Proposal for a Council Decision on suspending the Community obligations under the Sectoral Annex for Electrical Safety of the Agreement on Mutual Recognition between the European Community and the United States of America
Date: 2002-10-02
Institutions: European Commission
Subjects: United States, agreement (EU), approval, electrical energy, mutual recognition principle, safety standard, trading operation

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Proposal for a Council Decision on suspending the Community obligations under the Sectoral
Annex for Electrical Safety of the Agreement on Mutual Recognition between the European
Community and the United States of America

(2003/C 20 E/30)

COM(2002) 537 final

(Submitted by the Commission on 2 October 2002)

EXPLANATORY MEMORANDUM

1. Background

1. The Agreement on Mutual Recognition (MRA) between the European Community (EC) and the United
States of America (US) entered into force on 1 December 1998. Its objective is to facilitate EC-US
trade by providing effective market access with regard to conformity assessment for products covered
by the Agreement. This is achieved by permitting manufacturers to test and certify their products with
a domestic conformity assessment body (CAB) according to the requirements of the other Party. The
MRA also aims at promoting regulatory simplification and efficiency since the authorities of one Party
will no longer have to carry out assessment and monitoring of CABs located on the territory of the
other Party.

2. CABs play a key role in the successful operation of the MRA since they offer the testing, certification
and approval services needed by manufacturers to take advantage of the MRA. Without an adequate
availability of CABs exporters will have difficulty in taking advantage of the trade facilitation offered
by the MRA. In this respect it should be kept in mind that the use of the MRA by both manufacturers
and CABs is voluntary.

3. A general principle of the MRA is that a Designating Authority (DA) is responsible for the assessment,
designation and continuos surveillance of the technical competence of the CABs located on its
territory. In recognising a CAB under a Sectoral Annex, the MRA foresees a procedure whereby a
party is to give its consent or objection to a CAB designated by the other party. The MRA also offers
the possibility for a party to propose the suspension or withdrawal of a CAB on the grounds that it no
longer fulfils the applicable requirements on technical competence. Furthermore, the MRA foresees, in
view of maintaining confidence, that the parties exchange information on each other's systems for
assessing and monitoring CABs and can by mutual consent participate in joint audits/inspections of
CABs.

2. Problems in implementing the Sectoral Annex for Electrical Safety

4. The Sectoral Annex for Electrical Safety (hereafter referred to as ‘the Annex’) lays down in its Section
VI the procedures to be followed with regard to the designation, listing, suspension and withdrawal of
CABs. According to the text of the Annex the following procedure applies with regard to the
designation and listing of an EC CAB:

(i) The DA of the Member State in which the CAB is located shall designate a CAB by filing a
properly prepared proposal for listing, which includes a complete laboratory assessment under the
procedures of the US Occupational Safety and Health Administration (OSHA). OSHA would
notify the DA within 30 days whether the proposal was complete or whether additional
information was required. In reviewing the application OSHA shall rely on the Member State
DA for conducting on-site reviews of the CAB.

(ii) Upon receiving a complete proposal, the US shall give consent or objection to listing the

proposed CAB in Section V of the Annex.

(iii) The CAB is listed in Section V of the Annex by a decision of the Joint Committee and has thus

the status of Nationally Recognised Testing Laboratory (NRTL).

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5. These procedures clearly lay down the role and responsibility of, on the one hand, Member State DAs,
which is to prepare the complete application including on-site assessments done according to the
requirements in OSHA's regulation and procedures, and on the other hand, OSHA which is to review
the application and give its consent or objection to the proposed CAB.

6. However, the responsible US authority, OSHA, has refused to acknowledge and follow the procedures
set out in the MRA and recognise the role and responsibility of Member State DAs. OSHA has insisted
that only they can carry out the on-site assessment of EC CABs, since this is prescribed in their
regulations (29 CFR 1910). OSHA views the MRA as simply the mechanism needed for them to
recognise foreign bodies (in this case from the EC) to be eligible to be recognised under the Nationally
Recognised Testing Laboratory (NRTL) programme (see 29 CFR 1910 Appendix A I.A.1.b). Thus,
OSHA does not view the MRA as offering anything more in terms of facilitating the recognition of
CABs, by relying on the assessments made by Member State DAs.

7. Another element that needs to be taken into consideration is that OSHA has introduced fees for the
processing of NRTL applications and on-site assessments. The introduction of fees in itself is not
objectionable, however it would lead to a situation where EC CABs would have to pay fees to both
their Member State DA, which are responsible for the designation (including any on-site assessment)
under the MRA, and OSHA, which consider themselves responsible for the on-site assessment
according to their regulations.
it should be noted that Article 18 of the MRA
clearly states that a Party shall not charge fees with respect to conformity assessment services
provided by the other Party. The same situation would not apply to US CABs
since the
Community is in principle ready to recognise them according to the procedures set out in the
Annex and thus rely on the assessment and designation made by the US DA.

In this respect,

8. This situation has led to considerable uncertainty among potential EC CABs as to whether they would
be recognised and in particular under what conditions. To date no EC CABs have been recognised
under the Annex. A CAB designated by Germany has been recognised as a NRTL by OSHA. However,
this was done according to OSHA's own procedures and not according to those of the MRA. The
German CAB has consequently not yet been listed in Section V of the Annex.

9. The Commission services and the US administration have, in accordance with the third sentence of
Article 2 of the Agreement, held numerous consultations and made several attempts to find solutions
to the implementation problems described above. The Commission services have made numerous
proposals for ways of implementing the Annex and for confidence building activities that aimed at
addressing the concerns of all parties involved. All proposals have been rejected by OSHA. The
confidence building measures proposed by OSHA were of such a nature that they contradicted
both the spirit and text of the MRA and would have thus required a re-negotiation of the Annex.

3. Proposed course of action

10. The conclusion from the situation described above is that the US has, by refusing to abide by the
procedures laid down in the Annex, failed to fulfil its obligations under the Agreement. It is also clear
that this situation has led to that no EC CABs have been recognised under the Annex and thus EU
industry has no means of using the Agreement as an instrument for facilitating trade and market
access. As a consequence the EC has lost market access, as provided for in Article 2 of the Agreement,
for its products. In this context, it can also be considered that the US has failed to maintain legal and
regulatory authority capable of implementing the provisions of the Annex, in particular as it relates to
the reliance of the OSHA on the on-site assessment carried out by Member State Designating Auth-
orities of the Conformity Assessment Bodies located on their territory

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11. At

the same time the EC has, unless appropriate measures are taken in accordance with the
Agreement, the obligation to recognise CABs designated by the US and thus the Commission has
the legal responsibility to take the necessary measures to ensure that this obligation is implemented.
Maintaining such a situation would contradict the reciprocity and mutual recognition that underpin
the MRA.

12. From this it follows that the EC has not only the right to suspend or terminate its obligations under
the Annex, but is also obliged to do so in view of its implementation obligations under Community
law.

13. A suspension of

the Community obligations under the Annex, according to article 16 of

the
Agreement, would mean that the Annex as such is maintained in the MRA, but the EC would no
longer be bound to recognise US CABs. If circumstances develop in such a way that would allow an
implementation of the Annex according to the procedures foreseen therein, the Annex could quickly
be made effective again by repealing the suspension of Community obligations.

14. Termination of the Annex, according to article 21(3) of the Agreement, would entail that the Annex is
removed from the Agreement. If the EC would give notice of termination of the Annex, consensus
must be reached with the US to amend the Agreement accordingly. Failing such a consensus, the
Agreement in its entirety would be terminated. It should also be kept that if the Annex is to be
re-introduced into the Agreement, this would require a new negotiation between the parties.

15. In conclusion, the Commission considers that the suspension of the Community obligations under the

Annex is the appropriate and necessary action to take for the following reasons:

— The US has failed to fulfil its obligation and this resulted in a loss of market access as is provided

for by the Agreement.

— The balance of rights and obligations under the Annex would be ensured.

— The Annex should not be terminated since it represents a market access advantage for the EC and

should be made effective again as soon as circumstances permit.

— Suspension, compared to termination, would allow a quick resumption of the Annex.

16. The Commission would endeavour to take the appropriate actions, consistent with the Agreement, in
view of creating the conditions under which the Annex can be implemented in accordance with its
provisions.

17. Suspension of Community obligations requires, according to Article 3(3), second sentence, of Council
Decision 1999/78/EC (1), a decision of the Council, acting by qualified majority on a proposal from
the Commission.

4. Impact assessment

4.1. Impact on the Community budget

18. This proposal has no impact on the Community budget.

(1) OJ L 31, 4.2.1999, p. 1.

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4.2. Impact on business

19. The inclusion of the Annex in the MRA was, from the EC point of view, a major success since this
sector is, compared to the EU, heavily regulated in the US with mandatory use of specified US
standards and third party certification bodies. The Annex is also closely linked to the Sectoral
Annexes of Telecommunication Equipment and Electromagnetic Compatibility since most electro-
technical products are covered by regulations referred to in at least two of these three annexes. In
this respect, the suspension of the Annex could be seen as being to the disadvantage of EU industry.
However, since the Annex is at the moment not operational in practice — no EC CABs have been
recognised under the Annex — EU exporters cannot take advantage of the trade and market access
facilitation offered by the MRA in this sector.

20. The Commission has consulted with the relevant European industry federations, which for the most
part consider that the Annex has a value and would prefer that it not be suspended, since they believe
that it can be used as an instrument for wider regulatory cooperation with the US. However, the
Commission considers that the objectives which industry want to be pursued are outside the scope of
the MRA and could be better accomplished within a more appropriate framework, e.g. the Action Plan
for the Transatlantic Economic Partnership. A suspension of the Annex would not prejudice such a
cooperation.

5. Conclusion

21. For the reasons outlined in this explanatory memorandum, the Commission proposes to the Council

to adopt the attached decision.

THE COUNCIL OF THE EUROPEAN UNION,

Conformity Assessment
Community.

Bodes

designated

by

the

Having regard to the Treaty establishing the European
Community,

Having regard to Council Decision 1999/78/EC, of 22 June
1998, on the conclusion of an Agreement on Mutual Recog-
nition between the European Community and the United States
of America (1), and in particular Article 3(3), second sentence,
thereof'

Having regard to the proposal from the Commission,

Whereas:

(1) According to Article 16 of

the Agreement on the
conclusion of an Agreement on Mutual Recognition
between the European Community and the United States
of America, hereinafter referred to as the ‘Agreement’, a
Party may suspend its obligations under a Sectoral Annex.

(2) The United States of America has failed to fulfil its obli-
gation under the Agreement, in particular with regard to
recognition of
followed for
procedures

to be

the

(1) OJ L 31, 4.2.1999, p. 1.

(3) This has

led to that Conformity Assessment Bodies
designated or to be designated by the Member State Desig-
nating Authorities cannot be assessed, monitored and
recognised as foreseen by the Agreement.

(4) As a consequence the Community has lost market access
for its products

with regard to conformity assessment
covered by the Sectoral Annex for Electrical Safety.

and regulatory authorities

(5) It is also considered that the United States has failed to
maintain legal
capable of
implementing the provisions of the Sectoral Annex for
Electrical Safety, in particular as it relates to the reliance
of the Occupational Safety and Health Administration on
the on-site assessment carried out by Member State Desig-
nating Authorities of the Conformity Assessment Bodies
located on their territory.

(6) The Community and the United States have held,

in
accordance with the third sentence of Article 2 of the
Agreement, numerous consultations without leading to a
satisfactory solution,

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HAS DECIDED AS FOLLOWS:

Article 3

Article 1

The Community obligations under the Sectoral Annex for Elec-
trical Safety of the Agreement on Mutual Recognition between
the European Community and the United States of America are
hereby suspended in whole.

The Community may repeal the suspension of its obligations if
the Sectoral Annex for Electrical Safety can be implemented as
prescribed in the Agreement. In such a case, the decision shall
in accordance with the second
be taken by the Council
sentence of Article 3(3) of Council Decision 1999/78/EC.

Article 2

The President of the Council
is authorised to designate the
person empowered to send, on behalf of the Community, the
attached note to the United States of America.

The Commission shall endeavour
to take the necessary
measures, consistent with the Agreement, in view of ensuring
that the Sectoral Annex for Electrical Safety can be imple-
mented in accordance with its provisions.

ANNEX

The Council of the European Union presents its compliments to the Mission of the United States of America to the
European Union and notifies it that the European Community has decided,
in accordance with Article 16 of the
Agreement on Mutual Recognition between the European Community and the United States of America, to suspend
its obligations in whole under the Sectoral Annex for Electrical Safety of the Agreement.

The reason for the suspension of Community obligations is that the United States of America has failed to fulfil its
in particular with regard to procedures to be followed for the recognition of
obligation under the Agreement,
Conformity Assessment Bodes designated by the Community. This has led to that Conformity Assessment Bodies
designated or to be designated by the Member State Designating Authorities cannot be assessed, monitored and
recognised as foreseen by the Agreement.

As a consequence the Community has lost market access with regard to conformity assessment for its products covered
by the Sectoral Annex for Electrical Safety.

It is also considered that the United States has failed to maintain legal and regulatory authority capable of implementing
the provisions of the Sectoral Annex for Electrical Safety, in particular as it relates to the reliance of the Occupational
Safety and Health Administration on the on-site assessment carried out by Member State Designating Authorities of the
Conformity Assessment Bodies located on their territory.

The Community and the United States have held, in accordance with the third sentence of Article 2 of the Agreement,
numerous consultations without leading to a satisfactory solution.

The suspension of Community obligations as specified above is effective from the date of this note.

The Council of the European Union takes this opportunity to renew to the Mission of the United States of America to
the European Union the assurance of its highest consideration.