to a large extent on the effectiveness of the enforcement policy of their neighbours. Consequently, weaknesses in enforcement by one single Member State can seriously undermine the efforts taken by other Member States to keep non-compliant products from the market. This interdependence is reinforced by the fact that the competence of enforcement authorities is limited to the national territory. Where action is needed beyond the border, these authorities must rely on their colleagues in other Member States. In view of the global nature of automotive sector, with substantial imports of automotive products from outside the EU, this cross-border dimension is highly important. If actions were to be taken individually by Member States at national level to address market problems, this may entail the risk of creating obstacles to the free movement of motor vehicles aimed by the automotive product framework legislation. Hence there is clear added value to take action at EU level. 4.Objectives 4.1.General policy objectives The overall policy objective of reviewing Directive 2007/46/EC is to safeguard and strengthen the functioning of the internal market for motor vehicles by ensuring that all necessary mechanisms are in place for an effective and uniform application and enforcement of the type-approval framework legislation. It aims at ensuring that by means of ex-ante as well as by post-market controls all motor vehicles as well as systems, components and separate technical units intended for such vehicles which are placed on the EU market fulfil the applicable requirements, with a view to ensure a high level of safety and environmental protection, and to provide for adequate procedures to remedy the situation where non-compliant and/or unsafe products would nevertheless have been placed on the market. As such it is contributing to the general policy objectives of enhancing road safety and reducing pollutant and CO2 emissions. Finally it also aims at enhancing the competitiveness of the EU automotive industry, and that a level playing field is maintained for the economic operators involved. 4.2.Specific policy objectives Three specific objectives are envisaged with this initiative: –Ensure a better enforcement of the safety and environmental requirements governing the design and construction of motor vehicles and their parts and systems. –In accordance with the principles of smart regulation, ensure the highest degree of coherence with the recently updated type-approval legislation for motorcycles and tractors and with the reference provisions of the New Legislative Framework. –Reduce the number of non-compliant and unsafe automotive products on the market. 4.3.Operational policy objectives

Reduce the number of non-compliant and unsafe motor vehicles, systems, components and separate technical units intended for such vehicles being placed on the EU market, by: –Enhancing the traceability of automotive products; –Specifying and clarifying the respective responsibilities of the economic operators in the automotive supply chain with regard to the compliance and safety of these products; –Specifying the respective responsibilities of the different authorities involved in this process, with a view to ensure effective and uniform action against non-compliant and unsafe products across the EU market and the equal treatment of economic operators in the enforcement of the requirements; –Increasing the credibility of the type-approval tests and inspections by enhancing the criteria for the designation of technical services and for monitoring their performance; –Ensuring reliable and high-quality type-approvals procedures, including the conformity of production arrangements. 4.4.Consistency with other policies and objectives The objectives of the envisaged initiative are consistent with the integrated industrial policy for the globalisation era, which is one of the seven flagship initiatives under the Europe 2020 strategy. The initiative also ties in with the European Commission’s strategic initiative to re-launch the internal market and in particular with its proposals to improve product safety in the EU by strengthening market surveillance in the Member States. The Commission announced this initiative in its CARS 2020 action plan for the automotive industry as an important initiative to meet its commitments on smart regulation. 5.Policy options Building on the problem description in section 3.1, the following policy options have been identified for each of the five problem driver areas. 5.1.Problem driver A: insufficient traceability of automotive products and lack of clarity about responsibilities of economic operators in the supply chain Three possible policy options have been identified for further assessment: Option A1 (baseline scenario): business as usual. Option A2: Introduce voluntary agreements and awareness raising campaigns to improve the overall traceability of automotive products and clarity about the responsible actors in the supply chain. Option A3: specify legal provisions for the traceability of products and the responsibilities of economic operators in the supply chain. This could be done at different levels of ambition with regard to the scope, extent of information and technological tools for ensuring traceability being used. The following levels of ambition have been considered: a) low ambition level approach: use as a reference the current systems already in place in some parts of the industry. Currently, each company is regulating individually the identification and traceability of its products, but at the interface between companies it becomes more difficult. There is no clear agreement on delimitation accuracy required for parts and their components, who stores which process/quality data relative to which references, and which references are to be communicated to the customer and linked to the customer’s product.

The question is however whether applying these systems across the automotive product sector could make the traceability processes more transparent and more reliable throughout the supply chain. It should be noted that the systems are used on a voluntary basis mainly for supply chain management purposes and are not tailored to suit the needs of market surveillance. Therefore this option is not taken forward for the further impact assessment. b) medium ambition level approach: introduce harmonised product traceability requirements to ensure that automotive products (or their packaging/documentation, due to size/nature of the product) bear a type, batch or serial number or other element allowing their identification. For reasons of coherence and in line with the principles of smart regulation these requirements should be based on the reference provisions of the NLF Decision. The same principles would apply for specifying the provisions with regard to the identification of the actors in the supply chain and their respective responsibilities in terms of ensuring that the products they are placing on the market are compliant and safe. In line with the NLF provisions, manufacturers established outside the EU would have to appoint an authorised representative for market surveillance provisions. As the type-approval framework already contains a similar provision for type-approval purposes, the manufacturer can use the same representative for both purposes. Importers and distributors would have specific responsibilities with respect to approval and market surveillance as do manufacturers, particularly those that modify or rename (to their own name or trademark) automotive products. c) high ambition level approach (going beyond application of NLF provisions): use as a reference for the traceability requirements current high-technology traceability systems for automotive products, such as Radio Frequency Identification (RFID) tags. RFID is a technology that uses radio waves to transfer data from an electronic tag (which can be attached to an object) to an electronic reader, for the purpose of identifying and tracking the object (using a unique serial number). RFID tag technology is currently used in a wide variety of applications and can be affixed to any object that requires tracking or to assist with inventory management. This technology would be useful for tracking and recording non-compliant and unsafe automotive products on the market. Due to cost considerations (see section 6.1.2.3.) the high ambition level approach (Option A3c) has to be discarded. 5.2.Problem driver B: lack of clarity about the responsibilities & cooperation of enforcement authorities Four possible policy options have been identified for further assessment: Option B1: (baseline scenario): business as usual Option B2: awareness campaigns and/or voluntary agreements with and between enforcement authorities in the Member States to clarify and agree on their respective roles and responsibilities and to enhance the information exchange and co-operation between them, both at national and cross border level. Option B3: this option would envisage to specify the role of the different authorities involved in the enforcement of the type-approval legislation and to establish clear procedures for information exchange and co-operation between them to effectively mitigate the presence of non-compliant products on the market. These provisions would be aligned with those of Regulation (EU) No 168/2013. Option B4: joint actions by the Commission and the Member States, by: –providing targeted training for enforcement authorities; and –developing guidelines on the legal provisions for type-approval, conformity of production, recall of vehicles, safeguard measures and market surveillance. Option B4 can either stand alone or complement Options B2 or B3 and goes beyond pure application of NLF provisions. In responding to the ex-post evaluation study questionnaire, the majority of national authority respondents (75%) were in favour of joint actions by the Commission and the Member States as the most appropriate for addressing problems relating to the responsibilities of and co-operation amongst the different national authorities. 5.3Problem driver C: varying degrees of stringency and quality applied by technical services Three possible policy options have been put forward in the impact assessment roadmap: –Option C1 (baseline scenario): business as usual. –Option C2: the around 250 technical services across the EU would be invited to sign a voluntary agreement which clarifies their respective roles and responsibilities and aims to achieve a uniform level of stringency in type-approval testing and verification of conformity of production. The agreement would include mechanisms for information exchange and co-operation between technical services, as well as define a body (or bodies) responsible for managing and monitoring the agreement. The awareness campaign would be aimed at disseminating the details of this agreement to technical services and economic operators.

In practice, this policy option would be difficult to define further, due to the non-representative number of responses received from technical services in the context of the impact assessment study, and unlikely to be effective for the following reasons: –it appears there is no common understanding amongst TS either that there is a problem to be addressed or what the solution might be; –because of this, the willingness of TS to sign up to a voluntary agreement is uncertain (especially for those which perceive they have nothing to gain); –the ability of all TS to co-operate is also uncertain, given the large number of them involved and the question who should develop and monitor the agreement. –Option C3: would envisage developing provisions to clarify and strengthen the requirements technical services have to comply with to be entitled to perform type-approval testing and verification of conformity of production. These provisions would in particular aim at clarifying the criteria governing the technical independence (e.g. technical services are not allowed to be the designer, manufacturer, supplier, installer, purchaser, owner, user or maintainer of the vehicles or devices tested) and their financial independence (e.g. the remuneration of the top level management and assessment personnel is not to depend on the number of assessments carried out or on the results of those assessments). Alignment with the reference provisions of the NLF Decision and coherence with the provisions of Regulation (EU) No 168/2013 would be envisaged. 5.4.Problem area D: lack of clarity in safeguard measures & recall procedures Three possible policy options have been put forward in the IA roadmap: –Option D1 (baseline scenario): business as usual. –Option D2: awareness campaigns and/or voluntary agreements with and between the different authorities in the Member States involved in the implementation and enforcement of the internal market legislation for motor vehicles to clarify and agree on their respective roles and responsibilities in post-market safeguard measures and recall actions, and the communication channels and procedures for exchange of information and co-operation. Two points have to be noted with regard to Option D2: –there are substantial similarities and possible overlaps between Option D2 and Option B2 (with the latter covering the overall roles and responsibilities of enforcement authorities, including those relating to post-market safeguard measures and recall actions). –Option D2 cannot be used to improve the safeguard measures, primarily because a voluntary agreement cannot supersede a legally binding procedure involving decisions by the Commission. For these reasons, Option D2 has not been assessed in detail in section 6 below. Any impacts relating to clarifying the roles and responsibilities of enforcement authorities have been captured under Option B2 (and Option B3) and the double-counting of impacts under two similar or at least interconnected options needs to be avoided. –Option D3: amend the existing type-approval legislation relating to motor vehicles by including provisions to specify the role of and interaction between the different authorities involved in post-market safeguard measures and recall actions, as well as the cross border information exchange and co-operation between national enforcement authorities (type-approval authorities, market surveillance authorities, border control authorities, etc.). In addition, changes to the current provisions on safeguard measures would be introduced, in line with the two step approach of the NLF Decision and as already incorporated in the type-approval legislation for motor cycles. Under this approach Member States (or their approval authorities) would only be required to inform the Commission and other Member States of safeguard measures taken where they consider that the established non-compliance is not restricted to their national territory. In particular, the procedure to deal with safeguard measures taken at national level which give rise to objections from other Member States or the European Commission should be clarified. 5.5.Problem driver E: weaknesses in the procedures for ensuring conformity of production Three possible policy options have been put forward in the IA roadmap: –Option E1 (baseline scenario): business as usual. –Option E2: awareness campaigns and/or voluntary agreements with and between the different stakeholders involved in the conformity of production (manufacturers, technical services and type-approval authorities in the Member States) to clarify and agree on the criteria and procedures to be applied for verifying and ensuring the conformity of production. It should be noted that Options A2, B2 and C2 already consider the possibilities for introducing a voluntary agreement amongst economic operators, enforcement authorities and technical services respectively. Some of the key points made in that respect are summarised in Annex 6. .

Option E2 could also not be used to enhance the CoP provisions, because a voluntary agreement cannot replace the current requirements in Directive 2007/46/EC, unless the latter would be amended for that purpose through a regulatory initiative. In conclusion, option E2 has not been taken forward for further assessment –Option E3: this option would envisage developing within the type-approval legislation on motor vehicles provisions to clarify and strengthen the CoP provisions, through the application of the principles and provisions of the NLF related to the verification of conformity during the production stage. These provisions cover the assessment of quality management systems for production, and product related controls through inspection and testing, under surveillance by the competent authorities. The current provisions for ensuring CoP could be improved by incorporating the concept that the quality assurance system of the manufacturer has to be assessed by the type-approval authority (or an appointed body acting on its behalf) based on the detailed quality assurance system documentation to be approved by that authority or appointed body. 5.6.Specific needs for action The specific needs referred to in § 3.1.5 have not been addressed in a separate option as it is considered that these needs can to a very large extent be covered in the policy options for the five problem areas identified (in particular with those concerning safeguard clauses in area D). 5.7.Instruments for the policy options Each of the identified options for the five problem areas are considered to be fully in line with the proportionality principle as they envisage addressing regulatory failures in the automotive sector within the context of the overall policy objectives set out for the re-launch of single market strategy, in particular with regard to market surveillance, and by taking due account of the principles and boundaries of the horizontal framework for the marketing of products. To enhance the harmonised implementation of the type-approval requirements by the Member States, and in line with the principles of smart regulation, it is envisaged to replace the FWD by a Regulation, directly applicable in the Member States. 6.Analysis of impacts 6.1Problem driver A: insufficient traceability of automotive products and lack of clarity about responsibilities of economic operators in the supply chain 6.1.1.Summary of impacts assessed for the options under problem driver area A: The baseline scenario (Option A1) would do nothing to address the current, estimated market share of non-compliant and unsafe products on the EU market. Responsible economic operators would continue to be disadvantaged by competition from less scrupulous operators. There would be no change to the lack of coherence in the implementation of the type-approval framework. There would be no costs associated with this option, but no benefits. The self-regulatory option (A2) would provide clarity regarding the responsibilities of economic operators. However, neither voluntary agreements nor awareness campaigns are likely to affect the behaviour of less scrupulous economic operators. The coverage and enforcement of voluntary agreements is also uncertain, given that many SMEs in particular are not members of industry associations. The option would improve coherence with the principles of the NLF, and the costs would be low; however, there is considerable uncertainty that any benefits would be achieved. The regulatory option (A3) is likely to be the most effective. It would provide legal clarity on the responsibilities of economic operators and clear rules on traceability of products are likely to assist enforcement authorities in taking effective remedial action against non-compliant and unsafe products found on the market. Overall the costs are likely to be outweighed by the benefits. (For more details on estimated benefits and costs, see Annexes 8 and 9) 6.1.2.Details of impacts assessed for the options under problem driver area A: See table IA.1 of Annex 1 and Annex 9. 6.1.3.Assessment of effectiveness, efficiency and coherence of the options: Do Nothing Option Self-regulatory Option Regulatory Option Option A1 –

NEUTRAL (0) •Effectiveness: no change from current situation - does not clarify the responsibilities of economic operators nor address issues relating to traceability and proper enforcement of type-approval framework •Efficiency: no change from current situation - current value of non-compliant and unsafe products (€375 m - €4.5 bn)* likely to continue into the future and responsible economic operators will continue to be disadvantaged in competing with less scrupulous economic operators. Option A2 –

NEUTRAL (0) •Effectiveness: Neutral (0); provides clarity regarding the responsibilities of economic operators; however, voluntary agreements and/or awareness campaign are unlikely to impact on less scrupulous economic operators. Coverage and enforcement of industry-wide VA is also uncertain •Efficiency: Neutral (0); while cost of setting up a voluntary agreement may be low; it is unclear that any costs incurred would be justified by the results in terms of actual reductions in non-compliant and unsafe automotive products – or in terms of impacts on less scrupulous operators ignoring the rules Option A3 – SATISFACTORY (+) •Effectiveness: Highly Satisfactory (++); increased legal clarity for economic operators regarding their responsibilities. Clear rules on traceability implemented and enforced universally are likely to assist enforcement authorities •Efficiency: Satisfactory (+); level of non-compliant and unsafe products likely to reduce to €281 million and €3.4 billion * respectively. Responsible operators will also be less disadvantaged in competing with less scrupulous economic operators Coherence: does not increase coherence of type-approval framework with NLF. Also, risk of MS taking additional measures at the national level to counter non-compliant and unsafe products and thus risk of increased regulatory fragmentation Coherence: Satisfactory (+) if responsibilities of economic operators are consistent with NLF. Coherence: Satisfactory (+); consistent with NLF and reinforces type-approval framework. * For more details on quantified benefits and costs and the limitations of their robustness, see Annexes 8 and 9 6.2Problem area B: lack of clarity about the responsibilities & cooperation of enforcement authorities 6.2.1.Summary of impacts assessed for the options under problem driver area B: The baseline scenario (Option B1) would do nothing to clarify the responsibilities of enforcement authorities nor address issues relating to information exchange and cooperation between them. It would have no impact on the current, estimated market share of non-compliant and unsafe products on the EU market. No costs would be incurred with this option, but there would be no benefits.

The self-regulatory option (B2) would provide clarity on the roles and responsibilities of enforcement authorities. The extent to which actions would actually be modified from the current situation is highly uncertain; however, this option could reduce to some extent the current, estimated market share of non-compliant and unsafe products on the EU market. It would provide consistency with the NLF. Some costs would be incurred by the authorities in developing and implementing voluntary agreements, but these are likely to be balanced by the benefits of a reduction in the presence of non-compliant and unsafe products on the market and benefits to the authorities and economic operators from better communication. The co-regulatory option (B3) would improve enforcement capabilities through training, while the guidelines would provide more clarity. Its effectiveness would be enhanced if it was combined with either the self-regulatory or the regulatory initiative. It would provide consistency with the NLF. The costs would be relatively low and would be significantly out weighted by the benefits generated through a further reduction of the market share taken by non-compliant and unsafe products. The regulatory option (B4) would provide increased legal clarity for enforcement bodies regarding their responsibilities. Clear rules on information exchange and cooperation are also likely to assist enforcement. It will provide consistency with the NLF, which will be of particular benefit to authorities that are also responsible for other products already covered by the NLF. The costs incurred by stakeholders are likely to be outweighted by the benefits to stakeholders from the potential of reducing the market share of non-compliant and unsafe products. 6.2.2.Details of impacts assessed for the options under problem driver area B: See table IA.2 of Annex 1 and Annex 9. 6.2.3.Assessment of effectiveness, efficiency and coherence of the options: Do Nothing Option Self-regulatory Option Co-regulatory Option Regulatory Option Option B 1 – NEUTRAL (0) •Effectiveness:

no change from current situation - does not clarify the responsibilities of enforcement authorities nor address issues relating to information exchange and co-operation between them •Efficiency: no change from current situation - current level of non-compliant and unsafe products

(€125 m - €6 bn)* likely to continue into the future •Coherence: does not increase coherence of type-approval Directive with NLF. Also, inconsistent level of market surveillance across MS will continue Option B2 - SATISFACTORY (+) •Effectiveness: Satisfactory (+); provides clarity regarding the responsibilities of enforcement authorities; however, the extent to which actual actions taken go beyond the current situation is doubtful •Efficiency: Satisfactory (+); likely to result in a reduction in of non-compliant and unsafe products on the market •Coherence: Satisfactory (+); consistent with NLF and information exchange to be underpinned by NLF and existing structures Option B4 – SATISFACTORY/ HIGHLY SATISFACTORY (+/++) •Effectiveness: Satisfactory (+); training would improve enforcement capabilities, while guidelines provide more clarity; effectiveness as a stand-alone measure is far less than when combined with B2 or B3 •Efficiency: Highly Satisfactory (++) assuming overlaps with B2/B3, level of non-compliant and unsafe products is likely to reduce to €94 million and €6.8 billion *respectively •Coherence: Satisfactory (+); consistent with NLF and reinforces type-approval framework •Preferred by national authorities for information exchange and co-operation Option B3 - SATISFACTORY/ HIGHLY SATISFACTORY (+/++) •Effectiveness: Highly Satisfactory (++); increased legal clarity for enforcement bodies regarding their responsibilities. Clear rules on information exchange and co-operation likely to assist enforcement authorities •Efficiency: Satisfactory (+);

level of non-compliant and unsafe products likely to reduce to €63 million and €3 billion *respectively •Coherence: Highly Satisfactory (++) consistent with NLF and reinforces type-approval framework. Also ensures consistency in regulatory requirements for authorities overlooking other products covered by NLF and in particular motorcycles and tractors •Preferred by National Authorities for addressing their roles and responsibilities * For more details on quantified benefits and costs and the limitations of their robustness, see Annexes 8 and 9 6.3Problem area C: varying degrees of stringency and quality applied by technical services 6.3.1.Summary of impacts assessed for the options under problem driver area C: The baseline scenario would do nothing to address the disparities in the level of quality and performance of TS. Responsible TS would continue to be disadvantaged by competition from those that are less stringent and TS with other products in their portfolio would not benefit from consistency with the NLF. There would be no costs and no benefits under this option. The potential impacts of a self-regulatory option have not been assessed in detail as, in practice, it would be difficult to agree and enforce a voluntary agreement across a large number of TS, especially where there appears to be no common understanding of the problem and no existing body to agree and enforce a VA. Because of this, even though the potential costs are low, they are still likely to outweigh the benefits which are highly uncertain, bearing in mind that the likely impact of self-regulation in encouraging less stringent TS to improve their performance is doubtful. The regulatory option would provide increased legal clarity for TS on the requirements they need to meet. Although TS could incur some costs in ensuring legal, physical or personnel separation of conformity assessment from other activities, these costs are likely to be outweighed by a potential reduction in the market share of non-compliant and unsafe products. TS could also benefit from consistency with the NLF, if their portfolio includes other products covered by the NLF. 6.3.2.Details of impacts assessed for the options under problem driver area C: See table IA.3 of Annex 1 and Annex 9. 6.3.3.Assessment of effectiveness, efficiency and coherence of the options: Do Nothing Option Self-regulatory Option Regulatory Option Option C1 – Do Nothing •Effectiveness: no change from current situation - does not address disparities in the level of quality and performance of TS Option C2 – UNSATISFACTORY (-) •Effectiveness: Unsatisfactory (-); effectiveness of a voluntary initiative in encouraging TS to perform at high level of quality is doubtful, especially where financial pressures are involved Option C3 –

HIGHLY

SATISFACTORY (++) •Effectiveness: Highly satisfactory (++) increased legal clarity for TS regarding the requirements they have to comply with. •Efficiency: no change from current situation - current level of non-compliant and unsafe products (€250 m - €7.5 bn)* likely to continue into the future and responsible TS will continue to be disadvantaged in competing with less stringent TS •Coherence: does not increase coherence of framework Directive with NLF. Also, TS with other products in their portfolio would not benefit from consistent regulatory requirements set out under NLF and type-approval legislation for motor cycles and tractors •Efficiency: Unsatisfactory (-); difficult to agree and enforce a VA across numerous TS and need for enforcement body raises a number of legal, commercial & organisational issues and increases costs • Coherence: Neutral (-); •Efficiency: Satisfactory (+); level of NCDs and/or UADs likely to reduce by up to €125 million and €5.6 billion* respectively. For TS undertaking certification and other functions, some costs may be incurred in order to ensure personnel, legal or physical separation •Coherence: Highly Satisfactory (++) consistent with NLF and reinforces framework Directive. Also, ensures consistency in regulatory requirements for TS with other automotive products in portfolio (motor cycles and tractors) For more details on quantified benefits and costs and the limitations of their robustness, see Annexes 8 and 9 6.4Problem area D: lack of clarity in safeguard measures & recall procedures 6.4.1.Summary of impacts assessed for the options under problem driver area D: The baseline scenario would involve no change from the existing situation. However, there is some uncertainty over the significance of this problem area and it would also be partly addressed by the options for Problem Area B.

The self-regulatory option would not be practicable, as a voluntary agreements cannot supersede legislation and is unlikely to have sufficient legal standing in the event of a recall. The regulatory option is unlikely to have a significant impact, unless it would result to a large number of challenges from other Member States in response to national procedures. 6.4.2.Details of impacts assessed for the options under problem driver area D: See table IA.4 of Annex 1 and Annex 9. 6.4.3.Assessment of effectiveness, efficiency and coherence of the options: Do Nothing Option Self-regulatory Option Regulatory Option Option D1 –

NEUTRAL (0) •Effectiveness: no change from current situation – there is some uncertainty over the significance of this problem area •Efficiency: no change from current situation and no direct impact on level of NCDs and/or UADs on market •Coherence: no change from current situation and does not increase coherence of WVTA Directive with NLF Option D2 - UNSATISFACTORY (-) •Effectiveness: Unsatisfactory (-); as a voluntary agreement cannot supersede legislation which specifies post-market safeguard measures Option D3 –

NEUTRAL (0)/ SATISFACTORY (+) •Effectiveness: neutral (0) as no change from current practice •Efficiency: neutral (0); no impact on level of non-compliant and unsafe products; however, economic operators and authorities may avoid additional costs from challenging en being challenged on national procedures •Coherence: Satisfactory (+); in line with NLF, consistent with aim for better information exchange between national authorities 6.5Problem area E: weaknesses in the procedures for ensuring conformity of production 6.5.1.Summary of impacts assessed for the options under problem driver area E: The baseline scenario would do nothing to address the disparities in the quality criteria and procedures for CoP. The costs to stakeholders associated with this would continue and there would be no increase in coherence with the NLF. The self-regulatory option would be unlikely to have a significant impact on the proportion of non-compliant and unsafe products on the market. It would be difficult to agree and enforce a voluntary agreement across numerous economic operators and TS and the need for a body to monitor and enforce a VA raises a number of legal, commercial and organisational issues which could increase costs. In addition, the options identified for problem areas A and B address the key responsibilities of economic operators, enforcement authorities and TS, which should also help to address this problem area. The regulatory option is likely to ensure consistency and coherence with the principles and provisions of the NLF. While the vast majority of vehicle manufacturers are likely to have robust quality assurance (QA) structures in place already, this may not be the case for manufacturers of some vehicle parts and for some SMEs. These companies would incur some costs to improve QA structures; these costs are, however, likely to be outweighed by a potential reduction in the value of non-compliant and unsafe products on the market. Having a more robust QA system in place could also benefit economic operators, by increasing the efficiency of production and ensuring that fewer poor quality products are produced. 6.4.2.Details of impacts assessed for the options under problem driver area E: See table IA.5 of Annex 1 and Annex 9. 6.4.3.Assessment of effectiveness, efficiency and coherence of the options: Do Nothing Option Self-regulatory Option Regulatory Option Option E1 –

NEUTRAL (0) •Effectiveness: no change from current situation •Efficiency: no change from current situation - current level of non-compliant and unsafe products (€500 m - €6.8 bn)* likely to continue into the future •Coherence: no change from current situation and does not increase coherence of framework Directive with NLF Option E2 -

UNSATISFACTORY (-) •Difficult to agree and enforce a voluntary agreement across numerous economic operators and TS and need for enforcement body raises a number of legal, commercial and organisational issues and increases costs Also, Options A2, A3, B2, B3 and B4 already address the key responsibilities of economic operators, enforcement authorities and technical services Option E3 –

NEUTRAL/ SATISFACTORY (0/+) •Effectiveness: Neutral (0); no significant change from current approach •Efficiency: Neutral (0); formalises current best practice but may imply some costs for a few companies •Coherence: Satisfactory (+); improves consistency and coherence of framework Directive with NLF * For more details on estimated benefits and costs, see Annexes 8 and 9 7.Comparing the options 7.1.Summary of impacts of the policy options assessed The tables in section 6 provide a comparison of the policy options, against four key performance criteria: –the potential effectiveness, in terms of addressing the general problem, the specific problem areas and/or enhancing enforcement of the type-approval legislation. –the potential efficiency (or cost-effectiveness), in terms of the costs likely to be incurred in relation to the potential reduction in non-compliant and unsafe automotive products on the market.

–the coherence of the policy options, in terms of the extent to which the proposed intervention contributes to and/or mutually reinforces the existing type-approval framework –the benefits associated with the policy options considered The boxes with the policy options which rank best for each problem area are highlighted. 7.2.Preferred Combination of Policy Options Given the overlap between the problem areas, a combination of policy options is likely to be the most effective in addressing the problems of non-compliant and unsafe automotive products on the market. From the result of the analysis of options in section 6, the preferred combination of policy options that emerges is as follows: Problem area Policy Options Preferred Combination A: traceability of products and responsibilities of economic operators 1: baseline, business as usual 2: Self-regulatory initiatives 3: Regulatory initiatives 4: Co-regulatory initiatives (joint actions between MS and EC) A3b B: responsibilities and cooperation of enforcement authorities B3 + B4 C: quality of type approval tasks carried out by Technical Services C3 D: post safeguard measures and recalls D3 E: procedures for ensuring conformity of production E3 Self-regulatory initiatives by industry and enforcement authorities have been considered, but the analysis concluded that such an approach would be not sufficient for reaching to the fullest the initiative's objectives. This conclusion is based on the consideration that the improvements in the problem areas identified are unlikely to be effective and cannot guarantee a level playing field for all economic operators unless they are legally enforceable. 7.3.Comparison of impacts of preferred combination of policy options in terms of estimated reduction of the market share of non-compliant and unsafe automotive products This preferred combination of policy options could, based on the estimates, reduce the value of the market taken up by non-compliant and unsafe products by between €656 million and €12 billion per year. The estimated impacts of each of the preferred policy options on the proportion of non-compliant and unsafe products on the market, compared with that of the separate policy options, is summarised in the table below. It has to be stressed again that these figures only capture the approximate benefits of the reduction of market distortions caused by the presence of unsafe and non-compliant products. They do not reflect benefits in terms of reduced accidents, loss of life, environmental damage, etc. caused by these products. Policy Option 1: Do Nothing Market value* of … Option A1 Option B1 Option C1 Option D1 Option E1 TOTAL Non-compliant products 375 125 250 500 1 250 Unsafe products 3 000 6 000 7 500 4 500 21 000 Policy Option 2: Self-regulatory Initiatives Market value* reduction of Option A2 Option B2 Option C2 Option D2 Option E2 TOTAL Non-compliant products 6 6 Unsafe products 300 300 Policy Option 4: Co-regulatory Initiatives Market value* reduction of Option B4 TOTAL Non-compliant products 94 94 Unsafe products 4 500 4 500 Policy Option 3: Regulatory Initiatives Market value* reduction of Option A3 Option B3 Option C3 Option D3 Option E3 TOTAL Non-compliant products 188 63 125 250 625 Unsafe products 1 500 3 000 3 750 2 250 10 500 Preferred Combination of Options Market value* reduction of Option A3 B3 + B4** Option C3 Option D3 Option E3 TOTAL Non-compliant products 188 94 125 250 656 Unsafe products 1 500 4 500 3 750 2 250 12 000 * in million Euro **In this context, Option B4 is implemented as a complementary option to Option B3 and provides additional or benefits by reducing non-compliant and unsafe products by €31 million and €1.5 billion respectively The estimated value of the main costs for implementing the combination of preferred policy options is summarised in the table below: Summary of Costs of Implementing the Preferred Options (€ million) Lower Estimate Central Estimate Upper Estimate Indicative Costs to Non-EU Importers of Having an EU Representative – Option A3 0.1 3.0 90.0 Indicative costs of additional surveillance – Option A3/Option B3 1.4 10.1 Indicative costs of transposition into national legislation 13.5 27.0 Total Cost of Option B3 of developing the guidance and training material and delivering the training 0.1 0.4 0.9 Total cost of Ensuring Technical and Economic Independence – Option C3 0.1 2.0 > 3.0 Overall Costs of Implementing the Preferred Options 15.2 n/a 131.0 Despite the high degree of uncertainty about the robustness of the estimates made for the benefits the policy options could generate, one can nevertheless conclude that in most cases, the estimated costs of implementing the options are at least an order of magnitude lower than the estimated benefits. 8.Monitoring and evaluation In order to identify the key indicators for monitoring progress and achievement of the aims of the intervention, it is important to bear in mind that any changes resulting from revisions to the framework Directive for the type-approval of motor vehicles, voluntary action and/or joint action are likely to affect consumers, the automotive industry and regulators. The indicators have, therefore, been chosen to reflect not only the regulatory intent of the intervention but also potentially negative consequences of the intervention, which may indicate a failure (e.g. an increase in court cases after introduction of a voluntary agreement). The key indicators are as follows: –changes in the views of/complaints from consumers received by enforcement authorities relating to motor vehicles and vehicle components; –changes in the number/percentage of non-compliant and unsafe automotive products present on the EU market (e.g. compared with existing surveys); –changes in the number/percentage of safeguard measures taken by EU authorities against non-compliant and unsafe products both from intra-EU and extra-EU manufacturers/importers (i.e. taking into account increased traceability requirements for automotive products);

–changes in trends in RAPEX notifications for vehicles; and –changes in trends in voluntary recalls of motor vehicles (as an indicator for the effectiveness of the policy options retained in reducing the number of automotive products on the market representing a safety or environmental risk). A reasonable timeline to review the selected indicators for monitoring and evaluation (taking into account the nature and effect of the preferred policy options) would be in five years after the revised Directive has come into force. 9.Annexes 1) Tables 2) Case Studies 3) Acronyms used 4) General policy and regulatory context of the initiative 5) Schematic representation of the problem and its drivers, the consequences and the policy objectives identified aimed at remedying the problem 6) Key considerations concerning the possible introduction of a voluntary agreement amongst economic operators, enforcement authorities and technical services 7) Overall structure of the European automotive industry sector 8) Attempt to quantify the impact of the envisaged policy options: methodology used 9) Detailed assessment of the impacts of the policy options



Annex 1: TABLES Chapter 3: Problem Definition Responses to the public consultation (IPM) Table IPM.1 The presence of non-compliant and/or unsafe automotive products on the market… Agree fully Agree No opinion Disagree Disagree fully Don’t know Is distorting competition 54% 31% 13% 10% 2% 0% Is creating serious challenges for the enforcement of the current legislation 44% 44% 8% 20% 5% 0% has significant negative impacts on our society (health & safety, environment) 38% 49% 5% 5%% 3% 0%

Table IPM.2 The current type-approval system for motor vehicles in the EU… Agree fully Agree No opinion Disagree Disagree fully is reliable and of high quality 26% 49% 8% 17% 0% creates a level playing field 3% 59% 6% 28% 3% is not effective neither sufficient for taking actions against non-compliant products 0% 47% 12% 38% 3% needs increased attention to market surveillance 48% 28% 12% 12% 3% Table IPM.3 Problem drivers / needs identified Relevance Yes No No opinion A: traceability of products & responsibilities of economic operators 76% 16% 8% B: responsibilities & co-operation of enforcement authorities 64% 15% 21% C: quality of type approval tasks carried out by technical services 79% 9% 12% D: safeguard measures & recall procedures 32% 38% 30% E: procedures for ensuring conformity of production 53% 14% 33% Replies to the Ex-Post Evaluation study questionnaire (EPE) Table EPE.1 How serious is the issue of unsafe automotive products being placed on the EU market? Highly Serious Serious Exists, but minimal Not a problem Economic Operators 25% 0% 75% 0% National Authorities 10% 20% 40% 10% Technical Services 0% 50% 50% 0% Consumer Organisations 50% 50% 0% 0% Table EPE.2 what is the estimated share of unsafe automotive products currently on the EU market? Less than 1% 1 – 5% 5 – 10% 10 – 25% More than 25% National Authorities 0% 0% 50% 0% 50% Technical Services 0% 50% 0% 50% 0% Table EPE.3 How serious is the issue of non-compliant automotive products being placed on the EU market? Highly Serious Serious Exists, but minimal Not a problem Economic Operators 50% 0% 50% 0% National Authorities 20% 30% 50% 0% Technical Services 0% 75% 25% 0% Consumer Organisations 50% 50% 0% 0% Table EPE.4 what is the estimated share of non-compliant automotive products currently on the EU market? Less than 1% 1 – 5% 5 – 10% 10 – 25% More than 25% National Authorities 25% 0% 50% 0% 25% Technical Services 0% 33% 0% 33% 33%

Table EPE.5 Problem Area Importance will … Percentage of Responses Economic Operators Technical Services National Authorities A) Traceability of products and responsibilities of economic operators Significantly increase 0% 20% 22% Increase 33% 60% 33% No change 67% 20% 44% Decrease 0% 0% 0% Significantly decrease 0% 0% 0% B) Responsibilities of and co-operation between the different national authorities within the Member States involved in the enforcement of the legislation (type-approval, recalls, market surveillance, border controls) Significantly increase 0% 0% 22% Increase 0% 60% 11% No change 100% 40% 67% Decrease 0% 0% 0% Significantly decrease 0% 0% 0% C) Quality and performance of technical services Significantly increase 0% 0% 11% Increase 33% 40% 33% No change 67% 60% 33% Decrease 0% 0% 22% Significantly decrease 0% 0% 0% D) post-market safeguard measures and obligatory recall of vehicles (and components) Significantly increase 0% 0% 0% Increase 0% 60% 44% No change 100% 40% 44% Decrease 0% 0% 11% Significantly decrease 0% 0% 0% E) Verification procedures for ensuring conformity of production Significantly increase 0% 0% 0% Increase 0% 60% 67% No change 100% 40% 33% Decrease 0% 0% 0% Significantly decrease 0% 0% 0%



Chapter 6: Analysis of options Impact Assessment study results (IA): Table IA.1: summary of impacts assessed for options under problem area A Impact Option A1

(baseline scenario) Option A2

(self-regulatory) Option A3b

(regulatory) Functioning of Internal Market Lack of clear responsibilities for economic operators and on traceability of products results in non-compliant products with a total value of €375 million and unsafe automotive products with a total value of €3 billion placed on the EU market annually Increased clarity for economic operators and enforcement authorities in identifying non-compliant and unsafe automotive products and economic operators responsible for them. However, high uncertainty in ensuring compliance for the whole sector. Assuming that Option A3b is effective (i.e. 50% reduction) in addressing the problem of non-compliant and unsafe products, there would be a reduction in value achievable of between €188 million and €1.5 billion per year of such products on the market. It is anticipated that compliant automotive devices would be replace this volume. Costs to Firms Costs will continue to be incurred by reputable economic operators due to continued distortion of market caused by non-compliant and unsafe products Main cost incurred by industry associations is for developing voluntary agreements (€8,000 to €338,000) and awareness campaigns (€6,000 to €21,000 – low estimate) to use the Odette recommendations on traceability Costs for distributors and importers to ensure their obligations are met estimated costs range from €125,000 to €90 million) Benefits to Firms No benefits identified, other than to less scrupulous economic operators Companies are likely to benefit from the clarity provided in terms of their roles and responsibilities Increased traceability requirements will help economic operators to accurately link parts (subject to recall) and assembled vehicles, and to isolate the scope of a recall, improve customer service and reduce costs Costs to Authorities No additional direct costs. However, potential losses relating to benefits which could be accrued by self-regulatory and regulatory action. Additional costs associated with more resources to be devoted to post-market control efforts and interventions due to increasing number of non-compliant and unsafe products encountered on the market None identified Costs incurred for verifying that economic operators are satisfying their requirements (between €1.4 million and €10.1 million). Also costs of amending national legislation Benefits to Authorities None identified None identified More tools available for effective enforcement of legislation, resulting in less ad hoc costs associated with post-market remedial actions against non-compliant and unsafe products Costs to technical services None identified None identified None identified Benefits for technical services None identified None identified None identified Costs to Consumers Consumers will continue to suffer from negative effects caused by recalls, faults and potentially increased safety risk None identified None identified Benefits to Consumers None identified Improvement of current situation, however, this is not quantifiable Improvement of current situation, however, this is not quantifiable Social Impacts Continuation or increase of the health risks and accidents resulting from non-compliant and unsafe vehicles Small reduction in the share of non-compliant and unsafe vehicles on the market, with associated reduction of accidents and environmental harm Reduction in the share of non-compliant and unsafe vehicles on the market, thus reducing the number of accidents and negative environmental impacts. Environmental Impacts The presence of non-compliant motor vehicles resulting in undesirable environmental impacts would continue or even increase in the future Small reduction of non-compliant motor vehicles as a result of voluntary actions will generate a proportional positive environmental impacts Reduction of non-compliant motor vehicles as a result of regulatory actions will generate an associated positive environmental impacts

Table IA.2: summary of impacts assessed for options under problem area B Impact Option B1

(Baseline scenario) Option B2

(Self-regulatory) Option B3 (Regulatory) Option B4

(Co-regulatory) Functioning of Internal Market Lack of clear responsibilities and procedures for exchange of information and co-operation between authorities results in continued presence of non-compliant products and unsafe products on the EU market, estimated to represent a value respectively of €125 million, and €6 billion on an annual basis. It is estimated that Option B2 could result in a reduction of the value of non-compliant and unsafe products on the market of around €6.3 million per year and €300 million per year respectively. However the impact of Option 2 is highly uncertain. Assuming Option B3 is effective (i.e. 50% reduction), it is estimated that there would be a reduction in the value of non-compliant and unsafe products on the market of around €63 million per year and €3 billion per year respectively Assuming Option B4 - when applied in combination with Option B3 - is highly effective (i.e. 75% reduction), it is estimated that this would result in a reduction of the value of non-compliant and unsafe products on the market of around €94 million per year and €4.5 billion per year respectively Costs to Firms No additional costs expected for economic operators No additional costs expected for economic operators. No additional costs expected for complying economic operators. Less scrupulous operators may be faced with increased costs due to the better enforcement of the legislation achieved through this regulatory action No additional costs expected for compliant economic operators. Less scrupulous manufacturer/traders may experience an increase in their operating costs (as they would now incur compliance costs) Benefits to Firms No benefits identified, other than to less scrupulous economic operators which would continue to profit from the lack of co-ordinated action by enforcement authorities