COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a

Directive of the European Parliament and of the Council on marine equipment and repealing Directive 96/98/EC

Contents

1........... Procedural issues and consultation of interested parties. 2

1.1........ Organisation and timing. 2

1.2........ External expertise. 2

1.3........ Consultation of stakeholders. 2

1.4........ The key aspect of data availability. 4

1.5........ Results of the consultation of the Impact Assessment Board. 6

2........... Context 6

2.1........ Current EU legal framework for placing marine equipment on board ships - the MED.. 6

2.2........ Evolution of the EU reference legislation governing the free movement of goods. 7

3........... Problem definition. 8

3.1........ Description of the problem.. 8

3.1.1..... The MED suffers from weak implementation and enforcement mechanisms. 8

3.1.2..... The process of transposition of IMO rules into national law creates legal uncertainty and imposes excessive burden upon the industry and national administrations. 14

3.1.3..... Conclusion. 17

3.2........ Stakeholders affected. 17

3.3........ Baseline scenario. 18

3.4........ Does the EU have the right to act?. 19

3.4.1..... Legal basis. 19

3.4.2..... Subsidiarity. 20

3.4.3..... Proportionality. 20

4........... Objectives. 21

4.1........ Policy Objectives. 21

4.1.1..... General objectives. 21

4.1.2..... Specific objectives. 21

4.2........ Coherence with horizontal policies. 22

4.2.1..... New Legislative Framework. 22

4.2.2..... Better regulation strategy. 23

5........... Policy options. 23

5.1........ Pre-screening of policy options. 24

5.2........ Description of retained Policy Options. 26

6........... Analysis of Impacts. 28

6.1........ Preliminary remarks. 28

6.2........ Economic impacts. 28

6.2.1..... On the functioning of the Internal Market for marine equipment 28

6.2.2..... On operating costs and administrative burden. 31

6.2.3..... Impact on SMEs. 33

6.2.4..... On the competitiveness of economic operators. 34

6.2.5..... Impact on public authorities. 35

6.2.6..... Impact on users and passengers. 36

6.2.7..... Third countries and international relations. 36

6.3........ Environmental and Social impacts – public health and safety. 37

6.4........ Simplification of the regulatory environment 37

6.5........ Conclusion. 38

7........... Comparison of options. 39

7.1........ Effectiveness in relation to specific objectives. 40

7.2........ Efficiency. 40

7.3........ Coherence with the overarching EU objectives, strategies and priorities. 40

7.4........ Conclusion. 41

8........... Monitoring and evaluation. 41

1. Procedural issues and consultation of interested parties

Identification

Lead DG: DG MOVE

Subject: Impact Assessment (IA) accompanying the revision of Council Directive 96/98/EC of 20 December 1996 on marine equipment[1] (hereinafter MED).

Agenda Planning/WP reference: 2008/TREN/004 - simplification

1.1. Organisation and timing

Work on the present Impact assessment started back in 2008, following the reform of the EU reference legislation governing the free movement of goods[2]. While a general alignment of the internal market legislation with the new legislative framework took place in 2011, the specificities of the marine equipment sector made it advisable to carry out a separate exercise that could take those into account.

An Impact Assessment Steering Group (IASG) was established in September 2008 for the preparation of this IA to which all Commission departments concerned were invited. The following departments took part in the group's meetings: ENTR, ENV, TRADE and SG. The IASG met on 27 October 2008, 19 February 2009, 31 March 2009, 8 July 2009, 23 March 2012 and for the last time on 12 July 2012.

1.2. External expertise

In September 2008, DG TREN called upon the European Maritime Safety Agency (hereinafter "EMSA") to provide technical assistance in the preparation of this IA. Additional research has been carried out by the Agency based on the IAB opinion of 11 September 2009.

1.3. Consultation of stakeholders

Since the coming into force of the MED in 1997[3], the Commission and EMSA have organised regular meetings with the relevant stakeholders (principally the Member States and Notified bodies) in order to provide training and guidance as well as sharing best practices relating to the implementation of MED.

In addition the following steps have been taken specifically for the improvement of the Directive in question:

Questionnaire sent to the Member States by EMSA in September 2008, asking for data and figures on the most significant points concerning the implementation of the Directive. [4]

Questionnaire sent to the Member States, Industry and the MarED[5] Group of notified bodies - in early October 2008, in preparation of the stakeholder meeting. The questionnaire contained a preliminary analysis and questions concerning the scope of the Directive, Notified bodies, Market Surveillance, Safeguard Clause and Intellectual Property Rights.

Formal stakeholder consultation by the Commission[6] - On 27 November 2008 at a meeting held in Brussels. The Commission also received written contributions from six Member States and three industry representatives following the stakeholder consultation.[7]

In April 2012, all stakeholders were contacted again by the Commission to see whether the organisations wanted to endorse their 2008 positions or not, or provide fresher views on the possible amendments of the directive or new data.[8] The answers received largely confirmed the problems already examined in 2009, and provided clearer examples of the issues associated with the rigidity of the existing mechanism for the alignment of the Directive with the IMO changing standards.[9]

Throughout the preparation of this impact assessment, continuous consultation has been held with the marine equipment sector through their representatives in Brussels (the European Marine Equipment Council).[10] Bilateral contacts have also been held with two sub-sectoral associations who approached the Commission on specific issues.

Consultation of the stakeholders has shown that a) the Directive is necessary in order to provide a legal framework capable of ensuring both an appropriate level of safety and the free movement of marine equipment within the Community; and b) the Directive is nevertheless in need of an in-depth revision. Criticism from the stakeholders on the current working of the MED focused around four main areas:

(1) The Directive mechanisms do not work well because they do not tie in well with the particular circumstances of the marine equipment sector.

(2) There is limited supervision of the implementation of the Directive by Member States due to resource scarcity/available expertise.

(3) Complexity, time delays and unclear roles cause uncertainty for the Member States, Notified bodies and equipment manufacturers.

(4) Wherever the Directive deviates from standard international and/or IMO practice, this translates into operational difficulties for the operators, e.g. when the respectively applicable requirements differ or when transition arrangements do not coincide.

In general, while meaningful qualitative input was received from the stakeholders, this was not accompanied by quantitative information from either the industry or the Member States.

All in all, stakeholders (including SMEs) have been fully able to contribute to the current proposal for the review of the MED. Their views have been assessed and appropriately taken into consideration.

The standards set in the "General principles and minimum standards for consultation of interested parties by the Commission" have been met.

1.4. The key aspect of data availability[11]

There is not one sector-based (NACE[12]) classification covering the sector of marine equipment. This means that in many cases no uniform data is collected centrally, hence making this sector much harder to monitor than ship construction.

Furthermore, different definitions are used in different data sources making it difficult to arrive at “hard” estimations. Marine equipment manufacturers are often also suppliers of other industries (e.g. automotive, aviation, etc.) or are still integrated into the shipyards like in Italy. This should be taken into account when interpreting the data presented in the present IA.

It is worth mentioning that, according to a study undertaken by the Commission[13], no studies have been done at European level to look at employment in this sector, whereas only a few such studies have been carried out at the national level. For most countries, it is not possible to obtain figures relating to employment in the sector.

Lastly, the surveillance and control activities of the Member States face considerable difficulties given the specific features of the sector[14] and have not therefore produced comparable quantitative information. This makes it very difficult to gauge precisely the effectiveness of enforcement

The second stakeholder consultation, while confirming the qualitative perceptions made in the past, has not yielded any significant quantitative, up-to-date input. In light of this, the present IA and its conclusions are based on the best available sector-related data, even though being occasionally incomplete. Similarly, as a result of the known lack of data, it has been considered it would not be possible to carry out a meaningful, separate ex-post evaluation exercise to supplement stakeholders' input without incurring further serious delays.

1.5. Results of the consultation of the Impact Assessment Board

A first draft report for this IA was submitted to the Impact Assessment Board (IAB) on 16 July 2009. The IAB asked for a resubmission of the IA report in its opinion of 11 September 2009. The IAB's recommendations led to significant shortening and complete restructuring of the initial draft, as well as to the improvements in a number of key aspects.

A revised version of the IA report has been resubmitted to the IAB on 20 July 2012. The revised document takes into account the recommendations of the IAB in the following manner:

· The report has been brought in line with the standard structure of Commission Impact Assessments, including a clearer description of the different steps, a refined but shorter problem description pointing at the importance of the different issues and a market description.

· The sections on policy options, impacts, comparison of options and monitoring and evaluation have been strengthened. Objectives have been regrouped and simplified and policy options have individually been mapped to objectives identified.

· The report now places greater emphasis on safety considerations in the analysis of options.

The IAB sent its second opinion on 28 August 2012, with a number of recommendations for inclusion in the final version of this impact assessment. As a result of these recommendations, the baseline scenario has been strengthened, more explicit references to input from stakeholders have been included and the assessment of policy options in regard of simplification and reduction of administrative burden has become more detailed (with specific reference to quantitative estimations), while the monitoring aspects have been given more attention in order to resolve the problems associated with data availability in view of a future ex-post evaluation.

2. Context

A detailed description of the market for marine equipment is provided in Annex 4.

2.1. Current EU legal framework for placing marine equipment on board ships - the MED

Shipping accidents are a matter of serious concerns to the EU, in particular those that cause loss of human life and pollution of seas and coastlines. It is vital to ensure that safety requirements and standards of marine equipment keep up with the latest trends, especially as new technologies, materials and manufacturing processes are constantly being developed while lessons keep being learnt from experience.

In order to ensure high safety levels in the performance of the equipment carried on board ships, international conventions adopted under the auspices of the International Maritime Organization (IMO) require marine equipment to conform to certain safety regulations. These are mostly enshrined in the main maritime conventions themselves[15] together with their protocols and amendments, as well as in a number of other IMO instruments.

In this context, the MED has laid down common standards which provide a harmonised interpretation and implementation of the above mentioned IMO rules for the performance of marine equipment to be placed on board ships flying the flag of the EU Member States. Through this framework, the objective of this Directive is to contribute to safety at sea, to prevent marine pollution and to ensure the free movement of marine equipment within the EU.

The legislative technique used in MED to achieve its policy objectives is largely based on the principles defined in the New Approach for the area of free movement of goods.[16] Nevertheless, the MED has implemented a number of specific solutions which deviate from mainstream New Approach legislation due to the specificities of the marine equipment sector:

· marine equipment has to fulfil IMO international standards. Flag states are expressly required to issue a certificate of approval by the IMO conventions described above. The Directive has the specific objective to ensure compliance with this obligation as well as mutual recognition of these certificates between Member States.

- marine equipment encompasses some categories of equipment, which are also within the scope of Directives other than the MED (e.g. fire extinguishers, electronic material, protective equipment, pyrotechnics), the requirements of which may differ from, or even be incompatible with, those of the IMO.

This is described in more detail in Annex 5, which provides a description of the New Approach and a comparison between this and the MED.

2.2. Evolution of the EU reference legislation governing the free movement of goods

Experience over the years with the implementation of EU legislation in the area of free movement of goods has highlighted certain weaknesses and shown that the effectiveness of the system can still be improved. In 2008, the New Approach[17] was subject to a revision which led to the New Legislative Framework (hereinafter the "NLF") for the marketing of products.[18]

The IA accompanying the revision of the New Approach identified and fully analysed the problem areas which are common to New Approach directives, namely lack of confidence in notified bodies and in the whole notification process in general; weaknesses in market surveillance and efficient and consistent enforcement of the directives, inconsistencies and legal uncertainty in the current regulatory framework and misunderstanding of the value and role of CE marking. This IA has also identified and analysed a number of policy options to address the above problems across various sectors. Decision 768/2008/EC, which was adopted as a result of this analysis, provides a set of policy measures considered being the most adequate cross-sectorally, and which cover four main pillars: market surveillance, conformity assessment of products, CE marking and a set of measures for use of legislation.

The NLF leaves little flexibility to the co-legislators on the choice of tools for eliminating the malfunctions and inefficiencies of legislation based on the New Approach. Article 2 of Decision 768/2008/EC clearly says that Community legislation in the area of free movement of goods "shall have recourse to the general principles set out in [the said] Decision and to the relevant reference provisions of Annexes I, II and III [to that Decision]" while "[departing] from those general principles and reference provisions if that is appropriate on account of the specificities of the [marine equipment] sector[…]"[19]

Pursuant to this substantive reform, the Commission proposed the alignment of 10 technical harmonisation directives in 2011. As mentioned above, due to its important specificities, the MED was not included in this mainstream alignment, but remained a separate exercise.

3. problem definition

3.1. Description of the problem

As indicated above, criticism expressed by stakeholders in the public consultation on the current working of the MED focused on two main areas:

3.1.1. The MED suffers from weak implementation and enforcement mechanisms

The stakeholders' consultation conducted in the context of the revision of MED has confirmed that the marine equipment sector shares the same problem areas with other New Approach directives: unequal implementation in the Member States, ineffective market surveillance and misuse of safeguard clause. As a consequence, as suggested by stakeholders, the current legal framework defined by MED does not sufficiently ensure the complete application and implementation of IMO standards in the EU, possibly leading to safety risks and inefficient functioning of the Internal Market for marine equipment[20]. Annex 6 explains in greater detail how the problem areas common to New Approach directives materialise in the marine equipment sector.

The identified malfunctions of the MED system, which are shared with other New Approach Directives, stem from the fact that the MED has not yet incorporated the corresponding regulatory remedies provided by the NLF. This concerns four main pillars: market surveillance, conformity assessment of products, CE marking and a set of other standard measures to be used in future internal market legislation.

However, in view of the explicit provision contained in Article 2 of Decision 768/2008/EC, addressing the malfunctions of the New Approach directives means mandatory alignment of MED on the provisions of the NLF, and notably on Decision 768/2008/EC and Regulation 765/2008/EC. Against this background, and taking into the specificities of the marine equipment, the problem discussed in this IA is not if MED should be aligned with the NLF, but how to align. In this respect,

· The main objective of the NLF is to contribute to the design, implementation and improvement of a flexible regulatory framework providing access to the single market while protecting essential public requirements. It follows that trade-offs can be expected between the goal of ensuring cross-sectoral legislative coherence through the alignment to NLF on the one hand, and the goal of optimising the functioning of the internal market for marine equipment, on the other hand.

· The wording of Article 2 of Decision 768/2008 leaves no doubt that departure from the NLF needs to be justified on precise grounds of specificities of the sector concerned. In the case of marine equipment, the specific features of the product indeed have a strong influence on the capacity of the legislation to reap the full benefits of EU harmonisation legislation and therefore it may be reasonable to consider MED-specific solutions in specific areas. This aspect has been confirmed by the public consultation.

The table below identifies and discusses which provisions of the NLF may see their effectiveness affected by the specificities of the MED in a way that the full benefits of harmonisation legislation would not be attained by its direct application.

Table 1: Influence of marine equipment specificities on the effectiveness of NLF main provisions

|| Content of NLF provisions || Possible influence of marine equipment specificities

Market surveillance ||

Common EU framework || Regulation (EC) 765/2008 improves market surveillance through explicit requirements for Member States to carry out and organise market surveillance activities in respect of the principle of subsidiarity. Market surveillance is organised and performed at two main stages: - national surveillance authorities monitor that products placed on their market comply with the provisions of Community harmonisation legislation transposed into the national legislation; structured controls are carried out at the EU borders; - national surveillance authorities take action, when necessary, either to bring non-compliant products into compliance, to remove unsafe products from the market and /or to ban them, or in justified cases to destroy them. || No significant influence. However, in the particular context of the marine equipment sector, the quality of surveillance authorities' work becomes a matter of critical importance. Surveillance authorities must in any case have a good mix of maritime expertise and expertise in the technical fields covered by the Directive.

More effective post-market control mechanism || Regulation (EC) 765/2008 defines market surveillance measures to be carried out by the surveillance authorities. These include: to organise random and spot checks; to require all necessary documentation from the manufacturer in order to be able to evaluate product conformity; when justified, to enter the manufacturer's premises and take samples for testing, and in extreme cases to destroy products. Market surveillance is put in the hands of a single national authority and subject to structured planning and implementation. || The relevant market for the legislator is not the marine equipment sold in the EU territory, but rather the marine equipment due to be installed on board ships flying the flag of an EU Member State. Equipment due to be installed on board non-EU ships falls outside the scope and objectives of the MED (and hence outside the scope of this IA) even if sold within EU territory. Conversely, equipment to be placed on board EU ships may or may not physically enter the EU territory. As a result, - controls at the borders and within EU territory become less relevant and; - market surveillance becomes more difficult than in the case of other products. Moreover, in the marine equipment sector, national authorities (suffering a chronic dearth of resources) need to make expertise available in a very diverse range of technical fields (as the MED covers a vast range of equipment e.g. from upholstery to radars) and gain access to very specialised test labs.

Safeguard clause procedure || The safeguard clause procedure has been reorganised and streamlined. The new procedure ensures that the relevant enforcement authorities are informed about dangerous products and that similar action is taken against that product in all Member States. The Commission ensures that these measures do not constitute disguised obstacles to the free movement of products. || The great diversity of the equipment covered by the MED calls for equally diverse technical expertise, which may be beyond the Commission's or even EMSA's resources. This may cause delays and difficulties in the assessment of safeguard clauses.

Conformity assessment of products || ||

Common EU framework || The NLF clarifies and develops the rights and obligations of notified bodies, and strengthens the control mechanisms in the hands of the Member States and the Commission. || No significant influence. However, in the particular context of the MED, as described above, the quality of notified bodies' work becomes a matter of critical importance. Notified bodies must in any case have a good mix of maritime expertise and expertise in the technical fields covered by the Directive.

Essential requirements || The NLF recommends specific product legislation to avoid, wherever possible, going into technical detail and to limit itself to the expression of essential requirements. However, where health and safety, the protection of consumers or of the environment, other aspects of public interest, or clarity and practicability so require, detailed technical specifications may be set out in the legislation concerned. || Marine equipment has to meet the requirements of the international conventions, the relevant resolutions and circulars of the IMO, and the associated relevant international testing standards. These instruments contain detailed technical requirements against which the flag State must approve any equipment placed on board ships flying the latter's flag. However, the said international instruments leave very considerable latitude for flag States in the interpretation and application of the relevant requirements. Some requirements which are important for safety do not muster sufficient consensus to be made mandatory and thus are approved as recommendations or guidelines only. In the absence of a harmonising instrument, this might lead to very significant differences between Member States and potentially affect both safety and the smooth functioning of the internal market.

Notification of conformity assessment bodies || The Decision (EC) 768/2008 foresees stronger clearer rules on the requirements for the notification of conformity assessment bodies (testing, certification and inspection laboratories) including the increased use of accreditation; a system to ensure that assessment bodies provide the high quality services that manufacturers, consumers and public authorities need. || No influence

Conformity assessment procedures || Decision (EC) 768/2008 provides a simple, coherent and complete menu to select the most appropriate module(s)/procedure(s) for the specific area of activity. A conformity assessment procedure covers both design and production phases. The assessment of the conformity of the product in question may be carried out either by the manufacturer himself or by a (manufacturer's in-house or external) conformity assessment body, depending on the provisions of the modules selected by the relevant sectoral legislative instrument. || IMO requirements are based on certification by or on behalf of the flag State. Modules not compatible with this premise must be excluded. Furthermore, the particular circumstances of marine equipment make the sector vulnerable to notified bodies' conflicts of interest, thus making it advisable not to allow for in-house notified bodies.

CE marking || The Decision (EC) 768/2008 confirms the fundamental requirement to use the CE marking and clarifies its meaning. In addition the CE marking[21] is to be protected as a trade mark, which will give authorities and competitors additional means to take legal action against abuse. || The overlap with other internal market Directives applicable to marine equipment requires a mechanism to identify the products specifically built for their use on board EU ships and conforming to the specific requirements of the IMO.

Set of measures for use in legislation || Common EU legal framework ||

Obligations of actors in the distribution chain || The Regulation (EC) 765/2008 establishes common obligations for manufacturers, importers, distributors. Importers and distributors must check that products bear the CE marking, are accompanied by the required documents and carry the name of the manufacturer and the importer (if relevant). Importers must furthermore check that the manufacturer outside the EU has applied the correct conformity assessment procedure and establish a link to the manufacturer that allows the technical documentation to be obtained when it is requested by authorities. They must carry out sample tests on products which they have supplied, when this is appropriate in the light of the risks presented by a product to the health and safety of consumers. If necessary, they must also keep a register of complaints, non-conforming products and product recalls and keep distributors informed about such monitoring. In addition to the obligations that the current legislation already imposes on manufacturers, they must provide instructions and safety information in a language easily understood by consumers and end-users. Furthermore, they are subject to the same obligations on sample testing and product monitoring as importers. New obligations are introduced for all economic operators to ensure traceability of products throughout the whole distribution chain. Manufacturers and importers must put their name and address on the product or, where this is not possible, on the packaging or an accompanying document. Furthermore every economic operator must be able to inform the authorities from whom he purchased a product and to whom he supplied it. This obligation does not include sales to end-users. || The share of marine equipment which is actually placed on the market is small, with most of them being fixed on board ships in the shipyards. Equipment imported for installation on board non-EU ships is not relevant for the Directive.

Harmonised definitions and procedures (save the CE marking) || The Regulation (EC) 765/2008 establishes harmonised definitions and procedures among the NLF directives. || No influence

The table above shows that, for some key components of the application and enforcement mechanisms of MED, the specificities of the marine equipment either have an influence on the effectiveness of the solutions provided by the NLF or are simply not compatible with them, thus making it necessary to deviate from these solutions.

3.1.2. The process of transposition of IMO rules into national law creates legal uncertainty and imposes excessive burden upon the industry and national administrations

In the course of the stakeholders' consultation, both industry representatives and the Member States complained about the difficulty to establish, on the basis of the Annexes to MED and of the amending legislative acts (Commission Directives), which requirements apply to particular pieces of marine equipment at a given time. The main elements of criticism were that:

· The date of entry into force of the requirement and the date of validity of certificates is not specified;

· The information on the most updated version of the annexes to MED is not available in an easily readable form online;

· Manufacturers are not notified in time of upcoming changes in standards;

· The automatic update clause is too rigid, especially as regards testing standards, leading to massive and unnecessary re-certification of stocks even if construction and performance requirements remain unchanged;

· The directive's Annex is at present not suited to meet the needs of both industry and national authorities. The current update mechanism does not allow the Commission to e.g. address equipment components if and when necessary, include production standards, introduce elements of flexibility for Member States' implementation, etc.

The resulting legal uncertainty[22] is compounded by the fact that safety requirements and standards of marine equipment as laid down in the Directive annexes do not necessarily keep up with the latest trends. Therefore, equally important are the inherent safety risks in the application of obsolete requirements to marine equipment, as the update of the latter is in most cases due to safety risks newly identified or the approval of more effective technologies to address known risks. Furthermore the risk of detention of ships by foreign port authorities for non-compliance with applicable IMO standards increases significantly. Finally, it must be taken into account that many items of marine equipment are installed into larger integrated systems (e.g. engines, navigational systems, etc.) which may have been designed for components meeting the newest standards and which therefore could suffer from installation problems or low performance.

The resulting confusion for manufacturers, customers and national authorities can lead to unwanted mistakes and failures to conform to the requirements in force[23]. Moreover, this may render the management of stocks (at least part of which are kept overseas) extremely difficult and indeed more costly, as well as lead to re-certification gluts due to limited capacity on the side of the labs and notified bodies. [24]

The Commission has estimated (see Annex 12) that the current system may result in a burden of up to €6-7 million a year for the marine equipment industry only, of which approximately 2/3 may correspond to lost return on investment and stock management, while up to 1/3 could directly derive from double certification.

This situation stems from two main causes:

The legislative technique chosen to keep up pace with the development of IMO requirements is complex

As indicated above, marine equipment has to meet the requirements of the international conventions, the relevant resolutions and circulars of the IMO, and the relevant international testing standards. The MED therefore deviates from the principle of essential requirements defined in the New Approach so that IMO standards are applied and implemented in a harmonised way across Europe.

Currently, Annex A.1 to the MED contains the list of the specific construction and performance requirements to be met, as well as the mandatory testing standards to be used, in the conformity assessment of marine equipment due to be placed on board EU ships. This Annex is periodically updated in order to keep up with the legislative production of the IMO and, as appropriate, of the international and European standardization bodies[25]. The updates take the form of Commission Directives adopted in accordance with the regulatory procedure with scrutiny. The updates are then transposed into national legislation of each Member State within a period of twelve months. [26]

As an additional means to keep pace with the constant development of requirements and standards by IMO and the international/European standardisation bodies, the Directive includes a so-called "automatic update" mechanism. According to this, the performance and testing standards listed in Annex A.1 apply in any case in their up-to-date version – regardless of their explicit update in the Annex. However, in practice, this mechanism has proven quite ineffective for the following reasons:

- not all standards are simply amended but sometimes outright replaced;

- new items need to be incorporated into the Annexes;

- not all new amendments to the relevant instruments have a clearly identifiable date of entry into force; lastly, because even if this date exists, the amendments may contain "grandfathering clauses" not necessarily aligned with the principles of the directive and thus rendering very confusing the regime to be applied to the existing stocks. The net result of this is a significant degree of legal uncertainty and uneven practices among Member States, such that the automatic update mechanism cannot be relied on to replace a frequent, actual update of the annexes.

In summary, these two mechanisms work in such a way that:

1. Where a new standard replaces, amends or supplements an existing standard which is listed in Annex A.1 to the Directive, it will apply automatically on the date of its entry into force even without explicit change in the Directive's Annex. The immediate consequence of this is that what is listed in Annex A.1 may not coincide with what is actually applicable.

2. When a new standard does not fulfil the conditions under point 1, or does not have a date of entry into force, it will not apply until explicitly included in the Directive at the next periodic update of Annex A.1. The immediate consequence of this is that a new standard may not be applicable in the EU even if it is already applicable internationally.

The transposition process of IMO requirements into national law is lengthy

IMO normally leaves a reasonable time between the adoption of safety requirements and their entry into force, ranging in most cases between twelve and twenty-four months. To be effective, the EU transposition system should be capable of bringing the new requirements into national legislation within that time window. However, in practice, this is not the case. Experience has shown that the time lag between the update of instruments and international standards by IMO and the transposition of those into national law may easily reach 30 months per update (including update by the Commission and transposition by national authorities).

Box 2 illustrates the problems related to the currently process of transposing IMO rules into European and national legislation in the extreme case of the 4th amendment of the MED.

Box 2: Case study on the fourth amendment of Annex A

Work on the 4th amendment started at the beginning of 2005, that is, barely two years after the 3rd amendment[27]. At a moment of a particularly intensive activity of the IMO in the production of technical specifications for marine equipment, it soon became apparent that:

– Where new requirements had been adopted by the Organization, it was sometimes particularly difficult for the specialists to identify in a clear-cut manner their exact scope and the exact sequence of the application of new and old requirements depending on the type of ship and date of construction or putting into service. This was for instance the case of the items concerned under the IMO high-speed craft code, and extended to a significant portion of Annex A.1.

– The laborious and time-consuming process of identifying the correct requirements combined with the length of the formalised procedures involved made the process of adoption extremely time consuming, to the point that IMO requirements changed again while the technical discussion still went on. As a result, a number of items needed to be examined anew before their incorporation in the revised Annex.

– The adoption of the 4th amendment in these difficult circumstances required, in addition to countless rounds of online technical discussion coordinated by EMSA, examination of the dossier at three formal committee meetings and two specific committee expert meetings.

Eventually, adoption was only possible by leaving the update of a number of items for the following amendment, at the inevitable cost of making part of the 4th amendment obsolete already on the very day of its adoption. Similarly, even if the transposition time was cut to the bare minimum, for some other items the requirements in the revised Annex would become obsolete even before their transposition into national law. The cascade effects of the difficulties experienced in the 4th amendment are highlighted by the fact that a total 16 items added anew in the 4th amendment to Annex A.1 were subsequently modified in the 5th amendment, adopted less than a year afterwards. This was clearly very disturbing for both the industry and national administrations.

For economic operators, the delay between the entry into force of international requirements and the time when it can legally be placed on the market may also have implications in terms of cost at different levels. In the first place, it delays the return on the investment for the company that has developed the new marine equipment. In addition, a too lengthy process for approval of new marine equipment undermines the rate of innovation in the sector. As a result, long transposition delays have a negative effect on the overall profitability of the sector, especially as it is composed mainly by small and medium enterprises.

Moreover, the lengthy process of periodic update of the Directive's Annex adds to the confusion. In effect, due to the time lag between the entry into force of international requirements and their enforcement within the EU, the industry is left in a situation of significant uncertainty as to the substantial and testing requirements actually applicable - especially in the case where there is significant departure from the practice in third countries.

3.1.3. Conclusion

Experience with the working of the MED highlighted certain implementation and enforcement weaknesses common to New Approach Directives that can be addressed by aligning the MED on the NLF as foreseen by the co-legislators. However, in light of the specificities of the marine equipment, a key issue is whether MED-specific solutions are also needed in some areas. In addition, the transposition process of IMO rules into national law creates legal uncertainty and imposes excessive burden upon the industry and national administrations because of a long and complex legislative technique – making it very difficult to keep up with the production of technical requirements by the International Maritime Organisation.

For these reasons, the MED does not ensure the complete application and implementation of IMO and other standards by Member States, leading to safety risks and inefficient functioning of the Internal Market for marine equipment.

3.2. Stakeholders affected

The global competitive advantage of European marine equipment manufacturers relies greatly on innovation, having regard to the relatively low labour costs and other advantages that often benefit their competitors in the emerging countries.[28] The weakness of market surveillance and the safeguard procedures therefore affect European manufacturers disproportionately.

The current transposition procedure, which often leads to the temporary coexistence of conflicting rules at EU and global levels, is also source of administrative burden and costs related to the manufacturing of products according to two or more standards. The inefficiency of certification by notified bodies is finally source of costs, delays, and can distort competition between manufacturers. Given the strong links between the marine equipment sector and the shipyards, the latter are equally affected.

It must be borne in mind that SMEs, which are a majority among the EU marine equipment industry, are particularly vulnerable to the current problems as they have to face fierce competition in distant markets in a strongly regulated environment – where changes in regulation are very frequent. The industry has to adapt to the decisions made by a plethora of regulators (IMO, EU, national authorities), having little if any information on those decisions which in practice turn out to be uncoordinated both in timing and in content. Changes may have noticeable impacts on research and development investments, production planning or the management of stocks. These impacts may become important for SMEs, which find it harder to gain access to capital markets in order to adapt and stay competitive. The costs associated with the late implementation of IMO requirements in the EU (reduced return on R&D investment, costs of double certification) represent a heavier burden for SMEs (given e.g. that the cost of one type approval does not depend on the volume of production).

Ship passengers and crews are affected by the safety problems such as the presence on ships of counterfeit products of unknown performance (resulting from the ineffectiveness of market surveillance), possible use in the same mechanical unit of parts conforming with different standards (when new standards are not transposed in time), and the use of products certified by potentially incorrectly performing notified bodies. In case these problems lead to a major maritime accident, its consequences (eg. oil spill) could be felt by the inhabitants of coastal regions.

Finally, the ineffectiveness of the transposition system is source of administrative costs for the public administration and governments.

3.3. Baseline scenario

It is expected that the marine equipment sector will be affected by two trends in the foreseeable future. On the one hand, shipyards will gradually become final assembly facilities only, while most value added activity will continue migrating to the marine equipment sector. In this rising market, the share of Europe will however be declining (according to available sources, it would have already fallen to 31% in 2010 from 36% in 2005). Part of the reason is that many European players delocalise production to Asia where most of their customers – the shipyards – are located. As an effect, the problems related to market surveillance will become more acute in the future as an even larger fraction of the equipment will be manufactured and fitted on board European ships outside the physical borders of the EU.

The possible future enlargement of the EU to maritime countries such as Croatia and Turkey would significantly increase the fleet covered by MED rules and slightly increase the share of the EU in the global marine equipment market. At the same time, the increase in the number of EU Member States will further complicate the process of transposing IMO rules into EU and national legislation, exacerbating current problems.

The lack of data makes it impossible to measure the magnitude of these problems and hence to complete this assessment with the analysis of a set of meaningful quantitative indicators.[29]

A mechanism for a more efficient yearly update of MED Annex A has been initiated by EMSA at the request of the Commission as from 2008. This mechanism is based on a continuous monitoring of the essential requirements and testing standards for marine equipment and a Web based tool developed in order to facilitate the EU Member State contributions. Unfortunately, whatever the efficiency of these improvements is, it appears that the delay involved by the “amendment” procedure is still too important, as the time needed for a new IMO requirement to become effective within the national legal orders of the Member States continues to exceed significantly the window left by the IMO for its worldwide implementation. Annex 12 shows that the total costs incurred by the industry due to the delays in the transposition of IMO requirements into the MED can be estimated at approximately 6 to 7 million € per year of delay; in the baseline scenario, these costs should be expected to grow concomitant with the expectedly growing production of safety standards by the IMO, given the Organisation's ambitious work programme.

The EU procedure for the transposition of IMO rules will be affected by the changes introduced by the Treaty on the Functioning of the EU (TFEU). Currently, as stipulated by Articles 17 and 18.3 of MED, the annexes to the Directive are amended in accordance with a Regulatory Committee Procedure with Scrutiny. This will need adaption to the new Treaty provisions. Whether their fate is to become implementing acts (with an associated examination committee procedure) or, more plausibly, delegated acts[30], this should not bring about any significant reduction in the length of the procedures relative to the current state of affairs. Indeed, technical consultation with the Member States, be it at an expert or at a committee level, would continue to be necessary – as would transposition of each new Annex into the Member States' national legal orders.

In conclusion, the analysis of the baseline scenario seems to indicate that the problems concerning MED will grow in the future, making it even more urgent to review sub-optimal rules.

3.4. Does the EU have the right to act?

3.4.1. Legal basis

The EU transport policy, including maritime safety policy, has a well-established Treaty base in Article 100 of the TFEU (ex Article 80) upon which Directive 96/98/EC is based. This proposal modifies existing EU legislation principally to reflect the reform of the New Approach on which MED is partly based. The review uses the reference provisions provided in the Annexes to Decision 768/2008/EC, in line with Article 2 of the said Decision which stipulates that "Community harmonisation legislation shall have recourse to the general principles set out in this Decision and to the relevant reference provisions of Annexes I, II and III." In some points, the proposal departs from the provisions of the Decision, which is justified in light of the rest of Article 2 of the Decision "Community legislation may depart from those general principles and reference provisions if that is appropriate on account of the specificities of the sector concerned, especially if comprehensive legal systems are already in place".[31]

3.4.2. Subsidiarity

As the Commission already identified in its 1995 proposals, direct application of the IMO regulatory framework by the Member States in the absence of Community harmonisation had led to significant barriers to the free movement of goods, mostly stemming from a) the broad discretion left by the IMO instruments to the flag state, b) the production of additional national requirements and c) the divergences in the certification methods. At the same time, the resulting divergences in national regulations had led to uneven degrees of safety and environmental protection.

At the time it was established that harmonisation by the EU resolves these problems, as it results in a clearly identified set of requirements and uniform certification procedures capable of ensuring a high level of safety and of environmental protection. Moreover, unlike the international system, the EU offers the advantage of a judicial enforcement system – without which the effectiveness of those requirements and procedures would be seriously undermined.

The 2004 and 2007 enlargements have considerably increased the size of the Single Market and nearly doubled the number of Member States, making harmonisation even more necessary that before. At the same time, the expected steady increase in maritime transport volumes, and the enlargement of the EU to Member States having large fleets – notably Cyprus and Malta – has increased the importance of fixing and enforcing a common high level of safety and environment protection.

3.4.3. Proportionality

The EU does not harmonise itself the detailed technical specifications applicable, which are decided at the IMO level with full contribution of the Member States. It merely identifies in a clear way what specifications and technical standards of the IMO should be applied.

It is legitimate to enquire whether harmonisation could be achieved with soft law or mutual recognition. The Agreement between the European Community and the United States of America on the mutual recognition of Certificates of Conformity of marine equipment[32] can serve as an example of the limited effectiveness of such an approach. The agreement is based on the verification of the equivalence of the respectively applicable standards and the mutual recognition of certifications bodies and procedures. Given that both parties implement the IMO standards, a significant degree of convergence might have been expected. However, it appears that so far agreement has been reached, in this agreement, on the recognition of roughly 1/3 of the marine equipment listed in Annex A.1 to MED; for the rest, European and American rules have been deemed too divergent to make mutual recognition possible. This confirms the above mentioned Commission's findings of 1995, and clearly shows that in order to ensure the smooth functioning of the Internal Market and the full recognition of marine equipment between Member States, only a mandatory legislative approach can be effective – which is why only legislative options are analysed in what follows.

4. Objectives

This section defines the general and specific policy objectives of the proposed initiative and verifies their consistency with other EU horizontal objectives.

4.1. Policy Objectives

4.1.1. General objectives

Pursuant to Articles 90 and 91 TFEU, the Common Transport Policy (CTP) should contribute to the broader objectives of the Treaties. Within the framework of CTP and taking into account the specificities of marine equipment, the general objective of the proposed initiative is twofold:

· to enhance the implementation and enforcement mechanisms of the MED, thereby guaranteeing the proper functioning of the internal market for marine equipment[33] while ensuring a high level of safety at sea and prevention of marine pollution[34];

· to simplify the regulatory environment while guaranteeing that IMO requirements are applied and implemented in a harmonised way across the EU, thereby contributing to ensuring that the conditions necessary for the competitiveness of the Union's industry exist pursuant to Article 173 TFEU.

4.1.2. Specific objectives

Based on the problem and related root causes set out in section 2 above, the twofold general objective can be translated into specific objectives:

· to find an optimal way to align MED on the New Legislative Framework (as required under Article 2 of Decision 768/2008/EC (the NLF Decision) while taking due account of the specificities of marine equipment in the field market surveillance, conformity assessment of products and obligations for actors in the distribution chain;

· to shorten, simplify and clarify the transposition of amendments to IMO standards into the European and national legal frameworks.

The above specific objectives are sufficiently precise and inevitably contain the specific areas where measures are necessary. Therefore, it does not appear necessary to break them down into operational objectives.

Table 2: Mapping problem, drivers and objectives

Problems || || General objectives

The MED suffers from weak implementation and enforcement mechanisms, leading to safety risks and inefficient functioning of Single Market for marine equipment. || || To enhance implementation and enforcement mechanisms of MED, thereby guaranteeing an efficient functioning of the internal market for marine equipment while ensuring a high level of safety at sea and prevention of marine pollution.

The transposition process of IMO rules into national law imposes excessive burden upon the industry and national administrations and legal uncertainty about what standard is applicable. || || To simplify the regulatory environment while guaranteeing that IMO requirements are applied and implemented in a harmonised way across the EU.

Drivers || || Specific objectives

D1 || The MED has not been aligned, in a way that is compatible with the specific features of the sector, with the tools provided for by the NLF as regards: - market surveillance; - CE marking; - conformity assessment of products; - tools for use of legislation (obligations for actors in the distribution chain, harmonised definitions, etc) . || SO1 || to define an optimal way to align MED on the NLF in the field of: - market surveillance; - CE marking; - conformity assessment of products; - tools for use of legislation (obligations for actors in the distribution chain, harmonised definitions).

D2 || The legislative technique for transposing international safety standards for marine equipment into national law is complex and lengthy. || SO2 || to simplify, clarify and shorten the transposition process of IMO standards into the European and national legal frameworks

4.2. Coherence with horizontal policies

4.2.1. New Legislative Framework

The objective of the proposed initiative clearly contributes to the objectives laid down in the New Legislative Framework which is the tool for harmonising across all sectors European legislation concerning the certification of products in the internal market and, hence, to facilitate the free movement of goods.

4.2.2. Better regulation strategy

The objective of the proposed initiative is fully in line with the Better Regulation Strategy[35], the Smart Regulation Communication[36] and the efforts to reduce administrative burden illustrated by the activities of the High Level Group of Independent Stakeholders on Administrative Burdens (the so-called "Stoiber Group").[37]

5. Policy options

In light of the above and on the basis of the stakeholders' consultation, the Commission has identified four policy options – besides the baseline scenario – that combine specific EU actions across the two areas for action described in section 2 above. All policy options have been designed to be able to address both specific objectives defined in section 4.

Policy Option 1 would foresee the discontinuation of EU action. Under this option, the EU would abandon the specific regulation of the Internal Market for marine equipment which would then be governed by the general principles of the Treaty, including the principle of mutual recognition, and, where applicable, relevant horizontal legislation such as Regulation (EC) No 764/2008 - also part of the NLF. The latter regulation establishes procedures aimed at framing how authorities in the Member States monitor compliance with national technical rules on goods not covered by the harmonised Community rules.

Policy Option 2 would foresee a maximum alignment of the MED on the NLF, where departure from the latter's provisions would be kept to those issues where it is considered indispensable in any case – namely specific marking;

Policy Option 3 would take the form of a conditional alignment of the MED on the NLF, where additional MED-specific solutions would be introduced to optimise the effectiveness of the instrument, namely in the areas of IMO requirements and standards, obligations of economic operators, use of conformity assessment modules, product traceability and safeguard clause. These areas would largely be the same where the MED currently departs from the New Approach.

Policy Option 4 would represent a minimum alignment of the MED on the NLF, while still being inspired by the latter. It would build upon Policy Option 3 by adding the possibility of creating a MED-specific EU authority for market surveillance and one for notified bodies which would replace the national systems. This set of MED-specific measures could be considered in theory in order to channel maritime expertise into the Directive's control mechanisms in the two areas mentioned. In other words, these two additional measures would seek, compared to Policy Option 3, to combine the beneficial effects of pooling resources with the need to ensure familiarity with the maritime and shipbuilding/ship repair markets, their operation and their regulation at an international level. Policy Option 4 would therefore abandon the choice made in the NLF to maintain these two key functions in the hands of national authorities, pooling resources cross-sectorally at national level in the first place and ensuring mutual support, cross-fertilisation and coordination of national authorities at an EU level by means of EU-wide cooperative structures or the Commission itself.

5.1. Pre-screening of policy options

The Commission performed a preliminary screening of the above options on the basis of their effectiveness in addressing current problem drivers and of their efficiency. In parallel, the coherence of the possible policy options with the principles of subsidiarity and proportionality has been assessed. This pre-screening enabled the Commission to exclude PO 1 and PO 4 from in-depth assessment for the following reasons.

Policy Option 1 – Discontinuation of EU action

Under this option, Member States would apply IMO mandatory requirements for marine equipment based on their own individual assessment of the international conventions and depending on what specific conventions and instruments they are a party to. Each Member State would decide on the procedures leading to the delivery of a type-approval certificate to each item of equipment. Finally, Member State administrations would deliver the certificates either directly or through classification societies or other types of bodies/laboratories for testing and certification.

Abrogation of the MED would mean that the rigidities introduced by the current formulation of the MED would be removed. Furthermore, marine equipment would benefit from a more developed legal framework for non-harmonised products, where objections based on the quality of accredited certification bodies would no longer be possible and a structured procedure would protect manufacturers in the case of technical decisions made in another Member State[38].

However these advantages are clearly outweighed by the problems that abrogation would bring about. In the absence of an enforceable, harmonised system, the risk of competition at the expense of safety is particularly acute in the specific circumstances of the maritime sector, and the safety benefits brought about by this Directive would run a serious risk of being reversed. Manufacturers would be obliged to produce several versions of their product for Member States applying the international Conventions differently or at different times. Divergence in the interpretation and application of international conventions would not only have an impact on safety, but also on the good functioning of the Internal Market: even in the absence of objections as to the quality of notified bodies, problems would arise from diverging application of the compulsory testing standards - with the result that Member States would become reluctant to mutually accepting their respective conformity certificates without additional national controls. Control over certifying bodies and market surveillance would either remain as is or would be further relaxed. Free movement of goods would inevitably be affected – as had been the case in the past. In the long term the situation within the EU could become somewhat comparable to the current state of affairs in the trade with the USA under the mutual recognition agreement in force, and thus only one fraction of the products currently covered by the MED would truly benefit from mutual recognition and move without problems between Member States.

For these reasons, the discontinuation of EU action has not been retained for in-depth assessment.

Policy Option 4 - minimum alignment of the MED on the NLF

Preliminary analysis of this option by the Commission soon made it apparent that:

· While unification of market surveillance is clearly not seen by the Member States as a need[39], one stakeholder only has suggested a centralised approach for the licensing and control of notified bodies.

· Compatibility with existing national structures and coherence with the parallel, cross-sectoral coordination would become difficult;

· Cooperation with third countries would be rendered more difficult by the existence of parallel, MED-specific structures;

· The volume and diversity of products covered by market surveillance and the number of notified bodies under the MED would put such a task beyond reach, in terms of resources, of the Commission or EMSA.

In addition:

For market surveillance:

· The vast range of products covered by the MED makes cross-sectoral expertise as indispensable for market surveillance as is maritime expertise itself. Indeed, the MED covers items as diverse as protective equipment, electronics, pressure vessels, pyrotechnics, etc.

· Moreover, as mentioned above, marine equipment manufacturers usually serve more than one market and do not necessarily direct their production to ships only; thus extracting the marine equipment sector from a cross-sectoral market surveillance structure would automatically affect the both systems' effectiveness.

For notified bodies

· Similarly, while notified bodies need to have specific maritime expertise in order to be able to certify marine equipment, their activities are seldom limited to the maritime domain and the reasons of potential shortcomings need not be linked to one particular area of activity;

In light of the above, the Commission has considered that these policy measures were both ineffective and disproportionate relative to the simpler method of incorporating the marine equipment sector and its associated expertise into the general framework created by the NLF in the two areas under consideration, thus reaping the benefits of both resource pooling and cross-sectoral cooperation. Moreover, these policy measures would become very difficult to justify under the prism of subsidiarity, as a priori they can be expected to bring no net added EU value to the Member States' action.

The above confirms that the reasons which led the Commission's choice for the NLF's general case, clearly justified in the original impact assessment[40], remain valid for the specific case of the MED.

For these reasons, Policy Option 4 has not been retained for in-depth assessment.

5.2. Description of retained Policy Options

In light of the above, the Commission has identified two policy options - besides the baseline scenario - that constitute viable policy alternatives for achieving the objectives.

The table below summarises in detail the content of the envisaged possible policy options and highlights their main differences.

Table 3: Description of retained Policy Options

|| Policy Option 2 maximal alignment to NLF || Policy Option 3 conditional alignment to NLF

Specific Objective 1: to find an optimal way to align MED on the NLF

Market surveillance || ||

Common EU framework || Word by word transposition of NLF provisions into MED || Same as PO2

More effective post-market control mechanism || Word by word transposition of NLF provisions into MED || Same as PO 2 + Introduction of the possibility to use electronic tags to give better tools to market surveillance for detecting non-conforming equipment.

Safeguard clause procedure || Word by word transposition of NLF provisions into MED || Same as PO 2 + Additional provisions adapting the administration of the safeguard clause, making it possible for the Commission to decide to limit its assessment to the respect of due procedure by the Member State concerned.

Conformity assessment of products || ||

Essential requirements || Word by word transposition of NLF provisions into MED - current annexes to MED to be abandoned; compliance with IMO requirements[41] turned into "essential requirement". || Mandatory technical norms including mandatory and non-mandatory IMO requirements as well as European and international testing standards developed by European and international standardisation organisations on the basis of the IMO requirements.

Notification of conformity assessment bodies || Word by word transposition of NLF provisions into MED || Same as PO2

Conformity assessment procedures || Word by word transposition of NLF provisions into MED || Selective use of conformity assessment modules, whereby notably modules A and C (corresponding to the possibility of conformity assessment of products by in-house Notified Bodies) are not retained.

CE marking || No alignment, CE marking replaced by a wheelmark || No alignment, CE marking replaced by a wheelmark

Toolbox of measures for use in legislation || ||

Obligations of actors in the distribution chain || Word by word transposition of NLF provisions into MED || Adaption of obligations of actors in the distribution chain, reflecting the irrelevance of concentrating on the small share of marine equipment which is actually placed on the market within the EU territory. Manufacturers: same as in PO2 Importers and distributors: identification and registration; cooperation with market surveillance authorities (information, documentation, removal of risks, etc.)

Harmonised definitions and procedures (save the CE marking) || Word by word transposition of NLF provisions into MED || Same as in PO2.

Specific Objective 2: to simplify, clarify and shorten the transposition of amendments to IMO standards into the European and national legal frameworks

-/- || No transposition into EU legal order; IMO requirements in the form of essential requirements directly applicable in Member States. International and European standards are optional and give presumption of conformity. || Transposition of IMO requirements through implementing or delegated Regulations, which do not require transposition into national legislations. Testing standards (whether developed by IMO or by standardisation bodies) are mandatory.

6. Analysis of Impacts

6.1. Preliminary remarks

The two policy options considered in this IA report constitute alternative ways of aligning MED on the NLF.

As said above, the impacts of the alignment of sectoral legislation on the NLF have already been assessed in two IA reports, namely the one accompanying the Communication on alignment of ten technical harmonisation directives to Decision No 768/2008/EC of the European Parliament and of the Council of 9 July 2008 on a common framework for the marketing of products[42], and obviously the one accompanying the Proposals for the revision of the New Approach[43].

For this reason, the assessment of impacts of the policy options will rely to a certain extent on these analyses. Most of the impacts identified in the above-mentioned documents are indeed very relevant for PO 2 given that the latter, except for the CE marking, foresees maximum alignment to the NLF. Part of the impacts of the NLF is also pertinent for PO3 which foresees a conditional alignment to the NLF. Besides, the assessment also builds upon the results of the stakeholders' consultation.

In light of the scarce availability of quantitative data explained above, a qualitative assessment is predominant.

6.2. Economic impacts

6.2.1. On the functioning of the Internal Market for marine equipment

Common EU framework

Both policy options would import the relevant NLF provisions word by word. The MED would thus benefit from the significant evolution which the NLF represents relative to the baseline, with clear, structured and effective obligations for market surveillance authorities.

Market surveillance and safeguard clause

In PO2 and PO3, the alignment of market surveillance to a common EU framework should ensure a more uniform and sufficiently rigorous level of market surveillance across Member States compared to the baseline. This common EU framework should contribute also to a better protection of both consumers and professionals from unsafe products.

However, in addition to the more effective post-market control mechanism contained in PO2, PO3 also foresees the possibility to use electronic tags. These will facilitate detection of counterfeit and control of equipment already placed on board by both flag and port States. Given that marine equipment may or may not physically enter the EU territory before being placed on board EU ships, this additional measure gives PO3 a slight edge over PO2 in terms of effectiveness of market surveillance. [44]

Furthermore, the alignment of the MED's safeguard clause mechanism with the NLF in PO2 will ultimately lead to the adoption of equivalent measures across the EU in relation to products presenting a risk. However, in PO2, the variety of marine equipment and hence the diversity of technical expertise required is likely to render more difficult and time-consuming the assessment by the Commission of whether or not a national measure restricting the free movement of a product is justified. This drawback of PO2 is overcome in PO3 by allowing the Commission to limit its intervention to examining the respect of due procedure by the Member States – and thus examine the substance of the case only when justified.

Conformity assessment of products

PO2 and PO3 will include stricter requirements that will constitute a common benchmark for the assessment of NB throughout the EU regardless of the country in which they are active and of the specific NB providing the service. Moreover, according to the revised notification process, the notifying authority in a given MS will be able to scrutinise and object to notifications put forward by another MS. Therefore NB will be subject to more transparent and more coherent assessment and this will strengthen the conditions for a level playing field. Compared to the baseline, PO2 and PO3 will enhance equally the quality of (and hence confidence in) the conformity assessment of products.

However, compared to PO2, PO3 operates a choice in the available conformity assessment procedures by excluding the possibility for manufacturers to assess themselves the conformity of their products - hence avoiding possible conflicts of interest and, again, providing a more level playing field. While it is true that for very specialised products it is the manufacturer itself who can provide the best expertise and testing facilities, on the whole this is a healthy measure given that (see below) the entire process of conformity assessment, production control, delivery and installation on board may happen at very distant locations and under significant pressure from the shipyards; moreover, self-certification would hardly tie in with the IMO requirement for the flag State to approve the equipment placed on board.

Obligations of actors' in the distribution chain

In PO2, the MED will include clear obligations applying to all actors throughout the EU that are likely to eliminate the current differences in national legislation and to create a more even level playing field among actors. However, the additional obligations placed on actors in the distribution chain (obligations on importers and distributors concerning post-marketing controls and conditions of transport as well as those which mirror the obligations of the manufacturer) can be seen as disproportionate in PO2 compared to the baseline, in light of the relatively small share of products actually placed on the market. The reason for this is twofold:

- In the first place, when placed on board and subsequently throughout its lifetime marine equipment is subject to control by the public authorities, be it the flag State[45] or, while in service, also the port States.

- Secondly, and more importantly, for a majority of products the figures of the importer and the distributor, as well as their respective associated obligations are meaningless: the items are sold directly to the ships or to the building/repair yards who will install them on board – in most cases outside the EU territory. Only a fraction of the products (namely those imported and distributed into EU territory by commercial operators other than shipyards) would actually benefit from the above mentioned obligations. These measures would therefore generate an important, unjustified asymmetry between products (or even between different batches of the same product, depending on where they are placed on board) and place an uneven burden on operators, while in practice having insignificant effect.

PO 3 would limit the obligations incumbent on the operators to a level which would be more commensurate with the specificities of the marine equipment sector, concentrating on: a) the obligations of the manufacturers, as it is the manufacturer who is ultimately responsible for the safety of the product; and b) those obligations incumbent on the other operators (importers and distributors) which are specifically conceived to facilitate the task of market surveillance authorities – i.e. identification, access to information and documents and removal of risks.

Harmonised definitions

Both PO2 and PO3 would import the definitions contained in the NLF, which is not expected to have any influence on the functioning of the internal market.

Uniform interpretation and implementation of IMO requirements and testing standards developed by standardisation bodies

PO 2 proposes to turn compliance with IMO requirements into an essential requirement. Compared to the baseline scenario, only mandatory IMO requirements would be covered by this provision. This would be a generic provision: there would be no list of specific requirements applicable to each item of equipment. Furthermore, non-mandatory IMO requirements as well as non-mandatory testing standards developed by European and international standardisation organisations would not be covered by the essential requirement; similar to the NLF, compliance with European standards, and in this case also international standards, would simply provide a presumption of conformity.

Careful formulation of this framework (together with a number of accompanying measures such as lists of IMO requirements and international/European standards being published and kept up-to-date by EMSA) could greatly reduce, but never completely remove Member States' discretion both in the determination of the specific requirements and in the conduct of the assessment process; as a result, divergences between Member States in the application of the MED should be expected to appear sooner or later, which in turn would render mutual recognition more difficult.

The distortions to the Internal Market caused by this measure would be partly – but not entirely – mitigated by the alignment on the NLF, which will raise the overall trust in the quality of the work of NB. Conversely, market surveillance would become more difficult in the face of divergences in the basic requirements. The final outcome, in terms of the functioning of the Internal Market, would be probably worse in PO2 than in the current situation.

Under PO 3, the MED would make technical norms mandatory, including IMO requirements as well as technical standards - as it is currently the case. The technical norms will then be transposed into national law through implementing or delegated Regulations. The legislative framework will thus be completely harmonised, as is also the case today. This new technique will allow timely transposition of the applicable requirements and standards into the national legal orders, thereby ensuring consistency between the MED system and the IMO practice. Therefore, any incentives for operators to deviate from the harmonised framework[46] will be removed. The final conclusion is that PO3 should be expected to slightly improve the functioning of the internal market relative to the baseline.

6.2.2. On operating costs and administrative burden[47]

For economic operators

Under PO2, the additional obligations for the operators (especially distributors and importers)[48] would translate into an important additional administrative burden and hence costs for the said operators, which would be disproportionate (especially for the large number of SMEs in the sector) in light of the expected low benefits in terms of compliance rates. As has been explained this is due to the fact that, in the marine equipment sector, most of the products are never placed on the market and economic operators have so far had little reason or incentive for putting in place costly follow-up strategies for their products. [49] This aspect is a considerable drawback of PO 2 compared to the baseline. Better adapted obligations on economic operators in PO3 would increase operating costs for economic operators compared to the baseline, but in a much lesser extent than in PO2 and, more importantly, this additional burden would be commensurate with the associated safety benefits.

Thus e.g. the traceability obligations of the NLF, which would be transposed into the MED in both Policy Options, would require manufacturers and importers to indicate on the products their names, addresses and batches or serial numbers. This would inquire some costs, which shouldn't however be too high. Anyway, manufacturers are already obliged by legislation in place to indicate their names on the products, while batches and serial numbers are normally used for internal management reasons.

PO3 also includes a specific measure to facilitate market surveillance, namely the introduction of electronic tags. As discussed in Annex 14, the costs of electronic tags (the use of which only needs to be made possible but not necessarily compulsory for the manufacturers) is marginal[50], while the associated benefits are very considerable both in terms of safety and in terms of IPR protection.

The undeniable simplification of conformity assessment requirements in both Policy Options would reduce the costs of conformity certification for marine equipment manufacturers. However, in the case of PO2 where the applicable requirements are not harmonised, divergences among Member States could lead to uncertainty and re-assessment requirements, and the risk that in some cases several versions of the same product may have to be manufactured cannot be excluded; this means that the final costs for the manufacturers could be actually higher than today. For ship operators, the lack of recognition of certificates issued by other Member States, together with difficulties in the identification of the applicable requirements by Port State Control officers, could lead – in extreme situations – to the detention of ships, causing very high costs.

In comparison with the baseline, PO 3 foresees the abandoning of the conformity assessment module H (full quality assessment), which is in theory extremely expensive for manufacturers in the case of marine equipment. But even under the existing MED, this module – although allowed – was never used. The gains of the measure in terms of operating costs are close to zero.

Both Policy Options contain measures shortening the time needed for the implementation of IMO requirements within the European legal framework. In PO 2, this objective is achieved by eliminating the need to transpose IMO standards into the MED, while the Member States still have to transpose these into their national legal orders. In PO3, the same objective is achieved by eliminating the need to transpose the IMO standards into national legislation. Each of the solutions should reduce the time necessary for the changes to become applicable in Europe to the limits imposed by IMO. This will put an end to a certain extent to the current situation which, according to the Commission estimates, may result in administrative burden of up to €6-7 million a year for the marine equipment industry only.

In the absence of transposition of IMO requirements into the EU legal order in PO2, a certain number of differences in the implementation of IMO requirements by the Member States, be in in terms of content or in terms of timing, will inevitably remain despite the fact that PO2 also foresees the creation of a website clarifying the rules in place at each given moment. Therefore, PO2 will probably not be able to completely remove the administrative burden generated by these differences, especially in terms of double certification, as described above.

Under PO3 standards would remain codified in the EU legislation rather than being separately transposed into the 27 legal systems of the Member States as it would be the case in PO2. This will allow PO3 to be considerably more effective than PO2 and bring about considerable improvement relative to the current situation, as the burden for national administrations as regards the administration of the Directive's Annex would be reduced to a minimum.

For notified bodies

The strengthening of NB control and requirements foreseen in both Policy Options is not expected to lead to any additional operating costs and/or administrative burden on those NB which already act in accordance with high professional standards. Indeed, the relevant benchmark for the assessment of conformity assessment bodies has already been codified within EN and ISO standards.[51] The costs would be much more significant for those NB which currently perform poorly, but their efforts to comply with higher quality standards should be actually considered as benefits of both policy options. Following the alignment on the NLF, MED would also provide the national authorities with a stronger legal basis to exclude underperforming conformity assessment bodies from the single market.

The introduction of information obligations in both Policy Options is expected to lead to an additional – but overall negligible- administrative burden (i.e. basically the costs of transmitting the required information). This information will only be provided on an ad hoc basis as required by the nature of the information itself (i.e. information on refusals, restrictions, suspensions and withdrawals of certificates to be addressed to the notifying authority, and information on negative conformity assessment results to be addressed the other NB). Furthermore, NBs are free to choose the format of the transmission of information.

Compared to the baseline, PO 2 proposes to remove the restrictions in the choice of conformity assessment modules. Currently, a number of so-called modules (notably modules A and C) which foresee self- certification by the manufacturer, are not allowed in the marine equipment sector; neither is the use of in-house notified bodies. The major advantage of self-certification or using in-house NB is the high level of expertise available inside the manufacturing companies, which in some cases is lacking in many of the independent NB. Moreover, potential synergies within the companies could lead to cost savings compared to the baseline. However, self-certification would probably give raise to problems for ships in third countries, as these might not accept it as a valid method to comply with the flag State approval requirement in the international conventions. In the case of in-house notified bodies, safety would also probably be affected given their high exposure to conflict of interests in the particular circumstances of the sector. PO3 would remove both possibilities, thus representing higher costs for the manufacturers but also reducing the risks for the fleet.

6.2.3. Impact on SMEs[52]

Among the measures foreseen, none are specifically addressed to SMEs, or have a specific impact on them. However, in the same way as SMEs are particularly vulnerable to the MED system's weaknesses[53], one should expect the benefits and drawbacks of both options to be particularly felt by SMEs. The introduction under PO3 of the possibility to use electronic tags, an effective and very economical way to improve the effectiveness of market surveillance, is expected to help reduce counterfeit – a problem which is very acutely felt by SMEs.

SMEs, which are less equipped to face unfair competition from non-compliant products, will particularly benefit from improvements in market surveillance under both PO2 and PO3.

Under PO2, the burden of the extended obligations foreseen for importers and distributors should also be felt mainly by SMEs; while under PO3, the removal of obligations whose benefits are considered less significant will work particularly in favour of SMEs without detriment to safety.

The improvement of the safeguard procedure in both PO2 and PO3 will reduce the exposure of SMEs to the costs associated with lengthy procedures where they are currently placed in a particularly weak position. This effect will be more acute in the case of PO3, especially as regards potential reputational damage, as the specific measures foreseen constitute a strong incentive for a fairer procedure already at national level.

SMEs should particularly benefit of the simplification foreseen under PO2 by the recourse to IMO requirements in the form of essential requirements only – accompanied by informative instruments as to the applicable standards. However, this would come at the cost of greater uncertainty in the absence of clear-cut lists of requirements enshrined in an enforceable instrument, a problem resolved under PO3 with the adoption of delegated/implementing regulations. Again, these effects – both favourable and adverse – would be magnified for SMEs, which have more difficulty in gaining access to information on requirements and standards.

Under both PO2 and PO3, SMEs would greatly benefit from a system which would drastically reduce the time needed for IMO requirements to become applicable in the EU and thus a) improve return on R&D investments and b) reduce the costs associated with multiple certifications.

6.2.4. On the competitiveness of economic operators

Competitiveness of economic operators analysed below refers to the ability of firms to sustain and gain in market share through their cost and pricing policy, innovative use of production factors and novelties in product characteristics.[54] [55]

Enforcement system

Under PO2 and PO3, the more effective enforcement of MED through better market surveillance and better supervised NB activity resulting in higher quality of compliance controls will help defend the competitiveness of compliant firms against unfair competition. This aspect concerns in the first place notified bodies: it will become more difficult and risky for lenient or sub-standard NBs to certify products which in reality do not meet the stringent standards required by the law. In the second place, non-conforming equipment (or equipment in breach of intellectual property rights) will be more easily detected if placed on the market or installed on board EU ships – from which it will be removed. Since European manufacturers have a comparative advantage in high value added, innovative and reliable products[56], more effective enforcement of MED should be particularly beneficial for them.

Traceability of products

In addition, compared to the baseline, the introduction of requirements on traceability and cooperation with surveillance authorities for all economic operators in both policy options will help the former to trace non-compliant products and stop their circulation. [57] [58] PO3 incorporates the possibility of using an additional tool for market surveillance authorities, i.e. the electronic tag, to trace in a more efficient way non-compliant products. Thanks to this additional element in PO3, the level of protection of Intellectual Property Rights is likely to increase, protecting better marine equipment' manufacturers and stimulating thereby also research and innovation.

Obligations of actors in the distribution chain

Furthermore, the introduction of clear obligations for importers and distributors regarding the compliance of marketed products (more effective post-market control) in PO2 will allow action at all levels of the supply chain. This action will then help defend the competitiveness of compliant firms from unfair competition. However, these additional obligations in PO2 will only increase the rate of compliance for products placed on the market; they will not affect the vast majority of marine equipment, which is placed on board ships without ever being marketed in the European Union, while probably coming at a net cost for the operators concerned as has been described above.[59] Compared to PO2, better adapted obligations in PO3 will reduce the burden on operators without significantly affecting the effectiveness of the system.

Conformity assessment

For both options, a strengthened, more effective framework for conformity assessment will greatly increase the pressure on any unscrupulous manufacturers who could be tempted to turn the weaknesses of the current system into a competitive strategy and place substandard products in the market. Conversely, compliant, quality-conscious manufacturers and notified bodies will see their position strengthened. Since the competitive advantage of European manufacturers resides notably in the high quality of their products, they could be proportionately more affected than their global competitors. This effect should be clearly more noticeable in PO3 than in PO2, given that under the latter marine equipment would not need to comply with non-mandatory IMO requirements and international/European technical standards.

6.2.5. Impact on public authorities[60]

Compared to the baseline, the measures concerning clear obligations for all economic operators and clearer market surveillance procedures in both Policy Options are expected to substantially increase the effectiveness of public authorities' enforcement activities, while they are not expected in general to have negative budgetary consequences.

The new traceability obligations on operators will make it easier for market surveillance authorities to obtain documentation and information from manufacturers and importers and to identify non-compliant products, including from third countries. This may actually reduce the investigation costs of the authorities, while better cooperation between national administrations within a European market surveillance framework, will increase the efficiency and reduce the costs of market surveillance bodies. This impact is even more important in Policy Option 3 which incorporates the possibility to use electronic tags[61] in order to better trace non-compliant products.

In addition, the new safeguard procedure in the NLF contains a much more detailed description of the steps that the authorities have to take to deal with products presenting a risk. Most notably, it specifies when the relevant information should be exchanged in order to be useful for cross-border authorities: this will allow surveillance authorities to work more efficiently, as efforts already undertaken in one Member State will not have to be duplicated. Compared to PO2, PO3 would include a mechanism to simplify the safeguard procedure before the Commission, with a consequential positive impact for this and the administration(s) concerned.

In PO2, by turning into an essential requirement the compliance to IMO requirements, there is no longer need to transpose the latter into EU legal order. As described above, national administrations will no longer be required to contribute to the preparation of the periodic updates of the directive's Annex, but will still need to identify the relevant IMO requirements and transpose them into their national legal orders. Conversely, the legislative technique proposed in PO3 that would ensure transposition of IMO requirements through implementing or delegated Regulations does not require any longer transposition into national law – although national administrations would still participate in the preparation of the implementing or delegated acts. All in all, PO2 should not have any noticeable impact on national administrations or slightly increase their costs, while PO3 should bring about net savings. Costs for the Commission would be lower as well for both Policy Options compared to the baseline, with PO3 being more costly because transposition into EU legal order would still be necessary under this Policy Option.

6.2.6. Impact on users and passengers

Users and passengers in general will benefit from greater levels of safety as described in section 6.3 below. This impact is likely to be more important in PO3 than in PO2 compared to the baseline because of the higher potential of PO3 in terms of traceability of non-compliant products.

Due to the overall limited impact of alignment on costs, the new obligations on economic operators and NB are not expected to give rise to price increases for users/passengers. If, for specific products, moderate price increases occur, it is expected that the latter would be largely offset by the benefit of greater confidence in product quality.

6.2.7. Third countries and international relations

Neither PO2 nor PO3 contain trade-related measures, the matter falling completely out of the scope of the MED.

6.3. Environmental and Social impacts

The expected improvement of market surveillance together with an enhanced system for conformity assessment in both policy options is expected to strengthen the implementation of IMO standards across the EU. This is likely to help in reducing the number of non-compliant products on the market and thus the number of products potentially dangerous to the safety of passengers/ users and the environment.

More precisely, changes brought to the system of certification and to the enforcement of MED can therefore be expected to have a concomitant, indirect, but clearly positive impact on health, on safety and on the protection of the marine and coastal environment. This impact should result in a perceptible improvement relative to the current situation for both PO2 and PO3.

In addition, the shortening of the procedure for transposing IMO requirements (be it in PO2 or PO3) will accelerate the application in the EU of the latest safety norms, with a likely positive impact on the level of safety and on the protection of the marine and coastal environment compared to the baseline scenario.

The positive impact described above will be mitigated in PO2 by several elements. First, the unrestricted choice of conformity assessment modules in PO 2, including those which imply the certification of products by in-house NB, can have a negative impact on the quality of assessment. Second, the choice of turning compliance with IMO requirements into an essential requirement in PO2 implies that non-mandatory requirements, testing standards from standardisation bodies, recommendations and guidelines would not be covered by this essential requirement and their implementation is not guaranteed. This is likely to have a negative impact on safety compared to the baseline. Similarly, given that IMO requirements will not be transposed into EU legal order in PO2, fully uniform application of IMO safety standards for marine equipment within the EU will no longer be ensured in PO2. As a result, PO2 will not be able to achieve the same high standards for marine equipment as PO3, and thus the risks to health, safety and environment will be higher.

In the case of PO3, a fast and uniform EU procedure will give more certainty and have a positive influence on manufacturers' expectations, thus facilitating the availability of more advanced, safer products in the market and further reducing the risk of attracting stocks of obsolete products which could otherwise still be placed on board ships of EU flags lagging behind. Furthermore, the introduction of electronic tags to replace or supplement the wheelmark (PO 3) will increase the efficiency of market surveillance, therefore contributing to the detection and elimination of equipment (e.g. counterfeit) which is dangerous for health and safety.

6.4. Simplification of the regulatory environment

The use of the consistent and updated terminology provided for in the NLF will address the current problems of inconsistencies and legal uncertainty. It will reduce the administrative costs and burden linked to the need to conform to incompatible pieces of legislation.

As mentioned above, the choice made in PO3 not to include module H (full quality control) into the list of allowed conformity modules is aimed at eliminating from MED the reference to a provision which was anyway never used.

The changes to the method of transposing changes to IMO requirements are the main simplifying element. PO3, which eliminates the most burdensome procedure of transposing changes to MED into national legislation, seems the most interesting. PO2, and the elimination of the need to transpose rules into European legislation, has also its advantages, which must however be weighed against the distortions of the internal market it brings - noting that the need for MS to identify the applicable IMO requirements and transpose them into their national legal orders will remain. For the industry, both policy options would offer the opportunity to improve return on investment in the development of new products meeting the latest IMO requirements and, more markedly under PO3, a reduction in the current costs deriving from double certification. As is shown in annex 12, the respective savings for the industry could potentially reach 4 to 7 M€ for PO2against 6 to 7 M€ for PO3. Although these are relatively moderate figures when compared to the sector's overall turnover, it must be taken into account that the improvement would be particularly felt by SMEs which in extreme cases might at present be facing double certification costs reaching 1% of their turnover.

6.5. Conclusion

Both policy options propose the alignment of MED on the NLF. This will bring considerable positive impacts – compared to the baseline – which have been assessed in the IA on the NLF and summarised above. The difference between options 2 and 3 lies with the specific provisions conc