Source: EURLEX
Language: en
Format: md

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# 52014SC0023

**COMMISSION STAFF WORKING DOCUMENT Part 1: Evaluation of the Internal Market Legislation for Industrial Products /\* SWD/2014/023 final \*/**

  

SECTION || PAGE

|| Glossary and use of terms || 3

1. || Introduction and background || 6

|| 1.1 Evaluation aims 1.2 Evaluation scope and methodology 1.3 Recent developments in Union harmonisation legislation || 6 7 13

2. || Evaluation framework and typology of regulatory simplification || 17

|| 2.1 Evaluation questions 2.2 Intervention logic 2.3 Typology of simplification and support measures || 17 19 24

3. || Relevance and coherence of Internal Market Legal Framework || 34

|| 3.1 Relevance 3.2 Coherence of instruments 3.3 Coherence of definitions || 34 36 49

4. || Efficiency of the implementation regime || 53

|| 4.1 Overall picture 4.2 Conformity assessment of products 4.3 Notified Bodies 4.4 Accreditation 4.5 Declaration of Conformity 4.6 CE marking 4.7 Role of support and coordination mechanisms 4.8 Market surveillance || 53 54 56 67 70 74 78 79

5. || Costs of compliance and scope for simplification || 90

|| 5.1 Introduction and approach taken 5.2 Costs of compliance for firms 5.3 Scope for regulatory and administrative simplification 5.4 Benefits of simplifying administrative requirements 5.5 Quantification of the benefits from simplification of Union harmonisation legislation 5.6 Macro-economic impacts of simplification on growth and jobs || 90 93 106 110 114 117

6. || Effectiveness and fitness for purpose || 121

|| 6.1 Regulatory and non-regulatory barriers 6.2 Barriers to the free movement of innovative products 6.3 Barriers to the free movement of green products 6.4 Effectiveness in responding to the challenges of e-commerce 6.5 Effectiveness in allowing SMEs to operate across EU28 6.6 Effectiveness in handling the relationship between services and products 6.7 Effectiveness with respect to business-to-business products 6.8 Impact of IM legislation on the internal market 6.9 Impact of IM legislation on health and safety and consumer protection 6.10 Impact of IM legislation on environmental protection || 121 126 130 132 136 138 142 144 153

7. || Conclusions and recommendations || 158

|| 7.1 Conclusions 7.2 Recommendations || 158 163

Glossary

AB                  Accreditation
Body

ADCO                        Administrative
Co-operation

ADR               Alternative
Dispute Resolution mechanism

BAU               Business-as-usual

CA                  Conformity
Assessment

CAB                Conformity
Assessment Body

CE                   Conformité
Européenne

DoC                Declaration
of Conformity

EA                   European
co-operation for Accreditation

EO                   Economic
operators

EQ                   Evaluation
question

ESO                European
Standardisation Organisation

EU                   European
Union

FTE                 Full-time
equivalent

IA                    Impact
assessment

ICSMS            Information
and Communication System on Market Surveillance

IM                   Internal
market

MSAs              Market
Surveillance Authorities

NANDO         New
Approach Notified and Designated Organisations Information System

NB                  Notified
Body (Bodies)

NBGs              Notified
Bodies Groups

NLF                New
Legislative Framework

NRTL              Nationally
Recognized Testing Laboratory

ODM               Original
design manufacturer

OEM               Original
equipment manufacturer

PCP                 Product
Contact Point

PSMSP            Product
Safety and Market Surveillance Package

R&D               Research
and Development

SCM                Standard
Cost Model

SDoC              Supplier’s
Declaration of Conformity[1]

SME                Small
or medium-sized enterprise

TD                   Technical
Documentation

TFEU              Treaty
on the Functioning of the European Union

UK                  United
Kingdom

Internal
Market Directives/ Regulations

ATEX             Directive on Equipment
and protective systems intended for use in potentially explosive atmospheres

CPR                Construction Products
Regulation

EMC               Electromagnetic
Compatibility Directive

GAD               Gas Appliances
Directive

LD                  Lifts Directive

LVD               Low Voltage Directive

MD                 Machinery Directive

MID                Measuring Instruments
Directive

OED               Outdoor Equipment
Directive

PED                Pressure Equipment
Directive

PPE                 Personal Protective
Equipment Directive

REACH          Registration, Evaluation,
Authorisation and Restriction of Chemical substances Regulation

R&TTE           Radio and
Telecommunications Terminal Equipment Directive

RoHS              Directive on the
restriction of the use of certain hazardous substances in electrical and
electronic equipment

SPVD             Simple Pressure Vessels
Directive

A
full list of Internal Market directives and regulations within study scope is
provided in Table 1.1.

Notes on the use of terminology

·
The
terms: internal market legislation for industrial products and Union
harmonisation legislation have been used interchangeably in the report.

·
When
referring to specific internal market legislation, a
distinction has been made between (i) product-specific harmonisation
legislation and (ii) horizontal harmonisation legislation.

This Staff Working Document
builds on the Evaluation of Internal Market Legislation for Industrial Products
was carried out for the European Commission’s DG Enterprise and Industry by the
Centre for Strategy & Evaluation Services (CSES)[2],
supported by our partner organisations, Panteia and Oxford Research.

Drawing
on evidence gathered through the research, the evaluation provides an
independent evaluative judgment on the current state of play in the development
and modernisation of the body of internal market legislation for industrial
products. It does not represent the official view of the European Commission.

1.
Introduction
and background

Section
1 provides an overview of the evaluation’s objectives and scope and outlines
the methodology adopted. The subject of the evaluation, the overall policy and
legal context and recent developments in the regulatory architecture are then
set out.

1.1 Evaluation aims

The objectives of this evaluation are,
in summary, to:

·
Examine
how far the overall body of internal market (IM) legislation for industrial
products and the regulatory approach is fit for purpose and to what extent they
constitute an effective means of addressing barriers to the functioning of the
EU’s internal market for industrial products;

·
Evaluate
the relevance and coherence, efficiency, utility, effectiveness and
impact of Union harmonisation legislation and address a series of specific
evaluation questions[3];

·
Identify
and analyse any gaps, loopholes, inconsistencies and duplication in IM
legislation for industrial products or in administrative requirements for
economic operators;

·
Assess
the costs and benefits of Union harmonisation legislation for economic
operators and the impact on strengthening industrial competitiveness;

·
Assess
the cumulative impacts of, and interaction between legislation and compliance
requirements[4].

·
Make
recommendations as to how the efficiency and effectiveness of IM legislation
for industrial products (including structures and institutional actors to
support its implementation) could be improved so as to strengthen industrial
competitiveness and to create more favourable conditions for growth and jobs;

·
Identify
possible simplification measures through a preliminary analysis of the
potential impacts, and a comparison of the appropriateness and feasibility of
the different options to feed into a possible future impact assessment.

Since
the mid-1980s, the EU acquis for industrial products has
gradually expanded, and there are currently more than 30 directives and
regulations covering specific areas of industrial products (e.g. pressure
equipment, gas appliances) and horizontal directives that apply across many
different product groups, such as the RoHS (hazardous substances), REACH
(chemicals) and Ecodesign. A distinction can be made between two different
types of legislation falling within scope:

·
Product directives – Directives that address specific types of products, such as the
Pressure Equipment Directive (PED) and the Recreational Craft Directive; and

·
Horizontal directives – that cover a broad range of product groups. Examples are the Low
Voltage Directive (LVD), the Machinery Directive and the RoHS Directive.

Although
evaluations of individual pieces of IM legislation (directives and regulations)
have been undertaken, this study is the first overarching strategic review of
IM legislation for industrial products in 25 years. As such, it provides an
opportunity to: assess the fitness for purpose of the regulatory architecture
for ensuring the free movement of industrial products; consider the extent to
which further improvements could be made to strengthen coherence, efficiency
and effectiveness and to take stock of progress already being made through the
New Legislative Framework’s (NLF’s) modernisation agenda.

There
is a strong backwards-looking aspect to the evaluation. Progress to date has
been reviewed and any problems have been identified and analysed, either in the
legal framework itself, or in the implementation regime. There is equally an
important forward-looking element, since the study has examined the extent to which
Union harmonisation legislation is fit for purpose for the internal market of
the 21st century, and whether any simplifications or further changes
are necessary.

Strengthening
the effectiveness of the internal market for industrial products was identified
as a priority in the October 2012 update on an Integrated Industrial Policy[5]. The
European Commission
therefore committed
to carrying out an evaluation of the EU acquis in
the area of industrial products to assess the coherence and ‘fitness for purpose’
of the regulatory framework. The study is especially timely because
2012 was the 20th anniversary of the establishment of the internal market. The
study will make a contribution to the objectives set out in the Single Market
Act I[6]
and follow-up Communications[7]
to maximise the contribution of the internal market in industrial products to
achieving the Union’s growth and employment objectives, in line with the Europe
2020 strategy for smart and inclusive growth. In particular, the
evaluation provides a technical input to the Roadmap for the Reform of the
Internal Market for Industrial Products[8]
expected in late 2013.

1.2 Evaluation scope and
methodology
1.2.1
Evaluation
scope

The
study is ambitious in scope, since it covers not only most pieces of IM
legislation, but also the workings of the regulatory regime, including European
and national implementation structures. The focus of the study is on Union harmonisation legislation, although the specifications also required consideration of some
issues relating to non-harmonised products.

The majority (though not all) pieces of IM legislation
were within the study scope, as set out in the following table:

Table
1.1: Union harmonisation legislation within study scope

No || Year || Directive

1 || 1989 || Directive 89/686/EEC on personal protective equipment (PPE)

2 || 1992 || Directive 92/42/EEC on efficiency requirements for new hot-water boilers fired with liquid or gaseous fuels

3 || 1993 || Directive 93/15/EEC on explosives for civil use

4 || 1994 || Directive 94/9/EC on equipment and protective systems intended for use in potentially explosive atmospheres (ATEX)

5 || 1994 || Directive 94/25/EC on recreational craft

6 || 1994 || Directive 94/62/EC on packaging and packaging waste

7 || 1995 || Directive 95/16/EC on lifts

8 || 1996 || Directive 96/98/EC on marine equipment

9 || 1997 || Directive 97/23/EC on pressure equipment (PED)

10 || 1999 || Directive 99/5/EC on radio and telecommunications terminal equipment (R&TTE)

11 || 2000 || Directive 2000/9/EC on cableway installations designed to carry persons

12 || 2000 || Directive 2000/14/EC relating to the noise emission in the environment by equipment for use outdoors (OED)

13 || 2004 || Directive 2004/22/EC on measuring instruments (MID)

14 || 2004 || Directive 2004/108/EC concerning the electromagnetic compatibility electrical and electronic appliances, systems and installations (EMC)

15 || 2006 || Directive 2006/42/EC on machinery (MD)

16 || 2006 || Directive 2006/95/EC on low voltage devices (LVD)

17 || 2007 || Directive 2007/23/EC on pyrotechnic articles

18 || 2009 || Directive 2009/23/EC on non-automatic weighing instruments

19 || 2009 || Directive 2009/105/EC on simple pressure vessels (SPVD)

20 || 2009 || Directive 2009/125/EC establishing a framework for the setting of ecodesign requirements for energy-related products (Ecodesign)

21 || 2009 || Directive 2009/142/EC on gas appliances (GAD)

22 || 2010 || Directive 2010/35/EU on transportable pressure equipment

23 || 2010 || Directive 2010/30/EU on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products (Energy Labelling Directive)

24 || 2011 || Directive 2011/65/EU on the restriction of the use of certain hazardous substances in electrical and electronic equipment (RoHS)

Some
IM legislation was excluded because it has recently been subject to major
revision, such as the Construction Products Regulation (2011) and Medical
Devices Regulation (2012)[9].
It should also be noted that a further legislative initiative aimed at
simplifying four IM directives is under consideration as part of a separate
study[10].
Sectoral legislation is also outside the scope, since regulation in areas such
as the chemicals and automotive sectors has recently been evaluated. The
transposition of Union harmonisation legislation into national legislation was
formally outside the scope. However, since one of the issues examined was
whether directives or regulations are a more effective instrument in achieving
internal market goals, some consideration was made as to the extent of
divergence in the implementation of directives.

While
environmental legislation falling outside the scope of Article 114 was beyond
the scope, as part of the assessment of cumulative regulatory effects, through
the case studies, it was necessary to consider the interaction between IM
legislation for industrial products and other legislation applicable to
products. A series of EU regulations have been adopted in the past 10 years
that impose additional costs on industry, such as the WEEE Directive (2012/19
EC), the Energy Performance of Buildings Directive and product--specific
regulations such as the F-gas regulation (842/2006 EC).

The
second main area of focus has been on assessing how well the regime works to
support the implementation of Union harmonisation legislation at European and
national level, including the role played by different institutional actors,
coordination mechanisms and support structures.

The scope also included a review of progress made through
recent initiatives to help modernise Union harmonisation legislation such as
the New Legislative Framework (2008), the Alignment Package of 9 Directives
that forms part of the NLF’s implementation (2011) and the proposals set out in
the "Product Safety and Market Surveillance Package" (2013). These
and other recent relevant developments are set out in Section 1.4. This was
essential given the need to take stock of what simplification measures have
already been undertaken, or are planned in the near future, before considering
what further simplification measures might also be considered.

1.2.2
Methodological
approach

The
research has been carried out using a number of different research tools that
have allowed us to verify and to cross-check the evidence in accordance with
triangulation principles. These include: extensive desk research, two different
online surveys, carrying out a major interview programme with more than 200
stakeholders, undertaking product-based case studies across 10 selected product
categories, and analysing the results of DG ENTR’s Your Voice online
consultation.

The following diagram
shows the interconnection between the different phases and elements of the
study.

Figure 1.1:
Methodological framework by phase and research and data analysis tools

Desk
research involved a review of a wide range of documents and
a bibliography is provided in Appendix B. Among the documentation reviewed were
key EU legal texts and non-binding guidance produced by the Commission to
support the implementation of Union harmonisation legislation overall, and
guidance on specific Directives and Regulations. Relevant findings from
evaluations and impact assessments carried out focusing on individual pieces of
IM legislation have also been reviewed[11].

Two online
surveys were carried out with (i) Notified Bodies and members of
Notified Body Groups and (ii) Accreditation Bodies. The survey of Notified
Bodies received 128 responses, which equated to 11.4% of the total viable
sample of 1116 Notified Bodies contacted. The number of responses achieved
represents a 95% confidence level with an 8% margin of error. The response
level was positive given the problem of survey fatigue and contact problems[12].

The
distribution of responses from NBs by country in the sample broadly reflects
the distribution in the total population of NBs across Europe (distribution by
country is provided in Section 2) and was representative by size of the NB in
terms of the number of employees. Certain smaller EU countries (e.g. Bulgaria
and Czech Republic) are over-represented, while a few countries (e.g. France)
are comparatively under-represented in the sample.

In
terms of the pieces of legislation covered by the NBs that responded to the
survey, the participating NBs cover all pieces of IM legislation under
investigation. The most common are the Personal protective equipment (27% of
respondents), the Machinery Directive (24.6%), the Pressure equipment Directive
(18.9%), the Low Voltage Directive (18.9%). Good coverage of all conformity
assessment procedures (Modules) has also been achieved, with all procedures
covered by at least 35% of participating NBs. EC-type examination (Module B) is
the most common procedure (84% of respondents).

While
the majority of Notified Bodies primarily serve their national markets (67%
indicate that national market represent more than 50% of the their turnover
from conformity assessment services), there are also NBs with a more
international character (43% indicated that firms in other EU countries
represent more than 10% of the turnover and 34% referred to a similar share of
turnover for firms in non-EU countries).

The
survey of Accreditation Bodies attracted 20 responses out of a total of
32 contacted[13]
62.5%) including all Member States with a large manufacturing base as well a
range of smaller Member States. It is provides a broad geographical coverage.
Additionally, a few Accreditation Bodies were interviewed, which ensured a high
level of coverage of this stakeholder group.

201
interviews have been carried out[14].
The extensive interview programme with key stakeholders
included the broad spectrum of stakeholders such as national competent
authorities, market surveillance authorities, Notified Bodies and members of NB
groups, ADCOs, Product Contact Points, industry associations and individual
firms. An overview is set out in the table below:

Table
1.2: Interview programme – Number of interviews completed

|| Total

EU industry associations and stakeholders || 31

National industry associations || 9

Individual firms (e.g. manufacturers, importers, large/small firms) || 62

European Commission officials || 12

National authorities (market surveillance authorities, Accreditation Bodies, and chairmen/women of the ADCO groups). || 77

Notified Bodies Groups/ organisations at EU level || 4

Notified Bodies || 1

Consumer, environmental organisations and trade unions representatives || 1

Standardisation organisations || 1

Total || 201

A
total of 62 firms were interviewed, together with 19 industry associations for
the product-based case studies, out of a total of more than 220 firms
contacted. It should be stressed that only a small number of Notified Bodies Groups were interviewed and Notified
Bodies because as noted above, a large-scale survey was undertaken with
Notified Bodies.

CSES
also carried out an analysis of the 144 responses to the Your Voice
Consultation[15]
organised by the European Commission carried out between January and April 2013
as part of the roadmap initiative "Reforming the internal market for
industrial products". The consultation received response from industry
associations and individual firms across a broad range of sectors such as
manufacturing and ICT, and from public authorities, organisations providing
professional, scientific and technical services, wholesale and retail, consumer
organisations and individual citizens. The findings have been integrated into
this report and CSES provided DG ENTR with a summary analysis of the
consultation results. The analysis has also been integrated into the various
parts of the report.

Last but not least, in consultation with
the Commission, the project team selected 10 product categories for the case
study research, eight in harmonised sectors and two in non-harmonised sectors
(ski/Snow footwear and bicycles). A number of selection criteria were used,
such as ensuring that the product included professional users, products in
which SMEs have a strong presence among manufacturers, the need to include
intermediate not only final end products, etc. The case studies selected were:

•
Electric
motors

•
Laptops

•
Domestic
Refrigerators and freezers

•
Lifts
for persons

•
Gardening
equipment

•
Instruments
& appliances for measuring, testing and navigation

•
Air
conditioners

•
Integrated
circuits

•
Ski/Snow
footwear (non-harmonised)

•
Bicycles
(non-harmonised)

The
full versions of the 10 case studies are in Appendix C. These were
carried out using a combination of desk research, statistical analysis and
interviews with relevant firms and industry associations. For each case study,
we analysed relevant data sources (e.g. Eurostat Prodcom and SBS data, industry
data). Section
5 provides a summary overview of the findings through the case study research.

1.3 Recent developments in
Union harmonised product legislation

Since Union harmonisation legislation is complex and there
have been a number of significant developments in the legal framework since the
mid-1980s, it is necessary to provide a factual overview as to how the basic
regulatory architecture works, and to summarise steps taken by the Commission
to improve and modernise the regime supporting its implementation (e.g. the
legal framework on market surveillance and accreditation.

1.3.1
Introduction

Since January 1993, the
Internal Market (“IM”) has ensured the free movement of goods, services, people
and capital within the European Union (EU). Article 114 of the Treaty on the
Functioning of the European Union (TFEU)[16]
provides the legal basis for Union harmonisation legislation for industrial
products. The objectives are to promote approximation through technical
harmonisation measures and to ensure high levels of protection for safety and
health, consumers and the environment. An assessment of the intervention logic
is set out in Section 2.2.

1.3.2
Harmonised products and the New Approach Directives

In
1985[17],
the New Approach was adopted as the principle regulatory mechanism for
harmonised product legislation under which the “essential requirements” in
respect of safety and health are set out in the applicable internal market legislation.

The
legislative framework is non-prescriptive and technology-neutral with detailed
technical implementation dealt with through standardisation. Economic operators
are then free to determine how they demonstrate compliance with the essential
requirements, typically following European harmonised technical standards, or
an alternative means of showing that presumption of conformity has been
achieved.

After
two decades, the “New Approach” gained recognition and acceptance across many
industrial sectors as a method for achieving the effective operation of the
internal market in industrial products, while ensuring that minimum common
technical standards are met. In order to improve the effectiveness of the
regulatory framework under the New Approach Directives, the New Legislative
Framework (NLF) was adopted in 2008. The aim was to retain the central tenets
of the New Approach but to reinforce the regulatory system’s effectiveness,
improve transparency and remove any remaining
obstacles to the free movement of industrial products. In 2008, in
order to support the NLF’s implementation, two EU regulations and a decision
were adopted as part of a broad package of measures. In the area of harmonised
products, the “Goods Package” consists of:

·
Regulation
(EC) No 765/2008 sets out the requirements for
accreditation and market surveillance relating to the marketing of products and
Decision 768/2008/EC on a common framework for the marketing of products. The
Regulation applies to harmonised products; and

·
Decision
768/2008/EC on a common framework for the marketing of
products. The Decision lays down common principles and reference provisions.
This includes harmonised definitions and general obligations for economic
operators, rules for CE marking and a “menu” of conformity assessment
procedures. The Decision provides a general framework for future legislation
which will harmonise the conditions for placing products on the market.

1.3.3
The
Alignment Package

On 21
November 2011, the Commission adopted an “Alignment Package” to align nine
Directives with the common rules and approaches outlined in the NLF, taking
into account the “toolbox” set out in Decision 768/2008/EC, namely:
Low Voltage Directive (2006/95/EEC), Electromagnetic Compatibility Directive
(2004/108/EC); ATEX Directive (94/9/EC); Lifts Directive (95/16/EC); Simple
Pressure Vessels Directive (2009//105/EC); the Measuring Instruments Directive
(Directive 2004/22/EC); Non-automatic Weighing Instruments Directive
(2009/23/EEC); Civil Explosives Directive (93/15/EEC); and Pyrotechnic Articles
Directive (2007/23/EC). In addition, there are a number of other
Directives subject to a broader revision that includes an alignment to the
model provisions of Decision 768/2008/EC.[18].

1.3.4
Non-harmonised
products

Until
2008, the mutual recognition principle was implemented under Decision
3052/95/EC. Regulation (EC) No 764/2008, also known as the Mutual Recognition
Regulation, provides a common framework for mutual recognition in the area of
non-harmonised products. This relates to the application of the mutual
recognition principle in the area of non-harmonised products. Regulation
764/2008 complements two other pieces of EU legislation:

·
Directive
98/34/EC[19]
and the TRIS notification procedure - which
requires the Member States to notify the Commission and each other of any draft
‘technical regulations’ for products before they are adopted in national law;
the Directive is a preventive measure that allows the Commission and
Member States to verify that any new technical rule is compatible with EU law
before it is adopted; in contrast, the Regulation 764/2008 is a corrective
measure that ensures the correct enforcement of national rules on a
case-by-case basis; and

·
The
General Product Safety Directive,[20]
which requires the safety of all consumer products to be assessed in accordance
with European standards, Community technical specifications, codes of good
practice, the state of the art and expectations of consumers; except where
national rules apply, the Directive applies to all consumer products (whether
harmonised or not), whilst Regulation 764/2008 applies to all non-harmonised
products (whether likely to be used by consumers or not). Through the new
Product Safety and Market Surveillance Package, a new proposed regulation is
expected to replace the 2001 GPSD by 2015.

Approximately
25% of intra-EU trade is in the non-harmonised product area. In the absence of
Union harmonisation legislation, each Member State can adopt its own national
technical rules in relation to issues such as weight, size, composition,
labelling and packaging or, indeed, to apply no rules at all. National
legislation must still comply with the requirements of Articles 34–36 of the
Treaty on the Functioning of the European Union (TFEU).  In order to prevent
national technical rules from inhibiting trade, the TFEU also forms the basis
of the “mutual recognition” principle. According to Articles 34-36, Member
States are obliged to accept products lawfully marketed in another Member State
(and which are not subject to EU harmonisation legislation) even when the
product does not fully comply with the technical rules of the Member State of
destination.  Since 2008, the NLF has helped to drive the modernisation agenda
to ensure that IM legislation for industrial products is fit for purpose and
that present inconsistencies are eliminated. Following the adoption of the two
Regulations and Decisions mentioned earlier concerned with setting out a common
regulatory framework and common arrangements for market surveillance and accreditation
measures, there have been a series of further developments that form part of
the NLF and its follow-up.

1.3.5
Product
Safety and Market Surveillance Package

In
order to improve consumer product safety and to strengthen market surveillance
of products on the internal market, the Commission proposed a new package of
legislative and non-legislative measures, the “Product Safety and Market
Surveillance Package” on 13 February 2013. This builds on the overarching
framework provided by the NLF.

The
PSMSP consists of a number of elements, namely a Proposal for a Regulation on
consumer product safety, replacing Directive 2001/95/EC on general product
safety; a Proposal for a Regulation on market surveillance of products, a
Multi-annual plan for market surveillance until the expected coming into force
of the Regulations in 2015. The final part is an implementation report on
Regulation (EC) No 765/2008 setting out requirements for accreditation and
market surveillance relating to the marketing of products. Overall, the Package
is intended to enable better coherence of the rules regulating consumer
products identification and traceability and improved coordination of the way
authorities check products and enforce product safety rules across the European
Union. More specifically, the Commission highlights a number of key changes to
be introduced by the Package:

·
Alignment
of the general obligations of economic operators to ensure the safety of
consumer products with clearer responsibilities for manufacturers, importers
and distributors;

·
More
effective tools to enforce safety and other product-related requirements and to
take action against dangerous and non-compliant products through a single set
of rules for market surveillance;

·
Creation
of a more co-operative system of market surveillance across the EU; and

·
Streamlined
procedures for the notification of dangerous products and synergies between the
existing Rapid Alert Information System (RAPEX) and the Information and
Communication System for Market Surveillance (ICSMS).[21]

The
proposed Regulation on the Market Surveillance of Products responds to the
confusion said to be caused by the current “three-tier” system of market
surveillance which results from the fact that market surveillance rules and
obligations for economic operators are laid down in several different pieces of
EU legislation. For example, the General Product Safety Directive[22]
creates overlaps in relation to harmonised products intended or likely to be
used by consumers. Such overlaps have been criticised by the European
Parliament and stakeholders in industry and national administrations. In order
to improve the effectiveness of the regulatory regime, the proposed Regulation
would merge the rules on market surveillance of the General Product Safety
Directive, Regulation (EC) 765/2008 and many sector-specific pieces of Union
harmonisation legislation into a single legal instrument that applies
horizontally across all non-food sectors. There would be no distinction between
consumer and professional products or between harmonised products and
non-harmonised products for the purposes of market surveillance.

2. Evaluation
framework and typology of regulatory simplification
2.1 Evaluation
questions

The specifications for
this evaluation set out a number of high-level evaluation issues under the
headings of (i) relevance and coherence (ii) efficiency (iii) effectiveness and
fitness for purpose and (iv) impacts. In the following table, we summarise the
evaluation questions (EQs) that have been considered by the evaluation. In
order to address the overall objectives of the evaluation, it has been
necessary to revise some of the questions set out in the task specification and
to introduce additional questions.

Table 2.1:
Evaluation Questions

No. || Evaluation Question

|| Relevance and Coherence – Section 3

EQ1 || · Is harmonised product legislation (supported by voluntary technical standards) a relevant response to the problems and needs identified in the intervention logic?

EQ2 || · Are directives the most suitable legal instruments for the purposes of technical harmonisation in the relevant fields or should directly applicable regulations (requiring little or no transposition) be used?

EQ3 || · Is there evidence of gaps, loopholes, inconsistencies and duplication across Union harmonisation legislation and in the corresponding administrative requirements for economic operators?

EQ4 || · How coherent is the approach to definitions and product scopes in the various legal texts? (e.g. components, spare parts)

|| Efficiency of the implementation regime – Section 4

EQ5 || · What is the overall picture in relation to the efficiency of IM procedures, mechanisms and structures to support its implementation?

EQ6 || · How efficient is the conformity assessment process?

EQ7 || · How well do Notified Bodies serve the conformity assessment process

EQ8 || · Are conformity assessment bodies sufficiently regulated or are more stringent rules are needed?

EQ9 || · Is it appropriate to allow different elements of a conformity assessment to be performed by different bodies?

EQ10 || · What are the challenges for national competent authorities in monitoring the activities of Notified Bodies located outside the EU? How far is it appropriate – if at all – to open up Europe’s conformity assessment market to third countries?

EQ11 || · Should third-party conformity assessment be required for all industrial products?

EQ12 || · What are the benefits of accreditation for enhancing the single market for products (and services) and how could it best be used to support single market initiatives?

EQ13 || · Should accreditation be made compulsory for the purposes of demonstrating the technical capacity of conformity assessment bodies in the regulated sector?

EQ14 || · Is the current regime for the Declaration of conformity satisfactory?

EQ15 || · Is the current regime of CE marking satisfactory? Are there ways to improve the interaction between CE marking and other compulsory and voluntary markings enshrined in EU legislation?

EQ16 || · What contribution is made by support and co-ordination mechanisms such as Administrative Co-operation Working Groups and Product Contact Points?

EQ17 || · What are the main challenges facing market surveillance authorities?

EQ18 || · How effective is the co-operation between market surveillance authorities?

EQ19 || · Should non-harmonised/non-consumer products be covered by common EU market surveillance rules?

|| Costs of Compliance and Scope for Simplification - Section 5

EQ20 || · What steps do firms take to ensure compliance with IM legislation? What costs do they incur?

EQ21 || · How far is there scope for administrative and regulatory simplification of Union harmonisation legislation? To what extent is there scope for merging different directives?

EQ22 || · How far will administrative simplification bring about benefits for economic operators in terms of reduced administrative burdens?

EQ23 || · To what extent can the benefits of administrative simplification be quantified?

EQ24 || · What benefits from simplification can be identified for the wider economy?

|| Effectiveness and Impacts – Section 6

EQ25 || · What, if any, are the barriers (regulatory/ non-regulatory) to the effective functioning of the internal market for industrial products stemming from IM legislation for industrial products?

EQ26 || · Are there specific regulatory barriers to the development and free movement of innovative products, including products integrating key enabling technologies (KETs)? Are there any legal gaps not already covered by IM legislation for industrial products?

EQ27 || · Are there specific regulatory barriers to the development and free movement of green products? Are there any legal gaps not already covered by IM legislation for industrial products?

EQ28 || · To what extent is legislation adapted to the challenges presented by e-Commerce?

EQ29 || · How are SMEs (micro, small and medium-sized) affected by IM legislation for industrial products and how do they cope with the requirements? Is there scope to alleviate the burden on the different SME categories without compromising the overarching objectives of the legislation?

EQ30 || · Are there barriers to trade stemming from the way legislation handles the relation between services and products which are part of the same value chain?

EQ31 || · The specific situation of business-to-business (B2B products) which are developed and supplied to be used by professionals for the development of other products: Do these products require a special treatment?

EQ32 || · Overall, how effective is IM legislation for industrial products as a mechanism and means to achieve the objective of improving the functioning of the internal market?

EQ33 || · Overall, how effective is IM legislation for industrial products as a mechanism and means to achieve the objective of ensuring a high level of health and safety and consumer protection?

EQ34 || · Overall, how effective is IM legislation for industrial products as a mechanism and means to achieve the objective of ensuring a high level of environmental protection?

2.2.
Intervention logic
2.2.1
  Problem
definition and identification of needs

The
starting point was to define the problems and needs that Union harmonisation
legislation seek to address. The counterfactual situation prior to the
introduction of harmonised technical product regulations at EU level was also
considered. Prior to the introduction of the internal market for industrial
products, there was significant market fragmentation due to there being
different national legislation and technical standards in different Member
States. There were regulatory barriers to cross-border trade and customs
tariffs. There were practical barriers to exporting industrial products, and it
was more difficult to find out what national legislation was applicable in
another Member State.

Prior
to the advent of an internal market in industrial products, there was a lack of
a level playing field and fair competition since national regulations and
administrative requirements were more burdensome in some EU countries than in
others. In some cases, such as machinery, there was the absence of a national
equivalent to the Machinery Directive. In order for industry and SMEs to
benefit from the potential economies of scale that stem from the elimination of
barriers to cross-border trade, there was a need for technical harmonisation
measures.

2.2.2
General,
specific and operational policy objectives

The general
objectives underlying IM legislation for industrial products are set out in
Article 114 of the Treaty (TFEU). This provides the legal basis for the
adoption of approximation measures. In adopting such approximation measures,
Union harmonisation legislation should ensure a high level of protection as
regards safety and health, environmental and consumer protection.

A
number of specific objectives then relate back to these overarching
general objectives, such as in the case of harmonised products: ensuring access
to the internal market and fair competition; developing harmonised rules across
the EU for placing products on the market, preventing unsafe and unhealthy
products entering the market, etc. The circulation of non-harmonised industrial
products is intended to be ensured by the application of the mutual recognition
principle. Under the goal of environmental protection, the Industrial
Policy Communication (COM(2010) 614) also mentions the role of IM legislation
in promoting a more resource-efficient and sustainable European economy.

Balancing
the economic objectives relating to the internal market are the social and
environmental objectives within Article 114 relating to the prevention of
unsafe and unhealthy products from entering the market and the minimisation of
harmful environmental impacts. Whilst not incompatible with the internal market
objectives, these objectives reflect the need to protect against a “race to the
bottom”, whereby producers of harmful products are able to undercut other
producers. Here, clearly the adoption of recent IM Directives such as the
Ecodesign Directive and energy labelling requirements has potential to
contribute to this objective.

Although
Article 114 provides the sole legal base for Union harmonisation legislation,
the effective implementation of Union harmonisation legislation should also
contribute – albeit indirectly - to the achievement of EU industrial policy
objectives. Article 173 (TFEU) provides the basis for EU industrial policy and
is an important part of the wider policy backdrop. However, since IM legislation
does not differentiate between European economic operators and those from third
countries, since it is concerned with ensuring a level playing field within the
internal market, industrial competitiveness is a subsidiary objective.

Operational
objectives
provide the basis for evaluating the immediate activities and effects
associated with Union harmonisation legislation. They relate to concrete
actions taken at EU level, including formal activities, namely i.e. introducing
directives and regulations and setting standards, as well as defining
administrative requirements. For instance, Regulation (EC) 764/2008 establishes
a framework for the implementation of the mutual recognition principle and
mechanisms for non-harmonised products to be recognised, Decision 768/2008/EC
provides a common framework for the marketing of products. They also include
“soft” interventions, including providing practical support to industry and
promoting harmonisation with global trading partners.

2.2.3
Intervention
logic mapping diagram

An
intervention logic diagram is provided on the following
page (Figure 2.1) setting out the hierarchy of objectives. This ranges
from the general (strategic) policy objectives through to specific and
operational objectives. In the next sub-section, we describe the specific
mechanisms by which the objectives are pursued.

Figure
2.1: Intervention logic - IM legislation for Industrial Products

2.2.4
Division
of competence between the EU and national levels

At EU level,
the European Commission is responsible for the development of Union
harmonisation legislation for industrial products and its periodic review and
revision. It also has an important overarching role in monitoring and
evaluating its implementation. The Commission is also responsible for mandating
EU standardisation bodies to develop technical standards and for setting up
appropriate mechanisms and support structures to ensure its effective
implementation. It is also responsible for coordination aspects relating to
market surveillance.

In
order to strengthen the effectiveness of IM legislation and its implementation,
a number of different institutional mechanisms have been set up at EU
level, such as ADCO Groups and Notified Bodies Groups. These promote
information exchange and facilitate the discussion of the main challenges in
the implementation of Union harmonisation legislation. In addition, information
tools have been developed to support the implementation regime, such as the
NANDO Database of Notified Bodies across EU28 and the ICSMS, the
internet-supported information and communication system for the pan-European
market surveillance. Furthermore, EU guidance documents have been developed for
economic operators as to how to ensure more effective compliance with IM
regulations (Blue Guide, specific legislation).

Turning
to the national level, a number of mechanisms and structures that
support the implementation of Union harmonisation legislation are the
responsibility of the Member States. Member States are responsible for the
development of national implementing rules and for nominating the necessary
competent authorities, and have responsibility for designating Notified Bodies
– including determining whether accreditation mechanisms are required and for
monitoring the operation of NBs. Further responsibilities include the provision
of support and guidance to economic operators to ensure effective
implementation, market surveillance and enforcement.

In
the non-harmonised area, Member States are required to follow a notification
process where they consider that products should not enter their national
market, to establish national product contact points and to submit an annual
report on implementation. Product Contact Points also provide information and
guidance since 2008.

Finally,
manufacturers and other economic operators are expected to comply with
requirements and follow the various conformity assessment procedures while at
the same time – mainly through the industry associations – participate in the
development of technical standards and the working groups set up to monitor the
implementation of IM legislation. Other relevant stakeholders – e.g. consumer,
environmental groups and trade unions – also participate in this process.

For
all these activities, the Commission, the Member States, industry and
stakeholders all dedicate certain resources in the form of human and financial
inputs. The level of these inputs has a significant effect on the overall
efficiency of the legal framework. An assessment of how effective a role is
being played by the various institutional actors involved in supporting the
implementation of Union harmonisation legislation is provided in Section 4
(efficiency).

2.2.5
Mechanisms
and structures

The
implementation of Union harmonisation legislation is underpinned by a number of
mechanisms and structures that help to ensure effective implementation. These
are summarised below, with a distinction between EU and national level
implementation, monitoring and enforcement activities:

EU level -
Harmonised products

·
Mandate
EU standardisation bodies to develop technical standards

·
Review
and evaluate implementation of legislation and propose amendments /changes to
Directives and Regulations to reflect technological developments, address
implementation problems and economic and technical feasibility

·
Create
Notified Body coordination groups

·
Develop
information/support structures to assist industry and stakeholders in
implementation of legislation (e.g. NANDO, ICSMS online
information and communication system for pan-European market surveillance)

Non-Harmonised
products

·
Third
countries

·
Conclude
Mutual recognition agreements to reduce costs of testing and certification in
other markets

National Level
(Member States)

·
Appoint
national competent authorities in respect of specific IM legislation

·
Appoint
national Accreditation Bodies

·
Transpose
EU Directives into national legislation

·
Designate
Notified Bodies to carry out conformity assessment

·
Establish
national Accreditation Bodies to accredit Notified Bodies

·
Conduct
monitor and enforcement activities to ensure compliance with the legislation

·
Communicate
to other Member States decisions (notify) for approval, withdrawal of products

·
Lay
down rules and penalties for non-compliance

·
Participate
in support/coordination structures/groups (ADCOs)

·
Develop
support structures for industry (industry)

Non-harmonised
products

·
Operating
Product Contact Points

·
TRIS
notification system (98/34 notification procedure)

·
Submit
annual reports on implementation of Regulation 764/2008

Industry
and stakeholders

·
Comply
with legal requirements

·
Participate
in support structures for development of technical standards

·
Participate
in working groups monitoring the implementation of legislation (e.g. ADCOs,
Notified Bodies Groups)

The
human resources required at EU and national level in order to promote an
effective internal market in goods form an important part of the intervention
logic since they are the processes that need to be implemented efficiently in
order to bring about the effective implementation of IM legislation. An
assessment as to how effective some of the different aspects of the framework
for the implementation of IM legislation for industrial products (including the
role of different institutional actors) is explored in Section 3 of this report
(efficiency).

2.2.6
Effects
and impacts

The
final stage in the logic mapping was to assess the full and effective
implementation of IM legislation for industrial products in order to check what
sort of effects and impacts should materialise at different levels, namely:

·
Effects
on economic operators - strengthened access to the internal
market and global markets, leading to greater economies of scale and enhanced
firm-level competitiveness, cost-efficiencies through regulatory and product
convergence at European level and to some extent also globally.

·
Effects
on users and consumers - reduce incidence of non-compliant
products placed on market, promoting more sustainable consumption

·
Impacts
on the internal market – such as promoting an increase in
intra-EU trade, strengthening market access, promoting fairer competition and a
level playing field

·
Impacts
on health, safety, the environment and consumer protection – through
the setting of essential requirements, IM legislation’s effective
implementation should help to prevent unsafe and unhealthy products from being
placed on the market, and the environmental impacts of products should be
minimised.

·
Wider
impacts on industrial competitiveness and innovation – although
not explicit objectives in the legal base, Union harmonisation legislation has
the potential to strengthen competitiveness, e.g. through the promotion of
industry consolidation with manufacturing firms being able to operate across
the internal market, rather than in national markets, with greater economies of
scale, effects from the development of a body of Union harmonisation
legislation in promoting global regulatory convergence and convergence in
technical standards, enhanced take-up of innovation and RTD results (through a
technology-neutral approach).

The
extent to which the different types of effects identified through the logic
mapping have been substantiated through the research is examined later in this
report, in particular in Section 6 (effectiveness and impacts).

2.3 Typologies
of simplification and support measures

The
Commission has sought to make improvements to strengthen the coherence and effectiveness
of internal market legislation and the support structures and mechanisms that
support its implementation
at EU and national levels. This has been achieved through the
framework of the NLF (and the current Alignment Package) with an effort to
modernise the legal framework and to promote greater consistency between
different IM legislation in order to reduce administrative burdens for economic
operators. In addition, through periodic reviews and recasting of individual IM
directives and regulations, efforts have been made to promote regulatory
simplification.

A
typological framework was developed in order to assess what steps
have already been taken towards regulatory and administrative simplification,
and to
strengthen the implementation of Union harmonisation legislation through measures
and support actions. This was an essential step in order to be able to examine
the future scope for further simplification measures and possible measures to
strengthen efficiency and effectiveness more generally. The
typology consists of three main aspects:

·
Regulatory
simplification measures relating to Union harmonisation
legislation for industrial products (horizontal and vertical/ sectoral
legislation);

·
Administrative
simplification measures (for economic operators, national
authorities and market surveillance actors); and

·
Non-legislative
support actions that strengthen the efficiency and effectiveness of
regulatory implementation and the enforcement and monitoring of IM legislation.

The
validity of this typological framework has been tested through the research.
Examples of existing simplification measures have been identified and analysed
in the sections dealing with efficiency and effectiveness respectively
(Sections 4 -6). The mapping was a crucial starting point in exploring the
potential scope for further simplification. The typology provides a framework
for presenting the conclusions and recommendations relating to simplification
measures.

2.3.1
Regulatory
simplifications and clarification measures

Regulatory
simplifications can take different forms such as:

·
Changing
the structure of legislation relating to the internal market for industrial
products
- the possibility of a horizontal regulation to replace Decision 768/2008;
overcoming regulatory fragmentation in market surveillance by combining
different pieces of legislation;

·
Merging
different directives or regulations – combining
different
directives or regulations where there is scope to do so e.g. Machinery
Directive and Outdoor Noise Equipment Directive;

·
Updating
IM legislation for industrial products using the same regulatory
instrument – periodic reviews of legislation leading to the
codification and recasting of individual directives and regulations, or groups
of legislation aligned in parallel;

·
Updating
IM legislation through the use of a different regulatory instrument – transition
from an EU regulation to a directive;

·
Repealing
EU legislation –in cases either where legislation has proven to be
obsolete altogether, or where Union harmonisation legislation has been replaced
by recast or codified IM legislation.

Simplifications
and clarification measures can either be applied to individual pieces of
legislation or to groups of regulations and directives through recasting and
codification[23]
exercises. Through the NLF, an effort has been made to promote regulatory
simplification through the adoption of the common elements set out in Decision
768/2008 within the Alignment Package, without any major changes to the
substance of the legislation. Where legislation has been updated, opportunities
have been taken to provide clarity as to definitions, the scope (for instance,
whether spare parts and components are included) and in making administrative
requirements more consistent. The proposed typology of regulatory
simplification measures relevant to IM legislation for industrial products is
set out in Table 2.2, and is supported by concrete examples:

Table 2.2: Typology of regulatory simplification and
clarification measures

Type of simplification measure || Simplification – short description and key benefits || Union harmonisation legislation

Changes to structure of IM legislation (horizontal) || Proposal for a horizontal Regulation on the Market Surveillance of Products (PSMSP). The proposal would bring into a single piece of legislation applying across all non-food sectors rules on market surveillance. Making the rules more accessible. Benefits Simplification of Union rules on market surveillance and reduced market fragmentation – combining market surveillance rules scattered across different legislation e.g. General Product Safety Directive, Regulation 765/2008 and sector-specific legislation into a single Regulation. || PSMSP - COM(2013) 74 final

Changes to structure of IM legislation (vertical) || Merging IM directives and regulations Merging IM legislation could help to maximise synergies, minimise overlaps and inconsistencies and reduce administrative burdens for economic operators. || · Machinery Directive (2006/42/EC) and Outdoor Noise Efficiency Directive (2000/14/EC)[24] · PED (97/23/EC) and SPVD (2009/105/EC) Directives · PED (97/23/EC) and transportable pressure equipment (99/36/EC) Directives

Updating IM legislation (using same regulatory instrument) || Recasting and codification of directives There is no fixed timetable for reviewing and recasting legislation. Periodic reviews of IM legislation provide an opportunity to review and simplify legislation and to apply lessons from practical experiences of the legislation’s implementation through recast directives. The New Legislative Framework (NLF) and alignment of groups of IM regulations Decision 768/ 2008 introduced a common framework for marketing products to ensure greater consistency between IM legislation. The Alignment Package will implement the NLF’s common approach across 9 directives (common definitions of economic operators, their obligations and responsibilities). || · Machinery Directive 89/392/EEC recast in 2006/42/EC · RoHS Directive 2002/95EC, recast (2011/65/ EU)[25] · PPE Directive 89/686/EEC, revision process on-going · R&TTE Directive 1999/5/EC revision process on-going with proposal for new “Radio Equipment Directive”

Updating IM legislation (using a different regulatory instrument) || Replacing directives with directly applicable regulations Benefits: no national transposition requirements with reduced scope for differences in interpretation between Member States, uniformity across the internal market, legal certainty for economic operators. || Examples of industrial product legislation where Regulations have replaced Directives: · Cosmetic Products Regulation (1223/2009/EC) · Construction Products Regulation (305/2011/EC) · Proposal for a Regulation on medical devices (COM(2012) 542

Repealing EU legislation || EU regulations can include periodic review clauses so that any which are no longer relevant or have become obsolete can be repealed. || IM legislation under the New Approach covers broad harmonised product areas

The
updating of
Union harmonisation legislation, through recasting and codification allows
for clarifications to be made. This may include, for instance, clarifying the
demarcations between directives, a clearer presentation of the scope
and definitions of key terms, and updating the list of product
groups falling within scope, widening and clarifying product
exclusions,
and taking into account industry developments and innovation, for instance,
accommodating new product groups that did not exist when the legislation was
first drawn up.

Given
that there has already been a substantial amount of legislative revision across
IM legislation for industrial products, it is worth an assessment as to the
value of legislative review processes. Such improvements are not always
concerned with simplifications, but are rather part of on-going efforts to
improve the overall coherence and effectiveness of the regulatory framework.

Table
2.3: Clarifying legislation

Clarifying the borderline and delineation between Directives || The MD 2006/42/EC clarifies the borderline between the scope of the Machinery Directive and the Low Voltage Directive to provide greater legal certainty. It also sets out clearly the delineation between the MD and the Lifts Directive and ensures mutual exclusivity.

Clearer presentation of scope and definitions of the key terms || NLF: provides a clearer definition of the obligations for different economic operators e.g. manufacturers, importers and distributors. Previously, responsibility for product safety was entirely on manufacturers.

Widening and clarifying exclusions of products || EMC: the Directive allows the display & demonstration of non-compliant equipment at trade fairs, exhibitions etc. provided that a sign indicates that the equipment may not be marketed or put into service until it has been brought into compliance and that electromagnetic disturbances are avoided. EMC: Apparatus intended for a fixed installation and not otherwise commercially available may be exempt from the Declaration of Conformity, CE marking, etc. EMC: Where new editions become available and are to be applied it does not necessarily mean that a complete EMC re-assessment of an existing product is necessary. The evaluation may be restricted to those modifications directly affecting the apparatus concerned. R&TTE: radio receivers and fixed-line telecommunications terminal equipment will be excluded from the proposed new Directive and will instead fall within the scope of the EMC Directive and, depending on power supply voltage, either the Low Voltage Directive or the General Product Safety Directive. R&TTE: - the proposed new “Radio Equipment Directive” will introduce an exemption for components used for pre-production purposes not placed on the market.

2.3.2
Typology
of administrative simplification measures

In
order for the overall regulatory regime to work effectively, economic operators
need to demonstrate that they have complied with the essential requirements set
out in Union harmonisation legislation in order to achieve presumption of
conformity. Since the adoption of the New Approach, and its subsequent
evolution through the NLF, which will help to modernise Union harmonisation
legislation itself, administrative requirements for economic operators have
been set out in the legislation. Examples are CE marking requirements, which
have been in place since 1993 indicating a product's conformity with EU
legislation and the obligatory steps before a product can bear CE marking, such
as producing a Declaration of Conformity (DoC).

Although
in principle, administrative requirements for economic operators are clear (CE
marking, DoCs, self-certification or third party conformity assessment
depending on the IM legislation and safety risk involved), in practice,
anomalies and differences between EU legal texts have emerged. This is partly
due to the fact that the overall volume of legislation has increased, and the
fact that legislation has evolved piecemeal. This was explicitly recognised
through the adoption of the NLF in 2008, which provides a framework for coordination
and ensuring a more common approach.

Requirements
for DoCs currently vary between Directives in relation to information that
needs to be provided, and whether the DoC needs to be placed together with the
product or can be in the accompanying manual alone. The date when a product is
considered as having been placed on the market may also vary. In some
instances, products are considered as being on the market from the date of
publication of an information notice in the EC Official Journal (OJ) whereas for
other IM legislation, presumption of conformity applies from the date when the
DoC is signed off by the manufacturer. The review allowed us to identify
different types of administrative simplification measures. The typology
includes examples of simplifications that have been introduced through the NLF,
and examples of administrative simplifications specific to particular IM
directives or regulations.

Table 2.4: Typology and examples of administrative
simplification measures

Type of administrative simplification || Examples

Common approach to conformity assessment || The NLF (Decision 768/2008): common approach across Union harmonisation legislation to conformity assessment through a standard suite of modules with a new more consistent lettering system. These are gradually being integrated into IM legislation, for instance through the Alignment Package Legislators can choose from these modules in drawing up IM legislation. Art. 4 refers to the need to “avoid imposing modules which would be too burdensome in relation to the risks covered by the legislation concerned”.

Standardised template and information requirements for DoCs || The NLF (768/2008) sets out common procedures for producing DoCs and a standard format across different applicable IM legislation.[26] The NLF also provides a suggested standard template for a DoC.

Removal of requirement to notify placing on the market || R&TTE: a revision in the proposed new Radio Equipment Directive to remove the requirement to notify the placing on the market of equipment using frequency bands which are not EU-wide harmonised.

Identification of apparatus || EMC: There is flexibility in the requirement that apparatus be identified by “type, batch, serial number or any other information allowing for the identification of the apparatus”, allowing the manufacturers to choose their own means of identifying an apparatus for regulatory purposes.

Unused administrative provisions (i.e. choosing not to enforce them) || R&TTE: the relevance of some of the administrative provisions in the Directive has been questioned, e.g. various kinds of small equipment such as RFID tags or cochlear implants, emit radio signals that are unlikely of causing harmful interference.[27]

Lighter regime for SMEs || CPR: offers simplified procedures for the drawing up of declarations of performance for SMEs. However, concerns about how this operate in practice.

Lighter requirements on technical documentation || EMC: Declaration of Conformity and technical documentation to be made available on request does not need to be an original document but can be a copy. Technical documentation can be kept in any format, for example as a hard copy or CD-ROM.

Electronic processes, e.g. forms, reporting, notification procedures, NANDO || CPR: allows use of electronic forms for the submission of information and of online databases for registering products.

2.3.3
Typology
of non-legislative support actions

The
third strand of the typology (in addition to regulatory and administrative
simplifications) is non-legislative support actions. There are many
examples of support actions and these help to promote the efficient and
effective implementation of Union harmonisation legislation. These are
essential in closing the “gap” between formal legislative texts and the
situation on the ground. The table below provides a typology of non-legislative
support actions, supported by examples.

Table 2.5: Typology of non-legislative support
actions

Types of non-legislative support actions || Examples

Information, guidance, advice and publicity (customised to difference audiences) || · Guidance and handbooks, e.g. EU Blue Guide covering Union harmonisation legislation (2000, with revision during 2013) · Guidance on individual harmonised directives and regulations (EU, sometimes also national) · Website information – e.g. DG ENTR and national competent authority websites responsible for specific harmonisation legislation · Expert groups · Technical assistance visits and consultations · Communication campaigns

Coordination of activities between Member States || · GRAS-RAPEX · Coordination of cross-border surveillance activities · Joint enforcement · European cooperation on market surveillance (e.g. ADCO)

Pooling of information, experience and expertise || · EU-level dialogue bodies · Portability of test reports · Collection of information on enforcement, etc. · Databases, e.g. ICSMS, public platform for complaints and injuries · Traceability systems and information · Exchanges of officials, e.g. market surveillance authorities

Common methodologies || · EU general risk assessment methodology for products · Common approach to market surveillance of e-commerce · Common risk-based approach to customs product safety and compliance controls

Benchmarking || · Performance Benchmarks for market surveillance

Studies and research || · Feasibility studies · Impact assessments and evaluations · Stakeholder and public consultations

A
number of stakeholders at EU and national level have an important role to play
in implementing support actions. These may be taken by the Commission at EU
level or by national authorities at Member State level. The Commission has a
vital role in terms of ensuring overall coordination of support actions. It is
also directly involved in some activities, such as the development of
non-binding guidance on the application of IM legislation and in ensuring that
cumulative experiences of implementing legislation are built into this guidance
(e.g. Blue Guide, specific guidance).

National
authorities, notably competent authorities and market surveillance authorities
are also involved in implementing support actions on the ground, for instance
in communication, awareness-raising and information campaigns about
administrative requirements for economic operators (manufacturers, distributors
& importers), especially SMEs. Market surveillance authorities may also
launch dedicated campaigns about specific issues, for instance, problems
relating to non-compliant products and/ or documentation, awareness-raising
about impending deadlines e.g. timescales for different thresholds of chemical
products within the REACH Regulation coming into force.

Sectoral
bodies and industry associations may also implement actions in support of their
members. One of the advantages of non-legislative support actions is that they
do not need to be negotiated or require legislative changes. Some care is needed
in their design and use, since support actions do not replace the requirements
of the legislation; they should help clarify rather than contradict the
legislation. Among the wider target audience of such measures are: end-users
& consumers, researchers and the media.

In
Sections 3 – 6, we set out the detailed findings from the evaluation research.
The analysis draws on a number of data and information sources, namely desk
research, online survey work, an analysis of the results of the Your Voice
Consultation, an extensive interview programme and ten product case studies. At
the end of each sub-section, we list the main Research Findings (RFs) that have
emerged from the analysis of the evidence presented. These numbered RFs have in
turn informed the overall conclusions in Section 7, thus ensuring that each
conclusion is evidence-based.

3. Relevance
and coherence of Internal Market Legal Framework

The relevance
and
coherence of Union harmonisation legislation were assessed
through the evaluation. Among the issues considered were whether
the intervention logic is appropriate and meets the identified needs of
economic operators, consumers and end-users, whether directives or regulations
are the most appropriate regulatory instrument for IM legislation for industrial
products to achieve key objectives, and the overall coherence of the regulatory
framework.

3.1 Relevance

EQ1:
Is harmonised product legislation a relevant response to the problems and needs
identified through the assessment of the intervention logic?

Technical
product harmonisation legislation which sets essential requirements that avoid
being too prescriptive, supported by voluntary harmonised technical standards,
has been a highly relevant mechanism for the achievement of the objectives set
out in Article 114 of the TFEU. Technical approximation measures were viewed by
industry and national authorities as an appropriate mechanism for ensuring an
effectively functioning internal market with high levels of product safety and
health, environmental and consumer protection. However, ensuring that the
implementation of legislation leads to the achievement of such objectives
relies on effective market surveillance to ensure that non-compliant products
are not placed on the market (see sections on efficiency and effectiveness).

In
assessing the relevance of technical product harmonisation legislation, the
“counterfactual” situation was considered i.e. problems that existed prior to
the adoption of Union harmonisation legislation under the New Approach and the
establishment of an internal market in industrial products. As is well
documented in the seminal Cecchini studies in the
late 1980s[28]
and in subsequent studies to assess the benefits of the internal market[29], the
situation prior to the adoption of the internal market was characterised by
regulatory fragmentation and legal uncertainty for economic operators, with
different national technical regulations and standards for industrial and
consumer products across EU12[30].
The New Approach Directives provided a mechanism for addressing these problems
through a common, harmonised EU-wide approach to meeting the essential
requirements. This was highly relevant to achieving the objectives of an
effectively functioning internal market in products, with a level playing field
and fair competition for economic operators.

Prior
to the adoption of Union harmonisation legislation, each Member State imposed
obligations on economic operators in the interests of safety, health and
consumer protection. This meant that there were considerable regulatory and
non-regulatory barriers to trade in goods because of the different requirements
in different countries.

This
meant that economic operators had to treat each EU Member State as a separate
market, with its own rules. Although difficult to quantify, doing business on a
cross-border basis in this operating environment imposed considerable
regulatory compliance costs on economic operators. The adoption of successive
vertical and horizontal Union harmonisation legislation was therefore highly
relevant to addressing the identified needs of European industry. IM
legislation for industrial products has been a highly relevant instrument to
address the needs of economic operators. The approximation
of product legislation through internal market legislation has been relevant in
promoting industrial competitiveness because regulatory convergence at EU level
(supported
by voluntary technical standards) has made it easier for economic operators to
access the whole internal market. It has promoted access to new markets within
the internal market, promoted economies of scale and industry consolidation,
led to fairer competition and a level playing field between economic operators.

In
some instances, no national regulatory frameworks were in place prior to the
adoption of EU legislation, therefore harmonised IM legislation addressed
regulatory gaps enabling economic operators to develop a larger market for
their products, while ensuring high levels of product safety and protection.
For instance, until the adoption of the Machinery Directive in 1989, many
national legal frameworks did not sufficiently regulate the safety and usage of
electrical and mechanical machinery, despite the high level of risk involved
for those operating such machinery. In these sectors, EU legislation largely
preceded the development of national legislation, which was relevant in
preventing the emergence of different national regulations which would
otherwise have led to higher administrative burdens for regulatory compliance
for economic operators.

Feedback
through the interview programme from across the broad spectrum of stakeholders
in the area of internal market legislation for industrial products confirmed
that overall, there was broad satisfaction with the overall regulatory framework
and with recent efforts to modernise and strengthen it, most notably through
the NLF. An
industry association commented that “IM legislation is effective because it
sets out common requirements for placing products on the market and eliminates
barriers to the free movement of the products. It is also very effective in
ensuring common minimum standards”. While there is always scope to
improve the efficiency and effectiveness of IM legislation for Industrial
Products, from a relevance perspective, the regulatory framework is considered
to be relevant to identified needs in that it is flexible, responsive and often
used as a model for the development of industrial product regulation globally.

Overall,
the intervention logic underpinning the regulatory framework - and the link
between different levels of objectives - is broadly coherent. It allows the
development of appropriate pieces of legislation that can facilitate the
functioning of the internal market whilst offering protection for consumers,
health and safety and the environment. Since the internal market in industrial
products is crucial to the creation of growth and jobs, there may be scope to
include broader policy objectives relating to competitiveness and innovation.
An area of the logic behind Union harmonisation legislation that is less
coherent is the lack of a policy as to whether directives or regulations are
the most appropriate mechanism for achieving objectives. This question is
addressed in detail below.

Research Findings (RFs):

·
(RF1)
The situation prior to the adoption of Union harmonisation legislation was
characterised by regulatory fragmentation with different national regulations
and technical standards for industrial products across EU12.

·
(RF2)
Prior to the adoption of Union harmonisation legislation, there were many gaps
in the regulation of products posing a potential risk to health & safety,
consumer protection or environmental protection.

·
(RF3)
In the absence of Union harmonisation legislation, economic operators would
face barriers to trade and higher costs as a result of different national
regulatory regimes for many products.

·
(RF4)
In the absence of Union harmonisation legislation, there would be potential
risks to health & safety, consumer protection or environmental protection,
in cases where national regulatory regimes were inadequate.

3.2
Coherence of
instruments
3.2.1
Directives
or regulations?
EQ2: Are directives the most suitable
legal instrument for the purposes of technical harmonisation or should directly
applicable regulations be used?

Introduction

Since
the New Approach[31]
was adopted in 1985, more than 30 harmonised pieces of internal market
legislation have been adopted, the majority of which were EU directives, which
were the preferred regulatory instrument during the early stages in the
development of Union harmonisation legislation, when the internal market for
products was less integrated, and there was a need to allow for greater
flexibility during national transposition. In the past 10 years, however, the
use of regulations has become more common when new legislation has been
introduced (e.g. REACH Regulation, 2006, Fertiliser Regulation, 2003). 
Moreover, following periodic legislative revision processes to recast
legislation, a number of pieces of internal market legislation that were
formerly Directives have been recast as Regulations. Examples of Directives
that have evolved into Regulations are the EU Cosmetic Products Regulation
(1223/2009/EC), the Construction Products Regulation (305/2011/EC) and the
Proposal for a Regulation on Medical Devices (COM(2012) 542).

According
to feedback from the Commission obtained through this study, among the reasons
for this trend are that there is now longstanding experience of implementing
New Approach Directives under harmonised product rules and the internal market
for industrial products is much better integrated. There is consequently
greater support among stakeholders for harmonisation to be supported by an
appropriate regulatory instrument that avoids minor divergence in transposition
when directives are transposed into national legislation. The use of
regulations rather than directives by the Commission has not explicitly been
stated as a Commission policy due to the need to retain flexibility. The most
appropriate regulatory instrument is given due consideration as part of impact
assessment processes prior to the introduction of new, and the revision of
existing legislation.

Advantages
and disadvantages of Directives

Harmonisation
directives set out the legal framework and essential requirements while leaving
Member States flexibility to adopt national implementing rules to achieve the
legislation’s general objectives. A summary of the advantages and disadvantages
of directives is now provided, followed by examples of stakeholder feedback as
to the merits and drawbacks of using directives:

Table
3.1: Advantages and disadvantages of directives

Directives - advantages

Flexibility for Member States as to how European legislation should be transposed into national legislation, for instance as regards: · Whether national implementing provisions should be incorporated into new legislation at national level, or through the modification of existing legislation. · The form and national legal instrument used in transposition, which is left up to Member States (Article 288 TFEU). There is no obligation to create a single national measure where all the provisions are located. · The transposition process into national legislation provides an opportunity for national competent authorities to strengthen their knowledge about the specific implementation details of each Union harmonisation directive. This helps to build capacity before legislation is implemented, since national implementing rules are needed irrespective of which regulatory instrument is used. · Flexibility for Member States as to whether particular product groups designated as being of lower risk should be excluded from scope (e.g. optionality clause under the MID). This would be difficult to achieve through regulations.

Directives - disadvantages

· Minor regulatory divergences - directives help to ensure a minimum level of harmonisation across the EU, but there is minor divergence in the interpretation and application of legislation between Member States in some instances.  · Lack of synchronised timing across EU28 of the entry into force of Union harmonisation directives. · Most manufacturers do not use national legal texts but refer to European legislative texts on product safety and to the applicable European technical standards. This was seen as leading to duplication in legal texts, whilst resources could be better used elsewhere. · There is a perception – albeit a largely erroneous one - among some economic operators, that some Member States impose additional national requirements through gold-plating · The risk that a two tier approach as regards consumer and safety protection may emerge if Member States use the ‘optionality clause’[32].

The
feedback gathered through the research in relation to the advantages and
disadvantages of Directives are now examined in further detail.

Stakeholders
in some Member States were in favour of retaining Directives as the main
regulatory instrument to implement Union harmonisation legislation. For
instance, a market surveillance authority in Germany commented that “Directives
provide extra room for manoeuvre through the transposition process into
national legislation and the development of national implementation rules.
Directives work well for sectoral (or “vertical”) Directives such as the
Machinery Directive, LVD and the Outdoor Noise Directive”. A market
surveillance authority in France commented that “Directives are a better
legal instrument, since national implementing rules are required for the
effective application of internal market legislation at national level.
Regardless of the instrument, public administrations still need to be nominated
as competent authorities".

A
national body in charge of metrology in Spain commented that Directives
are preferable for the MID. “The optionality clause is useful since it provides
the option of not regulating products that are not considered to be of serious
concern to safety and consumer protection in each EU country”.  The same
interviewee also stressed that the transposition process provides an
opportunity to build knowledge and capacity among relevant national competent
authorities about forthcoming Union harmonisation legislation.

 A
government Ministry interviewed in the Netherlands stated that the
question of the relative merits and drawbacks of directives and regulations
respectively is complex. Whilst at first sight, regulations appear to be a more
effective instrument because they are directly applicable, national legislation
still sometimes has to be adjusted and national implementing regulations drawn up.

As
regards the disadvantages of using directives, a number of interviewees have
pointed to regulatory divergence in the application of Union harmonisation
legislation due to minor differences following national transposition processes
in the interpretations and/ or application of the law.  A detailed assessment
as to the effectiveness of national transposition was outside the study scope
(see Section 1.2). However, since the issue of the merits and drawbacks of the
use of regulations and directives was one of the evaluation questions, we have
considered this issue in general terms.

Evidence
from the interview programme, Your Voice Consultation and CSES online surveys
found that stakeholders perceive there to be regulatory barriers due to
differences between Member States in national interpretation and in the
application of IM rules[33]
However, only a few detailed examples were provided as to these barriers (see
Section 4 – efficiency).

 
Some national competent authorities stated that there was less scope for
divergent interpretation in the national transposition of Union harmonisation
directives than in other areas of EU legislation due to the nature of such
approximation laws. Moreover, those that downplayed the significance of minor
divergences in the transposition and interpretation of legislation pointed out
that many Member States have transposed European legislation in a way that text
that remains close to the original spirit and intention of the law.

A
major industry association in the electronics and IT sectors commented that “The
transposition process can create problems, and requires industry to engage in
active monitoring of how legislation has been implemented into different
national laws, and any translation issues that may result in misapplication of
IM legislation. However, the internal market should be a single legal
jurisdiction”.A further drawback mentioned by interviewees
relating to the use of directives is the difficulty in ensuring synchronised
timing of the entry into force of IM legislation, since transposition processes
mean different timelines in each Member State. This was mentioned by
stakeholders such as some national competent authorities, industry
representatives and individual manufacturers.  National transposition processes
also take time and require human resources yet the research found that many
manufacturers do not even read national legislation, but take European legal
texts as their reference point. A number of market surveillance authorities
suggested that resources currently used by national competent authorities to
transpose directives into national legislation could instead be redirected
towards improving the effectiveness of market surveillance.

Advantages
and disadvantages of regulations

EU
regulations are directly applicable, although they still require
the development of national implementing rules.  The research found that the
use of regulations rather than directives can have a number of benefits in
contributing to the achievement of internal market objectives. A summary of the
advantages and disadvantages of regulations is now provided, followed by an
assessment of some of the stakeholder feedback received:

Table
3.2: Advantages and disadvantages of regulations

Regulations - advantages

· Regulations are directly applicable and do not require transposition (with the exception of the need to develop implementing rules) · Synchronised timing of the entry into force of regulations across the internal market · Uniformity in application with reduced scope for differences in interpretation, thereby ensuring greater legal certainty and a level playing field for economic operators · Potential to reduce the overall volume of Union harmonisation legislation by eliminating the need for transposition into one or more pieces of national legislation (most economic operators follow European legislation anyway). · Potential scope for cost savings and the use of human resources among national competent authorities for alternative purposes if civil servants are not tied up in national transposition processes. · Regulations may be a more appropriate instrument for pieces of horizontal Union harmonisation legislation, such as common rules on market surveillance and for placing products on the market (the latter is currently in the form of a decision).

Regulations  - disadvantages

· There would still be a need for a minimum set of national implementing regulations to be developed, but arguably with less scope than is the case for directives to tailor these according to national-specific situations. · Less flexibility to accommodate national-specific interpretations, although generally there is only limited room for manoeuvre in this regard (e.g. optionality clause within the MID).

The
research identified support among some stakeholders for the greater use of
regulations to implement Union harmonisation legislation in future.

Some
Member State authorities appear to be more willing than in the past to use EU
regulations as a mechanism for regulating harmonised products over time. This
reflects strengthened confidence in the regulatory framework for harmonised
industrial products and the level of integration of markets.

Support
was especially strong among industry associations and individual firms, since
industry has a clear interest in internal market legislation for industrial
products being implemented on as uniform a basis as possible since divergences
in application and interpretation between Member States - albeit minor - causes
legal uncertainty for economic operators. A number of companies interviewed
stated that regulations help to reduce the risk that unexpected regulatory
barriers are experienced in particular national markets within the internal
market. An EU industry association in the field of safety noted that industry
tends to prefer regulations over directives because “Regulations are clear, and
there is no need for national transposition. This means that all actors are on
the same playing field”.

There
was support among many national competent authorities for the greater use of
regulations, although this view was not shared by all Member States (see
comments under the advantages of directives). A number of competent authorities
noted that regulations could help to reduce the overall volume and
administrative costs of legislation since national legislation transposed from
Union harmonisation legislation is largely duplicative. Moreover, the majority
of economic operators follow European legislative texts and harmonised
technical standards in managing compliance with IM legislation, often in
conjunction with European guidance on IM legislation. This renders national
legislation somewhat redundant, although there remains a need to develop
national implementing regulations, regardless of which regulatory instrument is
used.A national Ministry in Romania commented that "EU
Regulations would eliminate the administrative costs of the transposition
process by significantly decreasing the resources needed to transpose and
implement legislation and in the application of particular terms and concepts”.
A market surveillance authority in Slovenia noted that "Regulations
lead to more coherent and uniform application, especially in respect of
horizontal issues such as market surveillance and general product safety".
Support for the adoption of regulations across IM legislation was not
universal.

Among
the potential disadvantages of using regulations identified by a small number
of stakeholders were the lack of flexibility for Member States to take
national-specific contexts into account.  For instance, under the Measuring
Instruments Directive (MID), there is an ‘optionality clause’ which allows
scope for Member States to opt out of EU requirements to regulate particular
product groups, if they classify them as low risk, or if a particular market
segment is not present.

Although
there is no universal consensus among stakeholders on this matter, the evidence
points to the conclusion that in future, the Commission should consider using
regulations as the preferred legislative instrument for Union harmonisation
legislation so as to ensure synchronised timing in Directives coming into
force.

A
number of national authorities suggested that a gradual transition to using
regulations rather than directives would help to avoid regulatory fragmentation
within the internal market due to differences in the interpretation and
application stemming from national transposition.  At the same time, there are
likely to be product groups such as measuring instruments for which directives
are more appropriate. The possibility of using directives should be retained.

Research Findings:

·
(RF5)
Directives allow a minimum level if flexibility for Member States to ensure
that national-specific operating contexts are taken into account during the
transposition process into national legislation. However, in many cases, Member
States transpose the Directives very close to the original European legal
texts. Economic operators typically refer to the text of the Directive rather
than to the relevant national legislation.

·
(RF6) 
Among the advantages of Regulations are the synchronised timing of their entry
into force.

·
 (RF7)
The rationale for using Regulations rather than Directives has not been
explicitly stated by the Commission.

·
(RF8)
The EU should retain the possibility of using both regulatory instruments to
maximise flexibility, but clarify the criteria for determining the choice of
regulatory instrument.

3.2.2
Gaps,
loopholes, inconsistencies and duplication
EQ3 - Is there evidence of gaps,
loopholes, inconsistencies and duplication across Union harmonisation
legislation and in the corresponding administrative requirements for economic
operators?

Over
a 30 year period, the gradual accretion of IM legislation has resulted in
inconsistencies arising between the different requirements
set out in some IM legal texts and in the administrative
requirements set for economic operators. This does not appear to be a universal
problem that affects the overall body of IM legislation. Indeed, only 16% of
Notified Bodies responding to the study suggested that
there were any such problems related to those Directives for which they had
been notified.
However, where gaps, loopholes, inconsistencies and duplication do
exist, they can cause significant difficulties for those operating in the
relevant sectors. The can include:

·
Legal
uncertainty for economic operators;

·
Inconsistences
in administrative requirements leading to unnecessary minor differences in the
templates produced for CE marking; and

·
Higher
administrative costs not only in complying with these requirements but also in
terms of familiarisation with the requirements.

Examples
of inconsistencies and duplication were identified through the interview
programme and Your Voice consultation and are provided in the following table.

Table 3.3:
Examples of gaps, loopholes, inconsistencies and duplication in IM legislation

Product area || Applicable directives || Problem type || Examples of gaps, loopholes, inconsistencies and duplication

Printers || LVD and Machinery Directive || Gap || Unclear demarcation between the LVD and the MD with regard to the definition of industrial printers. Lack of text in LVD as to when printers should be considered as being within the scope of the LVD Such text is however provided in the MD, which explains clearly that the Directives are mutually exclusive.

Pressure equipment || PED || Gap || Since the Directive was adopted, new product groups have come to market with evidence of new innovations. The definition of product groups consequently remains unclear and as to whether particular spare parts and components are within scope. Over-reliance on guidance for legal interpretation on product scope leading to legal uncertainties.

Non-road mobile machinery || Machinery Directive || Gap || Mobile machinery is within the scope of the MD, but the MD does not include requirements for road circulation of this machinery. These remain non-harmonised and subject to national requirements.

Cables || EMC Directive || Gap || Cables are not currently included within the scope of the EMC-directive

Electrical appliances under 50V || LVD Directive || Gap || Under the LVD, appliances under 50V are not covered. In practice, the GPSD provides a framework, but safety is not covered through harmonised requirements. There is no need for a declaration of conformity and CE marking. Doubtful whether voltage should be the most appropriate criteria. Energy usage of a product is today more important, but low voltage products presently excluded from the LVD with high energy-efficiency may not necessarily be safe.

Multiple products || R&TTE and Medical Devices Directive || Inconsistencies in requirements || Products where multiple legislation is applicable may face differences in CE marking requirements. This can result in conflicting requirements for integrated products. Problem should be solved since the proposed Medical Devices Regulation requires CE marking. See evaluation question on “CE marking” in efficiency section.

Multiple products || Declarations of Conformity Examples: MD, LVD, R&TTE and EMC Directives || Inconsistencies in requirements || Differences in CE marking requirements between the MD, LVD, R&TTE and EMC Directives (where the CE marking must be placed on product, detailed addressee information that has to be provided on the DoC).  Where multiple legislation is applicable to a given product, problems in terms of differences in requirements for the format / layout of the DoC, and whether the DoC has to be provided along with the product/ product documentation.

Multiple products Example: Pressure equipment || Spare parts and components Pressure Equipment Directive, ATEX Directive || Gaps and loopholes || Lack of legal clarity as to whether spare parts and components are included within IM legislation Inadequate definitions of spare parts and components. Confusion as to whether spare parts and components are distinct from one another or synonymous within scope of Directives. See evaluation question on spare parts and components.

Equipment and noise-emitting machinery || Machinery Directive, Outdoor Noise Emissions Directive and EMC Directive || Overlaps || There is a dedicated Directive on noise (Directive 2000/14/EC). However, the MD also covers issues relating to noise, pressure and electromagnetic compatibility. This raises the possibility of these IM regulations being merged.

OSH vehicles || Machinery Directive || Overlaps || Overlaps between requirements in the Machinery Directive concerning OSH vehicles that need to be EC-type approved

|| || ||

Non-road mobile machinery || Non-Road Mobile Machinery Directive and ATEX Directive || Conflicting requirements || Technical conflicts between Directive 97/68/EC (non-road mobile machinery) and the ATEX Directive. Stage IIIB engines are unable to be manufactured or adapted to conform to the technical requirements of both directives.

Construction Products || ATEX Directive, Construction Products Regulation || Unclear demarcation || Unclear demarcation between the ATEX Directive, and the Construction Products Regulation

Multiple products || PED and Simple Pressure Vessels Directive || Unclear demarcation || Unclear demarcation between the PED and Simple Pressure Vessels Directive

Whilst
these specific issues do cause difficulties, some of these problems are already
being tackled through the NLF, which has the potential to eliminate
inconsistencies between IM regulations, for instance, through the introduction
of a common approach to definitions, a clear explanation of the
responsibilities and obligations of different economic operators in the
distribution chain, and greater standardisation of administrative requirements,
for instance in relation to CE marking and the development of DoCs.

It
was, however, recognised that the horizontal provisions of the NLF
(Decision 768/2008/EC) have not yet been implemented in full. There remains
unnecessary duplication of administrative tasks to ensure compliance with
differing requirements relating to the definitions of common concepts (e.g.
placing on the market, manufacturer), the obligations of economic operators,
conformity assessment procedures, CE marking, DoCs, etc. There are also
differences between IM directives as to when the presumption of conformity
becomes effective (e.g. first national publication or in official journal).

Stakeholders
were therefore in broad agreement about the importance of the Alignment Package
which was seen as a critical part of implementing the NLF through standardising
the format and requirements for producing DoCs in line with Decision
768/2008/EC. Likewise, CE marking requirements are being made more common
through the common framework which is gradually being introduced across more
Union harmonisation legislation. The on-going process of alignment is gathering
pace and this will gradually eliminate inconsistencies.

It
was interesting that there was sometimes a perception among industry that there
were problems as regards overlaps between different pieces of legislation,
which on closer inspection were found not to be the case in practice. For
instance, in respect of the Ecodesign Directive, there were perceived among
some industry stakeholders to be overlapping and conflicting energy efficiency
requirements between the implementing regulations concerning motors and fans
within the Ecodesign Directive. However, upon investigation, it was found that
there are no “overlapping and conflicting” requirements for electric motors
(under Regulation 640/2009) and fans (under Regulation 327/2011).

Regulation
640/209 establishes minimum energy efficiency requirements for electric motors
(sold alone or integrated into products). These requirements address the
minimum energy efficiency class of the motor according to an internationally
used IEC standard. Regulation 327/2011 addresses the minimum efficiency of
fans, understood as products composed by an electric motor combined with an
impeller. If the impeller is sold alone it is assumed that a motor complying with
its relevant legislation will be used. The Regulation on fans calculates the
efficiency of this product as the quotient between the energy transmitted to
the gas and the electric energy used. Both Regulations appear to be
complementary since they address different aspects of the typical systems used.
Moreover, industry was consulted during the development of both Regulations and
has not contested them.

The
recasting of individual pieces of legislation also provides an opportunity to
accommodate industry developments and changes in product groups. For instance,
as noted earlier, problems relating to product scope (for instance, new
products not being covered other than through supporting guidance to the
legislation rather than in the legislation itself) and to the inclusion or
exclusion of spare parts and components can be addressed through legislative
revision processes. However, some industry stakeholders, especially for older
Directives such as the PED believe that such a recasting exercise is long overdue.

Another
important issue is whether the common framework for the marketing of products
(as set out in Decision 768/2008/EC) will result in unnecessary duplication in
IM legislation. Although there are many benefits of introducing a more common
approach to product harmonisation rules across the regulatory framework, the
length of legal texts of individual IM directives will double. An
alternative approach would be to adopt a legally-binding horizontal “umbrella”
regulation setting out common elements across IM legislation which was advocated
by some stakeholders interviewed. Several competent authorities, market
surveillance authorities and industry associations were in favour of a restructuring
of the legal architecture from a Decision to a Regulation.

Such
a horizontal Regulation would eliminate the need to lengthen IM legislation
unnecessarily, which was considered to be duplicative and not SME-friendly.
Unlike Decision 768/2008/EC, it would also be legally binding. However, there
were differing views on this point, with some stakeholders preferring all the
relevant text to be included in each Directive (typically, operators involved
in the production or marketing of products that only have to comply with a
single Directive) and others preferring to have the common text presented only
in a horizontal regulation or directive.

A
horizontal national regulation has already been adopted based on Decision
768/2008/EC in Germany. This provides a regulatory umbrella and overall
framework under which sectoral legislation at national level stemming from IM
product legislation is structured. There may be scope for other Member States
to adopt such an approach, drawing on the experience of Germany.

Although
this issue is not one of urgency, it would be more coherent in our view, at
least in the medium term to introduce a horizontal Regulation. Although there
would not be many quantitative savings (other than minor effects through
reduced familiarisation time), this would strengthen the coherence of the
legislation and SMEs in particular would appreciate legislation being kept as
short as possible.

Research Findings (RFs):

·
(RF9)
There are several instances of gaps, loopholes, inconsistencies and duplication
across the body of IM legislation; but these are relatively modest in number
and minor in substance given the size of the body of legislation.

·
(RF10)
Many of the outstanding instances are being addressed by the NLF and/or the
Alignment Package, e.g. standard format and requirements for DoCs and CE
marking.

·
(RF11)
Decision 768/2000/EC has not yet been implemented in full, resulting in some
duplication of tasks for economic operators. The limited legal weight of a
Decision may have had some impact in this regard.

·
(RF12)
Recasting Directives and Regulations provides an opportunity to eliminate gaps,
loopholes, inconsistencies and duplication.

·
(RF13)
There may be merit in a horizontal Regulation for the marketing of products
based on Decision 768/2000/EC (which would be legally-binding and limit the
length of subsequent Directives) compared to the inclusion of all the relevant
text within a single piece of legislation).

3.3
Coherence of
definitions

EQ4: How
coherent is the approach to definitions and product scopes in the various legal
texts (e.g. components, spare parts)?

3.3.1
Definitions
of economic operators

Strong
support was identified through the interview programme for the improved
definitions of economic operators and their obligations set out in Decision
768/2008/EC and gradually included in the legislation, most notably through the
Alignment Package. For example, Recital 20 of Decision 768 states that “it
is necessary to distinguish clearly between the manufacturer and operators
further down the distribution chain. It is also necessary to distinguish
clearly between the importer and the distributor, as the importer introduces
products from third countries to the Community market. The importer has thus to
make sure that those products comply with the applicable Community
requirements”. It was recognised by all interviewees that there were
advantages in having common definitions of economic operators (manufacturers,
importers and distributors) and in clarifying their respective
responsibilities. Since different economic operators are involved at different
points in the supply chain, there was strong support that they should assume
their respective responsibilities for ensuring regulatory compliance with IM
legislation. Ultimately, this should lead to strengthened market surveillance
and improved product safety.

A
number of industry associations asserted that the NLF was a significant
improvement in strengthening the coherence of the implementation regime for
Union harmonisation legislation because obligations for different economic
operators are clearly defined. There was also seen to be a fairer sharing of
the burdens between different economic operators in terms of their
responsibility for ensuring that products placed on the market meet regulatory
compliance requirements. Although manufacturers should continue to have primary
responsibility for many aspects of product safety and health, “the
implementation of the NLF will make all economic operators more diligent with
regard to regulatory compliance and product safety”.

Ensuring
that other economic operators take their share of responsibility for ensuring
regulatory compliance was viewed as beneficial in terms of the overall fairness
of the regulatory framework and the distribution of administrative costs and
burdens. Market surveillance authorities also viewed the sharing of responsibility
positively, since there is now greater clarity for economic operators about
what their role is and their obligations including the requirement to respond
promptly to requests from market surveillance authorities to provide technical
information and documentation. Decision 768/2008/EC states that “Distributors
and importers, being close to the market place, should be involved in market
surveillance tasks carried out by national authorities, and should be prepared
to participate actively, providing the competent authorities with all necessary
information relating to the product concerned”.

However,
the importance of a practical approach by market surveillance authorities was
also stressed. A number of industry associations suggested that there could be
delays and inefficiencies if market surveillance authorities first approach
distributors and importers since manufacturers have much of the technical
information needed that provides evidence to support the DoC. Moreover, many
manufacturers are reluctant due to commercial sensitivities to release the full
technical file to other actors in the distribution chain. It can therefore save
considerable time if market surveillance authorities approach manufacturers
directly in the first instance. Overall, the NLF was viewed as having made a
significant contribution to strengthening common definitions of economic
operators in legal texts, although there are some concerns about how realistic
it is for importers and distributers to retain all the information needed by
market surveillance authorities.

Research Findings (RFs):

·
(RF14)
Stakeholders support the common definitions and general obligations in Decision
768/2000, e.g. distinguishing between manufacturer, importer and distributor.
(Stakeholder views)

·
(RF15)
Definition of responsibilities is seen as fairer, e.g. importer and
distributors are required to cooperate with market surveillance authorities.
(Stakeholder views)

·
(RF16)
The definitions within Decision 768/2000/EC should be applied consistently
across the whole body of IM legislation, as and when individual Regulations and
Directives are recast.

3.3.2
Product
definitions and scope

Union
harmonisation legislation sets out the “essential requirements” and is designed
to be technology-neutral. A broad description is provided in EU legislation of
the product groups falling within scope. In order to keep the legal texts
concise, detailed descriptions of product sub-groups are not typically
included. Non-exhaustive lists of products within scope are sometimes also
provided in the annexes of IM legislation, and/ or through clarifications
provided in the accompanying guidance.

Sometimes
products within scope are updated annually through the activities of Working
Groups on different IM directives and regulations. These consist of the
Commission, Member States and industry stakeholders and discuss issues relating
to the practical application of IM legislation. This allows for the updating of
guidance, which although not legally binding provides practical support for
economic operators as to whether their product falls within scope.

The
research identified a variety of approaches across different pieces of IM
legislation to the definition of products within scope. Examples of the way
in which different IM legislation addresses these issues across a sample of
vertical and sectoral directives are provided in the following table:

Table
3.4: Treatment of definitions and product scope

Examples of IM legislation and type || Treatment of definitions and product scope

Machinery Directive (sectoral) || Art. 2 - general definitions are provided of ‘machinery’, and other broad product areas within scope are listed (safety components, lifting accessories, interchangeable equipment and partly completed machinery). Different categories of machinery, lifting equipment, etc. are then set out in further detail in annexes.

PED (sectoral) || Any pressure equipment that consists of a pipe, vessel, safety accessory or a pressure accessory and operates at >0.5 bar is considered to fall within scope. Legislation is non-product specific so that it can capture the full range of relevant products. However, lack of clarity as to whether specific components are included within scope (see detailed example).

EMC (sectoral) || The recitals state that the equipment covered by this Directive should include electrical apparatus and fixed installations. The definitions cover broad product areas rather than specific product sub-groups, e.g. equipment, apparatus and fixed installations.

Ecodesign Directive (horizontal) || Definitions are provided in the implementing regulations for specific product groups e.g. air conditioners and comfort fans, household dishwashers, household refrigerating appliances. Since ecodesign regulations are developed in specific product sectors, the scope of products covered is clear.

RoHS Directive (horizontal) || RoHS II (2011) is very specific about the specific product groups that are exempted from RoHS and in in setting out the six banned hazardous substances.

In
examining how coherent and comprehensive product definitions and scope
are, it should be recalled that there is a trade-off between ensuring
clarity and legal certainty for economic operators, while at the same time avoiding
hindering innovation through having too detailed descriptions of product
categories and sub-categories that fall within scope.

The
research found that although the definition of products falling within scope is
sufficiently clear for most technical harmonisation regulations, this is not
the case for all EU legal texts. Indeed, although a given IM directive or
regulation may provide a clear definition of product scope, economic operators
may still face difficulties in understanding whether their product falls within
the legislation’s scope, for instance, for specialised products, components and
spare parts. In some instances, this may represent a gap or duplication in the
text itself, in which case, there may be a need to update the text as and when
the legislation is recast. In other instances, it may be sufficient to provide
supporting guidance that provides the necessary clarification, without the need
to revise the text of the legislation itself.

For
instance, a Notified Body in Lithuania stated that there are legal gaps in
relation to product scope within the PED, in terms of the
types of pressure vessels covered. Some regulatory gaps have emerged because of
the time that has elapsed since the Directive was adopted (1997). New types of
pressure vessels have been developed since the legislation was drawn up.
Although such products are addressed in PED supporting guidance, the situation
is unsatisfactory because manufacturers point to the legislative text and only
want to address the minimum legal requirements. For instance, there is very
little in the legislation about large boilers, with manufacturers having to
rely on the guidelines. The lack of legal clarity means that sometimes it is
down to producers to interpret the guidance.

In a
previous evaluation of the PED, a number of national authorities have stated
that pressure accessories should be built according to the PED in order to
enhance the safety of pressure equipment. A detailed examination of the issue
may lead to the finding that safety aspects and market surveillance activities
would be enhanced if the wording was amended. Although this has potential to
strengthen product safety, the implications would need to be considered in
terms of the overall burden on industry before changes are made.

Research Findings (RFs):

·
(RF17)
There has been a variety of approaches to the definition of products and scope.
Product definitions are usually broad, with non-exhaustive lists sometimes
provided in Annexes.

·
(RF18)
There is often a trade-off between providing legal clarity and allowing
innovation, i.e. not having overly-detailed descriptions of product categories.

·
(RF19)
Whilst there will need to be a variety of approaches to the definition of
products and scope, there may be potential for greater consistency. This might
involve broad definitions clearly stated in the main text of legislation, with
specific definitions of categories and sub-categories defined in Annexes and
clarified by the various Working Groups, with suitable adjustments and
fine-tuning over time.

3.3.3
Definitions
of spare parts and components

A key
study issue was whether there are difficulties in the regulatory framework in
terms of the definition of spare parts and components.

An
industry association in Germany commented that they “regularly
receive questions as to whether components and spare parts placed on the market
are within the scope of, and need to comply with IM legislation”. A further
problem identified was that even when a definition is provided, and the
intention is to cover components and spare parts through IM legislation, the
scope may be narrowly defined resulting in a situation where some components
and spare parts are covered, but others are not formerly covered, but are
mentioned in supporting guidance documents.

Although
safety components are within the Machinery Directive’s scope,
other basic machinery components such as screws fall under non-harmonised
legislation. This can create confusion for economic operators as to which parts
of a machine are harmonised and which components are non-harmonised. A market
surveillance authority in Germany (that participated in the MD ADCO at EU
level) noted that the definition of “partially completed machinery” in the
Directive has caused confusion among manufacturers in understanding whether
their product falls within scope.

An
Evaluation of the Pressure Equipment Directive (PED (97/23/EC)
undertaken in 2012 identified examples of legal uncertainties in relation to
product scope specifically in the area of safety and pressure accessories[34]
(including components and spare parts for high pressure equipment). A number of
manufacturers stated that the definition of pressure accessories in the PED is
unclear which has resulted in uncertainty with regard to product scope. When
the Directive was first introduced, industry understood the Directive to apply
to all pressure accessories.

However,
after an examination of the wording, it was found that a large proportion would
no longer be covered. This was supplemented with a guideline in supporting
guidance that apparently “removed up to 70% of pressure accessories from the
PED’s scope”. These pressure accessories are now manufactured according to
‘sound engineering practices’ in the Member State where the manufacturer is
based. Some industry representatives are consequently confused as to whether
pressure accessories are within the PED’s scope and continue to manufacture
according to PED requirements. In addition, some manufacturers consider that to
bring consistency to the industry, the wording should be amended in order to
fully cover pressure accessories.

With
regard to the ATEX Directive, product definitions within scope
were viewed as being generally clear and working well. However, the definition
of components for explosives protection in the harmonised standard was found to
differ to some extent from the definition provided in the Directive. National
competent authorities interviewed did not believe however that this difference
causes any particular difficulties.

Some
ATEX components defined in the Directive are defined as equipment by the
standard such as Ex blanking elements. However, there is arguably a good reason
to do so. A component (as defined in the Directive) has to pass a conformity
procedure together with the complete equipment again if it is to be used. But
for some "components" the rules for their use are clear so that they
can be assessed as equipment, although they do not have their own ignition
source. It was recognised however by a member of the Ex Notified Body Group on
ATEX that a general, clear definition is not easy to produce. This is rather a
technical decision relating to explosion protection to handle some components
as Ex equipment.

A
further issue for the ATEX Directive is when components are incorrectly marked
as equipment. Components have to be marked with the symbol "U" and to
specify the certificate number. Equipment with special information for safe
installation and use has to be marked with the symbol "X" following
the certificate number. If a component has special conditions then these
components will be marked with the symbol "U" only. But there are
some components available on the market, which are marked with the symbol
"X". However, this problem should be addressed by the market
surveillance authorities (ADCO).

As
far as feedback from industry is concerned, their assessment was that the definitions
provided in IM legislation work reasonably well but are not always clear. One
of the national product contact points commented that “sometimes the
definitions are unclear and time needs to be spent discussing the meaning. An
example is instruments used to measure electricity consumption because of fx
suncells that provide electricity back to the grid”. It is unclear whether
these fall within the scope of the MID.

Although
the focus of regulatory compliance is on the end product placed on the market,
economic operators involved in the upstream value chain are only affected
indirectly. One major pan-European company producing components noted that
“there is a general understanding among components and spare parts
manufacturers that they must help the client to meet regulatory requirements
relating to end-user products, even if it is not explicitly mentioned in IM
legislation that they are covered”. Among the potential problems associated
with lack of clarity on product definitions and scope are legal uncertainty
among economic operators as to how to deal with these product areas and
divergent practices between economic operators as to whether they consider
components and spare parts as falling within the scope of IM legislation. Some
may choose to ensure that they are fully compliant, whereas others may not,
giving them an unfair competitive advantage.

Approaches
will inevitably need to vary across different pieces of IM legislation in line
with the nature of the products covered. However, there is a need to set out
guiding principles for the definition and inclusion of spare parts and
components in the legislation. These should aim at:

·
having
a safe, compliant end-product (therefore the responsibility is with the final
assembler);

·
facilitating
the supply of components that will ease the production of compliant products
(therefore, component manufacturers should be subject to the legislation in
some cases);

·
ensuring
a clear “paper-trail” from producers of components to producers of
end-products, so that manufacturers and market surveillance authorities can be
sure that the end product is compliant; and

·
ensuring
that products remain compliant after spare parts have been fitted.

Research Findings (RFs)

·
(RF20)
It is not always clear whether spare parts and components are covered by the
legislation or not.

·
(RF21)
Where spare parts and components are included, there is a lack of consistency
in wording, e.g. inconsistent definitions between spare parts and components.

·
(RF22)
Guidance from the European Commission is crucial to facilitating understanding
of definitions of spare parts and components.

·
(RF23)
There is a need for the Commission to set out guiding principles for the
definition and inclusion of spare parts and components in the legislation,
which should be applied as and when individual pieces of legislation are
introduced or updated.

4. Efficiency
of the implementation regime

In
this section, an assessment of efficiency is provided focusing on the
implementation regime underpinning the regulatory framework at EU and national
levels. The extent to which procedures, mechanisms and structures are
effective, and whether they represent an efficient way of achieving the
legislation’s objectives, was a central feature of the assessment.

4.1 Overall picture

EQ5:
What is the overall picture in relation to the efficiency of IM procedures,
mechanisms and structures to support its implementation?

A
number of procedures, mechanisms and structures have been put in place to
support the implementation of Union harmonisation legislation, ranging from
conformity assessment bodies that support economic operators by carrying out
third party conformity assessment to help them achieve presumption of
conformity through to national Accreditation Bodies, which play an important
role in ensuring that conformity assessment services are efficient and
effective.

Although
the majority of stakeholders were positive with regard to the role of Union
harmonisation legislation as a mechanism for achieving an
internal market in industrial products, they also pointed to a number of areas
where there remains scope to improve the efficiency and effectiveness of the
regulatory framework and the mechanisms and structures that underpin its
implementation.

The
responses to our survey of Notified Bodies (NBs) and Accreditation Bodies point
to some of the main weaknesses in the implementation system for Union
harmonisation legislation (see table 4.1). The majority of NBs (61%) viewed
market surveillance as being the weakest point in the implementation of IM legislation
while 42% expressed the view that that are also problems with the development
of technical standards and in the operation of Notified Bodies (38%). Accreditation
Bodies were most concerned about the amount of time that it takes to develop
technical standards and the transposition process of EU Directives into
national legislation, which may lead to divergent interpretation and
application.

Table 4.1: Most
common problems indicated in relation to the implementation of IM legislation
for industrial products

|| Notified Bodies || Accreditation Bodies

Answer Options || Per cent || No. || Per cent || No.

Legal provisions/requirements to place goods on the market || 17.0% || 16 || 25% || 3

Development of technical standards || 41.5% || 39 || 33.3% || 4

Transposition of EU Directives to national legislation || 25.5% || 24 || 41.7% || 5

Conformity assessment procedures || 16.0% || 15 || 0.0% || 0

Market surveillance activities || 60.6% || 57 || 33.3% || 4

Operation of Notified Bodies || 38.3% || 36 || 16.7% || 2

Answered the question || || 94 || || 12

No answer provided || || 34 || || 8

In
the following section, we examine some of the above aspects in more detail on
the basis of input from the interviews, the surveys and additional desk
research. A more detailed assessment of regulatory and non-regulatory barriers
is provided in Section 6 (effectiveness).

Research Findings (RFs)

·
(RF24)
Market surveillance is considered the weakest part of the implementation regime
for IM legislation, followed by the development of technical standards and the
operation of Notified Bodies (Survey of Notified Bodies and Accreditation
Bodies).

4.2 Conformity assessment
of products

EQ6:
How efficient is the conformity assessment process?

Conformity
assessment procedures demonstrate that a product, before being placed on the
market, conform to the essential requirements of the applicable IM legislation.
Conformity assessment can be carried out by public authorities, manufacturers
or Notified Bodies. There has been a system of conformity assessment since
1993. The modules for the conformity assessment procedures to be used in Union
harmonisation legislation were initially set out in Council Decision 93/465/EEC
of 22 July 1993 concerning the modules for the various phases of the conformity
assessment procedures and the rules for the affixing and use of the CE
conformity marking, which are intended to be used in the technical
harmonisation directives.

The
conformity assessment modules have subsequently been updated as part of the NLF
through Regulation 768/2008. The recitals to the Regulation state that “It is
necessary to offer a choice of clear, transparent and coherent conformity
assessment procedures, restricting the possible variants. This Decision
provides for a menu of modules, enabling the legislator to choose a procedure
from the least to the most stringent, in proportion to the level of risk
involved and the level of safety required”. The conformity assessment procedure
required therefore varies depending on the product in question, and across
different IM directives and regulations.

Regulation
768/2008 states in the recitals that “The manufacturer, having detailed
knowledge of the design and production process, is best placed to carry out the
complete conformity assessment procedure. Conformity assessment should
therefore remain the obligation of the manufacturer alone”. Feedback from
economic operators during the interview programme confirmed that although
Notified Bodies play an invaluable role within the regulatory implementation
system, manufacturers are well placed to carry out their own conformity
assessment, provided that self-certification is backed up by rigorous market
surveillance in order to ensure that the system is not abused by rogue
operators.

One
of the advantages of the NLF is that it has clarified the different
responsibilities and obligations of economic operators. Although it remains the
case that the manufacturer is responsible for carrying out the appropriate
conformity assessment procedure, importers are also responsible for playing
their part by ensuring that the appropriate conformity assessment procedure has
been carried out by the manufacturer, and that the technical documentation has
been drawn up, that the product bears the required conformity marking or
markings and is accompanied by the required documents.

The
current conformity assessment system has various advantages. It provides for a
suite of different modules for EU legislators for individual IM regulations.
Once the legislation has been drawn up and the relevant modules selected, then
the overall system of conformity assessment and the different conformity
assessment procedures involved are well known by economic operators, Notified
Bodies and market surveillance authorities since they have been in operation
since 1993.

Many
IM regulations allow economic operators to adopt Module A, self-certification,
which allows manufacturers the flexibility either to carry out conformity
assessment themselves or to have an independent third party Notified Body do
so. Among the feedback received though the interview programme was that
flexibility for economic operators in determining which conformity assessment
procedure to follow was appreciated by industry and SMEs.

Among
the interview feedback was the suggestion that manufacturers that are highly
familiar with carrying out conformity assessment procedures under different
modules should
be allowed to do so using a self-declaration. “When manufactures produce
only one type of product they are less familiar with general conformity
assessment processes. However, if manufactures are used to performing
conformity assessment procedures for other product categories that fall under
more demanding modules, they should also be allowed to do using a
self-declaration because they know the processes and how to test products
sufficiently”.

It is
not clear how such a system would work in practice, given the difficulty in
checking the competence of individual economic operators. A stakeholder working
with SMEs in Belgium pointed out that “while self-certification is often
possible, a lot of economic operators do not know or do not have the means to
deal with internal production control or performing the necessary checks”.

The
survey responses indicated that there was a generally positive view with regard
to the role of different conformity assessment procedures as an implementation
mechanism to ensure products’ compliance with regulatory requirements and for
manufacturers to achieve presumption of conformity. Only 15% of Notified Bodies
indicated that there were any problems with the procedures, while none of the
Accreditation Bodies surveyed considered CA procedures to be problematic.

Among
the eight manufacturers that responded to the survey, none suggested that
conformity procedures pose an obstacle to the function of the internal market.
Similarly, there was a positive assessment of conformity assessment procedures
through the discussions across a broad range of stakeholders in the area of
industrial products and interviews with individual manufacturers. Broad
satisfaction with the current suite of conformity assessment modules was also
confirmed through the surveys of notified and Accreditation Bodies.

In
terms of the appropriateness of the different modules, most industry
stakeholders stated that they fit well into existing manufacturing processes
and allow firms the necessary flexibility. There were only limited examples
where the modules were not considered to be fit for purpose. For instance, it
was suggested that for personal protective equipment, Module H is too generic
and not appropriate.

There
were concerns however about the challenges in ensuring a uniformly high level
of quality of services across Notified Bodies throughout the EU in carrying out
conformity assessment procedures.

In
order to ensure a consistent level in the quality of the performance of
conformity assessment across the Union, it is necessary to strengthen the
requirements for notifying authorities and other bodies involved in the
assessment, notification and monitoring of Notified Bodies must fulfil and
crucially to ensure that Member States apply these requirements on a uniform
basis. One of the problems identified through the research was variations in
the quality of third party conformity assessment services being provided, which
risks undermining the internal market, for instance, where economic operators
having already had their products tested by third parties are required to do so
again in another Member State because of a perceived lack of confidence in the
Notified Bodies carrying out conformity assessment procedures in another Member
State.

Research Findings (RFs)

·
(RF25)
Roles are clear, i.e. manufacturer carries out conformity assessment and
importers check that the technical document relating to conformity assessment
is supplied and the CE marking applied.

·
(RF26)
Manufacturers appreciate the choice of modules relating to conformity
assessment (Survey of NBs and ABs; Stakeholder interviews; Case studies)

·
(RF27)
Self-certification by economic operators should not be allowed under all
Modules (except Module A); it would be too hard to check the competence of
operators. (Survey of NBs and ABs; Stakeholder interviews; Case studies)

·
(RF28)
Some operators are unsure which Modules apply to their products and whether
third party conformity assessment is required. (Survey of NBs and ABs;
Stakeholder interviews; Case studies)

·
(RF29)
There are concerns about a lack of uniformity in quality of conformity
assessments undertaken across EU28. In some instances, economic operators have
had to re-submit their products for testing because of a lack of confidence in
conformity assessments undertaken in other countries. (Survey of NBs and ABs;
Stakeholder interviews; Case studies)

·
(RF30)
There may be merit in strengthening the requirements on Member States relating
to notification of Notified Bodies and take steps to ensure consistent
fulfilment of these requirements across EU28.

4.3 Notified Bodies
4.3.1
Performance
of Notified Bodies

EQ7:
How well do Notified Bodies serve the conformity assessment process?

Notified
Bodies play an important role in the implementation of the IM legislation,
particularly for legislation where third party conformity assessment is
mandatory. According to the NANDO database[35],
there are a total of 1826 Notified Bodies (although the review of the database
indicates some duplicate records). It is also unclear whether all bodies in the
list are operating since the information in NANDO is updated on the basis of
information provided by Member States.

On
the basis of the information available, Notified Bodies’ distribution across
Europe mostly reflects the distribution of the population, although there are
some exceptions to this broad trend. For example, the UK has more than twice as
many NBs as France, despite being of a similar size. Similarly, the Netherlands
has many more NBs than Romania, despite being somewhat smaller.

Table 4.2:
Number of Notified Bodies by country

Country || Number || Country || Number

Austria || 58 || Italy || 218

Belgium || 50 || Latvia || 24

Bulgaria || 41 || Lithuania || 21

Croatia || n.d. || Luxembourg || 7

Cyprus || 3 || Malta || n.d.

Czech Republic || 38 || Netherlands || 68

Denmark || 36 || Poland || 81

Estonia || 11 || Portugal || 34

Finland || 28 || Romania || 37

France || 102 || Slovakia || 33

Germany || 336 || Slovenia || 18

Greece || 35 || Spain || 106

Hungary || 31 || Sweden || 45

Ireland || 4 || United Kingdom || 230

|| || ||

Norway || 21 || Japan || 2

Iceland || 4 || Liechtenstein || 1

Switzerland || 47 || Turkey || 29

Canada || 1 || United States || 26

Grand Total || || 1826

In
terms of the distribution of Notified Bodies by the area of legislation
covered, key Directives (Machinery, Lifts, Low voltage, EMC) are covered by
more than 100 NBs while there is a particularly high number of Notified Bodies
that cover the NAWI Directive.

Table 4.3:
Number of Notified Bodies by Directive

Directive || Number || Directive || Number

Active implantable medical devices || 20 || Medical devices || 77

ATEX || 64 || Noise emissions for outdoor || 70

Cableway installations || 23 || Non-automatic weighing systems || 255

EMC || 171 || Personal protective equipment || 114

Explosives || 13 || Pressure equipment || 36

In vitro diagnostic medical devices || 26 || Pyrotechnic articles || 13

Lifts || 161 || Recreational crafts || 34

Low voltage || 165 || R&TTE || 75

Machinery || 164 || Simple pressure vessels || 96

Marine equipment || 38 || Toys safety || 49

Measuring instruments || 145 || Transportable pressure equipment || 127

Source:
NANDO Database

On
the basis of the responses to the NBs survey, Notified Bodies are mainly
private entities (62.5% of total) or public organisations
(government-controlled) (37% of total). There also few that are non-for-profit
organisation controlled by associations or jointly controlled by government and
the private sector. The majority of NBs serve primarily firms in their country
(67% indicate that national market represent more than 50% of the their
turnover from conformity assessment services) but there are also few NBs with a
clear international character (9% indicated that firms in other EU countries
represent more than 50% of the turnover and 5.6% referred to a similar share of
turnover for firms in non-EU countries).

In
terms of size, the majority of Notified Bodies (54.5%) indicated that they
occupy no more than 10 Full time equivalent (FTE) in conformity assessment
services and only 13% occupy more than 50 FTE. However, this is not necessarily
a reflection of their size. More than 66% indicated that, besides conformity
assessment services, they also provide other services to firms.

As
regards the role of Notified Bodies, the main issue raised by a number of
stakeholders (industry as well as national authorities) is the inconsistency in
conformity assessment procedures. A number of stakeholders
interviewed stated that this was a significant problem pointing to varying
technical capacity and experiences among Notified Bodies, inconsistent
interpretation and application of guidelines and requirements. For a number of
national authorities the business orientation of many NBs means that they are
prepared to be rather flexible in order to gain or maintain clients.

The
survey of NBs also supports this view. Some 37% of Notified Bodies suggested
that the application of conformity assessment procedures is very or somewhat
inconsistent, while 25% that they are quite or very consistent. Similarly
balanced is the view of Accreditation Bodies (see Table 4.4). Detailed comments
provided by survey respondents pointed to differences in understanding,
interpreting and implementing requirements and also varying levels of strictness
in terms of adhering to the requirements. At the same time, industry
stakeholders interviewed suggested that there are also differences in the
approach adopted concerning the use of test results from other laboratories –
including those carried out by manufacturers directly.

Table 4.4: How
consistent is the application of conformity assessment procedures among
Notified Bodies across the EU?

|| Notified Bodies || Accreditation Bodies

Answer Options || Per cent || No. || Per cent || No.

Do not know || 12.8% || 15 || 10% || 2

Very inconsistent || 10.3% || 12 || 0.0% || 0

Somewhat inconsistent || 26.5% || 31 || 20.0% || 4

Neither consistent nor inconsistent || 25.6% || 30 || 40.0% || 8

Quite consistent || 23.1% || 27 || 30.0% || 6

Very consistent || 1.7% || 2 || 0.0% || 0

Answered || || 117 || || 20

No answer provided || || 11 || || 0

Source: CSES survey

According
to the survey responses the main reasons for the inconsistent application of
conformity assessment procedures appear to be the differences in the technical
capacity of Notified Bodies (58% of respondents) and the variations in the
transposition of IM legislation with different national implementation rules
adopted between Member States (59%). Among Accreditation Bodies, 79% referred
to differences between Member States, 32% to differences in the technical
capacity of NBs but also to unclear provisions in EU legislation (58%).

As
indicated by some national authorities, the weak technical capacity is a
reflection of the large number of NBs at least in some countries, where there
are a large number of Notified Bodies for a specific Directive. This leads to a
limited level of business activity in carrying out conformity assessment for
each NB and this may mean some NBs lack sufficient practical experience.
However, according
to the input from a few stakeholders in the sector, there is a consolidation
process of the conformity assessment market – not only at the EU level but
worldwide. There are few large NBs with subsidiaries inside and outside Europe
that bring along the necessary technical capacity in most areas. Smaller size
NBs are only expected to survive if they focus on niche markets, especially
private ones. This is seen as an issue of concern for some authorities, to the
extent that it means the firms in smaller markets may not have easy access to
Notified Bodies and need to incur additional costs.

A
considerable number of stakeholders argued that further cooperation amongst
Notified Bodies at European level was what is mainly needed to guarantee a
consistent interpretation of issues around implementing rules. In that respect
the role of Notified Bodies Groups – presently operating in relation to
only some Directives[36]
– is seen as particularly relevant. The possibility of making participation in
these groups mandatory was supported by a few stakeholders. Among
the NBs that responded to the CSES survey, around 65% indicated that they
consider NBGs are quite or extremely helpful in ensuring a greater level of
consistency in the application of conformity assessment procedures.

For
example, the Chairman of the NBG for the ATEX Directive reported that the role
of the NBG had extended beyond coordination aspects to include discussions on
technical problems relating to how to apply the Directive, conformity
assessment procedures and the interpretation of standards. “Through the
ExNB-Group, any technical questions can be drawn to the attention of the ATEX
standing committee which is the official partner from the EC side”. The NBG
is also able to publish clarification sheets providing guidance on the ATEX
Directive, although these do not have legal weight. There are notified
procedures for informing the standing committee about these sheets, some are
annotated by the Commission and they are subsequently made available for the
public. They provide interpretative guidance, such as how to use standards and as
such are useful for manufacturers and users. However, it
should also be noted that some NBGs suffer from low levels of participation.
Furthermore, there are certain participation costs for the NBs (membership
fees, possible travelling for meeting).

Most
NBGs
include a small secretariat working part-time to provide information on issues
of relevance, the support necessary for an electronic information exchange
system, meetings and possibly working groups to examine relevant issues and
produce "Technical sheets for coordination" that report the common
position of the Notified Bodies[37].

The
cost of their operation does vary, depending on the level of sophistication and
may range from a few thousand Euros per annum to more than a €100,000. Annual
fees for participation in the rather well developed Medical Devices Directive
NBG are in the range of €2,300-4,500, to which there are additional costs for
the most active members for travelling for meetings etc. Thus, while there are
strong arguments in favour of some form of mandatory participation of NBs in
broader coordination groups – such as the NBGs - there are also possible cost
implications that need to be taken into consideration.

Research Findings (RFs)

·
(RF31)
Most providers of conformity assessment services do not operate at scale; most
have few staff dedicated to conformity assessment. (Survey of NBs and ABs;
Stakeholder interviews; Case studies)

·
(RF32)
Very few NBs operate transnationally at scale. (Survey of NBs and ABs;
Stakeholder interviews; Case studies)

·
(RF33)
Many NBs deliver only a limited volume of conformity assessment services and
therefore risk lacking technical capacity. (Survey of NBs and ABs; Stakeholder
interviews; Case studies)

·
(RF34)
There has been a process of consolidation amongst Notified Bodies. (Survey of
NBs and ABs; Stakeholder interviews; Case studies)

·
(RF35)
NBGs can be effective in ensuring greater consistency in conformity
assessments, notably through facilitating discussions and issuing guidance on
technical questions. (Survey of NBs; Interviews of NBs)

·
(RF36)
There is a need for measures to improve the low levels of participation in some
NBGs, which is often linked to cost. These might include mandatory payment of
membership fees or EU funding for their operations.

4.3.2
Regulation
of Notified Bodies
EQ8: Are conformity assessment bodies
sufficiently regulated or are more stringent rules needed?

While
there are concerns raised on the consistency of Notified Bodies, there are
diverging views on the extent that the introduction of a more stringent
regulatory framework for NBs is appropriate. Some stakeholder consider that
stricter rules – including mandatory accreditation – are necessary and other
consider that current rules are appropriate but that Member States are often
not consistent in enforcing them. It is also considered that in many cases the
problem is the absence of expertise and facilities among some national
authorities.

Among
survey respondents, most Notified Bodies were against the adoption of more
stringent rules (53.5% consider that NBs are sufficiently regulated while 33%
were in favour of more stringent rules) while the responses of Accreditation
Bodies provided a more balanced picture (47% against in comparison to 42% in
favour). The fact that there have not been any major or recurrent problems
relating to product safety in Europe was provided by some Notified Bodies as an
indication that there is no need to impose more stringent rules on Notified
Bodies’ operations. For other respondents, the New Legislative Framework – in
particular, Decision 768/2008/EC – has had a positive impact by making conformity
assessment requirements clearer.

Figure 4.1 - Is
it necessary in your view to introduce more stringent rules concerning the
operation of Notified Bodies?

Source: CSES
survey

Research Findings (RFs)

·
(RF37)
It is uncertain that more stringent regulation of NBs will improve the quality
and reliability of conformity assessment services. A greater priority is to
increase the expertise and resources available to national authorities
responsible for the notification process.

4.3.3
Conformity
assessment by different bodies
EQ9: Is it appropriate to allow
different elements of a conformity assessment to be performed by different
bodies?

There
was limited feedback on the question of allowing different elements of
conformity to be performed by different bodies. On the one hand, there are
concerns about the capacity to control the quality of those bodies while, on
the other, use of multiple bodies provides access to the technical capacity and
experience with multiple pieces of IM legislation that may not be available within
a single body.

Among
the Notified Bodies that responded to the CSES survey, 43.9% were against and
37% in favour. Similarly, among Accreditation Bodies, 42% were against while
37% were in favour. Among national authorities, the main concerns raised in
relation to the possibility to subcontract different parts of the conformity
assessment process is that there are greater difficulties in assessing the
capacity and competence of these bodies, particularly when they are located
outside the EU. Ensuring the quality of NBs located outside the EU is already a
challenge and existing subcontracting practices make this even more
problematic, particularly in relation to products where third-party
certification is mandatory.

On
the other hand, the discussion with industry stakeholders indicates that the
flexibility provided is appreciated and possible necessary in the case of
products covered by multiple pieces of legislation, particularly covering very
different technical areas. It is unlikely that a single Notified Body –
particularly a small one – will have the necessary technical capacity. At least
one Notified Body from Lithuania seemed to challenge this view suggesting that,
while integrated products may theoretically require different Notified Bodies
to be involved in assessing compliance with different IM regulations, in
practice most NBs are used to testing products for multiple pieces of
applicable legislation. It has not been possible to assess what is the current
practice but it logical to expect that not all bodies will have the necessary
facilities and expertise, particularly the smaller ones. Allowing manufacturers
to use multiple bodies or Notified Bodies to subcontract the work to third
parties can be seen as important for maintain many NBs in the market and
ensuring high level of competition in the market.

A
Notified Body interviewed in Lithuania stressed that although integrated
products are becoming more common, which theoretically may require different
Notified Bodies to be involved in assessing compliance with different IM
regulations, in practice, NBs are used to testing products for multiple
applicable legislation.

In
conclusion, the analysis identified mixed views on this issue and no clear
consensus. However, while the use of multiple bodies may pose certain
challenges, ensuring the quality of all bodies involved in conformity
assessment – including those in third countries – remains to be the key issue.
If this is properly addressed, the use of multiple CA bodies should be seen as
providing the necessary flexibility and helping to promote competition and
supplier diversity in the NB market.

The
discussions with industry stakeholders and authorities indicate that while the
flexibility provided is appreciated, the main concern with subcontracting
different parts of the conformity assessment process is that there are greater
difficulties in assessing the competence of these bodies. On balance, the need
to ensure quality of conformity assessments would tend to outweigh the benefits
of flexibility. The broad trend towards consolidation of NBs would appear to be
creating better capacity within individual NBs to carry out all elements of the
conformity assessment process.

Research Findings (RFs)

·
(RF38)
Allowing different elements of CAP to be performed by different bodies can
enable the necessary technical capacity to be made available. However, this
creates difficulties in assessing the capacity and competence of sub-contracted
NBs. On balance, the need to ensure quality of conformity assessments would tend
to outweigh the benefits of flexibility in allowing different elements of a
conformity assessment to be performed by different bodies. (Survey of NBs and
ABs, stakeholder views)

4.3.4
Conformity
assessment by different bodies
EQ10: What are the challenges for
national competent authorities in monitoring the activities of Notified Bodies
located outside the EU? How far is it appropriate – if at all – to open up
Europe’s conformity assessment market to third countries?

An
issue raised by national competent authorities (responsible for appointing
Notified Bodies) was the difficulty in assessing the capacity of NBs in
carrying out conformity assessment services located outside the EU, including
the subsidiaries of foreign-owned NBs located in the EU. Here, the main concern
was whether such NBs are sufficiently well regulated to ensure a common level
of quality and consistency in testing necessary to ensure confidence in third
party conformity assessment within the EU. The concern was that there are
currently problems in assessing their performance.

This
concern was shared by representatives of manufacturers that were interviewed.
Many of these made particular reference to bodies providing conformity
assessment services in third countries where, as claimed, the capacity of
national authorities to control their quality is limited. It was claimed that
branches of European Notified Bodies that operate in third countries are often
less strict in assessing that the requirements and the procedures under the
different modules are followed. The Chairman of the ExNBG commented that “in
theory, there are no differences between NBs in terms of the quality of
conformity assessment services that are being provided, but in practice there
are quite differing levels of knowledge and experience”. Given these
difficulties, it does not seem appropriate to open up Europe’s conformity
assessment market to third countries until the performance of NBs in those
countries can be assured.

Research Findings (RFs)

·
(RF39)
There has been particular concern over the quality of conformity assessments
undertaken by Notified Bodies in third countries. (Survey of NBs and ABs;
Stakeholder interviews; Case studies).

·
(RF40)
It does not seem appropriate to open up Europe’s conformity assessment market
to third countries until the performance of NBs in those countries can be
assured. (Survey of NBs and ABs; Stakeholder interviews; Case studies).

4.3.5
Necessity
of third party conformity assessment
EQ11: Should third-party conformity
assessment be required for all industrial products?

A
further proposal made by some stakeholders is the introduction of mandatory
third-party certification. Currently the involvement of a Notified Body is only
mandatory in the case of certain Directives while in others it is only required
for certain categories of products defined in the Directives (see table below).

However,
in relation to the total volume of products third party certification under
Modules B-H is mandatory for only a small share of products placed in the
market overall, since this mainly applies to higher risk products, which tend
to be produced in lower quantity. One estimate provided by an interviewee
suggested that no more than 5% of the total volume of products are subject to
mandatory third party conformity assessment.

Table 4.5: IM
Directives depending on requirement for third party certification by a Notified
Body

Mandatory || Mandatory for certain products || Not mandatory

Active implantable medical devices Gas appliances Cableway installations Explosives Pyrotechnic articles Lifts Noise emissions in the environment || Ecodesign Simple pressure vessels ATEX Hot water boilers In-vitro diagnostic Measuring Instruments Medical Devices Personal protective equipment Pressure equipment R&TTE || EMC Low voltage NAWI Recreational crafts Machinery[38]

The
Supplier's Declaration of Conformity (SDoC) route for conformity assessment is
allowed under many IM directives and regulations. From the point of view of
manufacturers, this was appreciated since it gives them the necessary flexibility
as to whether to carry out the applicable conformity
assessment modules using in-house testing alone, a combination of in-house
testing and external conformity assessment or solely third party conformity
assessment. The
findings from the case study research showed that different approaches are
adopted by manufacturers. Some firms may choose to meet conformity
assessment mainly based on SDoC but choose to outsource testing with harmonised
standards for particular directives (especially the LVD since the safety of the
consumer / end-user is at stake), even where non-mandatory. This was viewed as
providing them with added reassurance and in helping to manage reputational
risk

Among
stakeholders interviewed, there was broad support for continuing to make third
party certification mandatory in the case of high-risk products. The use of
third party certification is in principle based on a risk-based approach.
However, there was an absence of a clear justification for the use of third
party certification requirements based on the level of risk alone in all cases.
Generally speaking, under the Machinery Directive (MD), the SDoC can be used
for almost all types of mechanical and electrical engineering products. Since
2010, it has also been possible to use the SDoC procedure under the MD – at
least if harmonised technical standards are applied – for the higher-risk
categories of products set out in Annex IV of the Machinery Directive.
Conversely, third party CA is required for all products covered by the Outdoor
Noise Directive. Hence, according to some stakeholders, the mandatory third
party certification regime does not appear to always be based on the level of
safety risk of products.

In
the case study research, many firms indicated that, at least for the Machinery
Directive, even where a requirement for mandatory third party conformity
assessment has been removed (as was the case for the categories of machinery in
Annex IV that formerly required mandatory 3rd party CA), this did
not necessarily lead to a sudden reduction in demand for third party conformity
assessment services. Many manufacturers have continued to use the services of
third parties “voluntarily” for reputational reasons and to reassure their
customers that their products are safe.

Among
stakeholders there are only few – mainly national authorities - that support
the view that a mandatory third party certification for all products would be
appropriate and helpful in improving the effectiveness of the internal market.
Most
industry representatives were however not in favour of extending mandatory
third party CA beyond the current situation, since the SDoC has helped to
improve safety standards for products. Among the feedback received was that any
such development would create additional costs for industry and would also
potentially lead to delays in time-to-market.

Even
among
Notified Bodies – which one would probably expect to favour such a development
– less than half (46%) of survey respondents were in favour of introducing a
mandatory third party conformity assessment for all categories of products and
41% were against. Among Accreditation Bodies, 32% were in favour. Those in
favour suggest that self-certification under Module A does not provide a
sufficient guarantee that the minimum essential requirements have been met even
though there is recognition that such a requirement will create additional
costs for industry. At the same time they suggest that self-regulation allows
non-compliant products to enter the market and leads to unfair competition.

Among
those not against any change in the current requirements, many claimed that the
introduction of mandatory third party certification should be assessed on a
product by product basis on the basis of some type of risk-assessment. For
example, in the case of the Low Voltage Directive, certain products that are
not covered could be considered as posing significant risks and third party
certification was seen as being justified.

In
terms of the costs implications of the mandatory use of third parties, the data
collected indicates that the average cost of conformity assessment – excluding
testing costs that would have to take place even in the absence of third party
certification – is in the range of €30-50k/firm/annum or €3-4k on a per product
basis. According to the data from the case studies, the fees to third parties
do not represent more than 5% of the total compliance costs incurred by firms.
Furthermore, as indicated, even when not mandatory, it is common
among firms to outsource parts of the conformity assessment to third parties
either because of limited resources – particularly among SMEs – or simply as a
result of their own risk-averse approach. Concluding, third party certification
should be expected to introduce a small but not insignificant administrative
cost for a wide range of sectors. As indicated by some industry stakeholders,
it is not the fees that represent the main concern but the possible delays and
the negative effects in terms of time-to-market.

Research Findings (RFs)

·
(RF41)
Many manufacturers voluntarily submit their products third party conformity
assessments, either because they value the credibility offered by independent
assessment or because they lack the resources or expertise to undertake it in
house. (Stakeholder interviews)

·
(RF42)
There is a strong case for high-risk products to require third party conformity
assessment. Other products should be considered on a case-by-case basis, given
that manufacturers value the opportunity to choose between SDoC or third-party
conformity assessments. (Stakeholder interviews; Survey of NBs and
Accreditation Bodies)

·
(RF43)
There is a need to clarity the principles and circumstances under which third
party conformity assessments is required or not, e.g. via guidance from the
European Commission.

4.4 Accreditation
4.4.1
Benefits
of accreditation

EQ12:
What are the benefits of accreditation for enhancing the single market for
products (and services) and how could it best be used to support single market
initiatives?

Regulation
765/2008[39]
introduced a common legal basis for accreditation from January 2010. There are
currently 33 Accreditation Bodies, covering all Members of the EEA, Switzerland
and Turkey. Thus, while not mandatory to establish an Accreditation Body, all
countries have selected to do so.

According
to the Regulation, accreditation is voluntary. However, certain countries (e.g.
Lithuania, Slovenia, and Luxemburg) accreditation is mandatory while in others
(e.g. Germany) accreditation is only necessary in relation to certain
categories of products.

The
feedback received on the role of accreditation is rather mixed. In general,
industry and national authorities were positive about its role in ensuring
minimum levels of quality in the provision of conformity
assessment services by Notified Bodies.

This
was also the view of most Accreditation Bodies that responded to
the survey (85% said that accreditation has been quite or very helpful towards
the operation of the Internal Market). It is argued that accreditation has
helped in strengthening confidence in conformity assessment processes and is a
useful tool for ensuring greater consistency and improved technical expertise
among Notified Bodies across Europe.

The
discussions with interviewees found that Regulation 765/2008, which requires
each Member States to set up a single national Accreditation Body, has been
positive in making progress towards a more uniform approach to accreditation
across EU28. In some countries, such as Germany and Italy, this has led to
organisational restructuring at national level. This restructuring was viewed
positively since national Accreditation Bodies are now formally under the
responsibility of Member States authorities, whereas previously there were
competing Accreditation Bodies in the private sector, for instance, in Germany,
which undermined the objective of promoting quality and consistency in
accreditation across the EU.

The
national Accreditation Body in Germany commented that there is a public
interest argument for having a robust accreditation system in place underpinned
by appropriate procedures and assessment criteria for carrying out
accreditation. “Accreditation is an appropriate tool to demonstrate that
conformity assessment bodies are competent to carry out relevant tasks for
which they are notified so that businesses and consumers have full confidence
in the work of NBs and conformity assessment bodies”. Their British and
French counterparts expressed similar views, but they also emphasised that
compulsory accreditation would guarantee high levels of professionalism and
expertise among Notified Bodies across Europe.

However,
there
were also concerns raised by industry and national authorities regarding the
consistency of accreditation across the Union, which was viewed as varying
greatly. A number of conformity assessment bodies pointed out that there is a
need to build on the progress already made through the NLF in strengthening
common approaches to accreditation and developing practical tools, guidance
documents and criteria for national Accreditation Bodies carrying out the
accreditation of Notified Bodies.

The
European co-operation for Accreditation (EA) argued that accreditation has a
role to play in raising the quality of conformity of services but agreed that
there is currently a risk that different national Accreditation Bodies adopt
different approaches. In order to address this problem, it is contributing to a
process of putting together the main requirements for accreditation and the
preferred standards to be used. The basis on which NBs should be accredited
should be determined on a more consistent basis at EU level. “The process of
strengthening accreditation will involve Member States’ national Accreditation
Bodies, the European Commission and NBs”. There was general support among
Accreditation Bodies for EA to take the lead in this area, given that it has a
remit to coordinate work on accreditation at European level. It was also
pointed out that progress made by the ISO in developing international standards
on accreditation should also be taken into account[40].The
Notified Bodies that responded to the survey were generally positive about the
role that accreditation has played in improving the effectiveness of the
Internal Market: 45% were highly positive assessment (“very” or “quite”),
whilst 46% were fairly positive (“moderately” or “somewhat”). Accreditation was
seen as having made a positive contribution to enhancing the quality and
consistency of conformity assessment services. It was also pointed out that a
number of Notified Bodies have ceased their operations since the introduction
of accreditation in a number of Member States, an indication of their low
quality and how accreditation can serve as a mechanism for helping to raise
standards. However, more Notified Bodies focused on the differences of
approaches followed among different Accreditation Bodies both in relation to
the processes for carrying out accreditation and the assessment criteria that
are applied. Furthermore, many Notified Bodies suggested varying levels of
expertise and technical capacity of Accreditation Bodies to carry out their
accreditation role. Additional problems of the accreditation mentioned
included:

·
Lengthy
accreditation process: in some countries it can sometimes take close to two
years.

·
Doubts
concerning the appropriateness of harmonised standards (EN17020, EN17021,
EN17025) used for accreditation that have not been designed for the type of
tasks that Notified Bodies perform.

Table 4.6: Has
the accreditation of Notified Bodies contributed to the effectiveness of the
internal market for industrial products?

|| Notified Bodies || Accreditation Bodies

Answer Options || % || No. || % || No.

Not at all || 17.4% || 16 || 0.0% || 0

Somewhat || 21.8% || 20 || 5.0% || 1

Moderately || 23.9% || 22 || 0.0% || 0

Quite || 23.9% || 22 || 40.0% || 8

Very much || 20.8% || 12 || 45.0% || 9

Total || || 92 || || 18

skipped question / don’t know || || 36 || || 2

Source: CSES survey

Research Findings (RFs)

·
(RF44)
Stakeholders confirm the benefits of accreditation: i) strengthening confidence
in conformity assessment and ensuring consistency of conformity assessments;
ii) improving technical expertise and professionalism among NBs; iii) promoting
consolidation of NBs; iv) driving out poor quality NBs; (Stakeholder
interviews; Survey of NBs; Your Voice consultation)

·
(RF45)
Concerns relate to the consistency of accreditation across EU28. There is a
need for the basis for accreditation to be specified more explicitly at EU
level, in order to limit national variations and inconsistencies. (Stakeholder
views; Survey of NBs; Your Voice consultation)

4.4.2
Compulsory
accreditation

EQ13:
Should accreditation be made compulsory for the purposes of demonstrating the
technical capacity of conformity assessment bodies in the regulated sector?

Despite
mixed views on the accreditation procedure and its effectiveness, there appears
to be significant support towards mandatory accreditation across the EU. Among
Accreditation Bodies almost all were in favour while, even among Notified
Bodies, more than 68% of survey respondents agreed that the accreditation of
NBs should become compulsory. Accreditation is seen as a positive step for
ensuring minimum levels of quality and consistency by most
Member State authorities. It is considered necessary in order to strengthen the
quality and technical capacity of conformity assessment services of NBs.
Furthermore, it can lead to a consolidation process with larger NBs better
placed to respond to conformity assessment requirements for products that are
becoming increasingly integrated. Rather high support was indicated according
to the Your Voice consultation (51/96), primarily among industry
representatives (43/73) and less so among public authorities (4/15).

There
is still scepticism among a range of stakeholders referring to possible adverse
impacts from compulsory accreditation, particularly in smaller Member States in
Central and Eastern Europe. There are fears that there may be reduced number of
NBs and less competition if a consolidation process takes place. Mandatory
accreditation will also lead to costs for Notified Bodies but also delays. The
accreditation processes can be expensive and time consuming and a few examples
provided indicate that in some cases the whole process may exceed 2 years. Such
delays in the context of mandatory accreditation could create problems in the
operation of Notified Bodies while the additional costs incurred may lead to
the closure of smaller NBs and/or pass through to firms. It should be noted
though that no such impacts were reported from national authorities where
accreditation has been mandatory even before Regulation 765/2008.

An
alternative approach proposed by one Accreditation Body was the possibility to
make accreditation mandatory only for Notified Bodies wishing to be notified
for certain Directives or product areas. This is based on the example of
Germany where
it is mandatory for NBs to be accredited by the national Accreditation Body
(DAKKS) in order to be notified for certain product areas such as construction.
A
risk based approach focusing on the high risk product could be used to assess
for which products areas and Directive accreditation should be mandatory.

Another
alternative approach was proposed by the UK’s National Measurement Office on
the basis of the ‘peer-approval’ scheme in place in the UK, whereby
organisations such as local authorities can be approved as NBs without
accreditation, but using a similar process. The costs of peer assessments being
lower than those of accreditation, this approach allows organisations that have
been performing product verifications for a relatively long time to stay in business
without lessening the standards.

Whilst
the accreditation process requires improvement, there would be appear to be a
difference between perception and experience; the experience in EU15 suggests
that compulsory accreditation is not particularly problematic, whereas in EU12
the fears expressed might not necessarily be based on experience. There is
clearly a learning process that the relevant bodies in Member States must
follow. On that basis, it would seem appropriate to make accreditation
compulsory, over a reasonable timescale with appropriate guidance and
discussion at EU level, e.g. to limit the duration and cost of the
accreditation process, encourage co-operation and mutual learning between
Accreditation Bodies. Whilst alternatives to accreditation do exist, these do
not appear to be simpler than wholesale compulsory accreditation and would not
address the underlying problems.

Research Findings (RFs)

·
(RF46)
The accreditation process can be costly and lengthy, e.g. taking up to two
years. ABs may lack expertise and may vary too much in their approach to
accreditation. There are also doubts concerning the appropriateness of
harmonised standards used for accreditation. However, these difficulties can
often be overcome, provided that ABs learn over time. (Stakeholder interviews)

·
(RF47)
It
would seem appropriate to make accreditation compulsory, over a reasonable
timescale with appropriate guidance and discussion at EU level.
(Stakeholder interviews; Survey of NBs and ABs; Your Voice consultation)

4.5 Declaration of
Conformity

EQ14:
Is the current regime for the Declaration of Conformity satisfactory?

Declarations of conformity (DoCs) are a key element of the
New Approach Directives. They constitute a statement by the manufacturer that
the requirements of all legislation applicable to a product have been
fulfilled.
The intention of the NLF is that a single DoC
shall be drawn up containing all information required for the identification of
EU legislation to which the declaration relates and giving the publication
references of the acts concerned. Once the product has been placed on the
market, manufacturers and importers (or their authorised representatives)
should keep the DoC for a period of time specified by the relative legislation,
typically reflecting the lifecycle of the product and the level of risk.

The stakeholder feedback found that the current process of
preparing a DoC is broadly appropriate and effective, although there are
inconsistencies between IM directives as to the precise administrative requirements.
Of those interviewees offering a response, more than half specifically
expressed their satisfaction with DoCs and saw no need for any fundamental
revision. Such interviewees covered a broad spread of sectors including
domestic appliances, electronic equipment, cableways, lifts, gas appliances,
pressure equipment and protective clothing. The general tendency of
interviewees was to view DoCs as a useful rather than a crucial part of the
conformity and compliance process. None of the interviews suggested that the
current regime was unsatisfactory.

The most commonly-reported difficulty related to products
imported from third countries for which the DoCs were incorrect, fake or
non-existent or for which there were doubts on the conformity assessment procedure
used. As a result, it was reported that some importers may have unwittingly
placed non-compliant products on the market. Much of the problem appears to lie
in the relationship between importers and third country manufacturers. Many
importers face the practical difficulty of not receiving the DoC, as when the
product is supplied to them, particularly when it is not mandatory that the DoC
accompanies the products.

Others have faced the problem of a 3rd country supplier
completing a DoC but then supplying a non-compliant product; one enterprise
mentioned that the only solution for them has been to incorporate any liability
into the contract with that supplier. Some stakeholders also reported a lack of
clarity over responsibility for the compliance of products imported from third
countries. For example, under the New Approach, it is required
that that the name of the authorised representative of any third country
manufacturer be recorded in the documentation. However, it may be the case that
the importer is not specifically contracted to be the representative of the
manufacturer, particularly where there are several importers of the same
product. Where importers change the
trademark and type of the products, they are considered to be the manufacturers
and therefore have to establish the DoC; this complicates market surveillance,
because there is no way to trace the different trademarks and types
corresponding to a same product.

A minority of interviewees reported difficulties with DoCs
that tended to reflect a lack of awareness or understanding on the part of
economic operators. For example, some interviewees highlighted the risk that
manufacturers issue a DoC without understanding the requirements, the standards
that need to be covered, and the need to update the DoC as and when they
produce revised versions of any particular product.

One interviewee suggested that this was particularly true of
components suppliers, as they may have less awareness of the legislation than
the manufacturer of a final product (in this case, fuel dispensers). Whilst the
legislation does provide clarity over where responsibilities lie (i.e. with the
body that completes the DoC), there are potentially difficulties in long supply
chains, for example, where type-approvals are issued by a different
manufacturer to the one that does the DoC. It
was also reported that there had been inconsistent interpretations of when DoC
should be made available for installations, i.e. at the time of installation or
upon request from the market surveillance authority. Another difficulty
mentioned (by a small number of stakeholders) was the need for greater clarity
in the documentation so that the information provides a better identification
of the product and its components and the conformity assessment undertaken.

Decision 768/2008/EC provides a model structure for DoCs and
stakeholders welcomed efforts through the Alignment Package to standardise the
template. They also stressed that flexibility should be retained as to whether
to choose to produce a single DoC for all applicable IM legislation or a
separate DoC for each piece of legislation. However, Decision
768/2008/EC also proposed that a “single declaration shall
be drawn up in respect of all Community acts applicable to the
product containing all information required for the identification
of Community harmonisation legislation to which the
declaration relates”.

This was confirmed through the interview programme with
industry associations consulted at EU and Member State level in favour of
retaining flexibility. There was a divergence of opinion as to whether it is
preferable to have a single DoC covering all Directives that relate to a
product or a different DoC for each Directive (although few interviewees
offered any comment on this question). One in two respondents (24/47) to the
Your Voice consultation and a lift manufacturer interviewed as part of the case
study stated a clear preference for a single DoC covering all Directives. In
contrast, only three respondents to the Your
Voice consultation were in favour of a customised DoC for each piece of
legislation.

Nevertheless
a number of EU and national industry
associations were against this suggestion and advocated that each
economic operator should be free to choose whether to produce a single or multiple
DoCs depending on what best fits with their administrative procedures. What is
still generally accepted is that there should be a single template for all DoCs
and this is also broadly supported by the responses to the Your Voice
Consultation (42/47). A national competent authority suggested that some
companies may find it easier to produce several DoCs depending on their
procedures for quality assessment.

Another
issue that has caused debate is the proposal in the revised LVD Directive which
is part of the Alignment Package to require a colour picture of the product
for the DoC. There is already a requirement for a colour DoC for the Toys
Directive. However, this was as viewed by industry associations and individual
manufacturers interviewed as adding unnecessary administrative burdens. A
colour picture would not show whether the product is safe. A global
manufacturer of IT products pointed out that manuals for electrical and ICT
products are normally in B&W and this would therefore impose additional costs
with no added value.

Some
stakeholders also suggested that the information requirements of the DoC were
too onerous, given their purpose. For example, one interviewee mentioned that
recent legislation had introduced unnecessary new information requirements, for
example, identification numbers on products and a physical address instead of
just a website. One market surveillance authority also suggested that it was
unnecessary for the DoC to follow the product, since consumers tended to ignore
it and market surveillance authority could access the same information from
other sources.

With
regard to the cumulative regulatory effects linked to administrative
requirements, there are high levels of administrative burdens associated
with the frequency of updating DoCs. This can be a problem for all economic
operators, but is an especially significant burden for large firms that
manufacture, import and/ or distribute large numbers of products. Although not
a legal requirement to list the harmonised technical standards that have been
adopted in conjunction with the list of applicable IM regulations on a DoC,
many economic operators choose to do so. A large multinational in the ICT
sector stated that they have more than 1,000 products and update DoCs once
every 3 months for regulatory purposes. The company pointed out that across
their product range, there are frequent legislative updates of IM regulations
and updates to standards.

Based on the evidence, there does not appear to be a need for
any fundamental revisions of the DoCs and none of the stakeholders interviewed
suggested the process of completing the DoC itself was particularly onerous.
Issues arising tend to relate to non-compliance, whether wilful or inadvertent
(e.g. due to a lack of understanding). In many cases, such non-compliance
results from a broader failure to comply with the legislation rather than
specifically to the DoCs. There might be some scope to simplify requirements
relating to the information required to be presented in DoCs and also to the provision
of DoCs with products, provided that they are available as necessary (e.g.
provided to market surveillance authorities).

To help economic operators, it would be appropriate to allow
them the choice as to whether to produce a single DoC covering all relevant
Directives or a separate DoC for each Directive. There may also be some
practical steps that can be taken, such as improving the provision of
information to manufacturers in order to raise their awareness of the
requirements of Directives, or findings ways to facilitate the cross-checking
that certificates have been officially delivered, e.g. via databases.

Research Findings (RFs)

·
(RF48)
Despite some minor inconsistencies between different pieces of legislation and
irregularities in DoCs for products imported from third countries, the current
DoC regime is satisfactory and the model structure for DoCs provided by
Decision 768/2008/EC is useful. (Stakeholder consultations; Your Voice
Consultation)

·
(RF49)
The balance of views is in favour of a single DoC covering all pieces of
applicable legislation and a minority prefer multiple DoCs or the flexibility
for operators to choose. (Stakeholder interviews; Your Voice Consultation)

·
(RF50)
There does not appear to be any particular benefit in requiring economic
operators to supply a colour picture of the product (Stakeholder interviews)

·
(RF51)
Given the text of Decision 768/2008 and the fact that DoCs are relatively easy
to produce, it is recommended that a single DoC be required for each product,
covering all applicable pieces of legislation. This should be applied in all
updates to the legislation.

4.6 CE marking

EQ15:
Is the current regime of CE marking satisfactory? Are there ways to improve the
interaction between CE marking and other compulsory and voluntary marking
schemes?

The
CE marking system has been an integral part of Union harmonisation legislation
since 1993. The general principles governing CE marking were updated as part of
NLF in Regulation (EC) No 765/2008[41]
while Decision 768/2008/EC sets out the rules on the affixing of CE marking to
products to be integrated into Community harmonisation legislation. As such, CE
marking is a manufacturer's declaration that the product meets the requirements
of all applicable IM legislation. CE marking should be the only marking of
conformity indicating that a product is in conformity with Community
harmonisation legislation. However, for higher risk products, there are also
sometimes additional labelling requirements in addition to the CE marking (see
below).

The
majority of stakeholders indicate that overall the CE marking is appropriate
and operates rather effectively even if there are still issues to be resolved.
The analysis of the responses to the Your Voice consultation also found that the
majority of survey respondents did not perceive there to be any problems in
relation to the use of CE marking (33 out of 47) and did not support a change
to the overall approach.

There
was however, a divergence of opinion on the question of providing additional
information together with the CE mark. More than half of respondents indicate
that this is not necessary, whilst around one third suggested that additional
information should be presented, such as the applicable legislation or the
number of the Notified Body in the case of conformity based on a third party
conformity assessment module. However, as indicated by one stakeholder in
relation to this last point, the inclusion of the Notified Body number is not
appropriate since it can undermine the equivalence of self-certification under
Module A where no Notified Body is involved with other conformity assessment
procedures.

Among
consumers, awareness of CE marking is relatively high, with 66% of respondents
to a recent Eurobarometer survey reporting that they were familiar with the
logo. This was higher than for four other logos, namely those signifying
products detrimental to health if not used properly (64%), recyclable paper
products (55%), ecological products (17%) and organically farmed products
(16%). Familiarity was generally higher in EU15 than EU12, with respondents in
Bulgaria (38%) and Romania (32%) demonstrating least awareness, perhaps
reflecting their status as the newest Member States. Familiarity was highest in
France and Luxembourg (both 84%), followed by Sweden (79%), as well as in one
non-Member State, namely Iceland (81%). More men (70%) were familiar than women
(62%). Those aged over 55 years (55%) and those suffering various forms of
socio-economic disadvantage were less familiar than the population as a whole.
Overall, these findings suggest that, given time, consumers can be made aware
of the CE marking and that greater efforts should be made to promote awareness
in those countries scoring lowly in the Eurobarometer survey.

Low
awareness amongst some groups of consumers was not seen by the stakeholders to
be a particular problem, except where consumers wrongly believed that the CE
marking was a guarantee of product safety or quality. One hypothetical example
offered was that of an oven installed in a new building that might receive the
CE marking in line with the Construction legislation; in this instance, the CE
marking might lead a user to assume wrongly that the oven has been tested for
safety. However, this was not a concern that was broadly shared among
stakeholders. Given that it is mainly a declaration of conformity with
legislation, many stakeholders consider that it is not particularly important
that consumers have a proper understanding of the meaning of the CE marking.

Perhaps
more importantly, some stakeholders reported that low awareness amongst
manufacturers was a common cause of inappropriate use of CE marking, with some
applying the CE mark without knowing what it means. This issue might best be
addressed through a combination of enhanced market surveillance to guarantee
proper use of the CE marking and maintain confidence as to its role, as well as
efforts to promote awareness of the requirements and significance of the CE
marking amongst manufacturers, particularly those in third countries.
Encouragingly, there was some recognition that the Commission’s recent efforts
to promote awareness had proved useful. The Commission has, in fact, corrected
one misconception regarding the supposed “China Export” mark in response to a
question posed by a Member of the European Parliament.[42] This
mark was said to take the form of a symbol identical to the CE mark, except
that the letters were closer together. In its response, the Commission
confirmed that no such mark existed and that the said mark constituted the CE
marking as foreseen in the European legislation without respecting the
dimensions and proportions prescribed therein. The Commission also highlighted
the importance of market surveillance as well as its constant discussion with
Chinese authorities to ensure that Chinese exporters respect Community
legislation.[43]

Whilst
there is broad satisfaction with the current CE marking regime, a number of
issues were raised by stakeholders in relation to specific products or
directives. First among these were differences in CE marking
requirements between IM Directives, with concerns raised about the need to
provide a greater level of information on some directives than on others. For
example, directives such as the MD, LVD, R&TTE and the EMC[44]
require the CE marking or the address information to be provided. The Personal
Protective Equipment Directive was also mentioned as requiring additional,
perhaps unnecessary information.

Inconsistencies
in requirements between IM Directives were also mentioned as caused
difficulties in
specialist areas with specific regulatory arrangements that, until
recently, did not require CE marking. For instance, the Medical
Devices Directive 93/42/EEC covered the placing on the market and putting into
service of Medical Devices but did not require CE marking, since a different
regulatory approach applied. However, under the new proposed Medical Devices
Regulation (October 2012), CE marking will be required, which can cause
particular difficulties in relation to integrated products that include smart
functionality.

Table 4.7:
Example of inconsistencies between IM Directives in relation to CE marking

Medical devices that incorporate a radio part fall under the Medical Devices Directive (MDD; 93/42/EEC) and the R&TTE Directive (Directive 1999/5/EC). Manufacturers must then determine which Directive should apply for instance in respect of CE marking. Under the R&TTE Directive, products must carry a CE marking whereas under the Medical Devices Directive there is a special regulatory regime and products cannot be CE marked. This causes uncertainty for manufacturers in specialist product areas. Note - both Directives are currently subject to revision. In the case of Medical Devices, the European Medical Device Regulations were proposed by the Commission in October 2012, and in the same month, the revision of the R&TTE Directive through the proposed new “Radio Equipment Directive” to align it with the NLF. Nevertheless, new legislation will not come into effect until 2015 so these problems remain.

There
was also a call for clarity regarding CE marking on products/assemblies with
multiple parts. For example in the case of petrol pumps, it was reported that
Member States follow different approaches; some require the placing of a single
CE marking on the pump, whilst others require a CE marking on each nozzle of
the same pump. In the first case, once a nozzle is defect the whole pump is out
of use. In the second, the remaining nozzles can still be used.

A few
stakeholders expressed a view on the interaction of CE with other voluntary
markings. Those stakeholders that did offer a view did not see any particular
benefit from aligning the CE marking with voluntary markings, given that
consumers are generally unaware of the significance of the CE marking. Since
the CE marking only relates to regulatory compliance with IM regulations, there
does not appear to be any merit in combining it with quality marks, such as the
voluntary GS marking (Geprüfte Sicherheit or "Tested Safety") in
Germany. A number of industry representatives pointed out that although the
German GS is not compulsory, it is often requested by retailers and wholesalers
can be considered as a non-regulatory barrier to placing products in the German
market. This was considered to be a particular problem in the case of gardening
equipment (see case study in Appendix C). However, this is more a matter of
market pressure and wide recognition of the mark among GS consumers rather than
one of confusion with the CE marking.

There
is perhaps a need for the Commission to state more explicitly the purpose for
which CE marking is intended. If CE marking is specifically intended to inform
consumers, there is a need for a marketing campaign to raise awareness, and for
additional information requirements, such as a clear explanation in product
manuals of the meaning and implications of the CE marking for the product in
question. Many
stakeholders interviewed however did consider it to be particularly important
that consumers fully understand the meaning of CE marking. If
the main target audience of CE marking is market surveillance authorities, it
might be possible to reduce information requirements, if such information is
already provided elsewhere, e.g. in the DoC. For example, it might be possible
to remove
the obligation of putting a CE marking on the product manual when this is
already on the product or to offer the possibility to use electronic CE marking
on products such as mobile phones.

The
Commission should perhaps also clarify the significance of CE marking for
economic operators and consider the information that such operators might
require from suppliers. There is also the continued need to improve awareness
among manufacturers, importers and distributors regarding the significance of
CE marking and the obligations that it imposes on them.

A
number of further issues were identified in relation to how effectively CE
marking works. Some stakeholders interviewed stated that there was evidence of
inappropriate placement of CE marking on non-harmonised products (ladders were
mentioned as an example). Furthermore, more thorough market surveillance is
necessary to guarantee proper use of, and to maintain confidence in the CE
marking system.

A few
stakeholders suggested that while CE marking requirements are well understood
by economic operators, there can be additional product labelling requirements
in addition to CE marking. For instance, in the case of the Personal Protective
Equipment Directive and for products falling under category 3 (higher-risk protective
equipment and clothing) in addition to the CE marking, a digital code must be
included on the product from the NB that carried out the conformity assessment
process. In the case of the Measuring instruments along with the CE marking,
the metrological marking (M), the last two digits of the year in which the
conformity marking was affixed and the identification number of the Notified
Body should also be included. While there are some administrative costs, firms
and industry stakeholders interviewed did not suggest that these represent a
sizeable cost.

While
the majority view among stakeholders was against any changes to the CE marking
regime, there were also a few suggestions for improvements by some interviewees
and respondents to the Your Voice consultation. Close to two thirds (59/96) of
respondents to the Your Voice consultation indicated that it should not be
necessary to provide any additional information alongside the CE mark, but
around one third (34/96) proposed that some reference to the applicable
legislation needs to be presented (either direct reference of with an
additional marking) and 18 proposed that the Notified Body is also included in
the case of conformity based on a third party (as is already the case for the
MID). However, as pointed out by several stakeholders, the inclusion of the
Notified Body number can undermine the equivalence of self-certification under
Module A, where no third party certification is required.

Another
suggestion made by a few firms in the ICT/electronics sector was the
possibility of introducing of electronic CE marking for products with displays
(e.g. mobile phones) while another was the possibility of removing the
obligation of putting a CE marking on the manual of a product when this is
already on the product.

Overall,
given the evidence presented, it would seem that there is no need to change the
overall approach to CE marking. There is however a continuing need to ensure
through the NLF that there is greater consistency in CE marking requirements
between IM directives and regulations, given that many products must comply
with multiple applicable legislation. There may also be issues around
the need to state the specific Directive to which a CE marking corresponds when
placed on a product. With the growth in e-commerce, there may also be issues
around the control of imported goods, which the NLF struggles to address.

Research Findings (RFs)

·
(RF52)
CE marking is appropriate and effective and the logo enjoys a high level of
awareness amongst consumers (Stakeholder interviews; Your Voice consultation;
Eurobarometer survey)

·
(RF53)
There is no particular benefit to be gained from aligning the CE marking with
voluntary markings (Stakeholder interviews; Eurobarometer survey)

·
(RF54)
There are some minor difficulties relating to inappropriate markings, although
these can be addressed through awareness-raising activities and continued
market surveillance. (Stakeholder interviews)

·
(RF55)
There is no need for any fundamental change in CE marking, although there is a need
to bring greater consistency and avoid having different requirements for
different pieces of legislation and address the issue of products with multiple
parts. This can be addressed through the NLF, as and when legislation is
updated.

4.7 Role of support and
coordination mechanisms

EQ16:
What contribution is made by support and co-ordination mechanisms such as
Administrative Co-operation Working Groups and Product Contact Points?

Administrative
Co-operation Working Groups (ADCO) are in operation for a number of Directives[45].
Their role is to improve coordination and consistency in terms of the
interpretation of requirements and market surveillance. ADCO groups are in
operation for almost all Directives.

The
interviews indicate that ADCO groups are particularly valued by national
stakeholders for their potential to bring together the Commission, national
authorities and industry representatives to discuss and often address issues
that arise. ADCOs have also a strong role in developing guidance that assist authorities
and economic operators. For example, in relation to the Pyrotechnics Directive
the relevant ADCO group has published a list of what is banned in different
countries informing potential importers. It is a rather common view among
national authorities that each Directive and Regulation should have an ADCO
group.

Stakeholders
expressed concerns about the low level of participation or the limited
expertise of representatives of some Member States that participate in the
meetings. The absence of some Member States tended to weaken the potential to
address problems caused by non-compliant manufacturers in those countries. It
is suggested by some ADCO coordinators that there is need to strike a different
balance in the participation of generalists, policy experts and technical
experts participating in ADCO groups. Furthermore, most national authorities
call for a greater coordination between ADCOs and working group meetings.

A
number of national authorities called for increased financial support from the
Commission for attending of meetings as well as technical assistance to fund
ADCO activities, such as research and guidance. They also call for higher
visibility of ADCO activities and meeting through the commission websites. 
Interviewees agreed strongly on the need for provision of information at
national level because of the inevitable variations caused by transposition of
Directives into national law, and also because national bodies had the
networks, contacts and language skills to provide effective information
services to economic operators in their own country. One national body also 
highlighted the importance of providing advice on VAT and other tax issues
involved in trading across borders, alongside the information and advice
relating to the product legislation.

Interviewees
expressed divergent views regarding the value of national Products Contact
Points (PCPs). Stakeholders in some countries suggested that PCPs were
effective and providing a useful service. For example, one PCP had started to
organise coordination meetings for Notified Bodies, whilst two others reported
good relations with PCPs in other countries. However, others suggested that the
concept of PCPs was poorly understood and that PCPs had a very low profile.
Since many economic operators request and receive information directly from
national authorities, it may be necessary to review the role of PCPs in order
to determine their potential to add value to the services provided by national
authorities and industry associations.

Research Findings (RFs)

·
(RF56)
ADCO are valued by national stakeholders for their role in facilitating
discussion and action on issues of common concern and in developing guidance
for national authorities and economic operators, though their potential is
sometimes limited by low levels of participation and/or Member State
representatives lacking the necessary expertise. (Stakeholder interviews)

·
(RF57)
The effectiveness of ADCO could be enhanced by greater visibility (e.g. on the
Europa website), EU funding for participation and by EU technical assistance
funding, e.g. for research, publication of guidance, etc. (Stakeholder
interviews)

·
(RF58)
Product Contact Points are providing a useful service in some countries, though
in others  they have a low profile and their role is poorly understood.
(Stakeholder interviews)

·
(RF59)
There is a need to clarify the role of PCPs and introduce practical actions to
strengthen their effectiveness, e.g. facilitate a network at EU level.

4.8 Market surveillance
4.8.1
Challenges
facing market surveillance authorities

EQ17:
What are the main challenges facing market surveillance authorities?

Market
surveillance is a Member State responsibility, although the Commission has an
important overall monitoring and coordination role. Effective market surveillance
and regulatory enforcement is a crucial mechanism for ensuring the efficient
and effective implementation of IM legislation for industrial products. It is
vital for ensuring product safety and health and for promoting fair competition
and a level playing field among economic operators. In order to strengthen the
current approach to market surveillance, the EU adopted Regulation 765/2008 setting
out common market surveillance rules and the Commission has proposed a
Regulation on Market
Surveillance as part of the wider Product Safety and Market Surveillance
Package (PSMSP), as described above in section 1.3.5.

As
noted earlier, market surveillance is inherently challenging and is considered
by many stakeholders (e.g.  60.6% of NBs responding to our survey) to be the
most problematic part of the IM regime for industrial products. Indeed, the
impact assessment accompanying the PSMSP highlights a number of challenges,
which have also been confirmed by the research undertaken for this evaluation.

A
first challenge is the relatively high levels of non-compliant products
entering the market, although instances of non-compliance often relate to minor
administrative irregularities rather than to serious breaches of the essential
requirements. There is evidently a balance to be struck between preventing
non-compliant products from entering the market and avoiding the imposition of
unreasonable requirements on responsible economic operators. It is also
reported that there are relatively few withdrawals of non-compliant products
from the market, although the RAPEX information systems has helped to raise
awareness of high-risk products (see section 4.82 below). However, the 2006
public consultation on the New Legislative Framework (NLF) found that 87% of
operators considered there to be unfair competition due to the presence of
non-compliant products on the internal market[46].
Evidence from a number of evaluations and impact assessments suggests that
non-compliant products account for a sizeable share of the market in certain
sectors. This is confirmed in data provided by market surveillance authorities[47].

For
example, the impact assessment[48]
on the proposed “Radio Equipment Directive” to replace the R&TTE Directive
cited evidence from European Market Surveillance Authorities (MSAs) that
presently between as little as an estimated 28% and 56% of products were fully
compliant with the essential requirements. Administrative compliance
has been estimated at an even lower level by MSAs at about 20%. In
the case of the Ecodesign Directive, non-compliance was estimated to be 10- 20%[49]. In other areas (e.g. Gas Appliances,
Personal protective equipment) the existing studies indicate non-compliance
levels of no more than 5-10%[50]
and there are also cases – such as explosives – where, according to the
relevant evaluation study[51],
there are very few cases of non-compliance.

However,
this is also a possible illustration of authorities giving a higher priority to
products more directly linked to public safety issues. Estimates from market surveillance
authorities and enterprises collected in 2006 also ranged from 1% for
recreational craft to 30% for the Electrotechnical sector and even up to 50%
for luminaires. Similar findings were obtained in three market surveillance
campaigns carried out by the Administrative Cooperation group (ADCO) for the
implementation of the Electro-magnetic Compatibility Directive focusing on
Energy Saving Lamps, Power Tools and Consumer Entertainment Electronic
Products. The level of technical non-compliance was 23% for the Energy Saving
Lamps, 20% for the Power Tools and 50% for the Consumer Entertainment
Electronic Products while according to the ADCO machinery NOMAD study around
80% of products do not comply with noise requirements.

A
second challenge, related to the first, is the difficulty in ensuring the
traceability of products, which was stressed by a number of interviewees,
so that market surveillance authorities can obtain technical documentation not
only at the point when products are placed on the market but for up to 10 years
following their placement on the market. The limited traceability of products
and of manufacturers strongly hinders market surveillance authorities in
carrying out their work and improvements in this area would help to strengthen
the efficiency and effectiveness of MSAs. However, it should be noted that
economic operators were not generally favourable towards traceability
requirements, and in particular, were against the introduction of requirements
to register in databases. A major EU industry association stated that “the
manufacturer is already legally responsible for ensuring regulatory compliance
and for producing the DoC to achieve presumption of conformity. Traceability
has become a religion and imposes unnecessary administrative burdens on
economic operators, such as compulsory registration schemes and the requirement
to put the address of the responsible economic operator on the label.”

A
market surveillance authority in the UK commented that concerns about
the administrative burdens of registration schemes extend beyond industry to
some public authorities. “The proposed new registration scheme under the new
R&TTE is intended to improve the traceability of products. However, it
risks causing a bigger divide between good and bad providers; by creating more
hoops to jump through, it will discourage some economic operators from
complying and could also give greater competitive advantage to non-compliant
providers”.

A
Product Contact Point in Sweden pointed out that, although there has
been a lot of discussion about traceability in the context of the Alignment
Package, its value and importance depends on the type of product concerned, the
directive or regulation in question and whether it is a professional or a
consumer product. “When we refer to professional products where economic
operators are known to one another, the extent to which there is really a need
for traceability requirements should be reconsidered since this imposes
unnecessary administrative requirements”.

A
third challenge is the difference in approaches taken to market surveillance
in different countries, for example, how likely MSAs are to carry out
testing themselves, as opposed to requesting technical information from
economic operators. Such differences may undermine the internal market since
there could be variations for economic operators in their experiences, for
instance, the type and frequency of requests for information from market
surveillance authorities, the likelihood of having products tested, etc. Different
approaches to market surveillance often reflect different levels of resources
and technical expertise available to MSAs in each country; some stakeholders
were of the view that the level of resources and expertise was insufficient in
some countries.

One MSA
in Sweden noted that “We test a broad selection of products ourselves
and do not only ask manufactures to submit papers on the use of products. We
also test a broad selection of products from different geographic origins both
within and outside the EU. We do identify dangerous products and even where
products are generally compliant, remarks are made for three-quarters of
products tested”. Another MSA in Romania noted that market surveillance
needs to be “highly coordinated and capable of reacting rapidly. However,
market surveillance has not kept pace with developments in the Union's
regulatory framework, which could be overcome through the use of an
"intelligent" model. This means that “random checking” will not be
mathematically random, but will instead be focused on a risk-based approach and
the identification of potential problem products and economic operators that
have previously been non-compliant. Wholesalers, distributors etc. who are
known by experience to comply with the rules may therefore expect a fewer
inspection visits”.

Encouragingly,
stakeholders
reported that market surveillance had improved and become more consistent
across different Member States through the measures included in the NLF and, in
particular the common rules on market surveillance set out in
Regulation 765/2008. Some Member States (e.g. Greece, Ireland,
Slovenia) had made significant changes to their market surveillance systems,
such as the creation of national market surveillance authorities and the
development of market surveillance programmes, as a direct response to the
requirements of Regulation 765/2008.

Research Findings (RFs)

·
(RF60)
Market surveillance is considered to be the weakest part of the implementation
system, partly due to the inherently difficult nature of the task and in part
due to varying levels of resources and technical expertise available in
different countries. (Stakeholder interviews; Survey of NBs)

·
(RF61)
There are high levels of non-compliance for some products, low levels of
product withdrawals and a need to strengthen the traceability of products.
However, there is the need for MSAs to differentiate between minor instances of
non-compliance with administrative requirements and serious instances of
non-compliance with essential safety requirements. (Data from previous studies;
Stakeholder interviews)

4.8.2
Co-operation
and information sharing between market surveillance authorities

EQ18:
How effective is the co-operation between market surveillance authorities?

Through
the evaluation, we also assessed the extent to which mechanisms and tools put
in place to facilitate cooperation between market surveillance authorities and
information sharing are working effectively, notably the Rapid Alert
Information System (RAPEX) and the “ICSMS” tool (Information and
Communication System for Market Surveillance.

Regulation
765/2008 includes a reference in the Regulation to the RAPEX system and has
highlighted the importance of this exchange information mechanism for market
surveillance in the Single Market. The report on the implementation of
Regulation 765/2008 provides feedback on the added value of RAPEX. “Reference
to the RAPEX system in the Regulation has extended the obligation to send RAPEX
notifications to all goods falling within the scope of EU harmonisation legislation,
including products for use in a professional context (e.g. industrial
machinery) and products which may harm public interests other than health and
safety (e.g. environment, security etc.). This has contributed to the
protection of workers and the environment, although the total number of new
notifications has been limited during the first two years of implementation”.

However,
a market surveillance authority in Ireland noted that “RAPEX has not led
to many notifications for harmonised products for professional users and the
ICSMS has been more useful in practice”. Whereas RAPEX
was viewed as being useful in informing market surveillance authorities and the
Commission about high-risk products, and the database is useful for reporting
purposes on products presenting serious risks, ICSMS[52], the
general information support system for market surveillance also has
an important contribution in ensuring that there are mechanisms in
place for exchanging information between market surveillance authorities, joint
working and for virtual communication and cooperation.

The
tool provides a single portal containing information on specific products
(product description, test results, in cases of non-compliance
identified any remedial measures taken etc.). Two of the
actions set out in the Multi-annual plan for market surveillance refer to ICSMS
(Action 2: Maximise the benefits of ICSMS and Action 3: Create synergies
between GRAS-RAPEX and ICSMS). A small number of stakeholders referred
to ICSMS during the interview programme.

A
market surveillance authority in Germany stressed the importance of the
need for greater synergies between RAPEX and ICSMS. “ICSMS is a great
operational tool to communicate with different market surveillance authorities
in other EU Member States. Among the advantages of using the system are that it
is available in all languages across EU28. Documents can be uploaded and
although there is no automatic translation of all documents, most phrases are
translated. This solves one of the practical difficulties in ensuring effective
market surveillance - language problems can be a barrier to finding out about
dangerous products and for avoiding duplication of effort between market
surveillance authorities in different countries”.

ICSMS
was not seen as duplicating RAPEX but rather complementing it. It was pointed
out that it is only available in EN and it does not provide a tool for
communicating and collaborative working between market surveillance
authorities, which ICSMS does.

The
need to examine the scope to merge different databases on market surveillance
that feed into Member State reporting requirements to the Commission was
highlighted. For example, a market surveillance authority in Belgium
noted that “Each year, Member States have to prepare a report on market
surveillance carried out and set out the plan for the coming year. There are
several databases that are useful, such as Circa, RAPEX, ICSMS. The Commission
should investigate whether merging of databases is possible and should study the
value added of each database”.

Research Findings (RFs)

·
(RF62)
RAPEX and ISCSMS are viewed as useful in informing market surveillance
authorities. (Interviews of MSAs)

·
(RF63)
There is scope to increase the complementarity and synergy between RAPEX and
ISCMS. (Interviews of MSAs)

4.8.3
Risk-based
and systems-based authorities

The
proposed Market Surveillance Regulation is based on a risk-based approach to
market surveillance (of both harmonised and non-harmonised products). One of
the criticisms made by stakeholders is that there is no definition in the
Regulation of what constitutes risk, and the criteria to assess it. A market
surveillance authority in Germany commented that “Market surveillance
authorities should focus on checking non-conformity, since this is easier to
perform against the regulatory requirements. If instances of product
non-conformity are identified, and it is judged that these are likely to lead
to a risk or to a serious risk, then these products should be alerted through
the RAPEX system. Although they were in favour of having common elements in
Union harmonisation legislation built into a horizontal regulation, market
surveillance should continue to be based on an assessment of product compliance
with IM regulations.

However,
the report on the implementation of Regulation (EC) No 765/2008 published in
February 2013 as part of the PSMSP asserted that progress has already been made
in the development of a risk assessment methodology. It was noted that
the existing RAPEX Guidelines already provide for the risk assessment
methodology for consumer goods, and are an important reference point for Member
States. Moreover, in 2011, the Commission set up a Risk Assessment Task Force
composed of Member States' experts whose role was to assess: (i) whether the
existing methodology, whose main focus is on non-harmonised products, could
suitably take into account the legal requirements of harmonised goods; (ii) how
to address the need to assess risks to public interests other than health and
safety, which are not taken on board by this methodology.

Through
the research, we reviewed good practice in carrying out market surveillance
(given the broad focus of our study, only selected examples are possible). In
the Netherlands, a systems-based approach to market surveillance based
on risk has been adopted. This was recognised by interviewees in other
countries such as Latvia, as being an interesting, and potentially
transferable example. An explanation as to how the system works is provided
below:

Table 4.8: A
systems-based and horizontal approach to market surveillance and regulatory
enforcement[53]

In the Netherlands, the government adopted the “Vernieuwd Toezicht” (Renewed Surveillance Programme) in 2008. The aim is to strengthen the efficiency and effectiveness of market surveillance activities by fostering better relationships with economic operators and by raising awareness among enterprises about their legal obligations under product safety and environmental legislation. A distinction is made between (i) horizontal enforcement and (ii) system-based enforcement. These two different types of enforcement are already being applied by some government inspections agencies. Horizontal enforcement involves combining regulatory enforcement with horizontal activities and support actions for enterprises. Implementing a horizontal approach refers to the development of mutual cooperation between government and society. Horizontal enforcement is based on building mutual trust and a working relationship between government and economic operators based on the development and implementation of quality management systems to strengthen regulatory compliance. The agreements are set out in a covenant based on a partnership-based approach which is published on the inspection agency’s website. The provision of relevant information, the exchange of knowledge, and if relevant the monitoring of business activities are sufficient to consolidate compliance. System enforcement focuses on the enforcement of quality and assurance systems and more specifically on the development of a strategy for companies to set up robust regulatory compliance procedures, documentation to measure the results achieved, interventions committed and the defects. Surveillance in general takes place on the basis of periodical (administrative) inspections. Surveillance is not aimed at checking whether individual regulations have been complied with. The confidentiality of the government in the enterprise is still based on inspection. The application of horizontal and system-based approaches means that that one agency may apply the horizontal system and another may apply a system-based approach, while others adopt elements of both approaches. Through the application of a horizontal and system-based approach, the inspection can reduce the administrative burdens for enterprises/institutions which take their responsibility and do not injure the confidentiality received from the government. In addition the surveillance institutions are in the position to focus their capacity to enterprises performing not correctly. An example of a surveillance authority that applies the system approach is the Food and Consumer Product Safety Authority (Voedsel en Warenautoriteit). The systems-based approach is targeted at larger manufactures and EU importers based on the following criteria: position in the value chain (manufacturer, EU importer or major distributor); they must have a relatively large share of the market;, regularly included on RAPEX or often having defects found during product inspections; their willingness to invest in strengthening business-processes aimed at ensuring the safety of products.

Research Findings (RFs)

·
(RF64)
There is a need for better definition and clarification of risk and how to
assess it in the proposed Market Surveillance Regulation, building on the
proposed risk assessment methodology in the PMSP. (Analysis of legal text;
Interviews of MSAs)

·
(RF65)
There is a need for guidance on the relative merits of the alternative
approaches to market surveillance and the circumstances under which each type
of approach should be adopted. (Analysis of legal text; Interviews of MSAs)

4.8.4
Market
surveillance of non-harmonised products

EQ19:
Should non-harmonised products be covered by common EU market surveillance
rules?

Since
the evaluation begun, in February 2013, the Commission published a Proposal for
a Regulation on the Market Surveillance of Products, which is part of the wider
“Product Safety and Market Surveillance Package” to improve consumer product
safety and to strengthen market surveillance of products placed on the internal
market. The Regulation, if adopted, will merge the rules on market surveillance
of the General Product Safety Directive, Regulation (EC) 765/2008 and many
sector-specific pieces of Union harmonisation legislation into a single legal
instrument that applies horizontally across all non-food sectors. There would
be no distinction between consumer and professional products or between
harmonised products and non-harmonised products for the purposes of market
surveillance. The Commission intends that this “one-tier” system will eliminate
overlaps, close gaps and assimilate as far as possible the rules and procedures
applicable to all non-food products.

The
impact assessment accompanying the Product Safety and Market Surveillance
Package considered the appropriateness of non-harmonised products being covered
by common EU market surveillance rules, as well as the costs, benefits and
possible issues that could arise from such an approach.[54] It
offers a number of conclusions that have been reinforced and illustrated by the
findings from the recent Your Voice consultation and by the consultations
undertaken as part of the current evaluation.

First,
the impact assessment suggests that market surveillance will be reinforced by
the alignment of consumer product safety requirements with harmonised product
safety requirements, through greater clarity and legal certainty. It notes that
market surveillance is currently weakened by the differing requirements that
currently apply to products with similar characteristics and safety properties,
for example, toys and childcare articles.

Second,
the impact assessment suggests that common EU market surveillance rules
covering harmonised and non-harmonised consumer products will enable
enforcement measures to be targeted directly at the source of any risks to
safety. The proposed common rules will specify requirements concerning the
identification of the manufacturer and/or the importer authorities. According
to the impact assessment, this approach will also contribute to the
non-discriminatory treatment of economic operators by market surveillance
authorities of different Member States while allowing market surveillance
authorities to track down non-compliant economic operators more quickly and at
a lesser cost – by stopping unsafe products "at the source", i.e.
where the product is manufactured or imported to the EU. This approach will
also prove fairer and more effective by focusing on the operator primarily
responsible for the placement of any risky product on the market, i.e. the
manufacturer or importer, rather than the final distributor.

Third,
the impact assessment suggests that the costs imposed on (responsible)
operators by common EU market surveillance rules may be negligible in many
cases. For example, many producers do not use separate production lines for
harmonised and non-harmonised products and therefore already apply harmonised
product safety requirements to all their products. Many also already establish
technical documentation for non-harmonised products, even though not required
to do so. In addition, the impact assessment notes that the size of the
category of producers producing only non-harmonised products is extremely
limited.

In
contrast to the impact assessment’s findings, stakeholders consulted in the
current evaluation expressed some misgivings about the application of common
EU market surveillance rules to non-harmonised products. A key issue raised
was that of different national standards in areas that affect safety, such as
electrical installations. Such differences mean that common EU rules might
prove less effective, for example, potential risks are not assessed with
sufficient consideration to the (national) context in which products will be
used. Some stakeholders also pointed out that the Commission had ruled out
imposing product safety requirements on non-harmonised professional products
(i.e. products circulating only among professionals and never used by
consumers, such as industrial machines, raw materials and semi-finished
products) and that this risked creating a loophole.

Another
issue raised by interviewees was the risk of increased human resources and
costs resulting from the extension of common EU market surveillance rules
to non-harmonised products. Stakeholders noted that it is more complicated for
market surveillance authorities to carry out monitoring and surveillance for
non-harmonised products since they must contact market surveillance authorities
to ask whether products have been produced in line with national legislation,
which is resource intensive and slows down the process. Therefore, it was
argued by some stakeholders that a differentiated approach should continue to
be adopted to market surveillance, depending whether products are harmonised or
non-harmonised.

A
stakeholder in Romania for example commented that common rules on market
surveillance could lead to a high increase in costs in some Member States, if
the provisions obliged the relevant bodies to perform complex tests. An
increase in staff would be needed and the acquisition of additional testing
equipment for those bodies, and investment would be needed in reorganising
market surveillance systems, structures and personnel, with training to enhance
capacity. A national competent authority commented that “it is difficult to
put in place common EU market surveillance rules for non-harmonized products
because each Member State has its own specific national organisational set-up
and practices”. A market surveillance authority in Germany commented
that it is much more difficult for market surveillance authorities to assess
the risks associated with non-harmonised products, and this implies further
resources.

Feedback
from industry and MSAs highlighted some concerns regarding the proposal to
remove the distinction between consumer and professional products. It is easier
for MSAs to check consumer products before they are placed on the market
whereas this is often not straight forward for B2B products (for instance,
complicated machines) since these only appear when products are about to enter
the market or already in use. Considerable technical expertise is needed to
assess more complex industrial products. A ‘one size fits all’ approach to
market surveillance as proposed in the PSMSP may be difficult to implement in
practice, due to differences in how market surveillance activities are carried
out between harmonised and non-harmonised products and differences between
product types as to when it is feasible for MSAs to actually carry out testing
and risk assessment of products (pre or post-placement on the market).

The absence
of standards for non-harmonised products was cited by a number of
interviewees (market surveillance and national competent authorities) as a
further complicating factor that means market surveillance in the
non-harmonised product domain is resource-intensive. For instance, a
competent authority in the Netherlands stated that the lack of EN
standards means that it is consequently difficult for them to determine the
regulatory requirements that should be checked for products placed on the
market according to the mutual recognition principle. The resource implications
of the proposed Regulation were also highlighted in Denmark. Market
surveillance in the non-harmonised sector is more time consuming and costly and
requires strong cooperation from market surveillance authorities in other
Member States.

However,
not all market surveillance authorities would have to make changes to their
systems, processes and procedures if a common approach to market surveillance
were to be adopted. For instance, a market surveillance authority in Sweden
commented that “we have a tradition of working with both harmonized and
non-harmonized products in the same way so common rules will not lead to many
changes to our processes or ways of working”.

Since
market surveillance is a Member State responsibility, any extension of EU
market surveillance rules should take into account the willingness,
technical capacity and resources available to market surveillance authorities
to fulfil any additional responsibilities that would be required of them. There
may also be a need to provide support and guidance to manufacturers and other
affected economic operators as a means of ensuring effective application of the
legal framework and reducing unnecessary burden, as well as to national
authorities.

Among
the wider feedback from MSAs in relation to the proposal for a new regulation
on market surveillance as part of the Product safety and market surveillance
package (PSMSP)[55]
(COM(2013) 74 final) was that there are concerns as to how realistic the
suggested approach is for industrial products and whether there is too strong a
focus on consumer products, and whether testing on a sampling basis is more
realistic. One market surveillance authority commented that “There are
contradictions in the PSMSP, which makes a distinction between industrial and
consumer products, however for Regulation 765/2008, industrial and consumer
products are integrated”.

A
concern among stakeholders with regard to the proposed Regulation within the
PSMSP was that each Member State is required to set up a Market Surveillance
Authority (MSA) with relatively minimal guidance from the Commission. There is
a potential danger that this could result in 28 different sets of rules for the
implementation of market surveillance arrangements, with divergence in risk
assessment processes. Moreover, there are potentially additional costs
associated with the implementation of the PSMSP, namely a new set of testing
and evaluation laboratories could need to be set up by each Member State. It is
intended that this will come at least partly from fines and levies from
requiring manufacturers to carry out risk assessments when these are mandated
by MSAs. However, there is an evident risk that different MSAs adopt different
approaches, which could undermine the effective functioning of the internal
market.

Research Findings (RFs)

·
(RF66)
Market surveillance will be reinforced by the alignment of consumer product
safety requirements with harmonised product safety requirements, although this
may depend on the extent to which market surveillance authorities are able
absorb any increase in costs. (Impact assessment for PSMSP; Interviews of
market surveillance authorities)

·
(RF67)
Common EU market surveillance rules covering harmonised and non-harmonised
consumer products will enable enforcement measures to be targeted directly at
the source of any risks to safety. (Impact assessment for PSMSP)

·
(RF68)
The costs imposed on responsible operators are likely to be negligible in many
cases. (Impact assessment for PSMSP)

·
(RF69)
Different national standards for some products may reduce effectiveness of
market surveillance. (Interviews of market surveillance authorities)

5.
Costs
of compliance and scope for simplification
5.1 Introduction and
approach taken

An
important objective of the evaluation has been to understand the process by
which industry complies with the legislation and to identify and quantify the
costs incurred in compliance. Based on that, we have then identified ways by
which the legislation and its implementation might be simplified in order to
reduce those costs. Where possible, we have also attempted to estimate the
financial benefits of the simplifications.

More
specifically, the analysis has attempted to estimate:

·
costs
of compliance with IM legislation faced by firms (see section 5.2);

·
scope
for regulatory and administrative simplification of IM legislation (section
5.3);

·
potential
cost savings from simplification options (sections 5.4 and 5.5); and

·
macro-economic
impacts of simplification measures on growth and jobs (section 5.6).

This
task has been undertaken through ten case studies of specific product groups,
of which eight focus on harmonised product groups and two on non-harmonised
product groups. The table below lists the product groups covered by the case
studies.

Table
5.1: Product groups selected for case studies

No || Product || Applicable Legislation

Harmonised product groups

1 || Electric motors || Core Directives - LVD, EMC, ATEX Other applicable IM legislation: REACH, RoHS, Ecodesign

2 || Laptops || Core Directives - R&TTE, LVD and EMC Other applicable IM legislation: Ecodesign, RoHS, Packaging and Packaging Waste Directive

3 || Domestic refrigerators and freezers || Core Directives - LVD, EMC Other applicable IM legislation: REACH, Ecodesign, Energy labelling, RoHS, Regulation on materials in contact with foodstuff

4 || Lifts for persons || Core Directives - Lifts[56], LVD and EMC

5 || Gardening equipment || MD, EMC, Outdoor noise, Non-road mobile machinery Emissions, RoHS, REACH

6 || Fuel dispensers || MID, LVD, EMC

7 || Air conditioners || MD, EMC, LVD, CPR, RoHS, Energy Labelling, PED[57], Ecodesign, Regulation 2000/2037/EC on Ozone Depleting Substances Regulation 2006/842/EC on Fluorinated Greenhouse Gases Regulation 2007/1494/EC on Labelling Requirements

8 || Integrated circuits || LVD, EMC, ATEX, RoHS

Non-harmonised product groups

9 || Ski/Snow footwear || Directive 94/11/EC relating to the labelling of materials used in the main components of footwear for sale to the consumer, Directive 94/62/EC on packaging and packaging waste, REACH, Mutual recognition Regulation 764/2008

10 || Bicycles || Mutual Recognition Regulation 764/2008

For
each of these ten product groups, the relevant legislation was reviewed,
sectoral data on market size and structure was analysed and firms were
interviewed in depth in order to identify the processes followed in compliance
and the costs incurred. Data on costs was then analysed using the Standard Cost
Model, the European Commission’s prescribed tool for analysis of this nature in
order to draw conclusions around the cost of compliance and the potential for
cost savings from simplification of the legislation. Finally, macro-economic
impacts were assessed through the application of a macro-economic model.

Attempting
to quantify the costs of compliance, the potential for savings from
simplification and the macro-economic impacts of legislation is clearly not
without its challenges. Whilst the results presented in the sub-sections are
based on recognised analytical techniques, we must highlight these challenges.
In summary, these related to the following:

·
establishing
the baseline: whilst many firms have provided an indication of
the situation prior to the introduction of Union harmonisation legislation,
none were able to provide quantitative data on costs, given the time that has
elapsed; similarly, it has not seemed useful to compare current costs against a
hypothetical scenario in which no Union harmonisation legislation exists;

·
availability
of data:
data on costs can clearly be commercially sensitive and many firms were
unwilling to participate or reluctant to provide data; even where firms were
willing, many simply did not collect data relating to certain costs of compliance;
it was relatively straightforward to obtain data on the level of human
resources working directly on compliance with administrative obligations,
whereas data on product design and development and testing was less available;

·
disaggregation
of data:
for most of the products in question, several pieces of IM legislation are
applicable; moreover, most of the firms interviewed produced a range of
products or models for both EU and global markets; it thus became difficult to
isolate the cost of compliance with particular pieces of legislation from other
costs and to relate those costs solely to production for the EU28 market;

·
establishing
the “business-as-usual” scenario, namely the costs that would be
incurred in the absence of legislation; many firms found it difficult to
accurately estimate the proportion of costs that they would incur in the
absence of legislation, i.e. as part of the normal process of product design,
development and testing.

European
Commission guidance on the SCM makes clear that a distinction should be made
between administrative and substantive compliance costs:

·
Administrative
costs -
relate to the costs of preparing documentation and direct fees; and

·
Substantive
compliance costs - relate to any specific investments
firms must make in order to comply with the law.

It is
widely recognised that there may be nuances and an unclear demarcation between
the two types of costs because such costs are part of a continuum. Most
notably, in the case of testing carried out as part of conformity assessment
modules to comply with Union harmonisation legislation, the aim is neither to
obtain an authorisation or certification. Rather, it is to demonstrate
compliance with the essential requirements. Nevertheless, the guidelines
suggest that conformity assessment should still be treated as a substantive
compliance cost, even if the current definition does not exactly fit this area.
However, some elements of the conformity assessment process are administrative,
such as preparing the technical file and issuing the Declaration of Conformity.

Given
this potential lack of clarify, the way in which we have defined administrative
and substantive compliance costs in this study is summarised in the table
below.

Table
5.2: Administrative and substantive compliance costs

Type of costs || One-off costs || Recurring costs

Administrative costs || · Familiarisation with IM legislation and standards · Notified Bodies fees for IM legislation and mandatory testing || · Development and updating of technical files · Production of a DoC and CE marking · Conformity assessment: preparation of technical files in parallel with testing activities

Substantive compliance costs || · Modifications to product design (during new product development phase/ R&D) · Modifications to product design once products have been placed on the market · Costs of temporarily or permanently withdrawing products from the market || · Conformity assessment: preparation of technical files in parallel with testing activities testing for conformity with the applicable modules defined in IM legislation

Source:
CSES

The
extent of administrative and substantive compliance costs was estimated for
four stages in the process of compliance with IM legislation:

1. Preparatory
actions and familiarisation with the applicable legislation and relevant administrative
obligations for economic operators

2. Substantive
compliance: Introduction of processes or changes to product design and
production processes to ensure compliance with substantive obligations

3. Conformity
assessment procedures and the preparation of relevant technical documentation

4. Declaration
of Conformity or other statement of compliance and CE marking

Costs
incurred at each stage are now presented in the sub-sections that follow.
Although a common approach was adopted to the eight harmonised product cases,
in some instances it has been difficult to compare findings from the different
cases due to the data limitations already described.

We
then present estimates of the cost at sectoral level, for firms of different
size and for public authorities.

5.2 Costs of compliance
for firms

EQ20:
What steps do firms take to ensure compliance with IM legislation? What costs
do they incur?

5.2.1
Preparatory
actions and familiarisation with the legislation

Familiarisation
with IM legislation and the respective requirements is an important and ongoing
task for all firms. Even though the amount of time that firms spend on
familiarisation was found to vary, most firms indicate that they spend quite a
lot of time on such activities, commonly 15-20% of the total in terms of human
resources.

Many
large firms have staff specialising in regulatory compliance (commonly around
2-4 staff). Since monitoring legislation is part of their everyday business, as
part of the familiarisation process, they follow and input to EU policy and legislative-making
processes. The firms interviewed recognised that it was in their direct
interest to participate in shaping the form, content and implementation of
Union harmonisation legislation. Furthermore, many of the large firms
interviewed are actively involved in standards development processes. They are
involved in discussions at the policy level and have a clear view of relevant
developments, and of the dates for the introduction of new requirements or
changes to relevant technical standards.

Among
small firms, there is more of an ad-hoc approach to the familiarisation step,
i.e. whenever there are major legislative developments or changes to standards,
SMEs seem to find out about what changes are being introduced. They then assess
whether any modifications are necessary for existing products or for new
product development. SMEs find out about forthcoming changes through a number
of information sources, particularly the relevant national and/ or EU industry
associations – which charge a membership fee but provide updates on relevant
legal developments.

Some
firms interviewed also maintain a database that identifies the relevant
legislation and relevant/applicable standards for each of their products. Once
developed, however, such a database is useful across different business
functions since an overview of legal requirements is required by laboratory
staff involved in testing, production engineers and product development
departments. Some larger firms were found to have developed a more sophisticated
database / information management system that goes beyond a simple spreadsheet.
However, this can be costly and time consuming both to set up and to maintain.
A suggestion was made that it would be very helpful if there were an online
database or web portal where product group specific information about
compliance, such as forthcoming legislative developments and the dates of
updates to standards coming into effect was provided.

Firms
in a few product sectors covered also referred to costs for staff attending
training courses, either organised internally or through the use of external
consultants. The true cost of such training is difficult to identify, since it
may often be incorporated into wider staff training activities. In the case of
petrol pumps, one company suggested that it accounted for 15% of the total
costs of familiarisation, whilst another suggested a figure of 25%.

In
small firms, the familiarisation step typically accounted for less than one
full time equivalent (FTE), but sometimes additional external support was
needed. For larger firms, given their engagement in EU policy and
legislative-making processes and standardisation-related activities, the costs
are often much higher, usually around 3-4 FTE (although in one case, as many as
15 staff were involved, although only part of their time was involved in
familiarisation). This reflected a much more active approach to monitoring and
shaping the development of IM legislation and technical standards.

Among
other preparatory actions that involve cash costs for firms are the purchase of
harmonised standards which, in the majority of cases, represent the preferred
route to ensuring conformity with the applicable requirements. The costs of the
purchase and/or update of standards for a specific product group does not
account to more than €2,000 on an annual basis, and in many cases less than
€1,000.

The
amount of time for familiarisation varies depending on the year and what type
of legislation has been introduced. For instance, long-established IM legislation
was seen as much less burdensome during this step, compared with the
introduction of new legislation. For example, for the laptops case, a
significant resource input was required to input to the preparation of RoHS and
once adopted, to ensuring that companies were RoHS-ready. In the case of air
conditioners and air conditioning systems, the Ecodesign implementing
regulations required substantial familiarisation time.

Currently,
SMEs and large firms obtain information about IM legislation, technical
standards and administrative requirements from a variety of sources, such as
the legislative authorities, suppliers, industry and trade associations, market
surveillance authorities, etc. However, among SMEs and especially micro firms,
there is a low level of knowledge about IM legislation, and the specific
requirements for different economic operators in the value chain
(manufacturers, importers and distributors).

There
is therefore a need to ensure that there is an easily identifiable “first port
of call” available for firms in each Member State, particularly SMEs, to find
out more about which IM legislation is applicable to their products and which
standards could be applied to meet the essential requirements. Although the
European Enterprise Network could potentially help in providing a signposting
function, the European Information Centres (EICs) can only provide very general
advice and are non-specialised, as is the case for the SOLVIT network, whereas
PCPs have at least some specialist knowledge, since they are often located
within national Ministries that are responsible for different national
competent authorities.

Quite
a number of manufacturers that took part in the case studies stated that one of
the most significant challenges in respect of the familiarisation step is
keeping track of changes in legislation and updates to standards,
since there is a high cumulative frequency of changes. It was suggested that an
online web portal could be developed at EU level funded by the Commission to
provide a single reference point for firms to find out more about which
legislation applies to their product, and what changes are being made to
legislation and updates to standards.

It
should be stressed that there is already a lot of relevant
information available via the DG ENTR website about IM legislation,
non-binding guidance,
standardisation
and Notified Bodies. The issue is whether it is feasible to move from the
current legislation-based approach to a product-based approach, since this
would be resource-intensive. Given the large numbers of technical
standards,
such
a portal would only be able to follow a broad product category approach (since
it would not be possible without significant resources to check the position
for sub-categories of products. For instance, there are more than 700 different
types of standards for machinery alone.

5.2.2
Substantive
compliance with IM legislation

Having
understood and familiarised themselves with the applicable essential
requirements under Union harmonisation legislation for their product, firms
then need to comply with these requirements (often using a voluntary technical
standard) and with the appropriate conformity assessment procedures and CE
marking requirements.

Either
in the case of the development of new or modification of existing product
models, this typically includes a period of largely overlapping research and
development activities and product testing, the latter providing feedback on
the former. The main cost drivers are the costs of human resources (research, engineers),
materials, investment in testing facilities and in the costs of testing.
Ensuring compliance with the requirements is sometimes the main driver of
R&D and testing activities or may be only one among a number of
considerations in new product development. The aim is to satisfy market demand
and to ensure product quality. Thus, the share of these costs associated with
meeting legal requirements (substantive compliance costs) can vary greatly.
This is reflected in the input provided through the interview programme and
case studies.

Aspects
related to product safety may be linked to specific legal provisions but many
firms indicate that such activities would take place even in the absence of IM
legislation. In most case studies, the firms responded that testing for the
Machinery Directive, Lifts Directive, Low Voltage Directive or the EMC
Directive is largely part of their business as usual costs, i.e. what firms
would do irrespective of whether European harmonised product legislation was in
place. For instance, lift manufacturers undertake their own extensive product
testing both during development and installation so as to ensure high levels of
quality and safety. In most cases, these checks, which are often part of
internal quality management systems, readily encompass the minimum essential
requirements set out in the legislation.

In
contrast, firms very often consider that none of the costs of compliance with
environmental (emissions, noise, energy efficiency) requirements are
business-as-usual costs. An exception identified in this regard (material
handling equipment) indicated that the share of investment in R&D and
testing activities directly linked to IM legislation has recently increased
from a typical 10-20% to more than 60% of the total R&D budget. . Another
exception is the energy efficiency of domestic refrigerators and freezers [cf.
case study].

The
main reason indicated is the need to ensure compliance with Non-road Mobile
Machinery Emissions and the Outdoor Noise Directives, both of which require
dedicated testing facilities (the costs of a sound chamber to test for outdoor
noise can be more than €1 million). However, there are also benefits and
potential trade-offs with products’ performance, requiring additional product
design costs. In comparison, firms in the gardening equipment sector – a sector
also covered by the NRMM and the Outdoor Noise Directives - indicated that
10-35% of product development and testing costs could be avoided in the absence
of IM legislation.

Another
Directive considered by some stakeholders as having created significant
compliance costs for SMEs is the Ecodesign Directive, under which implementing
regulations are adopted in relation to specific product groups. The evaluation
of the implementation of the Ecodesign Directive in 2012[58]
suggested sizeable costs for R&D, testing facilities and possible changes
in production. The Ecodesign implementing regulations however only require
redesign of the worst-performing products.

A survey
organised by the Finnish Industry Association indicated that, on average, for
each firm the one-off costs of setting up the necessary test labs were around
€200,000 with an additional 1-2 FTE for relevant personnel. In the case of SMEs
that use external labs to assess conformity, the cost per product is, according
to information from the impact assessments, around €1,000 per product
model-family.
The testing of products also includes investment in testing facilities. Large
firms usually invest in their own testing facilities while smaller firms use
external labs more commonly, often those of accredited organisations that
provide certification services (Notified Bodies). The costs involved are
higher, but smaller firms often have no choice because they cannot afford the
major upfront investment to set up a suitable laboratory and to purchase
testing equipment.

Whether
directly or indirectly linked to legal provisions, an important point
identified through a number of the case studies (laptops, lifts) is that a high
percentage of substantive compliance costs are integrated into firms’ product
design cycle. Large manufacturers account for a very significant market share
and since they follow legislative-making processes leading to the adoption of
IM legislation, they are typically aware well in advance of the adoption of the
legislation what the requirements are likely to be, and they can therefore
factor these in to R&D and design processes well in advance of the
legislation coming into effect. A number of firms therefore indicated that even
the costs for compliance with the Ecodesign implementing regulations could be significantly
reduced when firms are given significant lead times and can integrate the
design and testing activities into their normal product development cycle[59]. It
should be noted however that the product development cycle varies among sector.
For example, in the case of laptops it is typically no more than 6 months,
while in the case of air-conditioners it can be up to 3 years. Product
development cycles are usually considered in the regulatory process
establishing Ecodesign implementing regulations.

In contrast,
frequent changes to requirements and standards can lead to sizeable costs for
industry. It
was also noted that regulatory changes for IM legislation are less frequent
than changes to environmental legislation. However, the interaction between (and
cumulative regulatory impacts of) IM legislation on the one hand and
environmental legislation on the other can sometimes lead to additional
administrative costs for industry.

While
in general many safety-related directives are not viewed as particularly
costly, frequent changes to the requirements or relevant standards can have
cost implications requiring the sudden withdrawal and redesign of products.
While it was not argued that individual pieces of IM legislation change too
frequently (usually legislation is reviewed once every 10 years) since multiple
legislation is applicable to a given product, and legislative review processes
are carried out at different times, there is an almost constant process of
monitoring for revisions. This is especially the case for technical standards,
where amendments to standards can be especially frequent.

An
example of the implication of changes to standards was provided in the laptop
case study where a large multinational had to withdraw a specific
desktop PC model that did not meet Amendment 1 of standard IEC 60950-1, a
standard set of electronic safety requirements. Similarly, a
manufacturer of air-conditioners estimated that it will need to use 75% of its
development resources over a 12-18 month period to make necessary adjustments
to meet the recently introduced requirements for fans under the Ecodesign
Directive.

After
the initial adjustments are made, the burdens associated with the Directive are
expected to significantly reduce. A lift manufacturer suggested that any
technical adaptation required by the legislation would cost around €500k-€1m in
terms of new product development. Such costs would relate to ensuring
conformity of design, a physical examination of 8-10 different product
platforms to be certified but also additional documentation for the conformity
assessment process, costs for sales companies, training for sales and
production staff, updating sales literature.

Moreover,
economic operators referred to additional risks arising for R&D and early
stage product development investment if they do not know how IM legislation
will develop over time, and the form that its implementation may take in
future. It
is difficult to provide typical values of substantive compliance costs across
the whole industry. They vary depending on the product category and the firm
strategy. The following table provides some illustrative examples from the case
studies.

Table
5.3: Examples from the case studies – compliance with the applicable
legislation

Product category || Example(s)

Domestic Refrigerators || A large firm typically spends 1-1.5 year FTE / firm, 80-90% of which is allocated to product development and product quality testing. Another large firm indicated that a typical product development project - leading to the development of a basic model with multiple variants – takes 3 years and requires and a budget of up to €100 million.

Gardening equipment || A large firm producing close to one million units indicated that around 3% of annual R&D budget of €50-60 million that is invested to the development of a new product is directly related to ensuring compliance with internal market legislation (circa €4 million). A small firm producing 15,000 units indicated investments for product design of €200-300k

Pumps and dispensers || A large producer of pumps and dispensers (over 1000 employees) estimated total compliance costs of €3.2m over the last five years, €2m on changes to product design and €1.2m to production processes.

5.2.3
Conformity
assessment procedures

The
conformity assessment procedure most commonly followed by manufacturers
interviewed was the Supplier’s Declaration of Conformity (SDoC). Among the
steps needed as part of conformity assessment are carrying out product testing,
the preparation of the technical file and the preparation of the DoC and the
required information manual and CE marking. For product groups that have
legislation that requires mandatory third party testing, an inspection by
Notified Bodies and appropriate certification is required.

According
to the common requirements set out in Decision 768/2008/EC, following the
placing on the market, this information needs to be kept for 10 years following
the placing on the market and to be updated whenever there are changes. This
can require significant time and resources, for instance, checking and updating
DoCs every few months, as and when legislation and standards are updated.

Significant
time is often dedicated to the collection of information from suppliers of
specific components or finished products. The estimated time for the
preparation of a technical file for a gardening equipment product ranges from
40-100 hrs. The costs for conformity can vary depending on the need or not for
third party certification. The data from the case studies suggests that the
annual budget of firms for services of Notified Bodies is in the range of
€30-80k, around €4,000 for certification of a single product and representing
20-25% of the total estimated costs for compliance. Similar figures were
provided by manufacturers of fuel dispensers. Manufacturers of fuel dispensers
– a product that requires third party certification - estimated that Notified
Bodies fees represented 55% of the conformity assessment costs, 35% relating to
initial inspections and 20% to periodic inspections. Data from the
evaluation of the Gas Appliances Directive[60]
also refer to certification costs in the range of €1000/product. However, the
input from a number of firms (gardening equipment, air conditioners,
refrigerators) is that firms use NBs services to support them
in testing and ensuring compliance even when third party certification is not
mandatory.

The
provision of relevant information in the instruction manuals and translation
costs are also part of the administrative costs. Data for translation costs of
these manuals to cover all EU countries ranged around €3,000 for each gardening
equipment model. It should be noted here that every change to relevant
standards or requirements lead to costs for the replacement of manuals. A
producer of domestic appliances selling around 2 million units indicated that
every time there is new legislation new information manuals need to be printed.
The estimated cost at an annual basis was around €100,000k/year.

Sectors
covered by the Outdoor Noise Directive (e.g. gardening equipment) need also to
submit information included in the DoC to the national and European
authorities. Estimates from the gardening equipment case were that it took
approximately 80 hours for the 20 different models in its production line. The
REACH Regulation and the RoHS Directive do not directly affect firms in the
manufacturing sector that are downstream users. The main task is the collection
of information from suppliers so as to ensure that no substances of high
concern are included in any component.

Some
large manufacturers may test components but more typically, the approach
followed is to request and collect appropriate certificates from suppliers, to
allocate part of a FTE on an annual basis for this activity. According to the
recent review of the REACH Regulation[61],
50-70% of downstream users of chemicals (mostly in the non-food manufacturing
industry with the exception of chemicals and plastics) have experienced an
increase in the costs of managing information along the supply chain, typically
in the form of additional workload for existing staff (small firms) or the
hiring of extra staff (large firms).

As in
the case of product design and testing, additional costs may also arise from
the changes to regulatory requirements and the updating of relevant standards.
There is a need to adopt information manuals and technical files. This can be
particularly problematic for small firms that do not have the structures and
mechanisms to follow developments on an on-going basis. The feedback provided
suggests that it is mainly these changes that create important adjustment costs
rather than the actual information obligations. This is seen as particularly
problematic for small firms.

Frequent
changes make the legal environment unpredictable but also introduce costs –
sometimes sizeable – for firms that try to follow all development and to fit
their information collection systems to the information obligations. The
feedback provided suggests that it is mainly these changes that create
important adjustment costs rather than the actual information obligations. This
is seen as particularly problematic for small firms. It was noted
that regulatory changes for IM legislation are less frequent than changes to
environmental legislation. However, the interaction between and cumulative
regulatory effects associated with the two can sometimes lead to additional
administrative costs for industry.

A further finding was that although economic operators may
not always be able to quantify costs, most firms were able to comment on the
level of staffing involved and the broad cost parameters. There were however
concerns regarding those areas of the regulatory framework where there is
potential future uncertainty for economic operators with regard to the future
costs of compliance, such as REACH. Given the very significant level of investment
and long lead times required in order to bring some types of new products to
market, there are concerns that the situation may change in the interim with
potentially very high costs for industry.

Table
5.4: Legal uncertainty for downstream users – laptops case study

A large global components manufacturer in the electronics sectors expressed concern as to whether particular chemicals would still be in use in 10 years’ time, and whether if not, substitute products are likely to be available. Product R&D operates according to long lead times and significant investment in the product development cycle is required to bring new innovative products to market. Economic operators, especially larger companies operating globally have to be inherently forward-looking in assessing how the regulatory landscape will evolve over time. The firm interviewed commented that “there is a great deal of legal uncertainty from a downstream user perspective. There is a substance called gallium arsenide and currently microchips cannot be made without it, but there is no viable substitute product. The substance is currently being reclassified under the CLP 5th ATP. There is a risk that the substance could be fast-tracked to being subject to an authorisation, which would impose major costs on industry. If a particular substance requires authorisation or is banned, then this could really disrupt the supply chain, and lead to legal uncertainty. REACH is delivering in terms of identifying harmful substances, but there should be a greater focus on assessing the impacts on impacts on downstream users.”

5.2.4
Estimates
of costs at sectoral level

On
the basis of data inputs from firms across the eight sectors examined, we
estimated compliance costs – administrative and substantive – at a sectoral
level. In the table that follows, we provide summary information drawing on the
data from the case studies focusing on:

·
Total
annual compliance costs (excluding business as usual costs) and their share in
the sector turnover;

·
The
main cost drivers (phases of the process, type of activity) of administrative
costs.

Various
caveats should be added before presenting the summary findings with regard to the
costs of compliance of IM legislation across 8 harmonised product groups.
Firstly, there were difficulties in obtaining reliable quantitative data on
cost parameters across all variables. Secondly, there were specific issues and
assumptions made regarding cost drivers for each case study. These are
indicated in the footnotes in Table 5.5 that provide an aggregate of sectoral
cost estimates for each case and explained in greater detail in the respective
case studies in Annex C.

The
total estimated annual costs of compliance of IM legislation across
the 8 harmonised
product cases were estimated at €342 million.

Table
5.5: Summary of findings – the annual costs of compliance of IM legislation
across 8 harmonised product groups

Product group || Total annual compliance costs for the sector and share in annual turnover (%)

Electric motors || € 33.2 million 0.3% of annual turnover

Laptops || € 28.1m 2.0% of annual turnover

Domestic refrigerators/freezers || € 86.0 million 0.4% of annual turnover

Lifts || € 26.0 million 0.9% of annual turnover

Gardening equipment || € 98.5 million 3.9% of annual turnover\*\*

Petrol pumps || € 12.2 million 1% of annual turnover

Air conditioners || € 50.1 million 1% of annual turnover

Integrated circuits || € 7.7 million <0.1% of annual turnover

Total || € 342 million

\*Notes
(i) the reasons for this outlier are explained in the case study on gardening
equipment (ii) reference should be made to the footnotes in the case studies
setting out the quantitative findings in all cases, since the assumptions made
underlying the data, any gaps and imputations used for particular cases needs
to be spelled out.

It is
also important to note that it has not always been possible to clearly
distinguish between administrative and substantive compliance costs in the
quantitative assessment. There are grey areas where the delineation between
different types of costs is unclear. For example, while conformity assessment
costs are classified as being substantive costs, there are aspects of
conformity assessment where administrative costs are incurred in parallel, such
as the preparation of a technical file. These were explained in greater detail
earlier in section 5...?. Where possible to do so, a differentiation between
the two was made in individual case studies.

This
being said, we can still observe wide divergence in compliance costs between
different harmonised product groups. In most cases, total annual estimated
compliance costs do not exceed 1% of annual turnover. The notable exceptions in
this regard were gardening equipment (3.9%) and laptops (2.0%). The explanatory
factors as to why compliance costs were higher in these sectors were explored
through the research.  In the case of gardening equipment, the
higher level of compliance costs was mainly because of the costs associated
with environmental IM legislation (the Outdoor Noise Directive, non-road mobile
emissions). In contrast to safety-related requirements which are very often
considered to be “business as usual”, costs of compliance with environmental
legislation are considered additional for the firms in the sector and,
according to most firms, rather demanding, particularly in terms of the testing
required.

For
gardening equipment, administrative costs were found to be only a small part of
total compliance costs. This seems to be the case generally for many consumer
products (gardening equipment, domestic refrigerators and air conditioners).
Substantive compliance costs are the main driver of compliance costs because
important aspects of product design and testing for safety are not considered
by firms to be business-as-usual costs. In comparison, in the case of the lifts
and electric motors, both products primarily addressed at professional users,
substantive compliance costs (product design and testing) are generally
considered to be business as usual and, as a result, the main focus of firms is
on the administrative costs of the legislation,

In
the case of laptops, the estimates provided may over-estimate the total
compliance costs associated with Union harmonisation legislation. Since the
industry is dominated by a small number of global manufacturers, it was
difficult for them to provide compliance costs disaggregated by geographic
region because they tend to design products for global markets and sometimes
for multiple – or at least dual – regulatory requirements with some
customisation of the product itself to local markets.

Ecodesign
was perceived as costly by some manufacturers that took place in the electric
motors case study. However, there was found to be a difference between
perception amongst industry about the main cost drivers in terms of the type of
legislation, and the actual costs. The Ecodesign Regulations do not require all
products to be redesigned, only the lowest-performing electric motors
(typically 20% of existing models). Since other major global jurisdictions,
such as the US, already had strict requirements, many motors already complied
and the Ecodesign regulations has simply prevented the dumping of poorly
efficient electric motors on the EU market. Compliance costs only equated to
0.3% of turnover in the electric motors sector.

5.2.5
Compliance
costs by firm size

There
were differences between firms in the level of compliance costs
(administrative, substantive) by firm size, although this was difficult to
substantiate based on the limited numbers of SMEs that agree to take part in
the study. SMEs were found to experience significantly higher costs / unit for
regulatory compliance compared with large firms that are better able to spread
the costs across a high number of units. SMEs also appear to have a higher
percentage of staff involved in compliance-related activities (familiarisation,
testing) than large firms, although few are able to have individual staff
members working full-time on compliance. Micro and small firms were also more
likely to have to rely solely on external third party conformity assessment
since many do not have their own in-house laboratory and testing facilities.

SMEs
are also at a comparative disadvantage because large firms follow EU
legislative-making and standardisation development processes more closely. As a
result, they are more aware about proposed changes to IM legislation in advance
and can factor in anticipated regulatory requirements prior to new IM
regulatory requirements coming into effect at the product design stage, which
lowers substantive compliance costs. Even if the number of SMEs that
participated in the case studies was limited, the quantitative findings on
compliance cost differentials were substantiated by a number of SME and
industry associations in particular sectors (e.g. lifts, air conditioning).

The
administrative burdens of compliance with Union harmonisation legislation were
sometimes found to be disproportionate for micro enterprises. For instance, any
manufacturer wishing only to place a product on the domestic market must still
comply with IM legislation (including DoC and CE marking requirements) if their
product is in the harmonised sectors. An example cited by a European SME
association of the burdens were the Finnish woodcutters, where micro
enterprises of 2 persons only producing products for the local domestic market
had to go through the conformity assessment procedures and to CE mark, even
though the products were sold untreated. Nevertheless, they are still subject
to the REACH Regulation.

5.2.6
Costs
for public authorities of monitoring product safety and regulatory enforcement

This
study has not allowed for quantification of expenditure on national support
mechanisms, structures and activities to support the implementation of Union
harmonisation legislation, such as on market surveillance. However, some data
was available in this regard through previous studies and impact assessments.

As
far as public authorities are concerned, the available estimates on the number
of product safety enforcement activities provided by national authorities
suggest that a total of 3,000-4,000 product inspectors across EU28 are engaged
in market surveillance and regulatory enforcement activities, with an annual
budget of enforcement activities in the range of €100-150 million[62].
These figures are quite a high estimate, as they include enforcement activities
relating to non-harmonised products. In addition, in order to assess the
overall costs of the implementation of Union harmonisation legislation, other
costs related to national implementation are the human resource costs for
policy coordination through the role of national competent authorities, for
instance, in the transposition of IM legislation, in the appointment of
Notified Bodies, etc.

The
feedback provided points to market surveillance as being the most
resource-intensive aspect of the implementation of IM legislation for public
authorities. From the small number of Member States that provided data on the
resources allocated to IM legislation, more than 80% appears to be allocated to
market surveillance activities. Compared to the situation prior to the
introduction of the IM legislation, national authorities may have experienced
some cost savings. According to the evaluation of the MID, for instance, many
authorities indicated a substantial decrease in their workload in terms of
dealing with applications for national certification. This reduction was most
notable in countries with a small number of manufacturers of measuring
instruments or where measuring instruments are imported on the basis of
certification undertaken in other countries.

5.2.7
Conclusions
on the costs of compliance with IM legislation for industrial products

Whilst
most manufacturers could highlight the most costly compliance steps and pieces
of legislation, few were able to quantify the costs incurred at each step with
any accuracy. However, as the overall volume of IM legislation has grown, it
was clear that the task of ensuring compliance with legislation and technical
requirements set out in harmonised standards is resource-intensive.

A
certain proportion of compliance costs were ‘BAU’ and would have been incurred
by industry regardless as to whether there was a European regulatory framework
in place. Many firms have well-developed internal safety testing procedures as
part of quality assurance procedures and use third party testing for
reputational reasons, even where not mandatory.

In
all sectors, the process of adaptation to new technical requirements can be
costly for manufacturers short-term, particularly when the transition period is
relatively short. In the long-run, substantive compliance costs fall over time
as manufacturers become more familiar with the requirements of the legislation.
Industry is highly familiar with compliance requirements for long-established
directives, such as the Machinery Directive, Low Voltage Directive and EMC
Directive. Since the technical standards and administrative requirements are
well-known, these can be factored in to design requirements from the outset.

Some
legislation is more costly than others to implement. Ecodesign implementing
regulations were often mentioned as costly, both because of the need for
changes to be made to the worst-performing products. However, it should be
noted that under Ecodesign Regulations, this does not mean redesigning all
existing models, rather only the worst-performing, typically 20% of existing
models. Moreover, products that have already been placed on the market are not
effected by ecodesign; components and parts are not a specific aspect:
ecodesign requirements are generic to the whole product. Substantive costs vary
by sector. In sectors characterised by rapid technological innovation, the
substantive requirements can usually be “designed into” the product; in that
sense, the legislation sets parameters regarding what is possible without
increasing the costs of design and production.

In
other sectors, substantive costs tend to account for a relatively high
proportion of total compliance, depending on the duration of the product
lifecycle. For example, it is more difficult for manufacturers of products with
a long lifecycle because they are more likely to have to make modifications –
or to identify alternatives or substitutes - to products already on the market.
This is more costly than factoring these into the initial design phase during
the R&D process.

It is
also worth noting that there has been a gradual accretion of IM legislation in
the previous 25 years and this has led to cumulative effects of regulatory
compliance. While it has long been the case that multiple pieces of legislation
may be applicable to a given product, when the New Approach was first adopted,
it was perhaps not foreseen that the body of internal market legislation would
grow to the level that it has. Moreover, the past decade has seen the
introduction of a number of IM directives and regulations that apply
horizontally across all product groups (e.g. REACH, RoHS, Ecodesign and Energy
Labelling). The cumulative effects of regulatory compliance stem from the fact
that manufacturers of industrial products must comply with a growing body of
internal market and environmental legislation. It is the cumulative frequency
of these changes and updates to legislation itself and to (voluntary) technical
standards that result in cumulative effects and impose additional costs, for
instance, familiarisation time to keep track of changes, integrating new
requirements into R&D and the product design phase, making modifications to
products already on the market.

Research Findings (RFs)

·
(RF70)
Familiarisation with the legislation accounts for a significant proportion of
the total costs of compliance, estimated at around 15-20% for many firms. Much
of these costs are in the form of staff time, around 2-4 FTEs in a typical
large firm and >1 FTE in an SME.

·
(RF71)
Ensuring compliance with IM legislation is sometimes a key driver of R&D
and testing activities or may be only one among a number of considerations in
new product development

·
(RF72)
Testing equipment can account for massive costs that manufacturers might not
otherwise incur. These affect SMEs disproportionately, as the cost is spread
over at lower volume of production.

·
(RF73)
In the long-run, a high proportion of substantive compliance costs are
integrated into firms’ product design cycles and are therefore negligible. In
that sense, the legislative requirements tend merely to set parameters around
what is possible rather than imposing additional substantive compliance cost

·
(RF74)
In contrast, frequent changes to legislative requirements and standards can
impose sizeable adaptation costs on industry, albeit one-off and short-term in
nature.

·
(RF75)
A significant proportion of the costs of conformity assessment relates to the
task of collecting information from suppliers, preparing technical files, checking
and updating DoCs and maintaining technical files for 10 years. Such costs are
greatly increased when there are changes to the legislation or the standards.

·
(RF76)
The costs of conformity assessment depend very largely on the need for
third-party certification. Certification of a single product typically costs
around €4k in NB fees, though annual certification of systems would be much
higher.

·
(RF77)
In most sectors the costs of compliance do not exceed 1% of annual turnover,
provided that much of the costs of product design and testing for safety can be
considered business-as-usual costs.

·
(RF78)
SMEs experience higher compliance costs relative to their turnover, though few
have individual staff members solely devoted to compliance. They are also more
likely to rely on external third-party conformity assessment and less likely to
follow and participate in the process of developing legislation and standards
at EU level.

·
(RF79)
Market surveillance activities are estimated to occupy 3,000-4,000 product inspectors
across EU28 at a cost of around €100-150m per annum. This accounts for around
80% of the total cost to national authorities of developing, implementing and
enforcing IM legislation.

·
(RF80)
The gradual accretion of IM legislation has required manufacturers to comply
with a growing body of internal market and environmental legislation. Frequent
updates to legislation itself and standards risk imposing cumulative costs, for
instance, related to familiarisation time to keep track of changes, integrating
new requirements into R&D and the product design phase, making
modifications to products already on the market, updating DoCs, etc.

5.3 Scope for regulatory
and administrative simplification

EQ21:
How far is there scope for administrative and regulatory simplification of
Union harmonisation legislation? To what extent is there scope for merging
different directives?

Although
there was some support among stakeholders for the possible merger of specific
pieces of IM legislation, stakeholders had differing views as to
whether simplification was possible at all, and whether this would result in
benefits, or simply risk making the regulatory framework more complex, with
additional familiarisation costs for economic operators, at least in the
short-term.

Through
the research, a number of examples were identified where consideration could be
given to the potential merger of specific IM directives and regulations in
order to reduce the overall volume of IM legislation as part of a streamlining
process. These are described in the table below.

Table
5.6: Possible simplification measures – mergers of directives

Type of simplification || Example || Key issues and possible simplification

Merger || Merging the Pressure Equipment Directive (97/23/EC) with the Simple Pressure Vessels Directive (SPVD) || There is support for merging the PED with the SPVD among some industry stakeholders but mainly national competent authorities. National officials would likely benefit from having to a single piece of legislation rather than two frameworks for pressure equipment. However, others favour retaining the status quo since simple pressure vessels currently benefit from a lighter regulatory regime. This issue was examined through the Evaluation of the PED[63] (CSES, 2012).

Merger || The Machinery Directive and Directive 2000/14/EC on Noise from Outdoor Equipment || The scope for merging the MD with Directive 2000/14/EC is under review. A technical study has been launched. A public consultation was carried out in 2010. Among the proposals under consideration are: simplifying the legislation by proposing revisions concerning noise data collection and methods of measurement.

Merger || EMC and the Machinery Directive || This was suggested by a minority of respondents to the Your Voice consultation.

Merger || RoHS and REACH || Both Directives apply to electrical and electronic equipment. Many stakeholders favour a merger or at least clarification of the relationship between the RoHS and REACH, as well as better co-ordination between those involved in implementation of the two pieces of legislation.

The
broad scope of this study does not allow for a detailed assessment of the
feasibility of merging different pieces of IM legislation for
industrial products. Given the complexity, a technical study would need to
be carried out in respect of each proposed merger, supported by appropriate
industry consultation. Indeed, this has already been recognised by the
Commission and the potential merger of the Machinery Directive and Outdoor
Noise Equipment Directive is the subject of a current study and stakeholder
consultation. Although the report is not yet available, our interview with the
Commission official in charge of the study indicated that at interim report
stage, there is no clear consensus among stakeholders as to whether the two
directives should be merged.

This
finding was echoed in our study through the interview feedback. There were
concerns among national competent authorities for instance as to the
feasibility of combining these directives. For example, an MSA responsible for
Directive 2000/14/EC in Italy was against the possible merger. “Although a
merger could theoretically be possible, differences in the aims of the two
pieces of legislation should be carefully considered. Whereas Directive 2000/14
seeks to reduce noise pollution and to protect the environment, Directive
2006/42/EC seeks to protect the safety of workers and users of the machinery”.
Moreover, in Italy, there are differences in the remit of the relevant
competent authority responsible for Directive 2000/14/EC (Ministry for the
Environment) and Directive 2006/42 (Ministry for Industry) respectively.
Combining the two Directives was viewed as risking undermining market
surveillance, because the existing enforcement framework reflects the different
objectives established in both directives. In this case, a merger may not
result in regulatory simplification and easing the work of enforcement
authorities.

There is a need to reconcile two different internal market
approaches since the Machinery Directive is one of the earliest ‘New Approach’
Directives whereas the Outdoor Noise Directive follows the ‘global approach’
concept. Practical challenges here are that whereas the MD focuses on
horizontal risks and on extensive, broad-based ‘families of products’, the Outdoor
Noise Directive follows a product-based approach. A further issue is that the
MD works on the basis of manufacturers following voluntary harmonised standards
whereas the Outdoor Noise Directive operates on the basis of “limit values”.

There
has also been a debate about the possibility of merging the Directive on
hazardous substances (RoHS)[64]
and the Regulation on Registration, Evaluation, Authorisation and Restriction
of Chemicals (REACH),[65]
since both apply to electrical and electronic equipment. For example, the
potential duplication of restriction procedures and criteria between RoHS and
REACH has been highlighted, and similarly parallel systems for the assessment
of chemical substances by chemicals specialists has emerged. This creates a
risk of inappropriate assessment of substances, unnecessary administrative
burdens and conflicting requirements. Here, further future legal clarification
would be useful, as and when further experience from REACH implementation is
available.

Orgalime,
the European Engineering Industries Association, had a similar view, and called
for better coordination and structured, continuous communication between the
different actors involved in the implementation of both pieces of legislation.
They also stated that a clear decision is needed from EU regulatory authorities
regarding the procedure that will apply in each case and consistent application
of this decision by all bodies responsible for implementing REACH and RoHS.[66]

In
response to these concerns, the Commission confirmed that when overlaps occur,
the strongest restriction (i.e. the lowest maximum concentration) should be
applied and that exemptions from the substance restrictions in RoHS 2 (as the
2011 recast to the 2002 RoHS Directive is known) may not be granted if they
result in a weakening of the environmental and human health protection afforded
by REACH. The Commission has also stated that a thorough analysis of the
coherence of RoHS2 with REACH will be undertaken as part of the first review of
RoHS 2, which is due by July 2014.[67]

However,
it should be noted that the Commission officials interviewed from DG ENV were
not in favour of such a merger, partly because of their position that there are
major differences in aims and scope between REACH and RoHS, but equally because
the RoHS Directive 2002 was recently recast. Indeed, although the RoHS
Directive 2011/65/EU (RoHS 2) entered into force on 21 July 2011 and required
Member States to transpose the provisions into their respective national laws
by January 2013, so the new provisions have only just come into effect.

A
further measure that could be adopted would be to widen the scope of
existing IM legislation to include further product groups,
both those already covered by IM regulations in principle, but where there is a
lack of legal clarity as to whether they are included. Similarly, certain
products may currently be excluded from the scope of certain directives and the
rationale for including them may need to be strengthened over time.

There
are clear benefits for industry in the Commission providing non-binding
supporting guidelines that provide information on the scope IM of directives
and regulations, and ensuring that these are regularly updated. This
is particularly the case when ‘grey areas’ are identified where there is
a perceived lack of legal clarity. This can lead to confusion as to which
legislation should be applied and / or how legislation should be applied by
enforcement authorities and manufacturers.

An
example of a product group where there has been uncertainty as to which is the
applicable legislation is ‘cylinders for breathing apparatus’, since these fall
under both the Pressure Equipment Directive (PED) and Transportable Pressure
Equipment Directive (TPED). This piece of equipment has been subject to much
debate in relevant European level working groups and evidence has been
presented that industry has struggled to understand which legislation applies
and which approach they should take to ensuring compliance. In response, the
Commission Legal Services (CLS) has produced a written legal opinion on the
question of whether cylinders for breathing apparatus are covered by the PED.
It concluded that they are covered, but they could also be covered by the TPED
rules as long as they don’t fall within the PED exclusions. The Commission has
suggested that they will produce a guidance note based on the CLS view and this
will be drafted and agreed by the appropriate Working Group.

Although
feedback suggests that industry and SMEs find the guidance very useful, some
stakeholders commented that guidance to support the implementation of specific
IM directives and regulations should be updated on a more timely and frequent
basis in order to ensure that it remains fully up to date. The provision of legal
clarifications in areas identified through this study as being grey areas, and
the should
help to provide better guidance for manufacturers in areas where there are grey
areas, or where there is confusion among economic operators. However, it would
be in the Commission’s interest if responses such as these can be quickly
developed in order to meet the needs of authorities and manufacturers.

In a
similar vein, as noted in the section dealing with components and spare parts,
our research found that there could be a strong rationale in having a more
common approach to definitions and to their inclusion across IM legislation.
This would help to strength the legal certainty of directives and clarify the
scope of the terminology. In line with comments received from the air conditioning
industry, prior to the introduction of legislation, research should be
undertaken by the Commission on understanding the existing framework so common
definitions can be immediately drawn upon with a view to ensuring that the
legal text is immediately understood by all market participants.

An
area where the scope of legislation could be extended relates to offshore
equipment. Given the increasing risks relating to the work of the offshore
industry, a number of industrial product directives are being considered for
extension to the sector in areas where they do not currently apply. This
includes the ATEX Directive, Machinery Directive and Pressure Equipment
Directive. A study is underway to explore the impact of the extension[68].

In
terms of widening scope of IM legislation, there clearly needs to be strong
consideration of impacts and whether benefits are incurred for industry and
users. It is likely that extending the scope may not result in simplification
for all segments of industry specifically those that solely manufacture
products under alternative arrangements. Often, benefits will be incurred in
terms of strengthening safety and environmental protection but not in terms of
lightening the regulatory load for industry.

Research Findings (RFs)

·
(RF81)
There may be scope for merging different pieces of legislation, such as PED and
SPVD, MD and OED, MD and EMC, and RoHS and REACH, although this will require
in-depth consideration on a case-by-case basis.

·
(RF82)
Consideration of merging directives should take into account the differences
between horizontal and product-specific harmonisation legislation.

·
(RF83)
Widening the scope of existing IM legislation to include additional product
groups, particularly where there is a lack of clarity, may increase certainty
for operators and thus help reduce costs of compliance.

·
(RF84)
There are clear benefits for industry from the Commission providing non-binding
supporting guidelines that provide information on the scope IM legislation,
particularly in any ‘grey areas’ where there is a perceived lack of clarity.

5.4 Benefits of
simplifying administrative requirements

EQ22:
How far will administrative simplification bring about benefits for economic
operators in terms of reduced administrative burdens?

Regulatory
and administrative simplification – and greater consistency in
requirements between IM legislation – should in principle lead to cost savings
for economic operators (EOs) through reduced compliance costs. It is important
to scrutinise possible simplification measures carefully, since there could be
unintended consequences that may serve to increase administrative burdens
and/or limit the scope for flexibility of economic operators, as well as reduce
the effectiveness of the legislation (for example, in respect of product
safety). There can also be unintended consequences that are the opposite of the
good intentions of the regulator. Specific examples are now provided:

Table
5.7: The simplification of DoCs – advantages and disadvantages

Simplification || Expected benefits || Potential disadvantages

Decision 768/2008 – common template for declaration of conformity Requirement that manufacturers should produce a single DoC || Eliminate inconsistencies between DoCs under different IM directives and regulations Common template would mean less familiarisation time for EOs. || Less flexibility for EOs If a single DoC is produced, then the DoC may have to be updated more frequently.

Taking
the example above, in Decision 768/2008/EC, there was a proposal
that for
manufacturers should be required to produce a single DoC
covering all applicable IM legislation, although this should in theory help to
reduce burdens for manufacturers. However, industry stakeholders were against
the proposal even if it is designed to help reduce their administrative costs.
Industry associations interviewed were strongly in favour of retaining the
current flexibility to decide either whether to produce a single DoC covering
all applicable IM legislation or instead multiple DoCs for each separate
directive and regulation applicable. This is an
example of where administrative burdens on firms could paradoxically be
increased, especially for SMEs.

The
rationale was driven by a concern among manufacturers of minimising cumulative
regulatory effects. Since there is a requirement in IM legislation and under
the NLF to regulatory review and update DoC, their view was that If multiple
legislation is applicable to a given product, and the manufacturer also decides
(voluntarily) to list the technical standards used to achieve conformity with
particular pieces of legislation, then the DoC has to be changed frequently,
due to the cumulative frequency of legislative updates and amendments of
technical standards.

In
the next example, we examine the issue as to whether less legislation means
that the costs for manufacturers and other economic operators are reduced. This
might be said to be the simplification conundrum.

Table
5.8: Simplification – does less legislation mean less cost?

The laptops case study provided an example of a product group where there are alternative routes to compliance with Union harmonisation legislation. Manufacturers of laptops choosing to define their product as a radio product follow the R&TTE Directive whereas those that adopt a modular approach to compliance will comply with the R&TTE, LVD and the EMC separately. In practice, though, since the essential requirements under the LVD and EMC are already included within the R&TTE Directive, the manufacturer still checks for electrical safety and electromagnetic compatibility. The fact that manufacturers can in effect choose between different Directives to achieve regulatory compliance allows consideration as to whether a situation in which less regulation is applicable to a given product would result in cost savings for manufacturers. Among the findings were that broadly similar administrative requirements and testing as part of conformity assessment procedures will apply irrespective of whether one piece of legislation has been applied or three pieces of IM legislation separately. Potential cost savings and impact of “simplification”: since manufacturers have different preferences, and both advantages and dis advantages can be identified of following a modular approach or the R&TTE-D alone, it is not possible to quantify the cost savings of a simplification measure in which only the R&TTE-D was applied. Indeed, manufacturers prefer retaining the flexibility of different routes to regulatory compliance. Although some benefits were identified of only following one piece of legislation, such as clear legal certainty that the manufacturer is solely responsible for legal compliance, there were no cost savings per se. Product testing, for instance for electrical safety, have to be performed irrespective of which route to compliance is adopted.

As noted earlier, the research identified
examples of IM regulations where there may be scope to merge directives and
regulations in future, such as the Machinery Directive and Outdoor Noise
Directive, the Pressure Equipment Directive (PED) and the Simple Pressure
Vessels Directive (SPVD). In assessing the potential benefits, there was a need
to consider whether there could be cost savings for manufacturers resulting
from the merger of IM legislation.

Mergers of IM legislation can be helpful in reducing the
cumulative effects of legislation. However, combining legislation does
not necessarily mean that manufacturers benefit from cost savings. Indeed, it
is difficult to make generalisations about whether merging Directives when
there is scope to do so will necessarily lead to cost savings and is always the
best approach. This is highly specific and depends on the objectives (e.g.
safety and health, environmental) level of risk, and conformity assessment
procedure applicable to the IM regulations in question that are under
consideration to be merged.

As shown in the table illustrating alternative routes to
compliance for the laptops case study, the extent of cost savings will depend
on whether mergers of Directives involve substantive changes or are largely
cosmetic in nature. Following a merger of IM legislation, similar requirements
may still apply irrespective of the number of individual pieces of legislation
applicable. For example, in the automotive sector, in order to bring about
regulatory simplification, about fifty different Directives were revoked by one
umbrella Directive and replaced by the direct application of the
internationally harmonised UN Regulations. However, the regulatory fitness
check of the type approval legal framework found that most manufacturers
consider this change to have been largely cosmetic, since it has not led to any
changes in the requirements themselves, or in the number of pieces of
legislation involved. There can also be execution risks, since changing the
structure of legislation requires additional familiarisation time for
manufacturers with the new structure of the legal framework[69]

There are potentially risks in merging Directives in instances
where the merger of two Directives may mean that the resulting legislative and
conformity assessment requirements becoming more demanding than was previously
the case. For instance, the current requirements for Simple Pressure Vessels
are less strict in terms of the conformity assessment procedure that can be
applied than for the PED. If the two were merged, then some manufacturers that
apply the SPVD expressed concern that those producing only Simple Pressure
Vessels may be subject to stricter requirements than they currently are.

Some manufacturers already apply the PED to manufacturing all
types of pressure equipment and in this case merging the directives would not
result in any changes per se. It would seem that the main benefits in this area
would be to simplify the legal framework for authorities responsible for
enforcing the directives and to strengthen the safety of pressure equipment for
users (this last aspect is a key issue given the relocation of some parts of
industry to areas outside Europe and the observation made in some quarters that
non-conforming products imported from third countries have been identified on
the Internal Market).

With regard to the possible merger of the Machinery Directive and
Outdoor Noise Directive, it remains unclear if the latter Directives were to be
merged with the MD which conformity assessment procedure would be adopted, and
whether the Supplier's Declaration of Conformity, which is the mechanism
allowed under the MD) would also apply for the Noise aspects, were these to be
merged. Even if the SDoC approach were to be permissible for outdoor noise,
there is not yet sufficiently robust data to show that third-party testing is
more expensive than internal testing (often with some external observation)
under the SDoC, which makes it difficult to quantify the potential cost
savings.

Moreover, the cost differential with SDoC is not always clear cut,
because many global manufacturers use third party testing anyway for
reputational reasons and because third party testing results may be required
and recognised on third country markets. In the short term, paying a consultant
or Notified Body to carry out some tests is less costly than acquiring the
necessary laboratory equipment and paying the recurrent costs (annual costs of
calibration). There is also a need to invest in human resources to carry out
testing internally.

Although on the one hand, making Union harmonisation legislation
as consistent as possible between IM legislation is strongly supported by
industry, given that industry is broadly satisfied with the current approach to
regulating industrial products and placing products on the Internal Market,
there are concerns about pursuing a regulatory simplification agenda if this
were to radically depart from the current approach, which is one driven by
flexibility and pragmatism.

In summary, the following potential costs and impacts might be
expected to arise from the simplifications described here:

·
There could be cost savings from merging specific Directives,
but this depends on what form the combined IM regulations take, the conformity
assessment system agreed and whether this differs from what preceded it, etc.
It is therefore difficult to quantify and the benefits to industry may be
spread unevenly if manufacturers are currently afforded the opportunity of
currently selecting alternative regulatory routes. However, clear savings would
be possible, where a single conformity assessment process can replace separate
processes for each piece of legislation.

·
Reduced cumulative impacts of IM legislation through merging
different pieces of legislation - e.g. reversing the
trend towards the gradual accretion of IM legislation which has led to
cumulative costs (including those that arise from the updating of IM
regulations and frequent changes in harmonised technical standards[1] the familiarisation costs). However,
since the safety and technical requirements for more established New Approach
Directives are well known to manufacturers, the savings might in practice be
quite modest.

·
Lower costs of familiarisation –
reducing the volume of IM legislation through merging different pieces of
legislation, would in time savings for manufacturers since they would have to
follow less legislation. However, in the short term, at the point when
Directives are merged, there may conversely be an increase in the amount of
time required for familiarisation with applicable regulations. Benefits may
result in the longer if manufacturers and authorities are required to take into
account fewer pieces of legislation as part of their daily remit.

It
should also be taken into account whether mergers reduce the overall regulatory
complexity for stakeholders by reducing regulatory burdens or whether mergers
benefit certain groups and not others e.g. a merger may not reduce the
technical complexity for manufacturers but may add to the existing workload of
public authorities since they would have to familiarise with the new
legislation and then still to check all the requirements. This depends on the
precise configuration of proposed mergers, whether the integration of the
legislative is cosmetic (e.g. when the manufacturer still have to require with
broadly the same requirements irrespective of whether multiple piece of
legislation apply or only a single piece of legislation.

Research Findings (RFs)

·
(RF85)
Where the legislation is simplified, e.g. through mergers of directives,
economic operators may benefit from reduced costs of compliance through having
to familiarise themselves and comply with fewer pieces of legislation and from
streamlined conformity assessment procedures.

·
(RF86)
Any proposed simplification of the IM regulatory framework must be strongly
evidence-based and supported by extensive industry consultation. Otherwise,
there are risks that the regulatory framework which currently affords
considerable flexibility for manufacturers and is effective in accommodating
innovation could become less flexible, as well as the risk of unintended
effects.

·
(RF87)
There are concerns that the possible merger of directives such as the MD and
the Outdoor Noise Directive and of the PED and the SPVD could lead to more
complex procedures form some types of products and be confusing for industry

·
(RF88)
Although mergers of directives may in some instances result in cost savings and
other benefits, equally, in other cases, simplification may paradoxically lead
to additional complexity for manufacturers. In addition, given that IM
directives aim for a high level of technical safety, revising standards to be
met in this area would ultimately undermine one of the key objectives of the
legislation and the generally high levels of user satisfaction that have been
attained.

5.5 Quantification of the
benefits from simplification of Union harmonisation legislation

EQ23: To what extent can the benefits of administrative
simplification be quantified?

Notwithstanding the difficulties identified in assessing the
benefits of simplification outlined in Section 5.1, the evaluation considered
the extent to which it may be possible to quantify the benefits of these
simplifications. Some manufacturers and industry associations had useful
contributions to make in generating ideas on possible regulatory and
administrative simplification and suggestions as to how Union harmonisation
legislation could be made more effective, they were not able to provide estimates
themselves as to the level of potential cost savings. Although a quantification
exercise was undertaken, it should be stressed that the research team had to
develop most of the assumptions.

Among the types of simplifications that were considered include
some of those examined in the previous section, such as merging IM directives
and regulations and introducing a common template for the DoC, thereby reducing
familiarisation costs. A distinction was made in our analysis between:

·
Regulatory and administrative simplifications – these are distinct
types of simplification measures, as explained in the typology (Section 2.3);
and

·
Specific simplifications relating to the eight product groups
covered by the harmonised cases.

An example of the quantification exercise in relation to general
benefits is provided in the following table. As explained above, the data is
based on assumptions, some of which are necessarily speculative in the absence
of firms being able to provide either data or even a ‘best estimate’
themselves.

Table 5.9: Simplification measures for all industrial products -
quantification of potential simplification savings

Proposed simplification || Explanation || Benefits and/ or disadvantages || Approximate savings

Ensure greater coordination in timing and updating of different pieces of IM legislation || Improve coordination in timing of regulatory review processes and recasting of IM directives and regulations. There are already examples of initiatives to strengthen coordination such as the Alignment Package which will involve the updating of 9 IM Directives in order to align these with the common provisions in the NLF). Ensure better synchronisation of the introduction of new, and revisions to existing IM legislation. || Minimise frequency of regulatory changes. Reduce cumulative costs of compliance. Also some disadvantages; less flexibility in terms of reacting on issues/new products/etc.; strong demands on firms/experts determining standards, etc. || 20.0%

Eliminate inconsistencies in requirements for the DoC between different IM legislation. No longer require DoC to be placed with the product (R&TTE-D only). Ensure a common template for the DoC across all IM regulations || There are currently differences in administrative requirements for the DoC between the R&TTE-D, EMC-D and the LVD-D respectively. Across IM regulations, there are also slightly different layouts and information requirements for DoCs. These problems are already being tackled through the Alignment Package. || Reduction in costs of producing a DoC. This would result from the use of a common template for a DoC rather than multiple templates. Reduced operational uncertainty for manufacturers (eliminate risk of delays to product shipments teaching the market[70]. || 0.2%

E-labelling and wider provision of compliance information electronically. Basic information – full DoC, technical standards that have been applied, safety data sheets could be provided online. Given commercial sensitivities, technical documentation could be provided through secure data transfer. || More regulatory compliance information could be made available online by manufacturers. The market surveillance system needs to be overhauled so that manufacturers provide most compliance information online rather than in paper copy. || For manufacturers: Lower printing costs, e.g. DoCs. Reduced human resource cost of responding to requests from MSAs for information. For MSAs: Better access to compliance information specific to each model. Reduced time to obtain compliance information. Resources freed up to carry out more technical checks. || 3.0%

Eliminate inconsistencies across Union harmonisation legislation as to whether CE marking is required. Example: before recent revision of Medical Devices Directive into a Regulation, there was no CE marking requirement but products faced conflicting rules. || Ensure uniform rules on CE marking across all relevant directives and regulations that require CE marking. Note: the Commission has already taken steps through the NLF and Alignment Package to rectify these inconsistencies. || Greater coherence in administrative requirements for economic operators || 0.4%

Make changes to the DoC allowing to identify a model and the variants || || Reduce costs for conformity assessment for firms operating as OEMs || 0.1%

Setting up mutual recognition schemes for conformity assessment procedures with major global jurisdictions || Discussions are currently taking place on the possibility of allowing for mutual recognition between the EU and US of conformity assessment through the framework of the TTIP || Reduce costs for European manufacturers of third party conformity assessment in the US || 0.2%

An assessment of possible simplifications is provided in each case
study, together with a quantitative estimate of the potential savings (see
Appendix C). Given some of the nuances associated with simplifications until
the fine detail has been drawn up (explained in Section 5.5), the cost saving
estimates provide approximate savings only.

Research Findings (RFs)

·
(RF89)
A number of simplifications have the potential to reduce the costs of
compliance with the legislation, namely: i) greater coordination in timing and
updating of different pieces of IM legislation; ii) Eliminating
inconsistencies in requirements for the DoC between different pieces of IM
legislation; iii) labelling and wider provision of compliance information
electronically; iv) Eliminate inconsistencies across Union harmonisation
legislation as to whether CE marking is required; v) Make changes to the DoC
allowing to identify a model and the variants; vi) Setting up mutual
recognition schemes with third-country jurisdictions.

5.6
Macro-economic
impacts of simplification on growth and jobs

EQ24:
What benefits from simplification can be identified for the wider economy?

5.6.1
Approach
taken

The
analysis presented here makes use of the estimated compliance costs and the
savings potential from simplifications for the 8 product groups examined
through the case study research. The basic assumption underlying the analysis
is that any cost reductions from simplifications to IM legislation will be
translated into savings in terms of firms’ operational costs, labour
productivity improvements and will eventually be passed on to consumers through
lower prices . Lower prices of products should help to strengthen the
international competitiveness of European manufacturers, thus boosting exports
and reducing imports. Ultimately, this should lead to an increase of the Gross
Domestic Product in sectors where regulatory and administrative simplifications
are made. An increase of GDP should, in turn lead to increased employment
within the sector.

However,
in the short term, increased labour productivity should be expected to reduce
employment, in turn reducing disposable household income and, as a result, the
level of private consumption. Thus, whereas GDP in the sector concerned is
increased at the macro-economic level, the impact of the reduction of
compliance costs on GDP is uncertain. Employment effects are also not a priori
certain, as the initial shock is a ceteris paribus reduction in the
number of jobs.

The
steps that were followed to carry out the quantitative assessment were:

1. Development
of a medium/long-term baseline scenario for economic development by defining a
set of plausible values of the exogenous variables of the model.[71]
These include the export volumes, consumption (household and government),
investment (enterprises and government), imports, GDP and depreciation and its
prices as well as labour costs and employment numbers.. The baseline
scenario was prior to regulatory simplifications being made of IM legislation.

2.
Estimates
of the level of cost savings linked to regulatory and administrative
simplifications of IM legislation identified in the eight product groups
examined in the case studies.

3.
Development
of an “alternative scenario” for economic development that takes into account
the estimated reductions in compliance costs.

4.
Comparison
of the alternative scenario to the baseline scenario so as to estimate the
impact of the compliance cost reduction on economic development.

Ideally, the estimation of the possible impact of simplification would be
based on a model of the EU economy as a whole or of each individual Member
State. Since this was not available, the PRISMA model for the Netherlands was
used[72]
and the costs reductions hypothesised for the EU economy were applied to an
economic baseline scenario to determine the impact on growth and jobs for the
Dutch economy. The results were then extrapolated to the EU level and the World
Input-Output (WIOM) model was applied[73]. This approach
could be justified on the basis that the core elasticities – mainly price
elasticities – do not vary too much across EU countries. Further details about the PRISMA and World Input Output Model models
used to carry out the quantitative analysis are provided in Appendix D of the
main report, which provides a technical note to support the quantitative
assessment of costs and the macro-economic assessment provided in Section 5.2
and 5.6 respectively.

The model variables that are directly affected are domestic final demand
by category (household and government consumption, investment), demand in the
private sector and labour productivity. Furthermore, exports should be expected
to increase as a result of a reduction in prices. The impact on EU imports has
also been taken from the PRISMA model. Taken together, changes in final demand
and imports determined the extent of changes in GDP. On the basis of changes in
GDP, employment effects were estimated making use of the expected changes in
labour productivity.

5.6.2
Impact
of simplifications

On
the basis of the analysis of the eight sectors examined in the case studies,
total compliance costs were estimated to be €342 million.

In
our analysis, a core assumption is that that these costs are borne by firms in
the selected manufacturing sectors (NACE Rev. 2 divisions 24 -30 and 33;
metallurgical industry under the PRISMA model).  The total cost savings for the
eight sectors were estimated to be around 11% of total compliance costs, or
around €38 million. It has also been assumed that this cost reduction would be
translated into a reduction in labour costs. At EU28 level, this means that
labour costs (including the imputed wage of the self-employed) would decrease
by 0.007% (see table 5.10) with an equivalent increase in labour productivity
of 0.007% for the relevant manufacturing sector metallurgical industry.

Table 5.10: Current
compliance cost and assumed cost reduction (EU28)

PRISMA model sector name || Relevant NACE Rev. 2 codes || total compliance costs (€m) || cost savings reduction

% || €m || in % labour costs [74]

Food industry || 10 -12 || 0 || 0 || 0 || 0.00

Metallurgical industry || 24 -30, 33 || 342 || 11 || 38 || 0.007

Chemical industry || 19 -22 || 0 || 0 || 0 || 0.00

Other manufacturing || 13 -18, 23, 31, 32 || 0 || 0 || 0 || 0.00

Wholesale trade || 46 || 0 || 0 || 0 || 0.00

Source: Panteia

5.6.3
Estimation
of impacts for the EU economy

Certain
adjustments were made between the PRISMA and WIOM models extrapolating from the
calculation of impacts to the EU28 economy as a whole. Firstly, the sectoral
classification used in WIOM is more detailed than the one in PRISMA. Secondly,
it makes use of the older NACE Rev. 1.1 classification of economic activities,
whereas since 2008, PRISMA has used the NACE Rev. 2 industrial classification
system. Thus, a correspondence table linking the two classifications has had to
be used.

The
results of the analysis are presented in Table 5.11. All final demand
categories excluding government consumption are all positively affected by an
11% cost saving. Imports would also increase, even though by less than the
impact on final demand. As a result, GDP would also be expected to increase. 
The basic conclusion is that the macro-economic effects of administrative and
regulatory simplifications to IM legislation and the estimated cost savings are
positive on balance. Exports are the main driving force behind this, and would
benefit from lower costs and lower prices of exported goods in selected
manufacturing sectors.

Table 5.11:
Macro-economic impact of 11% reduction of compliance costs on selected products

Variable || % change (EU28)

household consumption || 0.0005

government consumption || 0.0000

Investment || 0.0002

Exports || 0.0009

total imports || 0.0006

GDP || 0.0004

Source: Panteia;
calculations with PRISMA and WIOM

Table
5.12 shows the estimated impact on growth and jobs in EU28. At the
macroeconomic level, employment remains largely unaffected since the GDP
increase is caused by an increase in labour productivity. In the metallurgical
industry[75],
only around 40% of the original increase in labour productivity of 0.007% would
remain (0.003 against 0.007) due to the downscaling of enterprises in this
sector, thus an increase in the share of SMEs that have a higher share of fixed
costs and lower productivity levels.

Since
the benefits in terms of labour productivity in the specific sectors under
review are higher than the respective GDP increase, a small loss in the number
of jobs should be expected. Conversely, in other sectors of the economy, the
number of jobs created should be expected to increase.

Table 5.12:
Impact on GDP and employment of 12% reduction in the compliance costs on
selected products at EU28 level

Variable || || metallurgical industry || Total economy

GDP || % || 0.0008 || 0.0003

labour productivity (GDP per occupied person) || % || 0.0028 || 0.0004

occupied persons || % || -0.0021 || -0.0001

occupied persons || 100s || -400 || 0.0003

Source: Panteia;
calculations with PRISMA and WIOM

Conclusions from
macro-economic assessment of the impacts of simplification

Research Findings (RFs)

·
(RF90)
The simplification of IM legislation has the potential to reduce the costs of
compliance by around 11% of total costs of compliance, estimated at €342
million, i.e. a potential cost reduction of €38 million. This could lead to a
total increase in GDP of €48 million, equivalent to a GDP multiplier of 1.26.
The GDP-increase in the eight sectors under review in the metallurgical
industry (of which the 8 sectors form part) amounts to almost €19 million. The
number of jobs would decrease slightly, in particular in the sectors under review.

6.
Effectiveness,
fitness for purpose and impacts

This
section considers the overall effectiveness and fitness for purpose of Union
harmonisation legislation. The extent to which the legislation is achieving the
objectives set out in Article 114 of TFEU is considered. The benefits and
impacts of IM legislation at different levels are also assessed, for instance,
the effects on economic operators in opening up access to new markets, and at
the sectoral level, the impacts on market size and structure and on
strengthening industrial competitiveness of the promotion of intra-EU trade.

The specifications set out a number
of broad-ranging but specific issues for consideration that fall under the
effectiveness criterion. These include among others: the extent to which there
remain any regulatory and non-regulatory barriers, whether there are any
barriers to the development of innovative products and the use of advanced
manufacturing processes in production and KETs. A number of specific challenges
are then addressed such as whether the regulatory framework is fit for purpose
in dealing with the market surveillance challenges posed by e-commerce with
third countries, whether the legal framework is sufficiently friendly towards
green products, whether the increasingly blurred inter-relationship between
services and products leads to regulatory gaps, and the question as to whether
there should be a distinction made in IM legislation between regulating
products intended for professional use, as opposed to final consumers.

6.1 Regulatory and
non-regulatory barriers

EQ25:
What, if any, are the barriers (regulatory/non-regulatory) to the effective
functioning of the internal market for industrial products stemming from IM
legislation?

6.1.1
Regulatory
barriers

Stakeholders
confirmed that there has been considerable progress in addressing regulatory
barriers to the free movement of products through Union harmonisation
legislation since the New Approach was adopted in 1988, and the internal market
launched in 1993. However, the perception amongst economic operators is that
such barriers persist. For example, 89/96 respondents to a recent Your Voice
Consultation on possible reform and simplification of the regulatory framework
for industrial products, were view of the view that there remain regulatory
barriers within to the internal market for industrial products.[76]

Research
undertaken in the course of this evaluation identified four main types of
regulatory barriers that may undermine the effective functioning of the
internal market in industrial products.

The
first main type of regulatory barrier is differing or incorrect
interpretations or applications of IM legislation (including
language-related difficulties) following its transposition into national law.
This was most common regulatory barrier identified through the Your Voice
consultation. It is difficult to provide a detailed assessment since the
efficiency and effectiveness of national transposition processes (and the
incidence and nature of any infringement proceedings that may have been
launched by the Commission against particular Member States) were not formally
part of the study scope. Nevertheless, some feedback on this question was
obtained from national authorities.

Among
the feedback received was that, whilst in theory there is not much scope for
divergent interpretations of Union harmonisation legislation, there are
practical difficulties that may result in misinterpretations and misapplication
of the law. For instance, although there are official language translations of
each piece of IM legislation in all EU languages in the OJ, there is still
potential for misinterpretation and misunderstandings during the process of
transposing directives into national implementing regulations, even if these
are uncommon. For example, it was reported that differences in translation had
created divergences between the legislation applying in Italy and in
other countries, as described in the text box below.

 Table
6.1: Regulatory divergence in national transposition of EU Directives - Tunnelling
machinery

Under the Machinery Directive (MD), a problem occurred 3-4 years ago that stemmed from misapplication of EU law due to translation issues during the transposition process. This led to a change in the original intended meaning of the legislation, in particular, whether tunnelling machinery fell within the scope of Annex IV, which sets out categories of machinery that may be subject to one of the conformity assessment procedures involving a Notified Body. In Italy, the translation into national legislation meant that a tunnelling machine fell within the scope of Annex IV. However, other Member States, such as France, Spain and the UK had a very different interpretation. An Italian company faced legal uncertainty as to whether it could place its product on the market. Although the misinterpretation problem was resolved by the Italian authorities, since the operating costs of a single tunnelling machine are about €1m a day, there was a cost associated with the prolonged uncertainty.

The
above example illustrates why most economic operators and industry associations
interviewed were almost universally in favour of regulations to ensure legal
certainty (although views were more mixed on the advantages of regulations over
directives among national authorities).

Examples
were also identified of differences in interpretation as to whether technical
standards meet the requirements of IM regulations or not. For instance, sanitary
hot water equipment manufactured in accordance with EN 746-2 in industrial
enclosures is sometime accepted by market surveillance authorities under
Directive 2009/142/EC on Gas appliances (GAD). According to a respondent to the
consultation, “this has serious implications to the detriment of the firm that
made the placing on the market. There is a need to distinguish between
equipment intended for domestic hot water for domestic or commercial use within
the GAD and those intended for sanitary hot water industrial spaces that fit
better within the scope of the Machinery Directive. The same problem can occur
in other types of technological heating systems because it is not very clearly
defined within the scope of the GAD”.

Anecdotal
evidence suggests that it can sometimes be difficult for economic operators to
have products accepted that have already been placed on the market in the home
Member State where the economic operator is trying to place the product in
circumstances where conformity assessment testing has been carried out in a
country within the EU where the quality of testing services is not perceived to
be of equal quality or as rigorous. Even if this is against internal market
rules, and the manufacturer could potentially complain, this appears to be an
issue in some countries. The scale of the problem is difficult to assess since
it was difficult to identify concrete examples that could be cited. We detected
that some economic operators may be reluctant to complain, in case they
consider there is a risk for them to jeopardise their position in accessing
particular national markets.

The
problem of differing interpretations of legal requirements at national level
can also extend to guidance issued by national authorities. For example, one of
the enterprises consulted highlighted an example of two different national
authorities issuing conflicting guidance about which legal requirements were
applicable to economic operators.

Table
6.2: Conflicting advice and interpretation of IM requirements by MSAs

Example 1 - a firm in the Netherlands asked the German government what would be required to test a product for the REACH Directive. The national authorities agreed that tests could be made on a sample of several items and to then use the data obtained to make calculations for REACH across their product range. However, a similar request to the Dutch authorities resulted in different advice. The company was told that it must test each product from each supplier separately. Given the extra costs involved, a German exporter to Holland would thus have an unfair advantage over local producers. Example 2 - In 2007 the firm concerned asked the Dutch market surveillance authorities if the new standard for oil lamps should be followed, since there were many problems with this standard. Their reply was that this was not required. In 2008, products not meeting the new standard were taken off the market in Germany. This meant that the national authorities in Holland had to revise their advice and companies had to recall many items.

The
second type of barrier was that of additional national requirements,
most often introduced during the process of transposing Directives into
national law, a process known as “gold-plating”. These often concern the
after-sale phase related to the use, service and maintenance of products and
can lead to additional obligations to provide information or undertake testing,
which can different between countries. For example, a 2004 survey of firms
conducted by UNICE found that 115 of the 200 respondents had to introduce
product changes and 92 had to conduct additional testing or gain additional
certification. The perception of gold-plating was shared by several respondents
to the Your Voice consultation, as well as by several of the stakeholders
interviewed. For example, there reported to be diverging safety requirements
for recreational crafts and related boat equipment.

It
may however be the case that gold-plating is more one of a perceived problem
than an actual barrier. The research identified few confirmed instances of
gold-plating, in large part because many Member States have transposed the full
text of the relevant Directive, as written. Moreover, many economic operators
confuse national “voluntary” marking and labelling requirements with there
being additional national mandatory requirements in the legislation, whereas in
fact this is not the case.

Another
issue identified is that economic operators do not distinguish between products
covered by harmonised IM legislation and those where only the principle of
mutual recognition applies; indeed, the UNICE survey focused on both harmonised
and non-harmonised products. Similarly, where national authorities require
additional testing, this may reflect a lack of confidence in EC type-approval
certificates issued in other countries rather than additional national
requirements per se (as we discuss below). In other cases, national
requirements in areas not covered by EU legislation may impinge on the free
movement of harmonised products. For example, the installation of lifts
(harmonised under the Lifts Directive) may be affected by national regulations
relating to local building or fire safety standards, which are not harmonised
across the EU.

We
assessed how far the situation has changed in the past decade since the UNICE
survey was undertaken.  In the 2013 Your Voice Consultation carried out by the
Commission on possible reform and simplification of the regulatory framework
for industrial products, a high proportion of respondents perceived there to
remain at least some outstanding regulatory barriers to the internal market for
industrial products (89/96 respondents).  However, a note of caution is needed
in taking this finding at face value given that some problems cited by Your
Voice respondents as being of a regulatory nature were actually non-regulatory,
such as national marking and energy labelling schemes (see the next
sub-section).

The
third main type of barrier identified was the lack of consistency in the
recognition of EC type-approval certificates issued by NBs in other countries.
For instance, some countries do not recognise the calibration capability
approval carried out in another country. As a result, according to one
respondent, manufacturers in some countries, e.g. France, Germany, Portugal,
Spain, Switzerland need to go through type-approval processes again, which is
costly, even if they have already certified their products and followed EU
technical standards. An example cited was Solar Thermal Collectors; even where
products have already been certified under EN12975, the regulatory authorities
in some countries (e.g. France, Ireland) have insisted on additional national
certification requirements even though product testing had already been
undertaken in another country. Another example was provided by a national
authority in the UK: “Importers and distributors in different Member States may
be reluctant to accept products from manufacturers and OEM suppliers unless
they have been subjected to testing by a domestic NB, even if this goes against
internal market rules. In practice, there is not always confidence that
conformity assessment carried out by NBs in other countries are equivalent in
terms of quality of services. Manufacturers may consequently be asked to have
their products retested”.

The
fourth main type of barrier was the differences between Member States as to
whether products can be placed on the market if they have used an older
version of technical standards or whether the most recent version must be
used. There was a lack of certainty among economic operators and market
surveillance authorities in some Member States as to whether products that have
been legally placed on the market can remain on the market or should be
withdrawn once updated product safety standards have come into force. This was
raised for instance in relation to fuse sockets. Industry representatives
indicated that there have also been cases where products are blocked by customs
authorities because it is unclear what the legal position is in relation to
products conforming to outdated standards, which can add to economic operators’
operational risks.

The
extent to which such barriers hinder the effective functioning of the internal
market for industrial products should be seen in the light of the institutional
and regulatory mechanisms for addressing the misapplication of EU law in
national legislation. Under Article 258 of the TFEU, the Commission is
responsible for ensuring that EU law is correctly applied. Consequently, where
a Member State fails to comply with EU law, the Commission has powers to take
action in case of non-compliance.  It can bring infringement proceedings and,
where necessary, refer cases to the European Court of Justice. There are also
mechanisms such as the 98/34 notification procedure (and the TRIS database
which stores these notifications) through which Member States must inform the
Commission and other Member States about the adoption of draft national
technical regulations for products. There is then an opportunity for Member
State authorities to raise any concerns. An analysis of TRIS notifications was
carried out as part of the desk research. This found that most problems
identified related to non-harmonised products (a statistical analysis is
provided in the working paper on non-harmonised products in Appendix E).

Incorrect
application of EU law can also be tackled through soft measures such as
awareness-raising to promote more uniform interpretation and consistency in the
application of IM rules and through legal remedies (e.g. the possibility of
launching infringement proceedings against particular Member States).

Research Findings (RFs)

·
(RF91)
Despite considerable progress, regulatory barriers to the effective functioning
of the internal market persist, particularly in the form of differing or
incorrect interpretations or applications of IM legislation, additional
national requirements, lack of consistency in the recognition of EC
type-approval certificates issued in other countries, and inconsistency in
allowing the use of old versions of technical standards.

·
(RF92)
There is evidence to suggest the economic operators perceive the regulatory
barriers to be greater than they are in reality. Reported instances of
regulatory barriers often relate to non-harmonised product groups or to
misapplication of IM legislation rather than to the text of the legislation
itself.

6.1.2
Non-regulatory
barriers

A
number of respondents to the Your Voice Consultation identified non-regulatory
barriers to the free movement of goods. Among the most commonly cited barriers
were "soft law" requirements, quasi-legal instruments which do not
have any legally-binding force.

Respondents
pointed to a considerable number of “voluntary” national marking and
labelling schemes that operate across different national markets. These
were viewed by some respondents as being a de facto requirement in order
to get products into the distribution chain, even if they are not legally
required to place a product on the market.

The
multiplication of labelling requirements was viewed by enterprise respondents
as imposing a significant cost on manufacturers, and undermining the internal
market, often without adding much value. In addition, such labelling
requirements were viewed as causing confusion among consumers since there are a
large number of national marking schemes and labelling requirements. A further
problem identified was that in some EU countries, being part of a national
voluntary labelling and certification scheme has become a de facto
requirement to avoid higher risk insurance premiums. An example was cited
related to the use of a national certification system in France[77] (NF
UPEC) for ceramic tiles.

A
further illustration of a non-regulatory barrier was that in some product
areas, national certification schemes are in operation and those
economic operators that are from another Member State that do have such
certification may be unable to benefit in terms of having access to national
financial incentive schemes. An example cited in this regard was in relation to
certain types of renewable technologies where signing up to the national
certification scheme was a requirement in the UK in order to access funding. In
some Member States, respondents pointed to evidence that economic operators and
public authorities may raise objections to the use of specific harmonised
standards that deviate from established national practices and/ or national
technical standards. This creates legal uncertainty as to whether economic
operators will be able to use a single European standard across the EU or need
to customise the standard in particular national operating environments to
reflect national standards.

A
further non-regulatory barrier identified was that national standards have been
developed that are widely used but “voluntary” in some Member States. For
instance, in Germany, in some sectors such as lifts, it is difficult in
practise to sell products in the German market without meeting voluntary energy
efficiency standard VDI 4707 for lifts, which is a German national standard, and
displaying the appropriate energy efficiency labelling in the lift.  A small
lifts manufacturer from another Member State stated that “it is problematic for
non-German firms wishing to place their products on the German market is that
there are low levels of consumer confidence for manufacturers, assemblers and
installers that do not meet the German national “voluntary” standard”.  This
was confirmed through desk research. A Top 4 lifts company pointed out that
“The VDI 4707 guideline has been published by the Association of German
Engineers (VDI). Although this is an independent organization and as such,
their standards are voluntary, the VDI 4707 is quickly becoming the key
standard in the market worldwide”[78].

Research Findings (RFs)

·
(RF93)
Non-regulatory barriers, such as “voluntary” national labelling schemes,
national certification schemes and national technical standards, are reported
to affect the effective functioning of the internal market.

6.2 Barriers to the free
movement of innovative products

EQ26:
Are there specific regulatory barriers to the development and free movement of
innovative products, including products integrating key enabling technologies
(KETs)? Are there any legal gaps not already covered by IM legislation for
industrial products?

EQ26:
Are there specific regulatory barriers to the development and free movement of
innovative products, including products integrating key enabling technologies
(KETs)? Are there any legal gaps not already covered by IM legislation for
industrial products?

A
characteristic of the New Approach to Union harmonisation legislation is that
it is technology-neutral since the legislation only sets out the
essential requirements. Manufacturers are allowed to determine for themselves
how best to meet the essential requirements. An exception to this general rule
is legislation such as the Ecodesign Directive, which aims to remove
inefficient technologies from the market in favour of more
environmentally-friendly technologies, as discussed in section 6.3 below.

It
therefore does not matter from a legal point of view whether traditional or
advanced manufacturing processes are used, since the same legal framework
applies relating to the placing of the product on the market. For example, a
laptop using very innovative nano-electronic components is still subject to the
LVD and EMC Directives, in the same way that other domestic appliances, such as
refrigerators are.

 The
fact that Union harmonisation legislation is non-prescriptive regarding the
technical specifications that should be adopted means that by leaving detailed
implementation to technical standards, the regulatory framework is sufficiently
flexible. The more significant challenge is whether there are suitable
technical standards that manufacturers can follow and whether such standards
are updated sufficiently frequently to take new innovations into account.
Whenever there is no suitable technical standard available because the specific
innovation, new technology or advanced manufacturing process has not yet been taken
into account, firms can use alternative means to demonstrate presumption of
conformity, although this may be more costly since demonstrating conformity
with harmonised technical standards tends to be cheaper.

Ensuring
that the legislation does not pose barriers to the development and free
movement of innovative products is also essential to the achievement of other
EU policy objectives. For example, EU industrial policy seeks to promote the
development and application of Key Enabling Technologies (KETs).[79] A
KET-based product is defined as a product induced by KETs and/or those produced
by advanced manufacturing technologies. Examples of KETs are high-efficiency
photonic LEDs; advanced batteries combining advanced materials and
nanotechnologies for electro-mobility; biochips combining advanced materials,
nano-electronics and photonics; nano-components used in nano-electronics.
Clearly, the achievement of this objective in the industrial policy field is in
part dependent on the legislation being sufficiently accommodating.

The
majority of industry representatives and other stakeholders consider that that
Union harmonisation legislation is sufficiently technology-neutral and does not
impose particular restrictions or limitations on innovation. Indeed, IM legislation
was not viewed by interviewees from industry as restricting manufacturers in
either the use of innovative materials, advanced manufacturing processes or in
the incorporation of new technologies into products.

For
example, the Machinery Directive can accommodate the development of 3-D
printers as hardware, whilst the legislation applicable to the products
produced by 3-D printers will be dependent on the type of product produced. In
principle, assuming these products are placed on the market, they will be
subject to the same product safety rules (and underlying technical standards)
as any other industrial products.  There are a series of legal issues raised by
3-D printing, such as the risk of dual-use and challenges in protecting IPR
copyright, but such legal issues do not relate to product safety per se.

A
further issue raised through the increased use of 3D printers investigated was
who is legally responsible for the products produced by 3-D printing.  Should
this be the manufacturer of the 3-D printer, the designer of the 3-D printer,
the company selling the 3D printer or the final industrial user or consumer
that used the 3D printer to produce products that were then placed on the
market. However, legal responsibility is clearer than it might appear at first
sight. The manufacturer of printer hardware is responsible for the product
under existing IM legislation (irrespective of how high-tech the printer is),
while the user of the 3-D printing device is responsible for ensuring the
safety of products that they manufacture.

There
are also practical difficulties posed by the increased use of additive
manufacturing technologies in terms of in ensuring effective market
surveillance of products printed using 3-D printers. Whereas the quality of
industrial and consumer products sold through conventional supply chains can be
checked relatively easily by MSAs, it is much more difficult to check the
quality of products produced in small quantities by individuals or micro firms,
especially when the route to market may be through online commerce channels
only.

There
is also evidence that IM legislation has in some cases acted as a catalyst for
promoting innovation. First, the functioning of the internal market has enabled
some manufacturers to enjoy economies of scale in production, which allows them
to invest more in research and development. For example, the consolidation of
the lifts industry across Europe is acknowledged as having enabled the
development of more extensive research and development centres, since such
costs are spread across a larger number of units sold. Second, where essential
safety requirements have been made more stringent over the years (as and when
legislation is recast or when EU legislation replaces national legislation),
this can create a new demand for certain products. Again in the lifts industry,
EU legislative requirements relating to the incorporation of emergency
telephone systems in new lift units were reported to have boosted the demand
for such systems; this increased the incentive for firms to create innovative
new products in the knowledge that they would be more likely to recoup
investment costs.

In
some cases, there is evidence that the lack of EU legislation may prevent the
development and free movement of innovative products, such as products
integrating KETs. There will inevitably be a tendency for legislation to lag
behind the development of innovative products and technologies - legislation is
rarely developed for technologies and products that do not exist! For example,
in the case of products incorporating nano-materials (a KET), there is evidence
that, in the absence of a regulatory framework at EU level, Member States are
introducing their own legislation, given the need to ensure health and safety
in the production and sale of this particular product. Clearly for such
products, there is a need to develop appropriate EU legislation to facilitate
further
development and application of such KETs. The text box
below explores the case of nano-materials in more detail.

Table
6.3: Emergence of national legal frameworks in areas not yet covered by IM
legislation – nanomaterials

Legislation on nanomaterials has to strike a balance between an effective regulatory framework that takes into account scientific risks in usage while at the same time promoting the development of KETs and avoiding impeding innovation. There is currently no legal framework at EU level or harmonised legislation on nanomaterials. However, a legislative framework on nanomaterials is evolving in some Member States because the nanomaterials sector is a promising emerging sector but there are concerns about ensuring that the risks are appropriately evaluated on a scientific basis. France is currently the only Member State with a legal framework regulating the use of nanomaterials and the French national authorities are setting up a national registration system for the use of nanomaterials. Several other EU countries are exploring the possibility of introducing national legislation, such as Belgium and Italy. Since over the next 5 years, different national legal frameworks may be developed, the question as to whether harmonised EU legislation should be introduced so as to avoid regulatory fragmentation and to ensure a level playing field for economic operators is under consideration through a second EU regulatory review. There are however concerns among industry stakeholders in relation to the possible development of EU legislation on nanomaterials that the second regulatory review at EU level to determine whether specific legislation is needed on nanomaterials would move more quickly. Consideration is already being given to amending the annexes of the REACH Regulation to take nanomaterials into account. It is challenging doing so without making changes to the REACH regulation itself. A consultation is currently being carried out on this topic by ECHA and the Commission. The Commission’s view is that “The REACH approach to hazard assessment and risk characterisation, with its built-in flexibility, makes it overall suitable for nanomaterials”. Furthermore, the Austrian environmental agency is carrying out a review of RoHS. This is taking place faster than the process of reviewing whether EU legislation on nanomaterials is needed.

There
are a number of issues relating to the use of KETs and their integration into
innovative products. Firstly, revisions to technical standards do not keep pace
with technological developments. This does not necessarily prevent the
application of such technologies, but does risk imposing costs on manufacturers
who are required to use alternative means of demonstrating presumption of
conformity in the interim period between a new technology being developed and
technical standards being adjusted to reflect it. Since technical standards provide
the basis on which a significant percentage of manufacturers achieve regulatory
compliance, it is important that standards are developed in a timely manner and
keep pace with technological “state of the art”.

The
second difficulty is that multiple pieces of legislation may apply to
innovative products, sometimes with blurred boundaries between them. Again,
this would not necessarily prevent such products from being placed on the
market, since many producers (particularly large firms), conformity assessment
bodies and market surveillance authorities are used to dealing with such
complexity. The risk would remain, however, that some producers, particularly,
SMEs would lack the necessary resources to address the requirements of the
legislation and thus be deterred from placing innovative products on the
market. In these instances, there will be a continual need to monitor the
situation and, where necessary, revise the legislative framework, either
through recasting directives and regulations or through introducing entirely
new pieces of legislation. There may also be a need to provide additional
advisory support and guidance for SMEs, as and when it becomes evident that
they are struggling to address the requirements of the legislation in respect
of innovative products and KETs.

The
Industrial Policy Communication also highlights the importance of advanced
manufacturing (the use of innovative technology to improve products or
processes). However, it is important to stress that IM regulations are not
generally a hindrance to the development of advanced manufacturing, since this
concerns intermediate production processes whereas the focus of IM regulations
is on products intended for final use that are being placed on the market.
There are issues as to whether IM regulations are sufficiently clear about the
treatment of components and spare parts used in final products. Certainly,
there is confusion among economic operators in some product areas and whether
these are included within scope (see earlier analysis – evaluation question 2).

Research Findings (RFs)

·
(RF94)
IM legislation is sufficiently technology-neutral and tends to promote rather
than limit innovation. (Stakeholder interviews; Product case studies)

·
(RF95)
A lack of EU legislation may hinder the development and free movement of
innovative products, where Member States introduce their own legislation
(Nano-materials case study)

·
(RF96)
Where technical standards do not keep pace with technological innovations,
manufacturers may be required to use alternative ways of demonstrating
conformity with the essential requirements of the legislation. (Stakeholder
interviews)

·
(RF97)
Where multiple pieces of legislation apply to an innovative product, there is a
constant need to monitor and, if necessary, revise the legislative framework
and also provide guidance to operators. (Stakeholder interviews)

6.3 Barriers to the free
movement of green products

EQ27:
Are there specific regulatory barriers to the development and free movement of
green products? Are there any legal gaps not already covered by IM legislation
for industrial products?

Whilst
IM legislation is generally intended to be technology-neutral, other areas of
EU policy aim to promote wider development and use of green products. For
example, the Commission Communication “Building the Single Market for Green
Products”[80]
aims to facilitate a higher uptake of green products and of greener practices
by companies in the EU market by contributing to the removal of potential
barriers to the free circulation of green products in the Single Market.
Evidence from the Your Voice Consultation suggests that green products are able
to circulate, with the majority of industry representatives responding to the
Your Voice Consultation (40/47) reporting that were no regulatory barriers to
the movement of such products.

EU
legislation has, in some cases, promoted the development and circulation of
green products by aiming to remove inefficient technologies from the market in
favour of more environmentally-friendly technology. For example, the Ecodesign,
Outdoor Noise Directive (OND), and Non-Road Mobile Machinery Directives (NRMMD)
have explicitly aimed to ensure that all products fulfil a minimum level of
environmental performance and to ensure that they are freely traded across the
EU[81]. As
indicated by the recent evaluation, in the absence of the Ecodesign Directive,
national measures would have been implemented leading to the creation of
technical obstacles and market fragmentation that would operate against the
development of green products. Similarly, RoHS and REACH have promoted the
early phasing out of hazardous substances and dangerous chemicals respectively,
and incentivised manufacturers to identify alternative substitutes. The recent
review of REACH[82]
concluded that, notwithstanding the important administrative costs, the
information collection mechanisms, the registration and authorisation processes
and the candidate list of hazardous substances have often acted as stimuli to
product conception or innovation through the increased knowledge of substances
and properties.

Evidence
from the implementation of other pieces of legislation with environmental aims,
such as the F-gas Directive, RoHS and REACH regulations, OND or the NRMMD, is
rather mixed. Interviews of industry representatives highlighted a direct link
of the requirements of the OND and NRMMD to the promotion of innovation in
relation to less noisy and less polluting engines. However, it was also pointed
out that the share of R&D activity linked to NRMM provisions is disproportionate
(as suggested, up to 80% of the total R&D) leading to less progress made in
relation to other equally important objectives such as product performance.

At
the same time, it would appear that a number of non-regulatory barriers may
exist to the circulation of green products. A first barrier may be the lack of
a common definition of what a 'green product' is and what makes a 'green
organisation'. As indicated by a national industry association in Italy, there
is a “lack of harmonised criteria for applying different green terminology
across different product types. This can lead to confusion and misleading
advertisements for consumers, especially when the term “sustainable” is used.”
Another barrier can be national incentive schemes that promote the take-up of
environmentally-friendly technologies; whilst these do not prevent non-national
companies from supplying the national market, they clearly put them at a
competitive disadvantage (see text box below).

Table 6.5: Renewable Technologies
incentives schemes for UK providers

In order to access UK Government Financial Incentive Schemes installers of Renewable Technologies must be certified under the MCS Installer Certification Scheme. Within the Scheme Rules there are requirements that compel additional product testing or completely restrict the installation of some specified product types that are otherwise freely available elsewhere in the EU. The Microgeneration Certification Scheme (MCS) (Document MCS012 requires manufacturers to submit PV and Solar Thermal products for UK Specific Roof Tests and Certification, in conflict with EN12975) UK - MCS Scheme (Document MIS3001 specifically restricts the Installation of In-Roof Solar Thermal Products that carry the European SolarKeymark Certification). The MCS Installer Certification Scheme is the only scheme recognised by the UK Department of Environment and Climate Change (DECC). DECC do not recognise Installer Certifications Issued by other EU Member States which appears to be in conflict with UK obligations under Directive 2009/28/EC Article 14-3.

There
is also evidence that the free movement of green products is undermined by
weaknesses in market surveillance. It is a rather common view among most
stakeholders – including national authorities - that safety aspects are given
priority and compliance with environmental requirements in relation to
emissions, noise, energy efficiency are rarely examined given the limited
resources of market surveillance authorities. As a result of this, firms
producing in green products may face unfair competition from firms that either
make false “green” claims or are allowed to avoid certain costs and compete on
the basis of low prices. This view was supported by a small number of
respondents to the Your Voice consultation (7/47) who identified a lack of
appropriate market surveillance and enforcement of applicable environmental
requirements (e.g. in the case of Ecodesign).

Research Findings (RFs)

·
(RF98)
There are few, if any, regulatory barriers that specifically relate to the
development and free movement of green products. (Your Voice consultation;
Previous evaluations of IM legislation)

·
(RF99)
EU legislation has done much to promote the development and free movement of
green products by removing environmentally-unfriendly technologies from the
market and phasing out hazardous substances. (Analysis of text of legislation;
Previous evaluations of IM legislation)

·
(RF100)
Some non-regulatory barriers remain, e.g. lack of common definition on “green
products”, lack of harmonised criteria for green products. (Analysis of text of
legislation; Stakeholder interviews)

·
(RF101)
Some market surveillance authorities prioritise unsafe products rather than
products that fail to meet environmental standards. (Stakeholder interviews;
Your Voice consultation).

6.4 Effectiveness in
responding to the challenges of e-commerce

EQ28:
To what extent is legislation adapted to the challenges presented by
e-commerce?

When the New Approach Directives were introduced in 1985,
e-Commerce was in its infancy and accounted only for negligible levels of
trade.[83] Since then, levels of
e-Commerce have grown exponentially, now accounting for a significant share of
all transactions. By making information more available, helping to link
suppliers and purchasers across Europe and enabling better price comparisons,
e-commerce has great potential to facilitate the free movement of goods across
the EU. For example, a 2011 study for the Executive Agency for Health and
Consumers estimated that an increase in cross-border on-line retailing from
3.5% to 15% of all sales would benefit consumers by €204.5bn p.a. (equivalent
to 1.7% of EU GDP) through lower prices and increased choice.[84]
However,
the level of cross-border e-commerce within the
EU has remained relatively low. A 2010 Eurobarometer survey found that only 7%
of EU consumers had bought goods or services online in the previous year from a
seller located in another EU Member State.

Whilst IM product legislation includes few, if any,
references to e-commerce, the research has identified few particular problems
related to e-commerce within the EU in respect of compliance with IM
legislation; indeed, none of the stakeholders interviewed has suggested that
e-commerce raises concerns that are different from other forms of trade.[85]
For example, one interviewee compared e-commerce to telephone commerce, which
has been undertaken for many more years.

E-commerce does appear to present some serious challenges
where products are imported from 3rd countries into the EU.
Such challenges may require greater consideration by EU policy, which has
tended to focus mostly on e-commerce within the EU.[86]
Yet the scale of the problem would suggest the need for action at EU level; one
market surveillance authority in Germany reported identifying 20,000 different
compliant products offered for sale on the internet by 3rd country
suppliers. According to those stakeholders that offered a view, the main
problem with the legislation is the lack of clarity over when products are
placed on the market and by whom.

Indeed, there appears to be ambiguity as to whether
making available for purchase via on a retail website constitutes placement of
the product on the market. Similarly, there is the question as to whether the
purchaser of the product from a 3rd country supplier via a website
is the importer or not. In effect, e-commerce allows the product value chain to
be shortened, for example, by removing the need for wholesalers in many cases.
Overall, the effect is to facilitate the import of non-compliant products, with
consequent increased risks for purchaser. Reported problems include the sale of
products without use instructions or warnings in an appropriate language,
non-respect of guarantees and lack of effective legal redress. Whilst the
definitions of importers and distributors provided by the NLF are reported to
be helpful, it would appear that further clarification is necessary.

In addition to problems of defining responsibilities, there
are very significant practical problems in the market surveillance of
products sold on-line. Whilst market surveillance authorities did not
report any lack of legal authority to seize non-compliant products, they do,
however, report considerable difficulties in the identification and
interception of such products. Market surveillance authorities have fewer
problems to identify industrial products imported into the EU via “traditional”
routes, for example, through co-operation with border and customs authorities
who can help them intercept bulk shipments of products that may be
non-compliant. Similarly, market surveillance authorities have much fewer
difficulties to identify and intercept products sold through conventional
physical outlets. In contrast, goods purchased from third countries via the
internet may be delivered to the end-user in single consignments via the conventional
postal system, making it much harder to intercept potentially non-compliant
products.

One interviewee commented that: “It’s relatively easy to
intercept one shipment of 10,000 mobile phones at a port; it’s almost
impossible to intercept 10,000 mobile phones each of which has been posted
individually from a third country”. Moreover, even where market
surveillance authorities identify websites selling non-compliant products, they
may simply be unable to identify the supplier using the website.

The challenges raised by the difficulties in tracking and
tracing products may be compounded by a degree of ignorance amongst some of
the parties. In particular, providers of e-commerce platforms may be
unaware that their platforms are being used to trade goods that are
non-compliant. Similarly, end-users may be unaware that they are purchasing
non-compliant products from a third-country supplier and unaware that they
might not enjoy the same legal protection as they would in the case of
purchases made within the EU. Some interviewees also suggested that there might
also be a lack of clarity over the relative responsibilities of different
parties; for example, to what extent should end-users be considered as
importers of products? To what extent are e-commerce platform providers
responsible for goods sold via their platforms? In fact, according to the
limited liability provisions of the Electronic Commerce Directive,[87] it is the primary suppliers and
not the intermediary providers acting as mere conduits, caches, or hosts of
information that are liable for online content. However, the uncertainty
expressed by some interviewees may indicate a need for better information to be
made available.

Those interviewees that were able to suggest possible
solutions to the challenges raised by e-commerce advocated a mix of legislative
and pragmatic approaches. These solutions should perhaps be considered by the
Commission as part of its wider consideration of the challenges of products
sold on-line (i.e. Action 12 of the current Multi-Annual Market Surveillance
Plan).[88] Two interviewees suggested a
revision of current EU legislation relating to e-commerce in order to deal with
non-compliant products. Here, it is perhaps worth noting that the E-Commerce
Directive does not apply to services supplied by service providers established
in a third country, which may suggest a gap between that particular piece of
legislation and the body of IM legislation.

Another interviewee suggested that EU financial legislation
should be revised to stop imports of non-compliant products from outside the
EEA, i.e. by introducing the possibility to confiscate payments made for such
products. One interviewee also suggested that individual end-users, not just
companies, should be subject to the regulations if they purchase and import
non-compliant products; however, this does not seem a practical solution,
particularly for individual consumers who may be unwitting victims rather than
“co-conspirators”. Other interviewees highlighted practical action, such as co-operating
with providers such as eBay to identify and remove non-compliant products from
their websites, co-operation between market
surveillance authorities and internet service providers over the use of domain
names to supply non-compliant products, and agreements with 3rd
country authorities, notably China, to avoid imports of non-compliant products.
Since the Electronic Commerce Directive does state that cooperation with third
countries should be strengthened in the area of electronic commerce, there is
perhaps a case for ensuring that such co-operation includes a focus on
industrial products.

Research Findings (RFs)

·
(RF102)
IM legislation poses few problems related to e-commerce within the EU.
(Stakeholder interviews; EAHC study; Eurobarometer survey)

·
(RF103)
E-commerce with third countries presents serious challenges in the form of
non-compliant products. This relates to ignorance or ambiguity over
responsibilities for importing products or placing products on the market in
the case of e-commerce. (Stakeholder interviews)

·
(RF104)
Market surveillance authorities face significant practical problems to trace
and intercept non-compliant products imported from third countries via
e-commerce. (Stakeholder interviews)

·
(RF105)
There is a need to review the body of legislation with respect to e-commerce
with third countries and also promote practical approaches to market
surveillance. (Analysis of legal text; Stakeholder interviews)

6.5 Effectiveness in
allowing SMEs to operate across EU28

EQ29:
How are SMEs (micro, small and medium-sized) affected by IM legislation for
industrial products and how do they cope with the requirements? Is there scope
to alleviate the burden on the different SME categories without compromising
the overarching objectives of the legislation?

The
2013 Commission Communication on Smart Regulation[89]
commits the Commission to considering the needs of SMEs when developing EU
legislation. This can be pursued in various ways, such as applying the
micro-enterprise exemption, introducing lighter regulatory regimes for SMEs and
ensuring regulatory fitness. However, since the objectives of product
harmonisation directives are linked to health and safety, the protection of
consumers and of the environment (in line with Article 95 of
the TFEU),
there are inherent limitations on the scope for SME exemptions and/or a lighter
regulatory regime.

A
2011 Commission report on "Minimizing regulatory burden for SMEs -
Adapting EU regulation to the needs of microenterprises" noted that “much
legislation will remain applicable to SMEs and micros, covering fundamental
public policy obligations, for example, product safety standards that are
integral to trading throughout the single market”.[90] At
the same time, it must be noted that the cost of complying with EU legislation
is likely to be much less than the cost of complying with the requirements of
28 different national legislative regimes; in some cases, this might be of
disproportionate benefit to SMEs (compared to large enterprises that might be
well-placed to meet different national requirements).

Unsurprisingly,
there are very few examples of legislation being adapted to alleviate the
burden on SMEs. The Battery Directive does exempt small enterprises from having
to fulfil the responsibilities facing other producers in relation to waste.[91] The
Construction Products Regulation also includes simplifications aimed at
micro-enterprises.[92]
New procedures were introduced when the previous Directive was revised for
declarations of performance that need to be drawn up under the new regulation.
This is meant to reduce the costs incurred. However,
these two examples represent quite specific cases and it would be difficult to
replicate these approaches more widely.

Stakeholders consulted for the current study were unanimous
in their opposition to a differentiated approach to product harmonisation
legislation because product safety is paramount. A common view expressed was
that different rules or procedures for SMEs cannot be introduced since this
would risk undermining the objectives of Union harmonisation legislation. As
one German industry association with 1600 members commented, “SMEs
don’t want exemptions – a safe product must be safe irrespective of the size of
the undertaking”. Moreover, there was a
concern that different rules or procedures for SMEs would make carrying out
effective market surveillance activities more difficult and increase
the administrative burden on authorities. Market
surveillance authorities would need to check whether a given product was
manufactured
by an SME or a large firm and, in instances where different administrative
procedures are being applied according to the size of the undertaking, to
verify the equivalence of these procedures.

There
was, however, wide recognition amongst stakeholders that SMEs potentially face
a greater burden in complying with the legislation, which can serve to reduce
competition in the internal market. The most common problems reported related
to the diseconomies of scale facing SMEs in the compliance process. Indeed, SMEs
are more likely than large enterprises to lack the resources to undertake
activities that are required to comply with the legislation, such as testing or
measurement. Similarly, SMEs are less able than large enterprises to employ
specialist staff to ensure familiarisation with the legislation, disseminate
information and promote compliance. They are also less able to participate in
the work of bodies such as standards committees. Reflecting these difficulties,
a small number of stakeholders went so far as to say that SMEs were more likely
to be responsible for placing non-compliant products on the market, whether
inadvertently (through lack of awareness) or deliberately (in order to reduce
costs and without the need to protect a brand name).

Whilst
the opportunities to adapt the requirements of the legislation to SMEs are very
limited, there may scope to alleviate the burden in other ways. For example, it
might be possible to set different requirements in the area of management
systems (e.g. ISO 9001), with more demanding requirements for large firms than
for SMEs. Similarly, any costs related to surveillance as well as fines could
be made proportional to the size of the enterprise. Adaptations to registration
fees could be used, as in the case of REACH. It might also be possible to
provide standards in a greater range of languages, which would benefit all
operators but particularly SMEs (for whom translation of standards represents a
disproportionately greater cost). The Commission could also consider ways to
support greater participation of SMEs in the standards committees and other
fora at EU level, for example by providing greater help with costs; increasing
the participation of SMEs would not only help the SMEs directly involved, but
also help ensure that the legislation and the relevant standards are as
“SME-friendly” as possible.

Given
the greater difficulties that SMEs face in ensuring familiarity with the
legislation, there will be a continued to need to promote awareness and
understanding. Guidance is already available through the Blue Guide and some
guidance documents such as the Machinery Directive are very comprehensive in
scope already. As far as possible, the Commission should continue to ensure
that all such guidance is clear and “SME-friendly”. However, it has been
reported that some guidance documents should be revised in order to make them
clearer, such as the guidance on the PED which was viewed as confusing by some
interviewees. For instance, a Notified Body commented that “One of the main problems
with the PED is that there are gaps in the descriptive parts of the legislation
in terms of covering all types of pressure vessels. Some of these gaps have
resulted because the Directive is relatively old (1997) and new types of
pressure vessels have been developed since the legislation was drawn up.
Although such products are addressed in the supporting guidance to the PED, the
situation is unsatisfactory because manufacturers point to the legislative text
and only want to address the minimum legal requirements. For instance, there is
very little in the legislation about large boilers, only in the guidelines. The
lack of legal clarity means that sometimes it is down to producers to interpret
the guidance”.

In
the provision of information and advice, Member States clearly play an
important role and there may be scope for some to expand current provision,
including through the Product Contact Points. The Commission could support such
an expansion through identifying good practice at the national level and
promoting the replication of such good practice in other Member States. For
instance, an initiative has been launched by the Health and Safety Executive
(HSE) in the UK to simplify guidance for different product harmonisation
directives and to make it more SME-friendly, which might inform similar
approaches in other countries. Member States might also adopt other approaches,
such as maintaining a list of accredited consultants from whom SMEs can
purchase advice and receive support in ensuring compliance with EU legislation.

Research Findings (RFs)

·
(RF106)
There are inherent limitations on the scope to alleviate legislative
requirements for SMEs without compromising health and safety, consumer
protection and environmental protection and without making market surveillance
much more difficult. (Stakeholder interviews; Commission report COM(2011)803)

·
(RF107)
SMEs potentially face a greater burden due to diseconomies of scale and are
less able than large enterprises to participate in standards committees and other
bodies at EU level. (Stakeholder interviews; case studies)

·
(RF108)
There are practical ways to help SMEs that could be encouraged and replicated
across EU28, e.g. promoting participation in standards committees, guidance,
etc.

6.6 Effectiveness in
handling the relationship between services and products

EQ30:
Are there barriers to trade stemming from the way legislation handles the
relation between services and products which are part of the same value chain?

Technological
change, increasing complexity of product and innovation in both product design
and service delivery are changing the relationship between products and
services that are part of the same value chain. Indeed, the distinction between
product and service markets is becoming ever more blurred, in part because
consumers increasingly demand high-quality after-sales services. “Products are
integrated parts or enablers of a wider service. To put it differently, instead
of selling a product with a service, there is a tendency of selling a service with
a product (e.g. mobile phones)” [93].

Evidence
from the current consultation suggests that EU legislation is struggling to
adapt to this changing environment, which creates uncertainty as well as
potential barriers to trade and risks to health and safety. Union harmonisation
legislation relates to the initial placing on the market of products. Once
products have been legally placed on the market, they are then free to
circulate. Although as a general principle, IM product legislation should also
apply to product-related services, but the current regulatory framework in this
regard does not appear to be clear.

Difficulties
with the design and enforcement of legislation concern a number of different
areas. One difficulty is the extent to which original suppliers are liable for
the on-going safety of products and, consequently, the actions that they
must take at the point of sale, as well as the extent to which they comply with
any requirements. For example, manufacturers are typically required to provide
sufficient information on the services that may need to apply to a product at a
late date, in order for it to remain safe and useable. Yet stakeholders
reported that some manufacturers failed to provide sufficient information or
indeed any information at all in some cases.

Questions
were also raised over the appropriate time period for product guarantees, with
some stressing the need for different periods for different products. For
example, it was noted that one of the requirements of the PPE Directive is that
protective qualities must remain through the life of product; this created a
potential uncertainty regarding the relative responsibilities of the
manufacturer, customer and any later service provider. If the PPE product is
subject to ageing, manufacturer must indicate this fact on the product or in
the instructions, though they cannot control use. As one respondent noted: “use
defines the lifetime of products and not just care and maintenance”.

For
many products, it may be difficult to differentiate between the supply and
installation. In some sectors, such as construction or lifts and elevators,
it may simply be impossible to differentiate between supply and installation.
For these products, the legislation must recognise that companies are not just
selling products but a whole package that includes a service, i.e.
installation. Where services and products are addressed by different
directives, there is risk that suppliers will have to comply with two different
notification procedures, creating an additional cost. Whilst this was
highlighted as being problematic for construction products, for the lifts and
elevators sector it was seen as less of a problem, since lifts and elevators
are rarely, if ever, supplied without being installed. Moreover, lifts and elevators
tend to be installed by the manufacturer, who therefore ensures compliance
throughout the process.

In
contrast, the case of “on-site blasting” of civil explosives highlights a
potential inconsistency in the legislation. Since no explosive product exists
until the supplier mixes the necessary materials on site, on-site blasting is
specifically excluded from the current Explosives Directive, as it involves the
provision of a service rather than a product. However, on-site blasting will be
covered by the proposed new Regulation on consumer product safety, yet
stakeholders report a lack of consultation with product-specific groups in the
development of this new Regulation. As a result, the risk is that the technical
side of the Regulation might not therefore prove appropriate and the industry
will ultimately struggle to demonstrate compliance on issues such as on-site
blasting.

Spare
parts and components were also highlighted as causing
difficulties, both in terms of their supply, as well as their use in after-sales
service. These are evidently an integral part of the product lifecycle.
However, the research found that there are differences between different IM
legislation for industrial products as to whether spare parts and components
are included within scope across different IM directives and regulations.
Moreover, there is also the very practical problem of fitting new components
into old products, which raises the question of the extent to which a
product can be altered (e.g. when new parts are fitted) and still comply with
the requirements of the legislation.

This
problem is particularly common for products with long lifetimes, where the
original manufacturer might no longer be trading or the original component
might no longer be available. Equally, the legislation may risk creating
barriers to trade where it prevents independent manufacturers from
developing new components that fit into products supplied by large
manufacturers. Enterprises also face administrative burdens from the need to
ensure that product-related information is kept up-to-date and because there
are frequent changes to spare parts and components, they have to regularly
update technical documentation. For instance, the serial numbers for parts and
components change frequently.

As
with supply and installation, after-sales service also raises the
question of whether compliance is required under product directives or service
directives. Again, this creates the risk of having to comply with two different
notification procedures. As well as the potential for greater compliance, there
is also the risk of safety issues. For example, the LVD was highlighted as one
example of directive that fails to address the safety challenges raised by
after-sales services, since it is only concerned with the placement of products
on the market and not with after-sales, repair, renting to consumers, etc.
Whilst the stakeholders consulted were generally aware of this difficulty,
there were divergent views as to the most appropriate solution. Some called for
an extension of relevant EU product directives, whilst others suggested that
the regulation of services was better suited to the national level because of
diversity of condition and contexts, which might prove difficult to address at
EU level. However, even those stakeholders suggested that EU legislation might
provide some sort of a framework on which national legislation could build;
this might suggest the continued use of EU directives rather than regulations,
which would allow Member States the opportunity to customise the requirements
placed on after-sales service in line with national context.

One
very specific dimension of after-sales service that was reported to be
problematic was that of the qualifications of staff. For example, in
countries such as Germany, certain services may only be carried out by certain
enterprises or regulated professions. The construction sector was reported to
be particularly affected by such restrictions. As a result, the potential to
trade across borders was seen to be limited for companies providing a
combination of product and after-sales service, with many having to limit their
activities only to the provision of products. This also places a restriction on
the mobility of labour in the EU internal market, both permanent and temporary.
The solution to this problem would seem to be the reinforcement and
acceleration of efforts to promote the mutual recognition of skills and
qualifications across Europe, e.g. through the European Credit system for
Vocational Education and Training (ECVET), which promotes better compatibility
between the different vocational education and training (VET) systems in place
across Europe and their qualifications. Whilst progress has been made in this
area, it has tended to be undertaken in isolation to the design and
implementation of internal market legislation. There might therefore be scope
for the Commission to encourage greater co-operation and dialogue between the
IM and VET policy spheres.

Research Findings (RFs)

·
(RF109)
The increasingly blurred distinction between products and services creates
uncertainty around: i) the extent to which original suppliers are liable for
the ongoing safety of products and the appropriate time period for product
guarantees; ii) differentiation between supply and installation; iii) coverage
of spare parts and components; iv) after-sales service, i.e. whether covered
under product or service directives; v) qualifications of staff required to
undertake service and maintenance. (Analysis of legal text; Stakeholder interviews;
Case studies)

·
(RF110)
There is scope for the Commission to reduce this uncertainty through a note
highlighting the issues that need to be considered in any update of the
legislation and setting out in generic terms how these issues could or should
be addressed.

6.7 Effectiveness with
respect to business-to-business products

EQ31:
The specific situation of business-to-business (B2B products) which are
developed and supplied to be used by professionals for the development of other
products: Do these products require a special treatment?

IM
legislation covers a broad range of products for both industrial use and for
consumers. Many of the more high-risk product categories from a safety point of
view are primarily intended for use by professionals. In some Directives (e.g.
Machinery), there are provisions (Article 17) suggesting that manufacturers
need to take into account the intended use in the design and construction of a
product and also in relation to the information materials and instructions to be
provided which may differ between professional users and non-professional
operators. However, in the case of other product harmonisation directives,
there is no distinction in EU legal texts between products aimed at
professional and non-professional users, since achieving a high level of
protection in product safety is the main goal.

Base
on the consultations, there appears to be a broad consensus among stakeholders
that products developed and supplied to be used by professional users should
not be given any special treatment as far as the essential requirements are
concerned. A common view was that issues relating to product safety and the
level of risk involved in specific product areas are similar irrespective of
whether the intended user is a final consumer or a professional. However, the
results of the Your Voice Consultation suggest that a significant number of
stakeholders – including firms, public authorities and individual EU citizens –
consider that some such products should be exempted from IM legislation (29 out
of 86 respondents) or that simpler requirements – either in relation to
labelling and information requirements or the essential requirements – are
appropriate (15 out 87 respondents). For example, manufacturers, importers or
distributors could be required only to retain information electronically
relating to products intended for professional use rather than having to
include paper-based information and material.

In
total, around half of consultation respondents were in favour of special treatment
for B2B products. It should be noted however that among firms in the
manufacturing sector, the level of support for a differentiated approach was
less clear. Less than one third were in favour of some form of special
treatment. Support for exemptions primarily came from respondents in the
transport sector[94].
There is therefore a need to ensure that due caution is given to interpreting
the results.

Given
the diversity and sectors, it is perhaps not surprising that there is a
divergence of views amongst stakeholders. Based on a more detailed review of
responses to the Your Voice consultation and to the consultation within the
current evaluation, we can offer some more specific findings.

First,
there is a category of products that by definition are not supplied to
individual consumers. Examples of such products include lifts and elevators,
which are never supplied without being installed and tested by professionals,
whether employed by the manufacturer or some other company. Clearly, for such
products there is no need to differentiate between consumers and professionals
and a single set of requirements is sufficient. However, such products
typically require high safety standards to be respected, which would tend to
limit the scope for any lessening of legislative requirements, including those
relating to administrative documentation.

There
are also some products that are very unlikely to be used by anyone other than
professionals and which tend, in any case, to pose few safety risks. Some
metrology instruments might be seen as falling into this category, where the
purpose of legislation is to ensure accuracy of measurement rather than to
address potential hazards. Feedback from stakeholders in sectors such as
metrology suggests that the requirements of the legislation should not be
relaxed, as standards must be maintained. However, given that professionals
know that they have to buy products that meet the requirements of the
legislation, there might be possibilities to relax the administrative
documentation required.

At
the same time, any relaxation of administrative requirements should only be
undertaken after appropriate consultation with sector operators; many
professional users have clear expectations regarding type-approval
certificates, etc. and do not wish to undertake their own additional checks,
which would be necessary in the absence of legislation. In the case of
metrology, there are of course products such as fuel dispensers that do pose a
safety hazard; however, where such risks are addressed by other directives,
such as those relating to explosives, there might be scope to reduce the
documentation requirements specifically relating to the Measuring Instruments
Directive.

The
types of products that raised most concerns amongst stakeholders are those
intended for professionals and posing safety risks but that might ultimately be
used by consumers. For example, many electric power tools are meant solely for
use by trained professionals following prescribed safety measures. Yet such
products can often be sold to or passed on to non-professional, untrained users
without too much difficulty, creating considerable risks to safety. The
consensus amongst stakeholders was that special treatment would therefore not
be appropriate for these types of products. As one competent authority
commented, “many industrial products placed on the market are initially
designed for industrial purposes and then migrate to consumers. It would
therefore be impossible to differentiate in the Directives between the intended
product use between professional and non-professional users”.

Another
category is products that are intended for professional use, being sold as components.
Some of these products, such as components for lifts and elevators, are
unlikely to be purchased by consumers, and would in any case pose no risk if
purchased. For these products, some administrative requirements could perhaps
be lightened, such as use of the CE marking and market surveillance activities
might also be lighter. However, other products might be used by consumers,
perhaps after resale by the original (professional) purchaser of the product.
Although there are often specific distributors for such products, experience
shows the ease with which non-professionals can often access them. An appropriate
approach to take in these cases is perhaps to consider the likely risks that
might be posed to consumers, with the legislation tending to “err on the side
of caution”.

It is
also the case that some components or products tend only to be used in very controlled
environments, such as laboratories, research and development centres or
test facilities. In these instances, it might be possible to label the products
as 'parts' that are only required to meet the essential requirements on the
location of use, following a regime similar to that applicable for fixed
installations under the EMC Directive. This means that CE marking, Declaration
of Conformity or a formal EMC assessment before putting such products into
service in a research environment would not be required. Furthermore, for such
an exemption to apply under the EMC, there would need to be a direct link
between providers and customers. The appropriateness of this proposal and how
it might work in practice should be examined along with any possible definition
issues that may arise.

Research Findings (RFs)

·
(RF111)
There is no scope to limit the essential requirements of products to be used by
professionals, although for some products, there may be scope to reduce the
administrative requirements. (Stakeholder interviews; Your Voice consultation;
On-line survey)

·
(RF112)
There may be scope to reduce the requirements for components or products that
are only to be used in controlled environments, e.g. laboratories, test
centres, etc. These would have to be considered on a case-by-case basis, as and
when legislation is updated. (Analysis of text of EMC).

6.8 Impact of IM
legislation on the internal market

EQ32:
Overall, how effective is IM legislation for industrial products as a mechanism
and means to achieve the objective of improving the functioning of the internal
market?

The
Ceccini report[95] in
1992 found that Union harmonisation legislation for industrial products had
already reduced inefficiencies due to divergent product standards in national
technical product regulations. However, a number of major barriers to trade
remained prior to the establishment of the internal market in 1992, notably:

·
Technical
barriers to trade – with differing national regulations
across different Member States for specific industrial product groups; and

·
Administrative
barriers – a diverse range of national regulations
across different Member States meant that businesses faced considerable red
tape and administrative costs in finding out about national requirements.

Since
1992, there has been a steady accretion of the body of IM legislation and the
existing evidence suggests that this has been accompanied by a sizeable
increase in intra-EU trade. There are other factors and processes that have
also played an important role in the development of intra-EU trade (including
the introduction of the Euro currency and the EU enlargement, the broader
processes of globalisation, improvements in transport infrastructure and
reduction of transport costs, development of e-commerce) and it not possible to
determine the extent of contribution of the Internal Market legislation.
Nonetheless, the
data on levels of intra-EU trade do suggest a degree of correlation. The
available data for the period 1999-2011 show a clear increase in the general
level of trade in goods as the share of EU GDP but also in terms of the
intra-EU trade in almost all manufacturing sub-sectors. Furthermore, input from
stakeholders and the analysis of the role of specific pieces of legislation
affecting specific sectors also provides supportive evidence.

Figure
6.1 shows that over the 20 years since the Single Market’s launch in 1992,
intra-EU trade of goods has grown as a share of GDP by around 5%. Intra-EU
trade represented around 17% of EU GDP in 1999 and close to 22% in 2011. Furthermore,
intra-EU trade represents a very high percentage of GDP in most Member States,
a level that has grown over the period 1999-2012.

Figure 6.1 Intra-EU trade in goods as
share of GDP, 1999-2012 (average of export & import)

Source: Eurostat

Focusing
on the manufacturing sector, the evolution of intra-EU trade in the three broad
categories of industrial goods according to the SITC classification (Machinery
and transport equipment, manufactured goods classified by material and other
manufactured goods) has exceeded that of the growth of total value added of the
EU manufacturing sector (see chart below).

Figure
6.2 - Evolution of intra-EU trade (exports, 2000=100) in selected manufacturing
sectors in relation to manufacturing gross value added

Source: Eurostat trade statistics

Figure
6.3 Evolution of intra-EU trade in selected manufacturing sectors (value of
imports; 1999=100)

Source:
Eurostat

Whilst there are differences between
different sectors covered by IM legislation, most have experienced an increase
in the level of intra-EU trade, particularly during the first half of the
2000s. Only three have shown a fall in the level of intra-EU trade since 1999
(i.e. office machine and automatic data processing, metalworking machinery, and
photographic apparatus), and this coincided with the economic and financial
crisis of 2008.[96]

It
should also be noted that in most sectors the level of imports from outside the
EU has increased at a higher pace. As a result, in most cases, there has been a
reduction of the share of intra-EU trade in the total level of trade (see
figure below) reflecting the globalisation of markets, the increasing presence
of non-European manufacturers in the European internal market but also, as
illustrated in some of the case studies (e.g. gardening equipment, domestic
refrigerators), the fact that many EU manufacturers have transferred the
manufacturing of industrial products to outside the EU  even though where these
goods are destined for the EU market.

Figure 6.4 – Evolution of share of
intra-EU trade in total trade of selected industrial goods covered by EU
legislation

Source: Eurostat trade statistics

This
data may, however, understate the positive role of the introduction of Single
Market legislation and technical harmonisation requirements. A key limitation
in relation to this task is that EU trade data are generally available only
after 1999, a point of time when most of the EU Directives under examination
were already in force.

More
specific evidence can be found for those categories of products where
harmonisation came only at a later stage. One such case is the exhaust gas
analysers product group that is covered by the Measuring Instruments Directive
(2004/22/EC) (MID). The MID was introduced in 2004 and entered into force in
2006. It covers a range of measuring instruments but most of them had already
been harmonised, ever since the early 1970s[97]. Exhaust gas
analysers was a new category covered by the MID. The available trade data for
gas and smoke analysers (a category arguably broader than the exhaust gas
analysers) suggest an increase at the level of intra-EU trade even before 2004
but an even greater increase in imports to the EU taking place since 2005/2006.
According to one national officer responsible for the implementation of the
Directive, the increase in the trade of exhaust gas analysers is clearly
connected with the introduction of the MID.

Figure 6.5 - Evolution of trade (imports) for gas analysers
inside and outside the EU

Source:
Eurostat trade and structural business statistics. Note – the analysis did not
include Croatia, EU28

The
data are rather less supportive in the case of the recent harmonisation of
legislation is pyrotechnic articles. Directive 2007/23/EC on pyrotechnic
articles covers fireworks and pyrotechnic articles used in vehicles (airbags,
seat belts) and related products. The Directive entered into force in 2010
although it provided for up to a three year period for its transposition into
national legislation. Examination of the value of imports suggests a sizeable
increase in the level of intra-EU trade of explosives and pyrotechnic products
– in comparison with a slower development of extra-EU trade - but a much more
gradual increase in the case of fireworks[98]. Imports
from outside the EU (China is the predominant exporter) have increased much
faster.

Figure
6.6 Evolution of imports (intra-EU and extra-EU) of explosives and pyrotechnic
products (value in Euros)

Source:
Eurostat trade statistics. Note – the analysis did not include Croatia, EU28

Amongst
the Notified Bodies (NBs) and Accreditation Bodies (ABs) responding to the
survey, a clear majority supported the view that IM legislation had helped
ensure the harmonised operation of the internal market and ensured fair
completion and access to the internal market. (See Table 6.6). Among the seven
industry representatives that also responded to the survey, five indicated that
IM legislation had been effective or very effecting in harmonising the
operation of the internal market but only one considered it effective in terms
of ensuring fair competition.

Table 6.6: What
impact has Internal Market legislation for industrial products had in relation
to the following policy objectives?

Objectives || Respondent || Positive or very positive || Neutral || Very negative or negative || Responses[99]

Ensure the harmonised operation of the internal market || NB || 74% || 22% || 4% || 78

AB || 100% || 0% || 0% || 14

Ensure fair competition and access to the internal market || NB || 65% || 27% || 8% || 83

AB || 93% || 7% || 0% || 14

 Source: CSES survey

During
the interview programme, most stakeholders (industry representatives and
national authorities) also provided support of the role of the IM legislation
in terms of the free trade of goods (see selected representative comments in
the text box below). The main issue raised is the practical implementation and
the fact that, national legislation and requirements applicable to the use
phase can still effectively create obstacles to free trade of products.

Table 6.7:
Selected comments of stakeholders on the contribution to the functioning of the
internal market and free trade

The PPE directive is clear and everybody
has to fulfil it, so it is a very good instrument in terms of free movement of
goods. We have seen a huge boost for the industry in the early 90’ties as a
result of the PPE directive. When it sometimes goes wrong it is in the
interpretation in the individual countries. (EU industry association)

Benefits are the free movements of
goods. But market surveillance is needed. (national authority)

The free movement of goods
works well. There are some technical barriers and inconsistencies from specific
Member States but the frameworks that do exist allow productive discussion when
the inconsistencies occur and some form of resolution. However, it is important to stress that the
concept of free movement does not cover the later phases of use of industrial
products (but just the place into market and put into service) often subject to
very restrictive national and local regulations. These restrictions may start
immediately with the first use. (EU industry association)

The legislation has helped
with the free movement of products; there are very few problems with
exporting/importing across the EU. It’s also quite easy to import from other
countries such as the USA into the EU (EU industry association)

Overall positive – not
significant issues – barriers have been removed Positive in terms of boosting
exports inside EU (EU industry
association)

There is still no
guarantee of free movement due to the role of standards and national
requirements (EU industry association)

IM legislation, especially
New Approach legislation meets the needs of different types of economic
operators in a great extent. We would encourage the use of New Approach also in
other traditionally old approach sectors (chemicals, food,…). We estimate it
[is] very effective relating to free movement of goods within the IM (National
authority)

Better than before clearly
but [there is] no complete harmonisation. There are issues related to use
requirements at the national level [but] they are less and less of problem (EU
industry association)

The IM legislation
represents an overall effective mechanism for ensuring both free movement of
goods and a minimum level of standards in health, safety and consumer
protection (National authority)

It has been very effective
in ensuring free movement of goods. (National authority)

The market is in good
shape. There is definitely free movement of goods according to minimum safety
standards However, the level of enforcement does vary and this often depends on
the culture of public bodies in diff MS (National authority)

These
views are generally consistent with the conclusions of the recent evaluations
of a number of Directives. In the case of Gas Appliances Directive (GAD)[100], it
was concluded that “the GAD has made a significant contribution to free trade
in gas appliances. Harmonising certification requirements has been a
significant benefit for manufacturers, who previously had to fulfil varying
national certification requirements”. Indeed, this finding was supported by the
respondents to the survey organised for that evaluation; some 60% of industry
respondents and an even higher proportion of ministry respondents agreed that
the GAD has had a positive impact upon the free movement of goods/services and
cross-border trade, indicating that it contributed to the internal market and
that it had led to an increase in cross-border trade and the free movement of
goods.

The
recent evaluation of the Pressure Equipment Directive also concluded that
“Intra-EU trade in pressure equipment products over the period grew much more
rapidly than overall production, suggesting that the Internal Market
legislation in this area at least had a facilitating role. During the interview
programme it was noted that the biggest increases in intra-EU trade were in
products with a higher value and technical complexity”. The survey of industry
(51%) and other stakeholders suggested that the majority consider that the PED
is more effective than the previous system of national regulation (with 24%
giving a neutral response). Similarly, the 2007 evaluation of the Explosives
Directives found that businesses around Europe have seen a decrease in the
share of sales from national markets – from 82% to 67%. Businesses indicated
that 15% of their sales came from elsewhere in the EU, up from just 9% in 1993.

Taken
together, the existing evidence supports the conclusion that, while there are
imperfections, EU harmonisation legislation has made a significant contribution
to the free
movement of goods/services and cross-border trade, reduction of
national regulatory barriers and an effectively-operating internal
market. Weaknesses exist in the practical implementation at the national level
and, national requirements related to the use phase – which are still
responsibility of Member States and outside the scope of the Internal Market
legislation - can often reduce the effectiveness of the IM legislation.

There
is, moreover, evidence that IM legislation has delivered benefits for economic
operators that trade in global markets. Indeed, many stakeholders reported
benefits from compliance with Union harmonisation legislation, since compliance
costs can be ‘leveraged’. For instance, once a given product platform is
compliant with EU legislation, this can serve as a basic regulatory building
block to customise products and documentation to meet compliance requirements
for product safety and environmental legislation across other global
jurisdictions. IM legislation is among the most stringent in the world and can
therefore be used as a starting point for large firms in developing compliant
products for different regulatory jurisdictions globally. This is particularly
true for products where third country authorities have developed their own
standards to be consistent with those of the EU.

Research Findings (RFs)

·
(RF113)
The accretion of IM legislation has been accompanied by an increase in intra-EU
trade in absolute terms and as a percentage of GDP. (Eurostat data)

·
(RF114)
Whilst the influence of IM legislation cannot be separated from other
influence, e.g. global increase in trade, the consensus view is that IM
legislation has made an important contribution (Stakeholder interviews; Survey
of NBs and ABs; Results of previous evaluations).

·
(RF115)
Compliance with EU legislation can support economic operators trading in global
markets, particularly where third country legislation and standards are based
on those of the EU.

6.9 Impact of IM
legislation on health and safety and consumer protection

EQ33:
Overall, how effective is IM legislation for industrial products as a mechanism
and means to achieve the objective of ensuring a high level of health and
safety and consumer protection?

In
the IM legal base, high levels of health, safety and consumer protection
are a key objective. Indeed, this is the overriding principle behind the
setting of essential requirements (for safety and health) which underpin the
New Approach[101].

In
comparison with the situation prior to the introduction of harmonised Internal
Market legislation, there are obvious advantages. Manufacturers had to operate
in a highly fragmented market with different national regulatory requirements
(including those relating to product safety). There were attendant higher
risks, since manufacturers - especially from third countries - may not have
fully understood different national requirements. There are clear benefits in
having a single set of rules from the point of view of promoting product safety
and ensuring that products do not have harmful effects on health. EU standards
promote harmonisation and they have brought about a more uniform approach to
the testing and conformity assessment of products.

Furthermore,
horizontal IM harmonisation directives and regulations, such as RoHS and REACH
have also served as a useful mechanism for promoting healthier products. In
the case of RoHS, this has been achieved by restricting the use of hazardous
substances in products. This has had an especially beneficial impact through
the interaction between horizontal and product-specific Directives such as the
Toys Directive.

Evidence
gathered during the research suggests that IM legislation plays a positive role
in ensuring high levels of health, safety and consumer protection. Stakeholders
generally accept that the legislation has contributed to product safety and to
the protection of the health of industrial users and consumers of products. The
overwhelming majority of Notified Bodies and Accreditation Bodies responding to
our survey expressed a positive view, with only very few suggesting that the
impact had been negative. Five of the seven industry representative that
responded to the survey were also positive concerning the contribution of IM
legislation towards higher levels of safety and consumer protection.

Table 6.8: What
impact has Internal Market legislation for industrial products had in relation
to the following policy objectives?

Objectives || Respondent || Positive or very positive || Neutral || Very negative or negative || Responses[102]

Ensure high levels of health, safety and consumer protection || NB || 74% || 19% || 7% || 84

AB || 92% || 8% || 0% || 13

 Source: CSES survey

Individual
comments from stakeholders (national authorities and industry representatives)
also provide a positive view even if there are, again, question related to the
practical implementation. The following table provides examples of the typical
comments made during the interviews. In general, most respondents are positive
even though there are again concerns on the practical implementation and the
weak enforcement. Problems related to non-compliant products are
generally considered to be due to the fact that the rules in place are not
respected by all economic operators, poor market surveillance and enforcement.

Table 6.9:
Selected comments of stakeholders on the contribution to ensuring high levels
of health, safety and consumer protection

The level of enforcement does vary and
this often depends on the culture of public bodies in different Member States.
So yes the market works in terms of free movement but I'm not sure if the exact
safety standards are always met in all circumstances (national authority)

The main benefits [on Internal market
legislation] are Uniformity of good practice in market surveillance activities
and uniform rules for safety and market access business (national authority)

It has been effective for health and
safety. We have no big issues around that. (national authority)

Quality and safety is guaranteed on a
sufficient level. (EU industry association)

Think that in the areas of health and safety
there is scope for greater harmonisation – use of regulation would be
preferable (EU industry association)

The minimal essential requirements
provided for in the regulation are respected. Safety requirements are overall
well understood and respected. They filter out fraudulent producers
effectively. (national authority)

The body of IM legislation achieves the
objectives of the internal market overall in ensuring common minimum standards
in health & safety and consumer protection. Products are thoroughly
controlled, particularly in France. However, certain Member States do not
perform tests regularly and simply verify certification documents. (national
authority)

IM legislation is an effective mechanism
for ensuring free movement of goods and a minimum level of standards in health,
safety and consumer protection. (national authority). We would encourage the
use of New Approach also in other traditionally old approach sectors
(chemicals, food,…). i) we estimate it very effective relating to free movement
of goods within the IM ii) also very effective relating common minimum
standards in health and safety, consumer and environmental protection.
(national authority).

Another
relevant aspect is the increasing awareness of suppliers of products. A recent
Eurobarometer survey found that 86% of retailers selling consumer products felt
well informed about rules and regulations relating to product safety, which was
an increase compared to the figure of 80% in 2009. Some 97% of retailers
declared that they complied with all legislation dealing with the economic
interests of consumers and 80% believed that their competitors also complied
with the legislation. The same survey also showed that a large majority of
retailers selling consumer products correctly identified the following
statements about product safety as being true:

·
Retailers
must not place unsafe products on the market (only 9% gave incorrect
responses);

·
Retailers
must be able to present technical documentation on the safety of their products
(10% gave incorrect responses); and

·
Upon
the authorities’ request, retailers must cooperate with the authorities to
prevent risks posed by products which they supplied (10% gave incorrect
responses).[103]

A
large and increasing majority of retailers agreed that public authorities
“actively monitor and ensure compliance with consumer legislation (79%) and
product safety legislation (81%) in their sector in their country”. Whilst
these findings do not differentiate between products covered by EU IM
legislation and those that are not, it does offer evidence of a general
improvement in consumer protection.

From
the point of view of consumer confidence, according to a recent Eurobarometer
study, a growing majority of EU consumers agree that, in general, sellers and
providers respect their rights as consumers (65%) and that they are adequately
protected by the existing consumer protection measures (57%). Moreover, there
has been an increased level of trust in the safety of non-food products, with
only one in five consumers in 2010 (compared to one in four in 2009)
considering that a significant number of products were unsafe.[104]

There
is also evidence that there is still a significant distance to go in order to
achieve high levels of product safety and consumer protection that satisfies
consumer concerns. According to the February 2013 Product Safety and Market
Surveillance Package, a considerable percentage of products on the market are
non-compliant, which undermines consumer confidence. “Notwithstanding
legislation in place, unsafe and non-compliant products still find their way
onto the market. People still suffer harm and harmful products still pollute
the environment. Rogue traders persist - flouting the rules and undermining a
clear level playing field for operators. This undermines the internal market
and is a disincentive to businesses that invest a lot of resources in ensuring
that the design and manufacture of their products is safe”[105].

A
recent joint market surveillance actions under PROSAFE (Product Safety
Enforcement Forum of Europe) suggested significant levels of non-compliance
often associated with unsafe products and a study of the IFIA on electrical
products for household use in 2012 highlighted safety issues caused by a
significant number of non-compliant products imported from the outside of the
EU. While potentially biased by specific high-profile events, Eurobarometer
data also indicate a decrease in confidence of consumers in the safety of
products sold in the EU (25% in 2011 compared to 20% in 2010 think that a significant
number of products are unsafe). Moreover, a study by the Consumer and
Industrial Products Committee of IFIA39 on electrical products for household
use performed in 2012 shows that there a significant number of non-compliant
products with safety issues imported from the outside of the EU which circulate
on the internal EU market.

The
2012 Annual Report on the operation of the Rapid Alert System for non-food
dangerous products (RAPEX)[106]
suggests that there are a quite high number of notifications of products. It
notes that “throughout the last eight years, the number of notifications on
dangerous products has increased year on year”. While these have most
frequently been related to clothing, textiles and fashion items (34% of all
notifications, 668) – products that fall outside of internal market legislation
– they were by toys that are covered by the Toys Directive (19% of
notifications, 366) and another important category falling within the scope of
IM legislation, electrical and electronic equipment (11% of notifications,
205). Lighting equipment is another category of products that was relatively
often notified (3% in 2011). It should be noted that, according to the annual
report, the increasing number of notifications are a reflection of enhanced market
surveillance efforts and not necessarily an increase in the level of unsafe
products.

Specific
examples of non-compliance were also identified through the interviews and desk
research. For instance, the impact assessment for the new “Radio Equipment Directive”
cited evidence from EU Market Surveillance Authorities (MSAs) that only between
an estimated 28% and 56% of products were fully compliant with the essential
requirements. According to an interviewee from the Commission, levels of
administrative compliance have been estimated at an even lower level by MSAs,
of about 20%. Although this may include minor administrative non-compliance and
does not imply that most radio products are unsafe, it illustrates the fact
that non-compliance continues to be a major problem.

Research Findings (RFs)

·
(RF116)
IM legislation plays a positive role in ensuring high levels of health, safety
and consumer protection. (Stakeholder interviews; Survey of NBs and ABs;
Eurobarometer surveys on awareness of suppliers and on consumer confidence)

·
(RF117)
There remains a high number of non-compliant products, which undermines
consumer protection and consumer confidence. (Stakeholder interviews;
Eurobarometer survey on consumer confidence; Consumer and Industrial Products
Committee report; PSMSP)

·
(RF118)
There has been an increasing number of RAPEX notifications, reflecting enhanced
market surveillance but also the continuing problem of non-compliance. (RAPEX
data; Interviews of MSAs)

6.10  Impact of IM legislation on
environmental protection

EQ34:
Overall, how effective is IM legislation for industrial products as a mechanism
and means to achieve the objective of ensuring a high level of environmental
protection?

Finally,
with regard to the objective of environmental protection, it should be
noted that this has not been a prime objective of the majority of Internal
Market Regulations and Directives. Recent pieces of IM legislation - such as
the Ecodesign, RoHS, Noise emissions of outdoor equipment, Non-road mobile
machinery emissions and Waste Packaging Directives have been based on internal
market Treaty articles. The majority of Notified Bodies and accredited bodies
responding to the survey supported the view that IM legislation had helped
ensure a high level of environmental protection, although a sizeable minority
appeared to be more sceptical. Among industry stakeholders, five out of seven
were positive as to the contribution to environmental protection.

Table 6.10: What
impact has Internal Market legislation for industrial products had in relation
to the following policy objectives?

Objectives || Respondent || Positive or very positive || Neutral || Very negative or negative || Responses[107]

Ensure a high level of environmental protection || NB || 51% || 46% || 3% || 69

AB || 69% || 31% || 0% || 13

Source: CSES
survey

Furthermore,
as indicated in section 6.3, IM legislation plays a positive role in the
development of greener products and technologies but weak market surveillance
and enforcement of environmental aspects often operate against this.
Furthermore, for a number of industry stakeholders the interaction of IM
harmonisation legislation and other legislation in the environmental fields
(such as WEEE, the F-Gas Regulation) often leads to additional costs and even
duplication of requirements increasing the cumulative regulatory effects of IM
legislation.

·
 (RF119)
IM legislation has made a contribution to environmental protection, albeit a
modest one; this is not the primary purpose of most IM legislation and MSAs
have not tended to prioritise environmental protection. (Analysis of legal
text; Stakeholder interviews; Survey of NBs & ABs)

7.
Conclusions
and recommendations

This
evaluation has considered a wide range of issues relating to internal
market (IM) legislation for industrial products and the efficiency
and effectiveness of mechanisms and structures to support its implementation.
Among the cross-cutting themes examined were whether the legislative framework
for Union harmonisation legislation demonstrates ‘fitness for purpose’ and
whether there are any inconsistencies or instances of duplication between
different pieces of IM legislation. The question of how far such legislation
can accommodate innovation was also central.

While
clearly it is premature at this stage to evaluate the efficiency and
effectiveness of the New Legislative Framework (NLF) as a whole, an assessment
was made of the, the extent to which follow-up initiatives, notably the
Alignment Package has made a contribution to modernising and reforming the
legislative framework. Among the issues considered were the extent to which
there are cumulative regulatory effects (and compliance costs) of IM
legislation. The costs and the benefits of internal market legislation for
industrial products, and the possible scope for regulatory simplifications (and
cost savings associated with these) were also assessed.

7.1 Conclusions

In
this section, we present the conclusions of the evaluation. In each case, we
highlight the Research Findings (RF) on which the conclusion is based, which
provides the link back to the evidence presented in the main body of the
report.

7.1.1
Relevance
and coherence of the legislative framework

1.
Overall,
the IM regulatory framework demonstrates a high degree of fitness for
purpose. Internal market legislation is relevant to meeting key EU
objectives relating to the need for technical harmonisation measures in the
area of industrial products, with high levels of protection for health and
safety and consumers and, to the environment. (RF1, 2, 3, 4)

2.
The
IM legislative framework has in-built responsiveness to adapt to change[108].
Periodic review and recasting of various pieces of IM legislation over the past
25 years has helped to ensure that IM legislation continues to reflect
industry-specific and technological developments. (RF9, 10, 11, 12)

3.
In
general, directly applicable EU regulations appear to be a more effective
regulatory instrument than directives for implementing IM legislation.
Regulations remove the risk of divergence in interpretation of European rules
during national transposition and guarantee synchronised timing in
implementation, although in many cases, Member States merely adopt the
transpose the Directives as written. (RF5, 6)

4.
There
is a need to clarify the circumstances under which regulations or directives
should be used and this clarification should guide the choice of
instrument as and when legislation is introduced or revised. (RF7, 8)

5.
The
adoption of common definitions of different economic operators based on
Decision 768/2000/EC, together with a clarification of their respective
obligations and responsibilities is contributing towards a more coherent IM
legislative framework. The definitions in Decision 768/2000/EC therefore
merit application across the whole body of IM legislation (RF11, 14, 15, 16,
25)

6.
It
may be more practical to set out common elements across the IM legislative
framework in a horizontal regulation, rather than incorporating the same
additional text into each and every piece of IM legislation[109].
(RF13)

7.
Instances
of gaps, loopholes, inconsistencies and duplication in IM legislation are
relatively modest in number. Many are being or will be addressed by the
NLF, the Alignment Package and other recasts of the legislation. (RF9,10,12)

8.
There
is a need to bring greater consistency to the definition of products and
scope. This might involve broad definitions clearly stated in the main text
of legislation, with specific definitions of categories and sub-categories
defined in Annexes and clarified by the various Working Groups, with suitable
adjustments and fine-tuning over time. (RF17, 18, 19)

9.
There
is a lack of clarity and consistency in the inclusion and definition of
spare parts and components in IM legislation, which should be addressed by
guidance from the Commission. (RF20, 21, 22, 23)

7.1.2
Efficiency
of the implementation regime

10. Economic
operators appreciate the choice of modules relating to conformity assessment,
although some are unsure which modules apply to their products and whether
third party conformity assessment is required. (RF26, 28)

11. Self-certification
should not be allowed except Module A, given the
inherent difficulties in ensuring the competence of economic operators. (RF27)

12. Conformity
assessments undertaken across EU28 are of varying quality,
which often reflects a lack of technical capacity in some NBs, due to the fact
that few operate at scale or transnationally. This may require action at EU
level, namely the strengthening and more consistent fulfilment of requirements
on Member States relating to notification of Notified Bodies, rather than more
stringent regulation of NBs, as well strengthening Notified Bodies Groups.
(RF29, 30, 31, 32, 33, 34, 35, 36, 37)

13. The
need to ensure quality of conformity assessments would tend to outweigh the
benefits of flexibility in allowing different elements of a conformity
assessment to be performed by different bodies. (RF38)

14. It
does not seem appropriate to open up Europe’s conformity assessment market to
third countries, given the concern over the quality of conformity
assessments undertaken by Notified Bodies in third countries. (RF39, 40)

15. It is
not necessary to require third-party conformity assessments, except for
high-risk products. However, there is a need to clarity the principles and
circumstances under which third party conformity assessments is required or
not. (RF41, 42, 43)

16. Accreditation
strengthens confidence in conformity assessment by encouraging consistency of
conformity assessments and improving technical expertise and professionalism
among NBs.
Given these benefits, it would seem appropriate to make accreditation
compulsory, over a reasonable timescale with appropriate guidance and
discussion at EU level. (RF44, 47)

17. The
accreditation process can be too costly, lengthy and subject to national
variations and inconsistencies, reflecting in part a lack of expertise on the
part of some ABs. It may be possible to overcome these difficulties
by specifying the basis for accreditation more explicitly at EU level. (RF 45,
46)

18. The
current DoC regime is satisfactory, despite some minor difficulties
and DoCs are relatively easy to produce. On that basis, it would be preferable
for a single DoC be required for each product, covering all applicable pieces
of legislation, in line with Decision 768/2008/EC and without the need for a
colour photograph of the product. (RF48, 49, 50, 51)

19. Despite
minor difficulties relating to inappropriate markings, the CE marking regime
is effective and the logo enjoys a high level of awareness amongst
consumers. (RF 52, 54)

20. There
is no need for any fundamental change in CE marking, except to
bring greater consistency and avoid having different requirements for different
pieces of legislation and address the issue of products with multiple parts,
which can be addressed as and when legislation is updated. (RF53, 55)

21. Mechanisms
such as Administrative Co-operation Working Groups and Product Contact Points
play a useful role in supporting understanding of the
legislation and its implications. Their contribution could be enhanced by
greater profile and, in the case of ADCO, by EU funding for participation and
by EU technical assistance funding, e.g. for research or guidance. (RF56, 57,
58, 59)

22. There
is a lack of uniformity in approach to market surveillance across EU28 and
differing levels of resources and technical capacity.
Existing levels of technical compliance checks are not considered adequate to
ensure that non-compliant products are taken off the market and that
non-compliant operators are not given an unfair competitive advantage This
contributes to making market surveillance the weakest part of the implementation
regime, which in turns leads to high levels of non-compliance, low levels of
product withdrawals and a need to strengthen the traceability of products.
(RF60, 61)

23. MSAs
are most effective when they differentiate between minor instances of
non-compliance with administrative requirements and serious instances of
non-compliance with essential safety requirements which threaten
health, safety and the environment.. In the first case, constructive dialogue
with manufacturers can often prove effective. In the latter case, MSAs must
typically resort to legal action. Clearly, to achieve EU objectives, most
effort must be given to the more serious instances of non-compliance. (RF61)

24. RAPEX
and ISCSMS play a useful role in informing market surveillance authorities, which
could be strengthened by greater complementarity and synergy between the two
tools. (RF 62, 63, 118)

25. There
is a need for guidance on the relative merits of a risk-based approach versus a
systems-based approach to market surveillance, as well as
for better definition and clarification of risk and how to assess it, building
on the proposed risk assessment methodology in the PMSP. (RF64, 65)

26. The
PSMSP has the potential to reinforce market surveillance by
aligning consumer product safety requirements with harmonised product safety
requirements and by extending EU market surveillance rules to all consumer
products, which will enable enforcement measures to be targeted directly at the
source of any risks to safety. This new regime may pose greater costs on MSAs,
although the costs for responsible operators are likely to be negligible.
(RF66, 67, 68, 69)

7.1.3
Costs
of compliance and the scope for simplification

27. Familiarisation
with the legislation accounts for a significant proportion of the total costs
of compliance, estimated at around 15-20% for many firms and
consisting largely of staff costs. (RF70)

28. Compliance
costs have a strong element of Business as Usual (BAU) Costs,
since ensuring compliance with IM legislation is important, but only one of
many elements factored in to the product design and testing process by the
firms. The fact that compliance is often taken into consideration from the
outset makes the costs very difficult to separate costs such as testing
equipment from BAU costs. (RF71, 72, 73, 77)

29. The costs
of conformity assessment depend very largely on the need for third-party
certification and on the time taken to collate and store the necessary
technical documentation for the DoC. (RF75, 76)

30. There
is wide divergence in the level of total compliance costs across different
product groups. However, the overall burden does not appear to be excessively
burdensome.
In most - but not all cases - total annual estimated compliance costs
(administrative, substantive) for the sector do not exceed 1% of annual turnover.
(RF77)

31. There
are concerns among economic operators as regards the level of administrative
costs and burdens associated with some IM compliance requirements. For
instance, traceability requirements were viewed as being insufficiently
flexible and/ or disproportionate, examples were found of minor inconsistencies
in administrative requirements between IM legislation, with ambiguity in
translation requirements for DoCs since the NLF. (RF75)

32. There
are cumulative regulatory effects from the interaction between IM legislation
and environmental legislation applicable to products.
Even though it is has always been the case that multiple pieces of legislation
are applicable to a given product, in recent years the overall body of Union
harmonisation legislation has grown, as well as environmental legislation
applicable to products[110].
(RF80)

33. There
is evidence that SMEs face higher compliance costs per unit than large firms and
cannot achieve leverage on investment in compliance costs in the same way that
global manufacturers can[111].
However, since product safety is non-negotiable, there is limited if any scope
for exemptions for SMEs or micro firms. (RF78)

34. There
are administrative burdens for industry resulting from the frequency of changes due
to the updating of legislation and even more so the updating of harmonised
technical standards[112].
(RF74, 75)

35. Since
large firms participate much more actively in EU legislative-making and
standardisation processes, they have a comparative advantages compared with
SMEs,
since they become aware about the legislation earlier and factor it into the
product design stage earlier, thereby lowering substantive compliance costs.
Since they are often also involved in drafting standards, this reduces the
extent to which the concerns of SMEs are taken into account and risks favouring
large producers. There may be scope to take practical steps to support the
involvement of SMEs in such processes (RF78, 107, 108)

36. There
is potential scope to simplify the body of IM legislation and its administrative
requirements, such as through merging directives, eliminating
inconsistencies in administrative requirements and making a gradual transition
towards electronic provision of compliance information by manufacturers to
MSAs. Such simplifications have the potential to reduce the costs of compliance
borne by operators. However, the extent to which such savings are realisable in
practice would need to be explored in more depth. (RF81, 82, 83, 84, 85, 86,
87, 88, 89)

37. Simplification
of IM legislation might reduce the costs of compliance by
around 12%, although the extent of such savings will vary from product group to
product group. (RF90)

7.1.4
Effectiveness,
fitness for purpose and impacts

38. Regulatory
barriers to the functioning of the internal market persist in
the form of differing or incorrect interpretations or applications of IM
legislation, additional national requirements, failure to recognise EC
type-approval certificates issued in other countries, and inconsistency in
allowing the use of old versions of the standards. However, there is evidence
to suggest the economic operators perceive the regulatory barriers to be
greater than they are in reality. (RF91, 92)

39. IM legislation
is technology-neutral and tends to promote rather than limit innovation,
provided that the legislation and the standards keep pace with technological
innovations and that up-to-date guidance is made available. (RF94, 95, 96, 97)

40. There
are few, if any, regulatory barriers that specifically relate to green products,
although some non-regulatory barriers remain, due to a lack of common
definition on “green products” and a lack of harmonised criteria. (RF98, 99,
100)

41. Whilst
the legislative framework is generally adequate in respect of e-commerce within
the EU, EU, it is not operating effectively to prevent the import of
non-compliant products from third countries. This reflects a
gap in between the E-Commerce Directive and the body of IM legislation and
practical difficulties faced by MSAs. (RF102, 103, 104, 105)

42. There
are inherent limitations on the scope to alleviate legislative requirements for
SMEs without compromising other objectives, although SMEs
potentially face a greater burden due to diseconomies of scale. There are,
however, practical ways to help SMEs that could be encouraged and replicated
across EU28, e.g. promoting participation in standards committees, guidance,
etc. (RF106, 107, 108)

43. The
increasingly blurred distinction between products and services creates
uncertainty in the implementation and enforcement of the legislation, which
could be addressed in any update of the legislation and setting out in generic
terms how these issues could or should be addressed. (RF109, 110)

44. There
is no scope to limit the essential requirements of products to be used by
professionals, except for components or products that are only to be used in
controlled environments, although there may be scope to reduce
the administrative requirements for other products. (RF111, RF112)

45. It is
generally accepted that Union harmonisation legislation has led to reduced
costs for industry when compared with a notional “counterfactual” situation of
a fragmented market with 28 different sets of national regulations and
standards
(as was the case before the internal market’s establishment, albeit when the EU
had only 12 Member States). (RF1, 3)

46. The
elimination of technical trade barriers through harmonisation measures is also
associated with growth in cross-border intra-EU trade and industry
consolidation. This has allowed for economies of scale and scope
to be achieved, which has helped to strengthen the industrial competitiveness
of European economic operators. (RF113, 114)

47. There
are benefits for economic operators in investing in compliance with IM
legislation, where they trade in global markets. Once a given
product is compliant with EU legislation, it can often be easily customised to
meet compliance the requirements set by other legislative regimes, particularly
where third country legislation and standards are based on those of the EU.
(RF115)

48. IM
legislation plays a positive role in ensuring high levels of health, safety and
consumer protection, although there remains a high number
of non-compliant products, which undermines consumer protection and consumer
confidence. (RF116, 117)

7.2 Recommendations

In
this section, we set out the recommendations from the evaluation, which draw on
a wide number of research sources: the online surveys, the interview programme,
the case study research with manufacturers and industry representatives and the
Your Voice consultation. The conclusions section highlights the rationale
underlying these recommendations. Where appropriate, we signpost which sections
of the report the more detailed rationale can be found.

The
recommendations are grouped together under the following headings: (i) Improving
the architecture of Union harmonisation legislation; (ii) Strengthening the
effectiveness of the regulatory framework; (iii) Improving the functioning of
Union harmonisation legislation; (iv) Regulatory simplification; (v) Reducing
administrative burdens for economic operators; and (vi) Strengthening the
implementation regime for Union harmonisation legislation. Due account needs to
be taken of existing and ongoing regulatory and administrative simplification
measures and of efforts to strengthen consistency of the regulatory framework.

7.2.1
Improving
the architecture of Union harmonisation legislation

Key
issues relating to the architecture of Union harmonisation legislation are
mainly set out in Section 3 (relevance and coherence). The recommendations reflect
the evidence gathered from across a broad spectrum of stakeholders. However, in
some cases, where there was no clear consensus, such as the possibility of
introducing a horizontal regulation based on Decision 768/2008, we provide an
independent evaluative judgement.

1. Consideration
should be given by the Commission to using regulations rather than directives
as the primary instrument for implementing Union harmonisation legislation. This
would eliminate differences in the timing of national legislation entering into
force across EU28, and reduce the risk of divergent transposition,
interpretation and application.

2. However,
there should remain flexibility to adopt directives should it be more
appropriate in specific circumstances. Although the
general policy would be that regulations are preferable to directives, if the
Commission considered that a directive was more appropriate on the basis of an
impact assessment (IA), it should clarify the rationale for using whichever
legislative instrument is put forward in the IA.

3. Periodic
reviews should be undertaken of IM legislation for industrial products to
ensure that the regulatory framework is consistent, and that there are no major
gaps, loopholes, inconsistencies or duplication either in the legislation itself
or between different pieces of IM legislation. IM
legislation should be reviewed once every 10 years as a minimum to ensure that
legislation remains up to date and reflects industry developments and product
innovation.

4. A
horizontal regulation based on Decision 768/2008 should be considered in the
medium-term, setting out common definitions and other common elements that
apply across Union harmonisation legislation. Although not
feasible in the near term, since a different approach has been adopted through
the Alignment Package, a horizontal regulation would be more coherent
and would reduce the length of legal texts in individual product regulations
and directives.

5. Non-binding
guidance on complying with Union harmonisation legislation should be updated by
the Commission on a more regular basis, given its
usefulness to manufacturers. Where possible, it should give insight into
the rationale for particular requirements or standards.

6. In a
number of areas within professional goods, the legislation applicable at the
use phase (e.g. installations, maintenance) set at national level imposes
additional barriers that reduce the benefits of harmonised legislation. While
such aspects are outside the scope of IM legislation itself, the development
and provisions of IM legislation should take such aspects into consideration
aiming to minimize any obstacles (to the extent possible).

7.2.2
Strengthening
the effectiveness of the regulatory framework

Key
issues relating to strengthening the effectiveness of the regulatory framework
are set out in Section 6 (effectiveness, fitness for purpose and impacts).

7. Legislative
review processes leading to the recasting of
existing IM legislation should be coordinated and synchronised so
as to minimise administrative burdens for industry[113].
The
research showed that there are cumulative effects in the form of
increased administrative burdens for firms due to the high cumulative frequency
of legislative changes and updates to technical standards.

8. Consideration
should be given as to the feasibility (political/legal and practical) of
introducing a specific date/year when new or amended pieces of IM legislation
that have already been adopted come into force. This would also give
SMEs more time to prepare.

9. The
Commission should give further consideration as to ways of strengthening the
participation of SMEs in EU legislative-making and standardisation processes. One
possibility would be to ensure that SME representative associations are better
represented in working groups on specific IM directives and regulations, with
support provided for the costs of their participation where possible[114].

10. There
should be a faster transition towards “e-market surveillance” in which economic
operators will be expected to make as much compliance information available online
as possible. This would promote more efficient and effective
provision of two-way compliance information and data between MSAs and economic
operators. This would also be more efficient for economic operators from an
internal organisational perspective, given the need for periodic review and
updating of DoCs and other technical documentation.

11. Economic
operators should be allowed to make general regulatory information about
specific products / models/ platforms available in online format only (e.g.
DoCs). More
sensitive technical documentation and supporting test data requested by MSAs
could be transferred electronically via secure data transmission.

12. The
Commission should actively promote cultural change among MSAs to encourage them
to accept compliance information electronically. Many MSAs prefer
to have paper copies of compliance documentation (DoCs, technical files). One
means to achieve this could be through the exchange of officials, as proposed
in the Product Safety and Market Surveillance Package.

13. In order to
facilitate the transition towards a paperless future for market surveillance, market
surveillance authorities (and customs authorities where appropriate) should be
equipped with scanning equipment or smart phone readers that would link through
to the compliance section of the economic operators’ website or to a dedicated
standalone website. This is subject to resources being identified and
requires joint investment by industry and MSAs.

14. Economic
operators should be given greater flexibility as to how they meet traceability
requirements in order to promote greater use of e-labelling. This
would help to alleviate the major concerns that economic operators have with
regard to current traceability requirements for products and packaging
to provide full addressee information. These are seen as unnecessary and
detract from product aesthetics and industrial design. E-labelling provides a
viable alternative route to meeting the same requirements.

15. When
a currently non-harmonised product group becomes part of a harmonised product
group, consideration should be given as to whether it is possible to integrate
new product groups within existing pieces of IM of legislation, rather than
proposing new legislation.

7.2.3
Strengthening
the implementation regime for Union harmonisation legislation

16. The mechanisms
to facilitate cooperation and the exchange of information between MSAs should
continue to be supported and given appropriate funding. EU
funding for EU coordination and support actions relating to market surveillance
through the PSMSP are critical and should be maintained if not further extended
in coordination with MSAs aiming for the most efficient use of resources.

17. IT-driven
systems such as the RAPEX and the ICSMS information system should continue to
be supported. They serve different purposes/ functions and have
proven vital to strengthening the effectiveness of market surveillance and
regulatory enforcement.

18. Although data is
already collected by MSAs on the incidence of non-compliance of products
checked, this should be further disaggregated by type of non-compliance. At
the minimum, comparable data should be available and this should be broken down
according to whether instances of non-compliance are administrative or
technical.

19. The use of
accreditation should be further strengthened through a
consistent approach in the area of harmonised products in line with Regulation
(EC) No 765/2008.

20. The operation of
Notified Bodies Groups/Organisations could be strengthened and extended to all
pieces of IM legislation, given their important role in promoting coordination
and a more consistent approach among NBs. A requirement
could be introduced for active participation by Notified Bodies Groups for all
Notified Bodies, while taking into consideration the cost implications for the
operation of smaller Notified Bodies. Extensive use of the appropriate
information exchange systems (already in place among some of the existing
Notified Bodies Groups) should help to keep the costs of participation low.

21. The possibility
of making the accreditation of Notified Bodies mandatory
should be further considered, with priority given to Internal Market
legislation that concern high risk product categories or issues of higher
safety and consumer protection concern.

22. In order for the
above to happen in practice, there could be a compulsory accreditation
requirement for non-European testing house granted Notified Body status. Concerns
were expressed with regard to retaining confidence in the quality of the
services provided by all Notified Bodies – European and non-European.

23. Synergies should
be fully exploited between different structures in the IM implementation
regime, for instance between SOLVIT (which solves general problems relating to
the non-functioning of the internal market and Product Contact Points (PCPs),
which have more specialised knowledge about non-harmonised product legislation.
For
instance, there could be referrals of cases from SOLVIT to PCPs, and staff
working at SOLVIT contact points could be made better aware about coordination
mechanisms and contact points for industry that specialise in issues relating
to the implementation of internal market in industrial products.

24. The role of the
Product Contact Points should be expanded to harmonised products so as to
provide a first point of contact for and basic information about Union
harmonisation legislation to firms. Many firms don’t
know who to turn to and there is a low level of knowledge among some smaller
firms and micro enterprises about internal market legislation, and even whether
harmonised or non-harmonised legislation applies to their product. This
would both strengthen the visibility of PCPs while providing SMEs with a clear
information source from where they can obtain information.

7.2.4
Reducing
administrative burdens for economic operators

25. The SME
Test should always be applied to internal market legislation so as to ensure
that administrative requirements do not impose disproportionate burdens to
SMEs. It should be reiterated however that there is only limited scope for
SME exemptions from the legal provisions in IM legislation and for a lighter
regime in terms of administrative requirements.

26. A
single reference source could be developed at EU level for firms providing
information as to what changes have been made to IM legislation and updates to
standards and when these come into force. This could be
funded by the Commission and delegated to an appropriate body (or operated
through a technical service contract).

Such
an information portal would save time and resources for industry, particularly
SMEs.
Economic
operators signing up to the service could then receive email updates outlining
upcoming changes and informing about when these will take place.
Moving from a legislative-based to a product-based approach to informing economic
operators about applicable IM legislation and voluntary standards would however
be a technically demanding and resource-intensive exercise.
This would also require the strong cooperation and support of industry
associations and ESOs, some of which already do relevant work in this area.

27. The Commission
should ensure that the administrative simplifications
proposed through the NLF’s Decision 768/2008 are fully implemented. For
instance, inconsistencies in requirements for DoCs between directives should be
eliminated. However, there remains a need for adequate consultation to
ensure that these changes ensure sufficient flexibility for economic operators.

28. Economic
operators should be allowed to continue to choose between producing a single
DoC and a different DoC for each piece of applicable IM legislation. Some
economic operators prefer the latter approach, since it means that there is
less frequent updating of individual DoCs when technical standards are updated.

29. The
current requirement for a DoC to be placed together with products in paper copy
in the R&TTE Directive should be removed. The short form
of the DoC currently used is not necessary given that electrical manufacturers
already provide the full DoC online.

30. The
Commission should provide clarity as to what constitutes a “reasoned request”
for translating part of the technical file by an MSA (c.f. Decision 768/2008). Safeguards
should be put in place to ensure that MSAs requesting the translation of part
of a technical file is the exception rather than norm[115].

7.2.5
Regulatory
simplification

31. Future
simplification exercises should take into close account and give priority to
previous and ongoing simplifications within the NLF framework, including
through the Alignment Package. It is crucial that industry is
not over-burdened with too frequent legislative changes, since there have been
many changes in the past decade, with others due to come into effect in the
near future.

32. Regulatory
simplifications identified through the research[116]
that involve the merger of different pieces of IM legislation should be subject
to public consultation, and supported by technical studies. Careful
consideration is needed to ensure that proposed simplification measures enjoy
sufficiently broad stakeholder support.

7.2.6
Extending
the reach of IM legislation

33. The Commission
should promote international convergence in legislation on industrial products,
since this could help to lower compliance costs for industry, thereby
strengthening industrial competitiveness. The Trade and
Investment Partnership (TTIP) being negotiated between the EU and the US is an important step
in the right direction, but further cooperation with regulators in other third
countries that are key European export markets should be explored, such as
China, Russia, Brazil, Mexico and Australia.

[1] The terms “manufacturer’s declaration of conformity” and
“self-declaration of conformity” are synonymous with SDoC.

[2] The study is part of Lot VI of the Framework Contract for the
Procurement of Studies and other Supporting Services on Commission Impact
Assessments and Evaluations (2008/S146-195858).

[3] A summary of the key evaluation questions specified in the
specifications is provided in Section 2.1

[4] A typology and conceptual framework showing how cumulative impacts
have been assessed through the research is provided in Section 2.3.

[5] COM(2012) 582

[6] COM/2011/0206 final

[7] COM(2012) 573 final

[8] http://ec.europa.eu/governance/impact/planned\_ia/docs/2013\_entr\_003\_industrial\_products\_en.pdf

[9] The Commission adopted a “package on innovation in health”
consisting of the “Communication on safe, effective and innovative medical
devices and in vitro diagnostic medical devices” (26 September 2012)

[10] The separate study is reviewing the PED 97/23/EC; Personal
protective equipment (PPE) 89/686/EEC; Appliances burning gaseous fuels
2009/142/EC; and Cableway installations designed to carry persons 2000/9/EC

[11] Impact assessments (IAs) have only been compulsory since 2006 and
while IAs relating to Union harmonisation legislation have been reviewed,
legislation that predates this period was not subject to an IA process.

[12] Out of 1826 notified bodies listed in the NANDO database there were
136 duplicate entries and in the case of 648 NBs, no email address was
provided, or it was incorrect (non-functioning) or missing. The CSES team
conducted its own desk research and identified alternative contact details for
74 NBs.

[13] 28 Member States plus Iceland, Liechtenstein, Norway, Switzerland
and Turkey

[14] Some interviewees were interviewed twice either because of the
complexity of the information needed for the cases, or because they were
interviewed in a different capacity, first in their role within an industry
association and secondly in relation to their firm.

[15]
http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=IMIP&lang=en

[16] Consolidated Version of the Treaty on the Functioning of the
European Union, 26.10.2012

[17] Council Resolution 85/C 136/01 of 7 May 1985 on a new approach to
technical harmonization and standards.

[18] Recreational Craft, Personal Protective
Equipment, Radio and Telecommunications Equipment Directive, RoHS Directive,
Medical Devices.

[19] Directive 98/34/EC of the European Parliament
and of the Council of 22 June 1998 laying down a procedure for the provision of
information in the field of technical standards and regulations and of rules on
Information Society services

[20] Directive 2001/95/EC of the European
Parliament and of the Council of 3 December 2001 on general product safety

[21] Ibid.

[22] Directive 2001/95/EC of 3 December 2001 on general product safety.

[23] The codification of directives means bringing into one legal text
the original directive and its successive amendments.

[24] The possible merging of the MD and Outdoor Noise Emissions
Directive is being explored through a technical study for DG ENTR which began
in early 2013.

[25] The recast RoHS Directive adopted many of the common elements set
out in the NLF and provided greater clarity on which product groups that were
formerly exempted are now within scope.

[26] Article R10 relates to Declarations of Conformity in Decision
768/2008. Annex III to the Decision specifies the form the DoC must take and
states that by drawing it up, the manufacturer takes responsibility for the
product’s compliance.

[27] Example of a potential simplification that has been identified but
not yet implemented.

[28] Cecchini report on the Cost of Non-Europe, Paolo Cecchini, 1988

[29] “The European Challenge 1992 – the Benefits of the internal market,
”Paolo Cecchini with Michel Catinat and Alexis Jacquemin, 1992

[30] It should be recalled that it is difficult to achieve a
counterfactual that provides a like for like comparison given that the EU only
had 12 members when the New Approach was adopted.

[31] Council Resolution 85/C 136/01 of 7 May 1985 on a new approach to
technical harmonization and standards.

[32] Interim Evaluation of the Measuring Instruments Directive examined
the extent to which a two tier market concerning consumer protection and
competition has developed and if there is difference in the case of Member
States have not opted to require legal metrological control (optionality).  17
countries have opted out from the Directive for one or more instruments. The
only product area where optionality was linked with unfair competition
concerned taximeters.

[33] The extent to which this was due to the transposition process
itself, as opposed to misinterpretation and misapplication of the original
intention of EU legislation by national competent authorities and market
surveillance authorities was difficult to assess (since the transposition
process itself was outside the scope of the evaluation).

[34] Under the PED, ‘Safety accessories’ can be defined as devices to
protect pressure equipment against pressure limits being exceeded and ‘Pressure
accessories’ as devices with an operational function and having
pressure-bearing housings.

[35] Nando (New Approach Notified and Designated Organisations)
Information system, http://ec.europa.eu/enterprise/newapproach/nando/index.cfm

[36] ATEX, Explosives, Medical devices, Machinery, Lifts, Pressure
equipment, Personal protective equipment, Recreational crafts, R&TTE,
Outdoor noise

[37] See example of NB for Personal protective equipment: http://ec.europa.eu/enterprise/sectors/mechanical/documents/legislation/personal-protective-equipment/notified-bodies/index\_en.htm

[38] Under the Machinery Directive, the SDoC procedure generally
applies. Although the categories of machinery listed under Annex IV were
previously required to carry out 3rd party conformity assessment, since 2010,
this has only been mandatory if the manufacturer does not follow the harmonised
standard.

[39] Regulation 765/2008 setting out the requirements for accreditation
and market surveillance relating to the marketing of products and repealing
Regulation (EEC) No 339/93

[40] See for example ISO/IEC
17011:2004 Conformity assessment – General requirements for accreditation
bodies accrediting conformity assessment bodies and ISO/IEC 17025:2005 “general
requirements for the competence of testing and calibration laboratories”.

[41] Regulation (EC) No 765/2008 of 9 July 2008 setting out the
requirements for accreditation and market surveillance relating to the
marketing of products

[42] Written Question by Zuzana Roithová (PPE‑DE) to
the Commission, 27 November 2007.

[43] Answer given by Mr Verheugen on behalf of the Commission, 9 January
2008.

[44] The Machinery Directive, Low Voltage Directive, R&TTE Directive
and the EMC Directive respectively

[45] Machinery, LVD, Ecodesign, EMC, Pressure equipment, Lifts,
Recreational crafts, PPE, ATEX, Outdoor noise

[46] EC (2012), Product Safety and Market Surveillance Package -
COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT , http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=swd:2013:0033(51):FIN:EN:PDF

[47] EC (2012), Commission Staff Working Document, Annexes to the Impact
Assessment,

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SWD:2013:0033(52):FIN:en:PDF

[48] Proposal for a Directive of the European Parliament and of the
Council on the harmonisation of laws of the Member States to the making
available on the market of radio equipment

[49] Evaluation of the Ecodesign Directive (2009/125/EC) - Final Report

[50] Impact assessment study on the review of the Gas Appliances
Directive 2009/142/EC

[51] Evaluation on dg enterprise and industry legislation – Cosmetics
and Explosives Directives

[52] ICSMS provides an internet-based platform for the comprehensive
exchange of information between all the market surveillance bodies. The tool
has an internal area for the use of market surveillance authorities that can
also be used by customs authorities and EU officials.

[53] Source: Systeemtoezicht en Horizontaal Toezicht, conceptleidraad voor
de Rijksinspecties, Begrippen en randvoorwaarden, December 2012 http://www.inspectieloket.nl/vernieuwing\_toezicht/programma\_systeemtoezicht/

[54] Commission Staff Working Document: Impact Assessment Accompanying
the document - Product Safety and Market Surveillance Package, SWD(2013) 33
final

[55] http://ec.europa.eu/consumers/safety/psmsp/docs/psmsp-communication\_en.pdf

[56] The Machinery Directive applies to lifts for goods and to other
types of lifts not covered by the Lifts Directive, the Cableways Directive
applies to lifting appliances installed in outdoor mountain or urban sites.

[57] The SPVD is also applicable but only to certain types of air
conditioners.

[58]CSES(2012), Evaluation and review of the Ecodesign Directive, http://ec.europa.eu/enterprise/policies/sustainable-business/ecodesign/review/index\_en.htm

[59] We should note though that the product development cycle varies
among sector. For example, in the case of laptops it is typically no more than
6 months, while in the case of air-conditioners it can be up to 3 years.

[60] RPA (2011), Ex-Post Evaluation of the Gas Appliances Directive: http://ec.europa.eu/enterprise/dg/files/evaluation/03\_2011\_finalreport\_gas\_en.pdf

[61] CSES (2012), Functioning of the European chemical market after the
introduction of REACH http://ec.europa.eu/enterprise/sectors/chemicals/documents/reach/review2012/chemical\_market\_en.htm

[62] Commission Staff Working Document - Annexes to the Impact
Assessment Accompanying the document : Product Safety and Market Surveillance
Package,

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SWD:2013:0033(52):FIN:en:PDF

[63] http://ec.europa.eu/enterprise/dg/files/evaluation/evaluation-of-the-pressure-equipment-directive\_en.pdf

[64] Directive 2002/95/EC on the restriction of the use of certain
hazardous substances in electrical and electronic equipment

[65] Regulation (EC) No 1907/2006 of the European Parliament and of the
Council of 18 December 2006 concerning the Registration, Evaluation,
Authorisation and Restriction of Chemicals (REACH)

[66] Orgalime Position Paper (2013), Ensuring a truly complementary,
coherent and consistent implementation of REACH and RoHS2

[67] http://ec.europa.eu/environment/waste/rohs\_eee/pdf/faq.pdf

[68] Study on the impacts of possible
amendments to the ATEX Dir. 94/9/EC, the Pressure Equipment Dir. 97/23/EC and
the Machinery Dir. 2006/42/EC with respect to equipment intended for use in the
offshore oil and gas industry

[69] CSES (2013), Fitness Check of the EU legal framework for the
type-approval of motor vehicles.

[70] Such
delays can occur if customs and/ or MSAs mistakenly believe there to be a
requirement for all electrical products to provide the DoC together with the
product.

[71] It should be noted that in general macro-economic models tend to be
log-linear. As a result the effects calculated do not depend strongly on the
values of the exogenous variables. The log-linear behaviour has been seen to
hold for the PRISMA and WIOM model used in this study.

[72] PRISMA is a macro-sectoral model Panteia has developed for
medium/long- term scenario analysis in the Netherlands. See Box: Panteia’s
PRISMA-model for further information.

[73] Panteia’s WIOM (World Input Output Model) is used; see the Box
Panteia’s World Input-Output Model (WIOM).

[74] Including imputed wage self-employed

[75] It should be stressed that metallurgical
industry is the sector shocked but that the shock refers to part (i.e., the
eight sectors under review) of this sector only

[76] A note of caution is needed in taking this finding at face value
given that some problems cited by interviewees and Your Voice respondents as
being of a regulatory nature were found to be non-regulatory, such as national
marking and energy labelling schemes.

[77] The French certification NF-UPEC is the product certification that
testifies technical conformity of the product to the requisites required by the
French standards.

[78] VDI 4707 measures and classifies elevators according to their
energy performance. It defines an energy label and provides a figure for a
“yearly nominal energy demand”. Seven energy efficiency classes provide a
transparent and factual overview when rating elevators according to their
energy performance. They range from “A” to “G” with “A” being the best-in-class
system. Measurements are carried out on actual elevator installations, not on
theoretical models

[79] COM(2012) 582 final

[80] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52013DC0196:EN:NOT

[81] CSES (2012), Evaluation of the Ecodesign Directive- Final report, http://ec.europa.eu/enterprise/policies/sustainable-business/ecodesign/review/files/ecodesign\_evaluation\_report\_part1\_en.pdf

[82] CSES (2012), Impact of the REACH regulation on the innovativeness
of EU chemical industry, http://ec.europa.eu/enterprise/sectors/chemicals/documents/reach/review2012/innovation\_en.htm

[83] For example, online ordering was a key feature of the Minitel
system, introduced by France Télécom in Brittany in 1978 and extended
nationwide in 1982. See: www.minitelfr.com.

[84] Civic Consulting (2011), Consumer market study on the functioning
of e-commerce and Internet marketing and selling techniques in the retail of
goods

[85] The 2011 Commission Staff Working Document on bringing e-commerce
benefits to consumers highlights many issues relating to e-commerce in general
but these tend not to relate specifically to internal market legislation for
industrial products.

[86] For example, the 2009 Commission Communication on Cross-Border
Business to Consumer e-Commerce in the EU, COM(2009) 557.

[87] Directive 2000/31/EC of the European Parliament and of the Council
of 8 June 2000 on certain legal aspects of information society services, in
particular electronic commerce, in the Internal Market (Directive on electronic
commerce).

[88] Part of the Product Safety and Market Surveillance Package. See
section 2.1.4 of this report.

[89] Commission Communication on Smart Regulation: Responding to the
needs of small and medium - sized enterprises COM(2013) 122

[90] Report from the Commission to the Council and the European
Parliament: Minimizing regulatory burden for SMEs - Adapting EU regulation to
the needs of micro-enterprises, COM(2011)803

[91] Directive 2006/66/EC of the European Parliament and of the Council
of 6 September 2006 on batteries and accumulators and waste batteries and
accumulators and repealing Directive 91/157/EEC

[92] Regulation (EU) No 305/2011 of the European Parliament and of the
Council of 9 March 2011 laying down harmonised conditions for the marketing of
construction products and repealing Council Directive 89/106/EEC

[93] http://trade.ec.europa.eu/doclib/docs/2011/july/tradoc\_148053.pdf see Chapter 1.5

[94] A review of responses suggests that more than half of responses can
be linked to a single organisation.

[95] “The European Challenge 1992 – the Benefits of the internal
market”, Paolo Cecchini with Michel Catinat and Alexis Jacquemin, 1992

[96] See also table with detailed data in Appendix C.

[97] The MID repealed the relevant Directives.

[98] The increase in the use of explosives is linked to a significant
increase in the level of intra-EU trade of safety & detonating fuses,
igniters, detonators. This product category is covered by the Explosives
Directive 93/15/EEC.

[99] After exclusion of “Don’t know/not relevant” responses.

[100] Directive 2009/142/EC of the European Parliament and of the Council
of 30 November 2009 relating to appliances burning gaseous fuels.

[101] The term New Approach is becoming less frequently used in the
context of the NLF. However, irrespective of the terminology, Union
harmonisation legislation and horizontal and product-specific harmonisation
Directives that fall within this body of legislation aim to ensure high levels
of product safety.

[102] After exclusion of “Don’t know/not relevant” responses.

[103] Flash EuroBarometer Report No 300 – Retailers’ attitudes towards
cross-border trade and consumer protection, March 2011.

[104] Flash EuroBarometer 299 – Cross-border trade and consumer
protection, March 2011.

[105] COM(2013) 74 final

[106] RAPEX system allows EU Member State market surveillance authorities
and the European Commission to share information about dangerous products found
on the European market quickly and efficiently and to inform consumers about
potential risks to their health and safety.

[107] After exclusion of “Don’t know/not relevant” responses.

[108] Examples of changes in product groups include the placement of new
products come on the market, technological developments, a move toward more
advanced manufacturing processes, the use of different materials in products,
the advent of smart / integrated products, etc.

[109] Given that a different approach has already been adopted through
the Alignment Package, introducing a horizontal regulation should instead be a
medium-long term aspiration.

[110] Although environmental legislation was formerly out of scope, the
cumulative effects of complying with a number of pieces of different
legislation for a given product, both IM regulations and environmental, were
considered.

[111] The on-going review of the Ecodesign and Energy Labelling
Directives will specifically look into this question.

[112] Although individual pieces of legislation taken in isolation do not
change that frequently, since multiple pieces of legislation and standards are
applied, it takes considerable resource to keep track of these developments and
to manage compliance accordingly (e.g. frequent updating of DoCs).

[113] Since IM legislation has in the past been updated at different
times, there has been high cumulative frequency of regulatory changes for
industrial products. Industry stated that it would be beneficial if there were
to be coordinated updating exercises.

[114] There is already funding for NORMAPME which represents SMEs in
standardisation but in an earlier study they reported that they still did not
have enough resources to adequately follow standardisation processes.

[115] Technical files can vary in length from hundreds to thousands of
pages.

[116] Examples are the possible merger of the Machinery Directive and the
Outdoor Noise Equipment Directive and the possible merger of the PED and the
SPVD.

Appendix ||

A. || List of interviews || 2

B. || Bibliography || 10

C. || Product case studies || 13

|| Case study 1 - Electric Motors Case study 2 - Laptops Case study 3 - Domestic Refrigerators and Freezers Case study 4 - Lifts Case study 5 – Gardening Equipment Case study 6 – Fuel Dispensers (Measuring Instruments) Case study 7 – Air conditioners Case study 8 – Integrated Circuits Case study 9 – Snow-ski footwear Case study 10 – Bicycles || 13 33 67 83 102 119 136 168 188 203

D. || 3D printing case study || 214

E. || Technical note - quantification || 220

Interviews
Completed

Commission
officials

No || Name of organisation || Unit || Position/ relevance/ Directive responsible

1 || DG ENTR || Unit F5 – engineering industries || Machinery Directive

2 || DG ENTR || Unit F5 – engineering industries || Machinery Directive

3 || DG ENTR || Unit F5 – engineering industries || RTTE, EMC, LVD Directives

4 || DG ENTR || Unit E4 - Key Enabling Technologies (KETs) and ICT || KETs

5 || DG ENV || Unit C1 - Sustainable Production & Consumption Unit || Green products

6 || DG ENTR || Unit F5 – engineering industries || Lifts Directive

7 || DG ENV || Unit C2 Waste Management, RoHS. || RoHS Directive

8 || DG ENTR || Unit F5 – engineering industries || ATEX Policy Officer - Mechanical Engineering Assistant Policy Officer

9 || DG ENTR - || Unit F5 – engineering industries || Team Leader Electrical  and Electronic Product Regulation

10 || DG ENTR || Unit F5 – engineering industries || Policy officer National seconded expert

11 || DG ENTR || Advanced Manufacturing Unit || Policy officer

12 || DG ENTR || Unit F1 - REACH and nano-technologies || Policy officer

Stakeholders

No || Type of stakeholder || Name of organisations || Sector/product category/thematic area

1 || Consumer group || ANEC || General

2 || EU Accreditation body || EA (European Cooperation for Accreditation) || Network of accreditation organisations

3 || EU Industry association || AQUA || Measuring instruments - water meters manufacturer

4 || EU Industry association || Business Europe || General

5 || EU Industry association || CECE (Committee for European Construction equipment) || Machinery - construction equipment

6 || EU Industry association || CECED || Electrical equipment

7 || EU Industry association || CECIMO || Machinery - machine tools

8 || EU Industry association || CECOD || Measuring instruments – Petrol pumps

9 || EU industry association || CEMA (European Agricultural machinery) || Machinery (Agriculture machinery)

10 || EU industry association || EBI || Recreational crafts

11 || EU Industry association || EFCEM || Machinery - Catering equipment

12 || EU Industry association || EFESME - European SMEs in the lift industry || Machinery - Lifts

13 || EU Industry association || EFTA - European Free Trade Association || General

14 || EU Industry association || EGMF - European Garden machinery Federation || Machinery - Gardening equipment

15 || EU industry association || EMOTA, the European Multi-channel and Online Trade Association || E-commerce

16 || EU Industry association || EPBA - European Portable Battery Association || Electrical and electronics

17 || EU Industry association || EPIC the European Photonics Industry Consortium || Semiconductors

18 || EU Industry association || European Safety Federation || PPE

19 || EU Industry association || European Semiconductor Industry Association || Semiconductors

20 || EU Industry association || European Small Business Aliance || SMEs

21 || EU Industry association || Eurovent || Air conditioners

22 || EU Industry association || EVA || Machinery

23 || EU Industry association || Federation of Environmental trade associations || Air conditioners

24 || EU Industry association || Federation of the European Sporting Goods Industry || Snow/ski - wear

25 || EU industry association || FEM (European Federation of Materials Handling) || Machinery/ Lifts

26 || EU Industry association || FESI || Personal protective equipment

27 || EU industry association || GSMA || Mobile

28 || EU Industry association || Orgalime || Mechanical and electronics industry association

29 || EU Industry association || Petroleum Equipment installers and maintenance federation || Petrol pumps

30 || EU Industry association || T&D Europe || Electricity Transmission and Distribution Equipment and Services Industry

31 || National industry association || Safety Assessment Federation Ltd || Pressure, Machinery, Lift,

32 || National industry association – Denmark || Confederation of Danish Industry (DI) || Multiple Directives

33 || National industry association – Germany || VDMA || Machinery

34 || National industry association – Germany || ZIV || Bicycles

35 || National industry association – Germany || ZVEI || Electrical and electronic products

36 || National industry association – Italy || ANCMA || Bicycles

37 || National industry association – Netherlands || FEDA || Electric motors

38 || National industry association – Netherlands || RAI || Bicycles

39 || National industry association – Sweden || Teknikforetagen || Multiple Directives

40 || National industry association- Netherlands || FME- CWM Netherlands || General

41 || Notified bodies organisation || Association of notified bodies for medical devices || medical devices

42 || Notified bodies organisation || European ATEX Notified Bodies Group || ATEX

43 || Notified bodies organisation || European Coordination of Notified Bodies for PPE || Personal protective equipment

44 || Notified bodies organisation || Explosives Notified Bodies group || Explosives

45 || Notified body || CECOC || CIVEX, Pyrotechnics

46 || Standardisation organisations || CEOC - European Confederation of Organisations for Testing, Inspection, Certification and Prevention || Pressure equipment

National
authorities

|| Directive/Role || Country || Name of Organisation

1 || Outdoor noise || Belgium || ADCO Chairman

2 || ATEX, Low voltage, EMC || Belgium || FPS Economy SMEs, Self-Employed and Energy Directorate-General Energy Infrastructure & Controls

3 || Gas applicances || Belgium || FPS Economy SMEs, Self-Employed and Energy Directorate-General Energy Infrastructure & Controls

4 || General || Belgium || Service Public Fédéral Economie, P.M.E., Classes moyennes & Energie

5 || General || Belgium || National Contact point – Ministry of Economy

6 || Gas appliances/Pressure equipment || Bulgaria || State Agency for Metrological and Technical Surveillance

7 || Machinery/ Pressure equipment/PPE || Cyprus || Department of Labour Inspection - Ministry of Labour and Social Insurance

8 || Lifts/ ATEX || Cyprus || Ministry of Labour and Social Insurance Department of Labour Inspection

9 || EMC/ Low voltage || Cyprus || Ministry of Communications and Works Department of Electromechanical

10 || Pressure equipment/ ATEX || Czech Republic || Czech Trade Inspection

11 || Machinery/ Cableways/ Lifts || Denmark || Danish Working Environment Authority

12 || MID/NAWI || Denmark || Danish Safety Technology Authority

13 || Medical devices || Denmark || Danish Medicines Agency Inspection & Medical Devices

14 || National contact point || Denmark || Danish Business Authority

15 || Low voltage || Denmark || ADCO Chairman

16 || Accreditation body || Denmark || Danak

17 || Machinery || Estonia || Technical Surveillance Authority Industrial Safety Division

18 || Outdoor noise || Estonia || Technical Surveillance Authority Industrial Safety Division

19 || Machinery, PPE, Cableways || Finland || Ministry of Social Affairs and Health

20 || MID/NAVI, Pressure Equipment, Low Voltage || Finland || Ministry Employment and the Economy

21 || 17 Directives || Finland || TUKES (Safety Technology Authority, Electrical Safety)

22 || MID/NAWI || France || Ministère de l'économie, de l'industrie et de l'emploi - DGE/Sous-direction de la métrologie, de la normalisation, de la qualité et de la propriété industrielle - Bureau de la métrologie

23 || Low voltage || France || Ministère du redressement productif

24 || Machinery/Lifts/PPE || Germany || Federal Ministry of Labour and Social Affairs

25 || Multiple || Germany || Ministry for the Environment, Climate Protection and the Energy Sector

26 || Pressure equipment || Germany || Institution/Authority Bundesministerium für Arbeit und Soziales

27 || Accreditation body || Germany || DAkkS - Deutsche Akkreditierungsstelle GmbH

28 || EMC || Germany || ADCO Chairman

29 || 20 Directives  || Greece || Ministry of Development - General Secretariat of Industry - Directorate of Industries Support

30 || EMC/RTTE || Greece || Ministry of Infrastructure, Transport and Networks

31 || Multiple directives || Iceland || The Icelandic Consumer Agency

32 || PPE || Ireland || ADCO Chairman

33 || ATEX || Ireland || ADCO Chairman

34 || outdoor noise || Italy || Agenzia per la Protezione dell'Ambiente e per i Servizi Tecnici (APAT)

35 || Market surveillance authority || Italy || Istituto Superiore per la Protezione e la Ricerca Ambientale - ISPRA

36 || EMC || Latvia || Ministry of Economics

37 || Market surveillance authority || Latvia || CONSUMER RIGHTS PROTECTION CENTRE OF LATVIA

38 || MID/NAWI || Luxembourg || Ministère de l'Economie et du Commerce extérieur -ILNAS

39 || Multiple Directives || Luxembourg || Inspection du Travail et des Mines

40 || Pressure equipment || Lithuania || Institution/Authority Ministry of Economy of the Republic of Lithuania (Industry and Business Department)

41 || National authority – internal market problems || Lithuania || Ministry of Economy SOLVIT Lithuania

42 || Mutual recognition national contact point || Lithuania || Enterprise Lithuania

43 || Machinery || Malta || Regulatory Affairs Directorate

44 || ATEX, SPVD, PED, Lifts, MD, PPE || Netherlands || Ministerie van Sociale Zaken en Werkgelegenheid

45 || EMC, RTTE || Netherlands || Agentshap Telecom

46 || General || Netherlands || Ministry of Economic Affairs

47 || General || Netherlands || National contact point

48 || MD,Lifts, PPE || Netherlands || Inspectie SZW

49 || Lifts, ADCO || Norway || Chairman of ADCO group, Special adviser of Norwegian Building Authority

50 || Medical devices || Norway || Norwegian Directorate for Health and Social Affairs

51 || Cableways, Railroad || Norway || Norwegian Railroad Authority

52 || Multiple Products (Accreditation, Conformity Assessment, Standards, Market Surveillance) || Norway || Ministry of Trade and Industry

53 || Medical Devices || Norway || Norwegian Directorate for Health and Social Affairs

54 || National authority – internal market problems - || Poland || SOLVIT

55 || RTTE/EMC || Romania || National Authority for Management and Regulation in Communications (ANCOM)

56 || MID/NAWI || Spain || CENTRO ESPAÑOL DE METROLOGIA - National body in charge of metrology

57 || Machinery/Lifts/ATEX/ || Slovenia || Ministry of the Economy Directorate for Internal Market Division for technical legislation

58 || EMC || Slovenia || Ministry of the Economy

59 || PPE/ Low voltage || Slovenia || Ministry of Economic Development and Technology

60 || RTTE || Slovenia || Market Inspectorate of the Republic of Slovenia

61 || MID/NAWI || Sweden || Swedish Board for Accredition and Conformity Assessment (SWEDAC)

62 || RTTE || Sweden || Post and Telecom Agency

63 || EMC/ Low voltage/ATEX || Sweden || Swedish National Electrical Safety Board

64 || Machinery, PPE || Sweden || Swedish Work Environment Authority

65 || National contact point || Sweden || Ministry of Foreign Affairs, Department of Internal Affairs

66 || PPE || Sweden || Swedish Consumer Agency

67 || Mutual Rec. + Services Directive || Sweden || National Board of Trade

68 || EMC || Switzerland || OFCOM - Federal Office of Communications - Section Market access and conformity

69 || Accreditation body || Switzerland || SAS - Swiss Accreditation Service

70 || Machinery || UK || Department for Business, Innovation and Skills (BIS) Environmental & Technical Regulation Directorate

71 || Lifts || UK || Department for Business, Innovation & Skills

72 || Explosives || UK || Mines, Quarries and Explosives Policy Health and Safety Executive (HSE)

73 || Pressure equipment/ATEX || UK || DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM (BERR)

74 || RTTE/EMC || UK || Environmental & Technical Regulation Business, Innovation and Science

75 || Low voltage || UK || Department for Business, Innovation and Skills (BIS) - Environment and Technical Regulations Directorate

76 || PPE || UK || Department for Business, Innovation and Skills

77 || Accreditation body || UK || UKAS - United Kingdom Accreditation Service

Case study
interviews

Case number || Product || Interviews with firms completed || Interviews with organisations || Names of organisations

1 || Electric motors || 9 || 2 || ZVEI (Germany) FEDA (Netherlands)

2 || Laptops || 4 || 1 || Digital Europe

3 || Domestic Refrigerators || 3 || 1 || European Committee for Domestic Appliances

4 || Lifts for persons and goods || 8(1) || 3 || EFESME - European SMEs in the lift industry, European Lifts Association - ELA, European Lifts Components Association (ELCA)

5 || Gardening equipment || 5 || 1 || European Garden machinery federation

6 || Petrol pumps || 5 || 2 || CECOD PEIMF

7 || Air conditioners || 8 || 2 || Federation of Environmental trade associations Eurovent

8 || Integrated circuits || 8 || 1 || European Semiconductor Industry Association

9 || Ski /Snow footwear || 5 || 1 || Federation of the European Sporting Goods Industry

10 || Bicycles || 6 || 3 || ANCMA (Italy) RAI (Netherlands) ZIV (Germany)

Total || || 62 || 17 ||

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The case studies
in this document are part of the Evaluation of Internal Market Legislation for
Industrial Products carried out for the European Commission’s DG Enterprise and
Industry by the Centre for Strategy & Evaluation Services (CSES)[1],
supported by our partner organisations, Panteia and Oxford Research. The
case studies reflect the opinion of the persons and organisations that were
interviewed. This document should not be considered as representative of the
Commission’s official position.

Case
Study 1 – Electric motors

1.
Introduction – objectives of the study

The
product group examined in this case study is electric motors. The aim is to
analyse the applicable IM legislation, assess the costs associated with the
implementation of the applicable IM legislation, identify areas of overlaps and
conflicts between the different parts of the legislation that may lead to
problems and costs to the industry and identify and assess the benefits of
possible simplifications. The rationale for the selection of these
product groups was that:

·
Electric
motors are covered by a large number of IM Directives and Regulations;

·
There
is a large number of professional users in the sector;

·
The
sector represents a high share of total manufacturing (see industry structure
below). Hence demand for electric motors is closely related to manufacturing
processes and investments in the manufacturing industry[2].

The case study is
based on desk research and interviews with two national industry associations
representing manufacturers of electric motors and nine in depth interviews with
manufacturers of electric motors operating in Europe, four large size
manufacturers, one medium and four small.

2.
Product definition and description of structure of the sector

Product
definition

The
product group examined in this case study is electric motors. An electric motor
is a device which converts electric energy into mechanical energy[3]. These types of
motors are widely used in machine tools, household appliances, power tools and
other electrical appliances and equipment. There are two main types of electric
motors. These are the so-called AC and DC motors. Around 50% of the demand in
the European Union is for AC motors. Further distinctions can be made by output
in kW or by type of motor (single-phase, multi-phase).

Electric
motors are covered under PRODCOM code 27.11 that includes the following 21 different
sub-categories:

·
27111010
- Electric motors of an output <= 37.5 W (including synchronous motors <=
18 W, universal AC/DC motors, AC and DC motors)

·
27111030
- DC motors and generators of an output > 37,5 W but <= 750 W (excluding
starter motors for internal combustion engines)

·
27111053
- DC motors and generators of an output > 0,75 kW but <= 7,5 kW
(excluding starter motors for internal combustion engines)

·
27111055
- DC motors and generators of an output > 7,5 kW but <= 75 kW (excluding
starter motors for internal combustion engines)

·
27111070
- DC motors and generators of an output > 75 kW but <= 375 kW (excluding
starter motors for internal combustion engines)

·
27111090
- DC motors and generators of an output > 375 kW (excluding starter motors
for internal combustion engines)

·
27112100
- Universal AC/DC motors of an output > 37,5 W

·
27112230
- Single-phase AC motors of an output <= 750 W

·
27112250
- Single-phase AC motors of an output > 750 W

·
27112300
- Multi-phase AC motors of an output <= 750 W

·
27112403
- Multi-phase AC motors of an output > 0,75 kW but <= 7,5 kW

·
27112405
- Multi-phase AC motors of an output > 7,5 kW but <= 37 kW

·
27112407
- Multi-phase AC motors of an output > 37 kW but <= 75 kW

·
27112530
- Multi-phase AC traction motors of an output > 75 kW

·
27112540
- Multi-phase AC motors of an output > 75 kW but <= 375 kW (excluding
traction motors)

·
27112560
- Multi-phase AC motors of an output > 375 kW but <= 750 kW (excluding
traction motors)

·
27112590
- Multi-phase AC motors of an output > 750 kW (excluding traction motors)

·
27112610
- Alternators of an output <= 75 kVA

·
27112630
- Alternators of an output > 75 kVA but <= 375 kVA

·
27112650
- Alternators > 375 kVA but <= 750 kVA

·
27112670
- Alternators of an output > 750 kVA.

Industry
structure
Enterprises

According
to data from Eurostat there were around 14,000 enterprises in the electric
motors sector in the period of 2008 – 2010, which were concerned with the
manufacturing of these motors. As mentioned before this concerns NACE code is
27.11 (Manufacture
of electric motors, generators and transformers), which is broader than only
electric motors.

Table 1: Number of enterprises – electric motors,
generators and transformers sector (NACE 27.11)

2008 || 2009 || 2010

14,697 || 14,272 || 14,544

Source:
Eurostat, Structural Business Statistics.

The
following table shows the production value for the years 2009 and 2010. It
shows a sharp increase from 2009 and 2010. This is not in line with the number
of employees, which stayed stable around 2.5 million during the same time period.

Table 2: Production value (in million €) – electric
motors, generators and transformers (NACE 27.11)

2009 || 2010

45,530.38 || 53,606.02

Source:
Eurostat.

Products

Based
on the Eurostat PRODCOM data for 2009, the total market size for electric
motors was around 733.5 million units or EUR 10.5 billion in production value[4]. In the
following table an overview is provided of the different PRODCOM indicators and
their export/import value for the year 2009. In Europe 293.2 million electric
motors, generators and transformers were produced. The corresponding production
value was 12.3 billion euro’s. The sector has exported a value of 4.2 billion,
while imports amounted to 2.4 billion. This confirms the view that most motors
are still produced in (Western) Europe given the highly automated production
processes present in those countries[5].
Table A1 in the Annex gives a detailed description of all codes and the
production, import and export values.

Table 3: Production, import and export value –
electric motors, generators and transformers (2009), PRODCOM CODES: 2711010 to
27112670[6]

|| Quantity (units) || Values (€)

Production || 293,264,097 || 12,309,392,520

Import || 543,812,581 || 2,433,820,520

Export || 103,498,097 || 4,261,409,780

Total EU market (Production + imports - exports) || 733,578,581 || 10,481,803,260

Source:
Eurostat PRODCOM.

Tables
4 and 5 show numbers of units sold and value data for the four most common
technologies of motors. 91% of all electric motors sold in Europe in 2010 are
small power range motors, namely under 750W. In this year, only 0.01% of the
motors sold had a very large power range, 9% were medium range motors.[7].

Table 4: Electric motors and generators sold by type
in EU27 (thousand units, 2010)

Technology || Power range

≤ 750 W || > 0,75 ≤ 375 kW || > 375 kW

units || % || units || % || Units || %

DC Motors and Generators || 12,176 || 56 || 4,417 || 21 || 1 || 5

AC Single-Phase || 67,019 || 29 || 6,379 || 30 || n/a || n/a

AC Multi-Phase || 11,700 || 5 || 10,175 || 49 || 28 || 95

Universal || 23,288 || 10 || n/a || n/a || n/a || n/a

Total || 230,123 || 100 || 20,970 || 100 || 30 || 100

Source:
EuP lot 30: Electric Motors and Drives (2012).

Table 5: Revenue data for electric motors and
generators by type EU27 ( millions €s, 2010)

Technology || Power range

≤ 750 W || > 0,75 ≤ 375 kW || > 375 kW

Value € || % || Value € || % || Value € || %

DC Motors and Generators || 1,762 || 39 || 515 || 11 || 64 || 5

AC Single-Phase || 1,365 || 30 || 805 || 17 || n/a || n/a

AC Multi-Phase || 805 || 18 || 3,384 || 72 || 1,142 || 95

Universal || 576 || 13 || n/a || n/a || n/a || n/a

Total || 4,508 || 100 || 4,705 || 100 || 1,207 || 100

Source: EuP lot 30: Electric Motors and
Drives (2012).

3.
Analysis of applicable IM legislation and standards

Identification
of relevant IM legislation

Electric
motors are covered by seven different pieces of legislation. This legislation
is divided into three categories:

·
Health
and safety (Low Voltage Directive, Machinery, RoHS Directive on hazardous
chemicals, REACH, ATEX directive),

·
Electromagnetic
compatibility (EMC Directive); and

·
Energy
consumption (Eco-design and the respective implementing measures)

The
following directives are applicable to electric motors:

·
Low
Voltage Directive: LVD is applicable to all electric
motors, except extra low voltage and high voltage;

·
Machinery
Directive:
the MD is applicable for high voltage electric motors (high voltage electric
motors are considered as partly completed machinery). It should be mentioned
that in general electric motors are used in machines, for which the MD is
applicable. So, although the MD is not applicable to most electric motors, MD
is applicable to the machines with electric motors;

·
Directive
on Electromagnetic Compatibility (EMC): EMC is
applicable to all electric motors. Some interviewees mentioned that EMC is not
relevant to electric motors, because electric motors do not cause disturbances.
There only might arise problems when other components are added (such as
control units).

·
ATEX:
ATEX is only applicable to electric motors that are used in specific areas
(explosive atmospheres).

·
RoHS:
Refers to the use of chemicals (such as lead).

·
Reach:
Refers to the use of chemicals (such as copper lamination).

·
Ecodesign:
Ecodesign is applicable to a large part of the electric motors (see below).

The
table in the appendix provides an overview of relevant IM legislation for the
electric motors, including the basic administrative requirements.

The
most important directives is terms of impacts are considered to be the
Ecodesign (EuP for IEC-motors) and ATEX. ATEX (if applicable) is considered the
most burdensome since it requires third party certification.

Ecodesign
is a relatively new Directive in relation to electric motors. Electric motors
which have to comply with the Ecodesign directive are called IE-motors or
IEC-motors. For these motors there are rules for energy efficiency. EC
Regulation 640/2009 implements the European Ecodesign Directive for electric
motors. It contains requirements for the design of electric motors. The
Regulation was published on 23 July 2009 and entered into force on 12 August
2009. There are several efficiency levels in the regulation. Minimum
requirements are IE2 from 2011, IE3 or IE2 combined with a variable speed drive
(VSD) for motors above 7.5 kW from 2015 and IE3 or IE2+VSD for motors above
0.75 kW from 2017. Because of the clear timetable enterprises can anticipate on
the new efficiency levels. Also international standards are developed before a
new level comes into force. Every new level means for enterprises that they
have to design new electric motors, which stimulates innovation. Some
interviewee noticed that the new efficiency levels are used in the market as a
commercial tool.

Analysis
of gaps, overlaps, inconsistencies and duplication

Most
interviewees mention that there are no gaps, overlaps, inconsistencies and
duplications in the IM legislation, that there is no scope for simplification
and that there are no big issues that justify opening up directives. The NLF
has resolved most issues, such as differences in definitions of producers and
importers.

For
the Ecodesign regulation, there is a gap at the moment. When the motor can be
used in environment temperatures of more than 40 degrees, or higher than 1.000
meters, then Ecodesign is not applicable. This is because special purpose
motors (such as motors designed to be used at high altitudes or temperatures)
need to remain in the market as they fulfil a specific function. However, it
was noticed that there are enterprises that put a nameplate on a normal product
that it can be used in an environment temperature of 41 degrees and in that way
they escape from the Ecodesign regulation. This problem is already recognized
and an amendment to the Regulation has been launched and should be published
soon.

Some
interviewees mentioned that there are sometimes inconsistencies in directives
and sometimes there are duplications in standards. But they say that these are
not very obvious and that they are unavoidable looking at the huge amount of
regulation. They do not experience these overlaps as troublesome. Because of
the increase in the number of directives there is a risk of more
inconsistencies. For enterprises it is difficult to have a full overview of all
directives. In practice, these gaps are solved in a pragmatic way.

An
interviewee mentioned a problem with the ATEX-directive. According to him it is
a problem who is responsible for a product with an
ATEX-certificate from the manufacturer, that is repaired by another (certified)
enterprise.

4. Analysis of costs of
compliance with IM legislation
Introduction

The
information presented in this section is based on the in-depth interviews with
nine manufactures of electric motors. The firms range in terms of size and
production volume. From six respondents data on administrative costs were
collected, four large size manufacturers, one medium and one small.

Table 6: Basic information on the firms interviewed

Firm || Specific/main product || Firm size || Annual sales from product || Main markets

A || Electric motors || Large (>1000 employees) || 3,500,000 units || --

B || Electric motors || Large (>1000 employees) || 25,000 units || 100% of sales in the EU

C || Electric motors || Large (>500 employees) || 900,000 units || 80% of sales in the EU

D || Electric motors || Large (>500 employees) || 260,000 units || 60% of sales in the EU

E || Electric motors || Medium (250-500 employees) || 600,000 units || 98% of sales in the EU

F || Electric motors || Small (<250 employees) || 15,000 units || 80% of sales in the EU

G || Electric motors || Small (<250 employees) || 40,000 units || 100% of sales in the EU

H || Electric motors || Small (<250 employees) || 20,000 units || 100% of sales in the EU

I || Electric motors || Small (<250 employees) || 20,000 units || 100% of sales in the EU

Before we
briefly discuss the process steps some remarks need to be pointed to understand
the typical situation for electric motors:

·
In
this case study we identified seven directives which are applicable to electric
motors. But in general not all directives are applicable to all electric
motors. The applicable directives for electric motors differ between companies,
depending on which type of motors they produce. For example, the ATEX directive
is only applicable to motors which are used in explosive atmospheres.

·
Lots
of companies do not produce bare electric motors. Often frequency converters,
controllers, software, etc. are added to the electric motors. These added
components are often also covered by legislation individually or in combination
with the electric motor. For example, some interviewees mentioned that electric
motors themselves do not produce interferences and the EMC directive actually
is not very relevant, but when frequency converters or controllers are added
this causes interferences which make the EMC directive very relevant. Another
interviewee mentioned that the Machinery directive was not applicable to the
electric motors they produce, but that their customers use the electric motors
in their machines. These machines are covered by the Machinery directive. This
leads to customer requirements with regard to the supplier of the electric
motors in line with the Machinery directive. In general, interviewees indicated
that it is difficult for them to distinguish between the processes to comply
with the obligations for the electric motors and the processes to comply to the
obligations for the added components, because for the manufacturers it is one
integrated process.

·
Most
of the directives relevant for electric motors exit already for a relative long
time. They do not change that much and companies are used to comply with these
directives. It is incorporated in their processes. Only the Ecodesign
implementing regulation is relatively new and has at the moment the largest
impact on companies. The regulation requires that electric motors, covered by
the regulation, have to reach certain levels of energy efficiency in several
steps. For some manufacturers/models [as indicated in section 1.6 the
requirements are not more stringent than elsewhere in the world and do not mean
that all models need to be redesigned, only a number of them. Typically
ecodesign means redesign for 20% of the existing models. Since other
jurisdictions such as the US already had strict requirements, many motors
already complied and the ecodesign regulation simply stopped the dumping of the
poor efficiency ones on the EU market], this does not require simple adjustment
of existing models, but complete electric motors have to be redesigned. When
asking about internal market legislation for electric motors, most interviewees
start with the Ecodesign regulation, because this regulation is the current
issue and has the major impact on the companies. Other directives are more
viewed as business as usual. The Ecodesign regulation causes extra costs for
the companies, but on the other hand most interviewees use the new requirements
as strategic issues in their markets. They recognize the impact of electric
motors on energy use in the world and that improving the energy efficiency of
electric motors is very important. They try to be the first with the
development of more efficient motors in the market.

The following
steps can be identified in the process of placing electric motors to the
market:

·
Familiarisation
with applicable/relevant obligations

·
Introduction
of processes or changes to product design and production processes to ensure
compliance with substantive obligations

·
Conformity
assessment procedures and relevant documentation

·
Declaration
of conformity or other statement of compliance and CE marking

Familiarisation
with applicable/relevant obligations

To comply with
the applicable internal market legislation companies need to have knowledge of
the applicable directives and of the standards. As mentioned, the applicable
directives for electric motors differ between companies, depending on which
type of motors they produce. For example, the ATEX directive is only applicable
to motors which are used in explosive atmospheres and the Ecodesign directive
is not applicable to all motors because this directive includes several
exceptions.

In general, the
companies are linked to information sources on Directives and on standards or
they have their own system. For example a smaller Dutch producer is a member of
the NEN-connect network. This is a digital platform which shows the different
standards and directives which are of interest for producers of electric
motors. The platform sends an automatic message when the standards are updated
and changes need to apply. When this message arrives, the firm examines the
change and decides if they have to change their design. Furthermore, companies
buy standards and get all technical features to comply with.

One interviewee
mentioned that they participate in standardisation groups to be informed in a
very early stage about the backgrounds of the legislation and standards. For
them these backgrounds are necessary for the correct application of the
requirements.

The
average costs for familiarisation with applicable/relevant obligations of the
interviewed companies amount to approximately 0.2% of turnover. More than 90%
of these costs are cost of human resources.

Introduction
of processes or changes to product design and production processes to ensure
compliance with substantive obligations

For developing
new electric motors and production processes the companies have to comply with
the requirements of relevant directives. For most directives working in
accordance with the relevant standards is incorporated in the development,
testing en production processes of the enterprises. At the moment the Ecodesign
implementing regulation requires that electric motors are more and more energy
efficient in several steps. To comply with these efficiency requirements
enterprises have to redesign some models [as indicated in
section 1.6 the requirements are not more stringent than elsewhere in the world
and do not mean that all models need to be redesigned, only a number of them.
Typically ecodesign means redesign for 20% of the existing models. Since other
jurisdictions such as the US already had strict requirements, many motors
already complied and the ecodesign regulation simply stopped the dumping of the
poor efficiency ones on the EU market. Although this
causes extra costs, several respondents mentioned that these developments also
offer new opportunities in their markets.

For
most producers of electric motors testing is the most costly step to comply
with the relevant Directives. But on the other hand most interviewees would
also test a lot when there were no directives and standards. This is needed to
develop and sell safe products. This is especially the case for ATEX-motors
because these motors are used in explosive atmospheres.

The
average costs for compliance with requirements (product design and testing) of
the interviewed companies amount to approximately 0.6% of turnover. 74% of
these costs are cost of human resources, 23% are costs for testing equipment
and 3% are costs for third parties.

Conformity
assessment procedures and relevant documentation

This step is
concerned with preparing technical documentation, which causes costs for
employees of the enterprises, and with conformity assessment. Conformity
assessment is especially related to inspection of notified bodies. This is the
step that causes most of the external costs. This is especially relevant for
ATEX-motors. For ATEX- motors it is mandatory that a notified body inspects the
designs of these motors and test motors to get the required marking. This is
only needed when companies produce motors that are to be used in explosive atmospheres.

The
average costs for conformity assessment procedures and relevant documentation
of the interviewed companies amount to approximately 0.3% of turnover. 57% of
these costs are cost of human resources, 32% are costs for third parties and
11% are costs for testing equipment.

Declaration
of conformity or other statement of compliance and CE marking

Drawing up
declarations of conformity and CE marking is not viewed a big issue for the
interviewees. Compared to the other steps this is a minor step, not very
complex and not very costly. The average costs for declaration of conformity or
other statement of compliance and CE marking of the interviewed companies
amount to approximately 0.1% of turnover.  More than 90% of these costs are
cost of human resources.

Business
as usual

Companies were
asked to differentiate between Business As Usual cost (BAU) and cost
specifically due to the internal market regulation. Part of the activities
obliged by IM legislation companies would perform anyway. For example, a firm
may carry out product testing so as to check the quality and safety of
products. Such costs are known as ‘business as usual’ (BAU) costs. Respondents
mentioned that the largest shares of the activities that cause the
administrative costs are business as usual. If there were no directives and
standards the enterprises would have their own quality and safety standards. To
meet these standards companies also have to test their products. Some
enterprises mentioned that without directives they would spend less on some
external tests (costs of third parties). On average, 73% of the costs of human
resources spent on compliance activities is considered as business as usual by
the interviewed companies. For the costs of third parties this average is 67%
and for the costs of testing equipment 87%.

5. Assessment of costs of
IM legislation for the whole sector

Data collection

Based on the
information provided by interviewees, the average costs of complying with IM
legislation have been estimated. Out of six respondents, data on costs
were collected, four large size manufacturers, one medium and one small. In
principle the respondents are manufacturers. But some of them also have some
trading activities (import of motors).  Cost data have been collected for
activities relating to electric motors, especially manufacturing, but the
respondents could not distinguish between the compliance costs for the
manufactured and the imported motors. The data collection was focussed on the
costs to comply with the following legislation: Low Voltage Directive, Machinery
Directive, the Directive on Electromagnetic Compatibility (EMC), ATEX, RoHS,
Reach and Ecodesign.

The six
interviewed companies were asked to give estimates of the costs of human
resources, costs of third parties and costs of testing equipment for total
compliance activities (top down approach). Also data on time and tariff were
asked (bottom up approach), but this did not result in sufficient usable data.
For the testing equipment the costs for the last five years are collected to
calculate the average cost per year. Next the interviewees were asked to
distribute these costs of human resources, costs of third parties and costs of
testing equipment over the identified steps of the compliance process
(familiarisation, compliance with requirements, conformity assessment, DoC and
CE marking and other) and they were asked which parts of these costs are
considered as business as usual.

Estimation
of costs

All costs are
collected as totals for enterprises. The cost estimates for the whole sector are
based on turnover. All costs were calculated as percentages of turnover and
this was then used to weight the results. The data collected with two SMEs did
not show clear differences – in terms of costs as a percentage of turnover - as
compared to the data for large enterprises. Therefore, there were no grounds
for making a distinction in the calculations. In other words, it has been assumed
that the compliance costs as a percentage of turnover are the same for large
enterprises and for SMEs.

Based on the
results from the six respondents, in Table 7 the estimates of compliance costs
for the sector of electric motors are presented as percentages of turnover. The
costs were standardised by calculating averages of the percentages. To estimate
the compliance costs for the whole sector of electric motors we followed the
following steps:

·
for
each type of costs (cost of human resources, costs of third parties and costs
of testing equipment) the costs were calculated as a percentage of the turnover
of electric motors, averaged over respondents (first row in Table 7)

·
the
distribution of the costs over the different process steps is again an average
of the estimated distribution from the respondents, as a percentage of the
annual compliance costs (see distribution over process steps  in Table 7)

·
we
then determined the average percentages of business as usual (as percentage of
annual compliance costs, per cost type), to distinguish between the total
compliance costs and the regulatory burden  related to the internal market
legislation (last 2 rows in table 7).

Table 7 - Estimate of average compliance costs (%)

|| Cost of human resources for total compliance activities || Costs of third parties || Costs of testing equipment || Total

Annual costs (% of turnover) || 0.95% || 0.13% || 0.18% || 1.26%

|| || || ||

Of which (% of annual costs; is the distribution over process steps) || || || ||

- Familiarisation || 19.17% || 8.50% || 2.50% || 15.65%

- Compliance with requirements (product design and testing) || 49.00% || 15.00% || 80.00% || 50.16%

- Conformity assessment || 16.67% || 71.50% || 16.67% || 22.15%

- DoC and CE marking || 13.50% || 5.00% || 0.83% || 10.79%

- Other || 1.67% || 0.00% || 0.00% || 1.26%

|| || || ||

And of which (% of annual costs) || || || ||

- Business As Usual (BAU) || 73.33% || 68.00% || 86.67% || 74.76%

- Regulatory burden || 26.67% || 32.00% || 13.33% || 25.24%

Source:
CSES study

To
calculate an estimate of the overall costs for the whole sector we used the
value of the total EU market according to Eurostat PRODCOM, namely € 10,5
billion in 2009 (see table 3). Applying the percentages in table 7, led to the
figures presented in the table 8.

Table 8 - Estimate of
compliance costs for the whole sector of electric motors (€)

|| Cost of human resources for total compliance activities || Costs of third parties || Costs of testing equipment || Total

Total Annual costs || € 99,175,627 || € 13,159,638 || € 19,368,345 || € 131,703,610

|| || || ||

Distribution over process steps: || || || ||

- Familiarisation || € 19,008,662 || € 1,118,569 || € 484,209 || € 20,611,440

- Compliance with requirements (product design and testing) || € 48,596,057 || € 1,973,946 || € 15,494,676 || € 66,064,679

- Conformity assessment || € 16,529,271 || € 9,409,141 || € 3,228,057 || € 29,166,470

- DoC and CE marking || € 13,388,710 || € 657,982 || € 161,403 || € 14,208,094

- Other || € 1,652,927 || || || € 1,652,927

|| || || ||

- Business As Usual (BAU) || € 72,728,793 || € 8,948,554 || € 16,785,899 || € 98,463,246

- Regulatory burden || € 26,446,834 || € 4,211,084 || € 2,582,446 || € 33,240,364

Source:
CSES study

6. Benefits of Internal
Market legislation

Most
interviewees in the sector of electric motors are very satisfied with the IM
directives, the standards and the harmonisation of their sector which replaced
regulations in 27 countries.

It has reduced
administrative burdens for enterprises rather substantially – even though it
has not been possible to quantify and, nowadays, the interviewees suggested
they could hardly imagine a situation without harmonisation.

The firms also
consider as particularly positive the fact that – through their industry
representatives or even as individual firms – they can be involved in the
development of the IM directives and the standards. While it may be time
consuming this involvement reduces the risks of the development of too complex
and inconsistent requirements with high administrative burdens for companies. It
also provides certain level of predictability and this is the reason that most compliance
activities are considered as business as usual for companies.

At the same
time, some firms pointed to the benefits from specific pieces of IM legislation
in terms of the promotion of innovation in the sector. The Ecodesign Directive
has had an important impact in the case of electric motors market by introducing
energy efficiency requirements with a clear timetable. According to the
evaluation of the Ecodesign Directive it has pushed for a faster adoption of
the more efficient IE2 category that would have happened in the absence of the
Ecodesign. However, the evaluation concluded that the requirements are less
demanding that those in the US or Canada where IE3 level motors are already
dominant[8].

7. Simplification and
improvement options

Most
interviewees in the sector of electric motors are very satisfied with the IM
directives, the standards and the harmonisation of their sector. It is
mentioned that the IM directives replaced regulations in 27 countries. This
reduced the administrative burdens for enterprises substantially. The
interviewees are used to the harmonisation of the sector. They can hardly
imagine a situation without harmonisation.   Furthermore, it is mentioned that
the sector was involved in developing the directives and the standards. This
involvement reduces the risks of too complex regulation, inconsistent
regulation and high administrative burdens for companies. We have already seen
that most activities to comply with the IM legislation are business as usual
for companies.

Some
respondents mentioned some gaps and inconsistencies, but these were already
described in section “3 Analysis of
applicable IM legislation and standards” under “Analyses of gaps, overlaps,
inconsistencies and duplication”. These gaps and inconsistencies do not affect
compliance costs.

It
is not surprising that companies cannot mention important options for
simplification and improvement of IM legislation.

Fewer
audits from notified bodies

A small
enterprise that produces about 15,000 electric motors a year mentioned that
fewer audits from notified bodies could save some costs. This is related to
conformity assessment (inspection by notified bodies) and is only relevant for
ATEX-motors (motors that are to be used in explosive atmospheres). For
ATEX-motors it is mandatory that a notified body inspects the designs of these
motors and test motors to get the required marking. But, when the rules or
standards are changed a bit, all ATEX-motors have to be inspected again. According
to the respondent, this should not be necessary. At the moment, the costs for
this respondent for notified bodies are on average about € 12,000 a year. The
market for ATEX-motors is a small part of the market for electric motors. With
the assumption that fewer audits would lead to a reduction of costs for
notified bodies of 10%, the total savings would be about € 300,000.

Reduce
the frequency of changes in standards

The small
enterprise that produces electric motors mentioned that changes of standards
could occur less often. Changes in standards cause costs for getting the new
standard and corresponding certification. On the other hand, another respondent
mentioned that especially the ATEX-requirements are getting higher and higher,
but this is necessary for safety reasons. Cost savings would very much depend
on the implementation. To estimate cost savings we use the following
assumptions: 25% reduction of the costs for purchase of standards
(familiarisation costs to third parties), 10% reduction of costs for human
resources for familiarisation and 5% reduction of costs for assessment and
preparation. With these assumptions the total savings would amount to about
€ 1,990,000.

More
examples to explain more difficult requirements

A
large enterprise mentioned that it is sometimes difficult to understand the
requirements from IM-legislations. They do not know from the legislation what
is needed because explanations are not clear enough. It would be helpful when
there are some more examples to explain the requirements. This would reduce the
costs of familiarisation somewhat. When a reduction of 5% of familiarisation
costs is assumed, the total cost savings would amount to about € 250,000.

8. Overall conclusions

The
case study examined alternative and direct current electric motors. Total EU
market for electric motors in 2009 was 733.5 million units and €10.5 billion in
value. 91% of all electric motors sold in Europe in 2010 are small power range
motors, namely under 750W.

Electric
motors are covered by seven different pieces of IM legislation covering aspects
of health and safety (Low Voltage Directive, Machinery, ATEX), electromagnetic
compatibility (EMC), energy consumption (Ecodesign Directive) and chemicals use
(RoHS Directive on hazardous chemicals, REACH).

Based
on the information collected during the study it is estimated that the total
annual costs of compliance with IM legislation for the firms in the sector are
around €130 million, although more than 70% of this is considered to be part of
business as usual, namely costs incurred even in the absence of legislation.
The estimated net annual costs directly linked with the legislation are around
€33 million, no more than 0.3% of the annual turnover of the sector.
Substantive compliance costs are significant (around 50%) of the total and are
primarily linked with ensuring compliance with the Ecodesign and the ATEX
Directives. Still, there are also important costs for familiarisation with the
legislation (15%) and conformity assessment procedures, including in particular
the costs for notified bodies in relation to the ATEX Directive.

Despite the
costs, most firms in the sector of electric motors are satisfied with the IM
legal framework and the harmonisation of the sector legislation. By replacing
regulations in 27 countries it has reduced administrative burdens for
enterprises rather substantially – even though it has not been possible to
quantify. In addition they is a positive view of the opportunity to be involved
in the standards development process to ensure that requirements are not too
complex while also ensuring a certain level of predictability. In parallel, the
Ecodesign Directive requirements have effectively pushed for the faster
adoption of the more efficient IE2 motors, even if not for the IE3 level which
is already widely adopted in the US and in Canada.

In
terms of possible simplification, the feedback provided suggested there is
limited scope for changes and there are no gaps, overlaps, inconsistencies and
duplications in the IM legislation. The possibility of reducing the frequency
with which standards are replaced as a way to bring certain cost savings,
introduction of guidance document to facilitate familiarisation and possibly
the reduction of the number of audits from notified bodies. In total it was
indicated that savings of up to €2.5 million of total costs could possibly be
achieved for the sector.

9. Sources of information
Publications

·
Report
‘Trends and segments for electric motors’ by the Dutch Center for Encouraging
import from Developing Countries (CBI) – 2011.  www.cbi.eu/system/files/marketintel/Trends\_and\_segments\_for\_electric\_motors.pdf

·
Report
‘Trends and segments for electric motors’ by the Dutch Center for Encouraging
import from Developing Countries (CBI) – 2011.  www.cbi.eu/system/files/marketintel/Trends\_and\_segments\_for\_electric\_motors.pdf

·
Almeida,
Ferreira, Fong and Fonseca (2008), ‘EUP Lot 11 Motors’. www.eup-network.de/fileadmin/user\_upload/Produktgruppen/Lots/Final\_Documents/Lot11\_Motors\_FinalReport.pdf

·
Anibal
de Almeida, Hugh Falkner, João Fong and Keeran Jugdoyal (November 2012), ‘EuP
lot 30: Electric Motors and Drives, 2nd Draft’. www.eco-motors-drives.eu/Eco/Documents\_files/EuP-Lot30-Task-2-2-Dec-2012.pdf

·
Eurostat
PRODCOM

Interviews:

·
2
with national industry associations

·
9
interviews with enterprises (especially producers); from 6 respondents data on
administrative costs were collected.

Annex

Production,
import and export value per PROD-COM CODE

Table A1: Production, import and export value –
electric motors, generators and transformers (2009), PROD-COM CODES: 2711010 to
27112670

PRODCOM CODE/INDICATORS || Export values (000s) || Import values (000s) || Production Quantity (000s) || Production Value (000s) || Total

27111010 - Electric motors of an output <= 37.5 W (including synchronous motors <= 18 W, universal AC/DC motors, AC and DC motors) || 429,581,300 || 814,922,340 || 74,545,678 || 825,041,147 || 1,210,382,187

27111030 - DC motors and generators of an output > 37,5 W but <= 750 W (excluding starter motors for internal combustion engines) || 278,747,230 || 386,366,040 || 104,390,496 || 1,407,085,735 || 1,514,704,545

27111053 - DC motors and generators of an output > 0,75 kW but <= 7,5 kW (excluding starter motors for internal combustion engines) || 49,647,610 || 55,532,980 || 6,000,000 || 261,370,719 || 267,256,089

27111055 - DC motors and generators of an output > 7,5 kW but <= 75 kW (excluding starter motors for internal combustion engines) || 31,837,520 || 15,936,700 || 1,000,000 || 200,000,000 || 184,099,180

27111070 - DC motors and generators of an output > 75 kW but <= 375 kW (excluding starter motors for internal combustion engines) || 41,158,050 || 20,115,000 || 21,021 || 45,698,243 || 24,655,193

27111090 - DC motors and generators of an output > 375 kW (excluding starter motors for internal combustion engines) || 43,932,440 || 36,989,480 || 1,600,000 || 61,635,219 || 54,692,259

27112100 - Universal AC/DC motors of an output > 37,5 W || 140,273,990 || 121,276,880 || 21,783,407 || 495,727,677 || 476,730,567

27112230 - Single-phase AC motors of an output <= 750 W || 120,770,450 || 129,836,810 || 56,520,199 || 1,195,803,791 || 1,204,870,151

27112250 - Single-phase AC motors of an output > 750 W || 50,438,620 || 49,425,060 || 6,300,000 || 132,175,642 || 131,162,082

27112300 - Multi-phase AC motors of an output <= 750 W || 191,938,140 || 77,272,170 || 10,000,000 || 667,498,083 || 552,832,113

27112403 - Multi-phase AC motors of an output > 0,75 kW but <= 7,5 kW || 324,722,000 || 133,198,120 || 6,359,618 || 1,455,629,073 || 1,264,105,193

27112405 - Multi-phase AC motors of an output > 7,5 kW but <= 37 kW || 198,759,480 || 62,888,110 || 1,189,773 || 663,563,780 || 527,692,410

27112407 - Multi-phase AC motors of an output > 37 kW but <= 75 kW || 110,315,070 || 43,175,790 || 192,619 || 304,180,879 || 237,041,599

27112530 - Multi-phase AC traction motors of an output > 75 kW || 91,719,690 || 11,825,180 || 14,000 || 300,000,000 || 220,105,490

27112540 - Multi-phase AC motors of an output > 75 kW but <= 375 kW (excluding traction motors) || 171,106,750 || 49,028,550 || 54,834 || 422,095,148 || 300,016,948

27112560 - Multi-phase AC motors of an output > 375 kW but <= 750 kW (excluding traction motors) || 111,558,390 || 24,443,830 || 21,331 || 454,592,720 || 367,478,160

27112590 - Multi-phase AC motors of an output > 750 kW (excluding traction motors) || 630,921,610 || 55,401,750 || 11,593 || 1,003,373,605 || 427,853,745

27112610 - Alternators of an output <= 75 kVA || 114,769,970 || 85,838,450 || 3,142,975 || 326,940,309 || 298,008,789

27112630 - Alternators of an output > 75 kVA but <= 375 kVA || 63,040,220 || 29,373,550 || 66,725 || 177,975,375 || 144,308,705

27112650 - Alternators > 375 kVA but <= 750 kVA || 75,541,500 || 10,966,450 || 18,434 || 135,533,843 || 70,958,793

27112670 - Alternators of an output > 750 kVA || 990,629,750 || 220,007,280 || 31,394 || 1,773,471,532 || 1,002,849,062

Electric Motors, generators and transformers || €4 ,261,409,780 || €2,433,820,520 || 293,264,097 units || €12,309,392,520 || €10,481,803,260

Source: Eurostat
PRODCOM database, all values (€s, units) are in thousands

Summary of IM
legislation covering electric motors

Table A2 – Summary
of IM legislation covering electric motors

Name of legislation || Main issue addressed || Who is responsible? || Requirements for economic operators

LVD  2006/95/EC Directive on low voltage machines || Health & Safety  (low voltages machines) || Technical documentation should be provided by the manufacturer. Declaration of conformity procedures and CE marking can be followed by both the manufacturer or his authorized representative (art. 8) || According tot art. 2 of the directive, all products should meet the safety requirements set out in annex I. -Testing according to relevant standards (art. 5) -Development of technical file[9] -Declaration of conformity and CE marking (art. 8) -Mark with information (type, voltage, etc,) -Installation instructions and manual for final consumer (with translations)

Machinery 2006/42/EC Directive on machinery || Health & Safety  (machinery) || Manufacturers or his authorized representative (art. 5) || - Ensure satisfaction of health and safety requirements Annex I - Technical file (Annex VII) -Provide necessary information (instruction) - Conformity procedures (art. 12, art. 13 for not finished machines) - CE marking (art. 16) - EC declaration of conformity in accordance with Annex II, part 1, Section A and ensure that it accompanies the machinery - Construction file and risk assessment which contains: (i) a list of the essential health and safety requirements applied and fulfilled (ii) the description of the protective measures implemented to eliminate identified hazards or to reduce risks, (ii) the standards and other technical specifications used, indicating the essential health and safety requirements covered by these standards, (iv) any technical report giving the results of the tests carried out either by the manufacturer or by a body chosen by the manufacturer or his authorized representative, (v) a copy of the assembly instructions for the partly completed machinery

EMC  2004/108/EC Directive on Electromagnetic Compatibility || Electromagnetic compatibility || Manufacturer (and, for the CE marking (art. 7) his authorized representative) || - fulfill the protection requirements mentioned[10]. -Testing according to standards -Development of technical file -EC Declaration of conformity and CE marking (art. 7, 8 and Annex II) -Installation instructions and manual for final consumer -Meet essential requirements (art. 5 and Annex I) -Other marks and information (art. 9)

ATEX 1994/9/EC Directive on Equipment and protective systems intended for use in potentially explosive atmospheres[11] || Health & Safety (equipment and protective systems intended for use in potentially explosive atmospheres) || The directive carries obligations for the person who places products on the market and/or puts products into service, be it the manufacturer, his authorized representative, the importer or any other responsible person || -Risk assessment (see paragraph 4.3 guide) -Products should meet the health and safety requirements as set out in the Annex II of the directive (see article 3), -Meet the required testing to relevant standards -Development of technical documentation for testing purposes -CE Marking

RoHS (2011/65/EC) Restriction use of hazardous substances || Use of hazardous chemicals (Health and environment – art. 1) || Manufacturers are mainly responsible (art. 7) Secondly, art. 8 lists responsibilities of authorized representatives. Thirdly, art. 9 lists obligations of importers. Lastly, art. 10 lists obligations for distributors. || -Assure no substances listed in annex II are used (art. 4) The following measures are required from the manufacturers: -Assure production in line with requirements directive (art. 4 and 7a) -Collect compliance statement from suppliers (material declarations) -Technical file with supplier declarations and own analysis tests (internal production control, art. 7b) -Declaration of conformity (art. 7c) -Declaration of conformity to be kept for 10 years (art. 7d) -CE marking of the product -Procedures for production to remain in conformity (art. 7e) -Register of non-confirming and recalled products and informing distributors (art. 7f) -Identification mark on each product (art. 7g and 7h) -Take measures  if they have reason to believe non-conformity (art. 7i) -Provide information if so requested by a competent national authority (art. 7j)

REACH (1907/2006/EC) Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals || Use of chemicals (Health and safety) || Manufacturing, authorized representative (art. 4) or importer. || Collect statement from suppliers stating that he is in compliance with requirements (REACH compliance statement) Register and notification of the substances to the Agency.

Eco-Design Directive  2009/125/EC and Implementing Regulation 640/2009 (Design and sustainability) || Energy consumption/ efficiency || Manufacturer or his authorized representative is in general responsible. However, art. 4 of the directive lists specific requirements for the importer if the manufacturer is not established within the community. || Meet the ecodesign requirements as described in Annex I (art. 3 regulation) -Testing (conformity assessment – art. 4 regulation) -Declaration of Conformity and CE marking (art. 3&5 regulation) -Complying with the mentioned conformity procedure in the appendix, -Information in instruction manual for minimizing energy-use -Comply to the proper energy efficiency levels (IE2 or 3) -Instructions for consumers on sustainable use

Case
study 2 – Laptops

1. Introduction

Common aims of case studies

The
aim of the product cases is to assess how Internal Market (IM)
legislation for industrial products affects economic operators (manufacturers,
importers and distributors). The applicable Union harmonisation
legislation specific to each product is mapped out and an assessment of any
gaps, loopholes, inconsistencies and duplication is provided. The costs of
regulatory compliance (administrative and substantive) in meeting IM regulatory
requirements are then assessed.

Specific aims of case

The
rationale for the selection of laptops[12]
as a product
group was that:

·
A
key issues highlighted in the specifications was how far Union harmonisation
legislation is ‘fit for purpose’ in facilitating – or at least not hindering -
process / product innovation. Since laptops are characterised by a high level
of innovation and technological change, they provide scope to explore this
issue.

·
Laptops
are dominated by a small number of global manufacturers. This allows us to
consider how IM legislation affects multinational companies that produce
laptops for both the European internal market and other markets globally.

The
case study was carried out using desk research and interviews. With regard to
data sources, the main sources used were Eurostat SBS (2
digit NACE code level) and Prodcom data (8 digit NACE), sectoral studies and
market research reports.

2. Product definition and description of
structure of the sector

Information
and data on market size and structure for the laptop industry is presented.
Recent industry developments and market trends are also summarised.

Product definition and data availability

The
product group within scope is laptops (also commonly referred to as notebooks).
Other types of IT products, such as palm-top organisers, desktops and printers
are outside the scope.

Eurostat
SBS and Prodcom data extends more widely than laptops alone[13] and covers
the manufacture of computers and peripheral equipment. It was therefore only
possible to obtain data at a sufficient level of disaggregation for some
variables. In order to supplement Eurostat data and to compensate for data
gaps, we have also made use of industry data from industry associations and
other market data available through previous studies.

Market size and structure

The
size and structure of the laptops market is now considered. The main variables
presented are the number of enterprises, employees and production value, and
the value of imports and exports.  According to data from the PRODCOM database[14],
the total market for laptops is around €24.6 billion. Market studies available
provided similar estimates (€24.4 billion)[15].
According to the same data source, a total of 79 million laptops units are sold
annually within the EU.

Table 1: EU laptop market size (2011) – estimate
based on PRODCOM data for product code 26201100 - Laptop PCs and palm-top
organisers

Exports quantity (million units) || Value of exports (billion €s) || Imports quantity (million units) || Imports value (billion €s) || Production quantity (pairs) || Production value (billion €s) || Consumption volume (million units) || Consumption value (billion €s)

8.8 || 3.3 || 80 || 25.6 || 7,800,000 || 2.25 || 79 || 24.6

Source: Eurostat Prodcom data

A
leading EU industry association suggested a lower figure for laptops alone.
According to industry data, the current market size for laptops can vary
significantly and is about 32 million - 48 million units per annum. This is a
more accurate figure since palm-top organisers were not examined.  PRODCOM data
confirms that laptops manufacturing is mainly carried out outside the EU,
commonly in East Asia. The value of imports into the EU is more than 9 times
greater than of imports.

Global
laptop producers are commonly involved throughout the value and distribution
chain (e.g. from initial design, through to manufacturing and direct
distribution to consumers and businesses).  In recent years, since the price of
laptops has gone down considerably, manufacturers have had to adjust the value
chain. Accordingly, there is strong reliance of manufacturers on ODMs
(Original Designed Manufacturers). ODMs are suppliers that supply parts or
final parts for laptops and under the modular approach to complying with IM
regulations (see later in this case), may assume responsibility for the
compliance of the particular product modules/ parts that they produce.

Industry structure and employment

A
small number of major global laptop producers dominate manufacturing and
distribution activities. It was estimated that there are only about 20 large
firms in total and industry data shows that five multinationals have
approximately a 60% share of the global market (Hewlett-Packard, Dell, Acer,
Lenovo and Toshiba).

Additional
information about market share in Europe was obtained by searching the Amadeus
database (now called ORBIS) of Bureau Van Dijk on laptops. This confirmed that
top manufacturers have a very high market share. For example, HP has an
estimated 21.5% share of the market, ACER 11.4%, Lenovo: 11.4% and Asus 11.2%.
Data for other firms was not available.

Looking
beyond the leading global manufacturers, there are also
SMEs in the laptops sector. These build bespoke desktops and notepads in
relatively small volume (as little as a few hundred units). Data
from Eurostat’s Structural Business Statistics were of limited use since NACE
code 2620 “Manufacture of computers and peripheral equipment” extends well
beyond laptops. This shows that there were 6,963 enterprises in 2008.  An
alternative data source was the ORBIS database (Bureau Van Dijk) which provides
information on active enterprises in Europe.

The
ORBIS database lists a total of 7094 firms under NACE code 2622 for 2013 –
similar to the Eurostat figure. However, a keyword search with the “economic
activity description” field with the term “laptops” produced a list of 66
manufacturers. 3 of these are large firms and the remaining 63 are SMEs.   8 of
these firms were the headquarters of firms and the remainder were branches and
included as one or more subsidiaries of the large manufacturers. In total, on
the basis of the information collected, we consider that the number of firms
resulting from the use of the ORBIS database provides a realistic estimate of
the number of firms affected by internal market legislation.

In
terms of employment, the total computers and peripheral equipment sector
employed almost 1.1m people across Europe in 2008. There had been a reduction
in employment to 884,000 by 2010. However, this relates to the whole of NACE
2620 (including desktops, palmtop organisers and many other types of IT
equipment). The European industry association interviewed confirmed that the
number of employees in the laptops sector involved in manufacturing is very
low. Nevertheless, laptops are an important industry, when combining different
aspects of the value chain from manufacturing through to distribution
(wholesale, retail) and aftersales and servicing activities.

Key industry trends and challenges

This
case does not allow for a detailed review of key industry trends and
challenges. However, recent developments and key features of the laptop
industry are worth noting. These are, in summary:

·
The
importance of economies of scale and scope to be competitive, with a high level
of market concentration in manufacturing and distribution among a handful of
leading global firms.

·
A
decline in laptop sales and prices in a maturing industry. Increasing
competition from product groups such as tablets, smart phones and the advent of
alternative data storage solutions such as cloud computing, which reduces the
need for high computing power in portables.

·
Convergence
between the mobile phone and ICT markets (including the entrance of new
manufacturers that have diversified away from Smart Phones into tablets and
notebooks.

·
Strong
capacity for innovation and technological change[16].

·
Changes
to the business model and organisation of the value chain within the laptop
industry:

o Increased
use of ODMs in manufacturing processes.

o Leading
brand names moving away from selling hardware alone to combining these with
add-on services such as technical support.

3. Analysis of applicable IM legislation and
standards

Summary of applicable IM legislation

A
mapping exercise was undertaken to identify relevant applicable IM legislation
for laptops. In summary, the main legislation that is applicable is:

·
The 
Low
Voltage Directive (LVD) -  2006/95/EC

·
Electromagnetic
Compatibility Directive (EMC) 2004/108/EC

·
R&TTE
Directive (1999/5/EC)

·
RoHS
Directive (2011/65/EC)Ecodesign for Energy-related products Directive (ErP)
2009/125/EC

·
REACH
Regulation  (EC 1907/2006)

·
Packaging
and packaging waste (2004/12/EC)

The
detailed mapping of applicable legislation is provided as an annex. This
summarises the main issues addressed through the legislation (e.g. product
safety, energy-efficiency), the key administrative requirements for
manufacturers and examples of relevant (voluntary) technical standards. The
mapping of the legislation was based on desk research and discussions with
individual manufacturers.   It should be noted that environmental legislation
applicable to laptops such as the WEEE Directive (design for end of life and
recyclability) is outside the scope.

Overall,
the IM regulatory framework affecting laptops was regarded by interviewees as
being relatively stable in terms of the core applicable legislation. For
instance, the EMC Directive has been in place since 1989 and although this was
recast in 2004, there were no major changes. The LVD is one of the oldest
Single Market Directives and was adopted even before the "New" or
"Global" Approach came into being in the early 1970s. The R&TTE
Directive has been in place since 1999.

However,
further successive IM regulations applicable to laptops have been adopted in
the last decade, such as the RoHS Directive and REACH Regulation and the
setting of Ecodesign requirements for energy-related products (ErPs). Firms
interviewed stated that the introduction of new IM regulations have had a much
greater impact on the industry than their predecessors.

There
are currently general requirements common to electrical products used in
households and offices, and concern standby and off-mode electric power
consumption and Power consumption for information technology equipment (ITE).
However, specific requirements will soon apply following the adoption of
Regulation 617/2013 (Ecodesign requirements for computers and computer
servers), of which some requirements will be mandatory from 1 July 2014 and
others from 1 July 2016. In addition, there exists a voluntary energy labelling
for laptops used as office equipment, called 'Energy Star'. This is an
endorsement label for the most efficient appliances developed by the US, which
is also applied in the EU for office equipment).

 Conversely,
standards are always changing and being updated, which requires technical work
both during the development stage and in order to comply with new or updated
technical requirements.

Alternative routes to regulatory compliance -
laptops

There
are two alternative routes to regulatory compliance for
laptops. If a laptop is defined by the manufacturer as a “radio
product”, then the R&TTE Directive alone can be applied. Since the
Directive incorporates requirements relating to electrical safety and checking
for Electromagnetic Compatibility, this means that the LVD and EMC Directives
themselves do not need to be applied, since this would be duplicative.

However,
if the laptop is considered to be a piece of “electrical equipment”
containing a radio part within it, then a modular approach can be followed in
which the R&TTE, LVD and EMC Directives are treated separately for
compliance purposes. This can be especially beneficial for manufacturers in
a situation in which different manufacturers and / or ODM suppliers are
responsible for producing different parts of the product since they can then
assume responsibility for the compliance of specific product modules rather
than for the whole product.  An explanation as to how these approaches work in
practice, and the advantages and disadvantages of each approach from the
perspective of manufacturers is highlighted in the following table.

Table 2: A modular approach to compliance with IM
regulations

Compliance route || Description || Compliance requirements – analysis of differences || Advantages and disadvantages

R&TTE Directive alone || Complying with IM regulations using the R&TTE Directive only. This means that the whole laptop is treated as a single radio product. || · DoC must be placed together with the product · Product must be CE marked Notification requirements for non-harmonised radio frequencies Laptops with Wifi Radio Module Class 1 and 2 must include an alert mark next to the CE mark || Advantages · Only one Directive is applicable rather than three · Legal clarity - responsibility for whole product is sole responsibility of manufacturer Disadvantages · Cannot divide up compliance responsibilities between different components / parts manufacturers. · Additional labelling marking requirements compared to the EMC-D/LVD (e.g. alert mark next to CE mark, information on restrictions of use, etc…). · Making information available for the user which are not required for the LVD and the EMC (e.g. DoC placed with the product).

A modular approach - R&TTE, EMC and LVD Directives applied separately || Modular approach - the laptop itself is treated as a non-radio product and the R&TTE Directive is only applied to the radio module. Other parts of the laptop are subject to the EMC and the LVD || DoC must be placed together with radio module Only the radio module would potentially need the alert sign (Class 2) Notification requirements for radio frequencies (only for radio module part) || Advantages · Division of responsibility for compliance between manufacturers responsible for different components / parts of laptop · Manufacturer producing other parts of laptop under LVD and EMC don’t need to consider requirements specific to the R&TTE Directive e.g. alert sign, DOC with product[17] · Manufacturers of other parts do not need to provide a DoC to user (only upon request by a MSA)

Feedback
is now provided by manufacturers interviewed about their views on the overall
IM regulatory framework and their experiences of complying with IM legislation.
There are different views among industry as to which approach is
preferable. Firms interviewed all appreciated the flexibility afforded by Union
harmonisation legislation to determine whether to follow the R&TTE
Directive alone, or to adopt a modular approach as and when appropriate.
Interview feedback is now considered on this matter.

Firm C treats
laptops as a single radio product and complies with
the R&TTE Directive alone and assumes responsibility for the
product’s compliance. The LVD and EMC Directives are not applicable because the
essential requirements under these Directives are already included within the
R&TTE Directive. “The main benefit of a modular approach was dividing up
responsibility among manufacturers for different parts of the laptop, depending
on the module concerned. However, as a manufacturer, we prefer to take sole
responsibility for regulatory compliance”. This was considered as beneficial
when considering their obligations towards consumers and in terms of minimising
risks.

Conversely, in Firm A  and Firm B, the modular
approach is followed and compliance with the LVD, EMC and R&TTE Directives
respectively is addressed separately. The modular approach was considered to be
more efficient in a situation in which multiple manufacturers are involved in
producing the end product since the manufacturer of each part is able to assume
responsibility for their specific part.  In a competitive market place, it was
considered that suppliers need to take responsibility for the quality of their
product lines and it was believed that this had helped to strengthen standards
in the components market.

In Firm A, a different member of the regulatory compliance
team deals with each of these Directives and conformity assessment testing is
also carried out separately by different teams.  The firm pointed out
that under the modular approach, the manufacturer of the final product retains
ultimate responsibility for product compliance.  In the full version of the DoC[18],
a list of all modules that can be used for each product model is provided. This
has been made available online by all leading laptop manufacturers. The
modular approach was however seen as an effective mechanism for optimising
regulatory compliance processes and procedures, with advantages in allocating
responsibility to different manufacturers at different modules/ stages in the
production process.

Firm A
commented that “Since due diligence needs to be carried out on each product,
the modular approach allows us to provide better information to Market
Surveillance Authorities about how compliance has been achieved through each
product module. If an MSA asks for further information or raises questions
about a product, then the manufacturer or ODM supplier concerned that carried
out conformity assessment tests and produced technical documentation relating
to that specific module can provide technical information as to how regulatory
compliance has been achieved under that module”.

According to an industry association, most but not all laptop
manufacturers follow the modular approach. This depends on the manufacturer’s
business model and how the manufacturing of laptops is organised. Some laptops
are designed and manufactured by a single manufacturer, whereas others are
produced by multiple manufacturers and ODM suppliers, each responsible for
different parts / modules and components within the laptop.  For example, Firm
C is directly involved in all aspects of manufacturing and does not
generally outsource production (although it may source components from
suppliers), whereas most firms in the sector (including Firms A and B) use an
increasing amount of outsourcing to ODM suppliers for manufacturing. This trend
has been accelerated by downward pricing pressure for laptops and competition
from smartphones, tablets and cloud computing.

4. Analysis of costs of compliance with IM
legislation

In
this section, we provide:

·
A
summary of how laptop manufacturers meet IM compliance requirements from a
business process point of view, highlighting any differences in approach
between manufacturers.

·
An
estimate of the costs of complying with IM regulations (administrative and
substantive compliance costs)

·

Interview programme

In
order to carry out the quantitative research, four interviews have been carried
out with
global
manufacturers
(three with laptops manufacturers and one with a leading manufacturer
of chips
and processors)[19]. 
In addition, two discussions were carried out with a European industry
association.  An overview of the firms interviewed is provided in the following
table:

Table
3 – Overview of firms interviewed - laptops

Firm || Product category || Firm size || Annual sales from product in the EU

A || Laptop manufacturer || Large || 3 million units/ annum. Market share - 19-20% of EU market

B || Laptop manufacturer || Large || 4 million units/ annum. Market share – 25-26% of EU market

C || Laptop manufacturer || Large || NA - but circa 8-10% of EU market

D || Components manufacturer || Large || NA - but no. of laptop chips and components numbered in the millions/ annum

Although
there were challenges in persuading firms to take part, the firms interviewed
are all globally recognised players in the laptops industry and account for a
market share of c.a. 50-55% of the total market. There are an estimated total
of 15m annual laptop sales in Europe. Unlike for other products, no SMEs were
interviewed, since the laptops industry is dominated by large manufacturers
(see Section 2).

Overview – how do laptops manufacturers manage
regulatory compliance?

In
this section, a description is provided of the way in which laptops
manufacturers manage compliance with IM regulations. Five main steps were
identified in harmonised product sectors in order to place products on the EU
market. These five steps were defined for all the harmonised product cases and
have been used as the basis for carrying out discussions with manufacturers to
ascertain information about how they manage compliance processes and the costs
involved:

·
Familiarisation
with the applicable/relevant obligations  – preparatory actions

·
Introduction
of processes or changes to product design and production processes to ensure
compliance with substantive obligations

·
Conformity
assessment procedures and relevant documentation

·
Declaration
of conformity or other statement of compliance and CE marking

·
Other
activities related to obligations posed by authorities

The
way in which manufacturers manage each of these five steps and feedback received
on the type of costs involved is now provided.

Reference
should also be made to the previous section, which highlighted that there are
alternative routes to achieving compliance for laptops. Clearly, whether a
given manufacturer has decided to follow the R&TTE-D alone, or a modular
approach in which they comply with the R&TTE-D, EMC-D and the LVD-D
separately will have implications in terms of the way in which manufacturers
organise their business processes relating to compliance and testing.

Step 0 – Engagement in EU policy and
legislative-making processes and in standardisation-related activities

The firms interviewed recognised that it was in their direct
interest to participate in influencing the form, content and implementation of
Union harmonisation legislation. Since large manufacturers dominate the
laptops sector, they commonly participate directly in EU legislative-making and
standardisation development processes, for instance by taking part in working
groups meetings on particular Directives and in standardisation processes. They
also make an indirect contribution, for instance, by providing feedback through
the main European industry association, Eurodigital, who in turn participate in
EU regulatory processes and in consultations on specific IM regulations.

The
aim of this participatory approach is to ensure that industry feedback
influences and shapes the form of new IM legislation. Taking part in policy and
legislative-making processes enables firms to better anticipate regulatory
developments affecting laptops well in advance of the entry into force of IM
legislation. It also allows industry to shape the requirements for
manufacturers, which is especially important when the potential burden could be
significant and other appropriate but equally effective solutions are possible.
Among the examples of legislation where industry input was felt to be
especially important were RoHS, REACH and the drawing up of Eco-design
implementing regulations.

Firm B agreed that active participation
in EU regulatory development processes was vital and stressed that they invest
considerable time in monitoring key developments well in advance of new
regulations and technical standards being adopted and coming into force.  Firm C commented that “In order to ensure
that we are effective in managing compliance, we take part in the policy-making
process and this facilitates our understanding of how regulatory requirements
should be interpreted and implemented. It is important to have both direct and
indirect communication channels with legislators (e.g. participating in
industry associations, responding to public consultations, attending meetings
and workshops, direct email contact etc.)”.

The
preparatory phase prior to legislation and standards being adopted requires
human resources. Firm B commented that they worked approximately 75% FTE
on IM legislation and that they spent a lot of time following new regulatory
developments. This requires attending 6 industry meetings in Brussels per year
of 2 days’ duration, contributing to the preparation of industry responses to
proposed EU regulatory developments, etc.

However,
although this does take some time and resource commitment on the part of
industry, the scale of administrative costs incurred should be set in context.
It is in industry’s strong interest to monitor EU regulatory developments and
standardisation processes closely as part of an active approach to managing
compliance with IM regulations. This helps manufacturers to better anticipate
how changes in the regulatory regime applying to the products that they
manufacture is likely to affect their industry.  This can in turn help to
reduce substantive compliance costs by ensuring that upcoming or new
requirements are factored into the product design process from the outset.

Moreover,
large global manufacturers also employ thousands (and sometimes tens of
thousands) of staff and can spread the cost of engaging in EU policy and
legislative-making processes across sales volumes that amount to millions of
units per year in the EU. Although there are only a few laptop manufacturers
that are SMEs, such firms may find it more difficult to dedicate resources to
Step 0.

Step 1 - Familiarisation with applicable legislation
and relevant information obligations.

Taking
part in the early stages of the formulation of legislation as part of
preparatory work to help laptops manufacturers better anticipate forthcoming
legislative developments, updates to technical standards, etc. (Step 0) is
closely linked to Step 1, which is concerned with familiarisation with the
applicable legislation and relevant information obligations once IM regulations
have been adopted.

Manufacturers
invest considerable human resources in familiarisation with the applicable
regulatory and administrative requirements. Since the sector is dominated by
approximately 10 large global manufacturers, these firms have dedicated
regulatory compliance departments who not only work on familiarisation, but
brief their colleagues in other departments as to (i) which legislation is
applicable (ii) which technical standards could be utilised (iii) whether there
are any forthcoming regulatory changes likely that need to be considered in
product design (iv) preparatory work needed on documentation (mainly the
preparation of a DoC and of a technical file for each product.

There
was a lot of variance in the percentage of time firms estimated that
familiarisation took as a proportion of total time spent by internal staff over
the 5 process steps. For instance, Firm A estimated that about 10% of
staff time was devoted to familiarisation, whereas the equivalent figure for
Firm C was 15%. For Firm B, however, this was estimated at 40% (Firm D did not
provide an estimate).

Such
divergence among manufacturers will depend on the role and perceptions of the
interviewee and how the amount of time spent on compliance is divided between
different compliance activities and business functions. Since in many cases,
the interviewee was located in Europe, and was themselves involved in monitoring
regulatory developments, they did not always have the details of the amount of
human resources involved in testing activities for compliance, which are often
carried out in a different Member State or outside the EU. It was interesting
to note that requesting data from colleagues particularly those located outside
Europe was seen as challenging and would take considerable time and that the
quality of the information eventually provided may not be well thought
through.

More
generally, it was difficult to quantify how many staff are working on
compliance for any given product group, since most laptop manufacturers produce
a wide range of electrical and IT products. Regulatory compliance teams
typically work across a number of different product groups, are overseeing
different applicable IM regulations, as well as differences in the technical
standards which are specific to particular product groups. This means that it
is often difficult to estimate precisely how much staff time is spent on
familiarisation broken down to a particular product group. This was the case
for instance with Firm C, which has a team of 13 FTE staff working on
compliance with IM regulations and a further 13 FTE staff with EU environmental
regulations.

Laptop
manufacturers interviewed noted that they spent much less time on
familiarisation in regard to long-established IM legislation, such as the LVD
and EMC Directives, where the requirements have not changed that fundamentally
in 20-30 years. They spent much more time preparing their firms to meet new
regulatory requirements stemming from recently adopted IM legislation. Examples
cited in this regard from the past few years were the RoHS Directive (RoHS II
was adopted in 2011), the REACH Regulation (which entered into force on 1st
June 2007). For instance, Firm D, a global manufacturer of microchips
and compressors commented that there had been a lot of preparatory work for
RoHS and REACH. There was a need for specialist compliance staff to liaise
internally across different business functions such as R&D in order to
ensure that the firm was fully compliant and REACH-ready.

In
the near future, the introduction of new implementing regulations for Ecodesign
specific to laptops was viewed by firms interviewed as being likely to require
significant familiarisation time. An Ecodesign implementing measure was adopted
in 2013 for computers and servers in June 2013[20]. 
Laptops manufacturers already have some familiarity with Ecodesign requirements
through the requirements on Standby and Off-mode (Regulation EC 1275/2008)
which apply to electronic devices generally.

.

Lastly,
in order to help industry to minimise the burden of EU legislation, the
development of guidance materials was seen as invaluable in saving time for
familiarisation costs. For instance, a components manufacturer in the laptops
industry commented that the development of guidance for Ecodesign requirement
on standby and off-mode was especially important, given the technical
complexity involved. However, aspects related to standby and off-mode for
laptops are now included in the new ecodesign regulation for computers and
computer servers and no longer in the horizontal regulation on standby and
off-mode.

Step 2 - Changes to processes or changes to product
design and production processes

Like
other industrial products, laptop manufacturers have to incorporate regulatory
requirements into R&D and product design processes. However, it was
difficult to obtain cost estimates from manufacturers. In instances when data
was not available at all, the main reasons were that:

·
Where
manufacturers carry out conformity assessment testing internally, the testing
often takes place in laboratories outside Europe for global consumer products
such as laptops. Since laboratories work on products designed for the global
market, data on testing costs specific to European IM regulations is often not
collected by the manufacturer.

·
Laptops
manufacturers are increasingly reliant on ODM suppliers to carry out testing at
the product design stage. ODM suppliers do not usually break down their prices
to reveal the specific costs of regulatory compliance (and associated
conformity assessment tests) since they provide their client(s) with a total
estimated price.

·
Manufacturer
that make extensive use of ODM suppliers carry out random “spot” testing of
products as part of quality control procedures but only at the point when a
product model is already on the market (e.g. checking of product batches about
to be shipped).

Industry
found it difficult to quantify expenditure on substantive design costs. Firm
A pointed out that the business model makes it difficult for laptops
manufacturers to disaggregate costs. “There is lot of global leveraging and in
the notebook business a lot of manufacturing is outsourced this work is, the
certification are more and more included in the final price offer and not
always quantified, if it is quantified, the price is on global scale mixing a
lot of items. In addition, there are difficulties in calculating the leveraged
cost of testing modules, which nowadays are carried out on an outsourced basis
by OEM suppliers. Consumer notebooks are now totally managed by the outsourcing
partner and therefore we totally lost control of that type of costs especially
as annual aggregate and related to EU. Somehow by passing the ball we avoid to
ask to avoid the risk to have our outsourced partner to revise the agreements,
assuming that it is their task to keep tests costs low”.

Even
in those instances when data was available to the manufacturer, they were
unwilling to share this data because it was considered to be commercially
sensitive. Although some data imputations have been made by our team (see table
quantifying these costs), the feedback received was mainly qualitative.

It
was observed that by anticipating changes to IM regulations, firms are able
to help minimise substantive compliance costs. As noted above, large firms
follow EU regulatory development processes closely, and are usually aware about
changes to IM legislation and administrative requirements well in advance of
these becoming mandatory and also follow standards development processes. Since
laptop products are designed with knowledge of current requirements under IM
regulations (and those likely in future) in mind, and the core legislation has
been relatively stable in the past decade, this helps to avoid lots of changes
to produce design or to products already on the market due to changes in
requirements.

Another
observation from the research was that some types of costs, such as substantive
changes to product design once products have already been placed on the market
in the EU are probably lower for laptops than for say air conditioners due to differences
in the product development lifecycle and the duration of the product’s lifecycle
post-placement on the market.  Whereas for an air conditioner, this
lifecycle is typically 10-12 years (see Ecodesign Preparatory Studies[21]),
for laptops it is around 2-4.

If
changes are required due to changes in IM regulations (and/ or updates to
voluntary technical standards), these are usually identified well in advance by
laptop manufacturers. Any necessary changes can therefore be factored into the
design phase when new product models under development, which helps to reduce
substantive compliance costs.

It
is less common – though not unknown - for laptops to have to be temporarily
withdrawn from the market or for modifications to have to be made to existing
models. Rather, new laptop platforms under development take these changes into
account directly and existing models are simply phased out in line with their
planned product timeframe.

Some
examples of substantive costs were however identified over and above the
initial R&D and product design phase. For instance, interviewees stated
that the introduction of some IM regulations had resulted in them incurring
substantial additional costs, even if these were difficult to quantify. For
instance, under REACH, there was a need for chip makers supplying laptop
manufacturers to invest in R&D to identify and test possible substitute
chemicals for use in the production of micro-chips.

The
most costly pieces of IM regulations were perceived as being those IM
regulations introduced in the past five – ten years. This is partly because
new IM regulations require more familiarisation time, but mainly because
whereas the classical New Approach Directives were concerned with product
safety, more recent regulations have more environmental and health-focused
requirements in their objectives (e.g. concerned with restricting the use of
dangerous chemicals, hazardous substances, and ensuring improved levels of
energy efficiency).

There
may therefore be a need under these regulations to make significant changes and
to plan for these changes, for instance, in respect of product design and
specifications, the type of components and parts used, the substances and
chemicals used, etc.

Both
Firm B and Firm D regarded the introduction of RoHS and REACH as
having been burdensome for laptops manufacturers and components makers (e.g. of
chips and micro-processors) respectively. Firm D commented that while
recognising the environmental benefits, there were significant costs associated
with achieving REACH compliance.  These are examined in Table 4.

Table 4:  Industry
concerns about legal uncertainty for downstream users under REACH regulation

A concern among industry in relation to the REACH regulation was that there was perceived legal uncertainty as to which substances might be outlawed in future following substance evaluation or subject to restrictions and authorisation requirements. These concerns are particularly acute in terms of the potential cost implications from a downstream user perspective. There is not only uncertainty as to whether chemicals that are currently critical for some laptops components could be banned or restricted, and replacing them with alternatives could potentially be costly. This was viewed as especially problematic by Firm D.  For instance, the substance, gallium arsenide, is widely used and without it microchips cannot be produced. However, there is no viable product substitute. The substance is currently being reclassified under the CLP Regulation as part of the Adaptations to Technical Progress (ATP) to the CLP. This specific substance is currently also being assessed under the Community rolling action process substance evaluation by Latvia. However, there are presently no common criteria for undertaking substance evaluation in order to fast-track particular chemicals. In Firm D’s view, before banning or requiring authorisation for substances that could really disrupt the supply chain, there should be a more detailed impact assessment for downstream users. Since REACH is at a relatively early stage in the process of identifying harmful chemicals that need to be subject to authorisation, restrictions and phased out, there is considerable legal uncertainty and unpredictability for downstream users at the present time. Currently, manufacturers cannot plan for the future effectively and this was said to impose costs. Firm D noted that since a technology-driven development cycle from basic R&D through to high-volume manufacturing takes 10 years. Planning is therefore needed as to which substances can be legally used under IM regulations for the next 15-20 years and investment decisions need to be taken about semi-conductor production facilities which can be very high-cost. Such legal uncertainty may deter investment.

There
can also be substantive compliance costs associated with ensuring that
products already placed on the market meet requirements set out in updated
harmonised technical standards, even though there is a transition
period before new standards must be used for products and products that have
used the former standard to be slowly phased out. For instance, in the area of
electrical safety, in March 2013, a large multinational
announced that it had temporarily withdrawn a desktop PC product from the
market because it was not compliant with Amendment 1 of IEC 60950-1, an updated
standard on electrical safety. The firm concerned was reported to be
redesigning the product in order to allow it to continue to be sold in future.

Table 5: Differences in the cost of modifying
products to reflect the updating of standards – a comparison between Europe and
the US

There are differences between Europe and the US as to whether products can remain on the market once new and updated technical standards have been introduced. Firm B commented that the differences between the US and European regulatory systems affects the costs of modifying products in order to update technical standards, once these are placed on the market. In the EU, there is a transition period during which manufacturers that apply harmonised standards must update products in accordance with the new technical standard, usually within 2-3 years of a product being placed on the market. This imposes costs on the European laptops industry compared with other geographic regions. In contrast, in the US, once a product is already on the market[22], then even if a new, updated technical standard has been introduced, products using the old standard can continue to be legally sold in  the US . However, any new products in the development pipeline are required to conform with the new, updated standard.

Step 3 - Conformity
assessment procedures and relevant documentation.

The
applicable conformity assessment modules that need to be followed
will depend on which alternative route to compliance the manufacturer has
decided to select. As set out in detail in Section 3, if the modular approach
is applied, then appropriate testing will need to be carried out for the EMC-D,
LVD-D and the R&TTE-D respectively, whereas if the product is classified as
a radio product, then only the CA procedures applicable under the R&TTE-D
will need to be applied[23].

The
laptop manufacturers interviewed use the Suppliers’ Declaration of Conformity
(SDoC) as the main conformity assessment route to meet the
essential requirements for applicable IM regulations. Many
manufacturers also choose to use a third party to carry out testing in respect
of some IM directives, although this is not mandatory. This is a common
approach (for instance for the LVD to check electrical safety) since many
manufacturers prefer to use external conformity assessment bodies either to
carry out all the testing or to check a sample of products that have already
been checked by the manufacturer using internal testing. This approach was seen
as helpful in minimising risks and in reassuring consumers, which is important,
since there are reputational management issues at stake.

Industry
confirmed that the flexibility of carrying out conformity assessment internally
using the SDoC was appreciated. Since the majority of laptops are produced by
global manufacturers using large in-house testing facilities, it was felt that
manufacturers could ensure product safety equally as well as third party
conformity assessment. Firm B commented that “there is no evidence
that SDoC makes products any less safe compared with the use of mandatory third
party testing, so long as the system is underpinned by robust market
surveillance”.

There
were difficulties in obtaining data on the costs of internal and external Conformity
Assessment Procedures, for the reasons already set out in
Step 2 (e.g. commercial sensitivity of data, internal testing costs not shared
between different business divisions globally, difficulty in obtaining accurate
data when testing carried out outside EU by manufacturer or when outsourced to
ODMs).

Nevertheless,
some estimates on the annual costs of external conformity
assessment, were obtained. For instance, Firm A estimated that across
the 30-40 different product platforms launched annually on the EU market, it
spends approximately 800000– 1m EUR per year on third party conformity
assessment. In addition, it estimated that in-house testing costs approximately
10000 EUR / regulatory model. A distinction was drawn here between a
“regulatory model” on which compliance is built and a “marketing model” i.e. a
firm may develop many different models for marketing purposes, but there are a
much smaller number of basic platforms on which basic compliance is built.
However, it was not possible to obtain estimates of the one-off and recurring
costs of internal laboratories and testing and of the purchase equipment.

The
applicable
conformity
assessment mechanism is defined in each implementing measure and conformity is
generally based on internal design control or on a quality assurance management
system. Implementing measures may also make provision for modules, but this is
typically Module A unless explicitly stated otherwise. In the case of
the forthcoming Ecodesign requirements for computers and computer servers
(Regulation 617/2013), when these start to apply, the applicable conformity
assessment procedure will be the internal design control system set out in
Annex IV of the Ecodesign Directive or the management system for assessing
conformity set out in Annex V of the Directive.

Since
large firms dominate the laptops market, no SMEs were able to be interviewed.
Some feedback was nevertheless obtained on SMEs. According to the industry
association, Eurodigital, it can be challenging for SMEs to test products for
Ecodesign requirements. Firm D, which is a global manufacturer of chip and
micro-processors confirmed that it assists smaller manufacturers in carrying
out testing to meet Ecodesign requirements, which currently apply only to
standby power mode), but will be replaced by requirements applying to computers
and computer servers as a whole through Ecodesign implementing regulation
617/2013.

Feedback
was received from two global laptops manufacturers on the costs of standards.
It was pointed out that a distinction needs to be made between harmonised
standards and wider standards and technical specifications that are used by the
industry but which are not directly linked to complying with IM legislation.

Although
the purchase of harmonised standards is voluntary, since the leading laptops
manufacturers follow these standards, they are regarded as being part of the
overall costs of compliance (even if they only account for a small percentage
of the overall costs). There are just a few harmonised standards that meet the
essential requirements set out in IM legislation and are included in the
Declaration of Conformity (DoC) for laptops. In analysing costs, only the
purchase of these harmonised standards should be considered. The same standards
can often be applied not just to other types of laptop models but also to other
product devices horizontally. For instance, ETSI EN 300 328 relates to 2,4GHz
WiFi technology, regardless as to whether the device concerned is a laptop or
an MP3 player.   We therefore asked firms to estimate the proportion of the
costs of standards solely relating to laptops and to IM legislation.

Firm
A stated that the cost of purchasing a single standard, especially those
related to the EMC and to electrical safety under the LVD is typically around
80 EUR. There are cheaper prices when obtaining updates for standards that have
already been purchased. A manufacturer of laptops will typically follow some
30-40 standards in total (of which only a few are harmonised standards needed
to build compliant products). However, as noted above, once a complete set of
standards has been purchased, these can then be used across multiple laptop
models.

An
alternative option for large manufacturers is to purchase a company license,
which then gives them the right to purchase a certain number of single licenses
(typically 50 licences for all IEC standards purchased). The cost is
approximately 40,500 EUR, which is a one-off cost, but which can be used to
cover multiple laptop products (and other devices).  The cost of purchasing
standards specific to the laptops segment of Firm A were estimated to be in the
order of 5000 EUR per year across multiple product models. The cost is higher
for large firms than for SMEs because SMEs can purchase standards with a single
user license, whereas to share the knowledge internally, large firms must by
a company license, or at the least a license for multiple users.

One
of the interviewees commented that “companies need to operate smartly in terms
of the way in which they deal with buying standards otherwise they may waste
money, even if the cost of standards is a relatively small part of the whole.
The cost of buying standards is not normally attributed to the cost of an
individual product, rather that the purchase of a complete set of standards is
needed in order to build multiple laptop platforms”. In this respect, there are
similarities to the costs of purchasing laboratory equipment in that this is a
pre-requisite and part of the "set up" costs for being a manufacturer
in the sector.

According
to the interviewee in Firm A, “some European Standardization Organisations such
as ETSI adopt a more industry-friendly approach since the standards that they
develop are free (in effect, they are paid for by industry who pay to
participate in the standards development process for ETSI standards. The amount
payable is dependent on the type of membership, the size of the company, and
the participation that it has in the standards development process”. Firm C
noted that “some companies are more CENELEC-oriented and either purchase
individual standards or have a subscription, whereas others are more
ETSI-oriented and pay subscriptions to be involved in the standardization
process (as standards are indeed freely available). Other laptops manufacturers
are involved in the development of both CENELEC and ETIS standards, so the cost
of their participation in standardisation making processes (and in purchasing
standards) is higher”.

Step 4 - Declaration of Conformity (DoC) or other
statement of compliance and CE marking.

Producing documentation - the DoC and the technical
file

In
common with other industrial products, having first carried out conformity
assessment procedures, laptop manufacturers
are required to produce a DoC and technical file and to keep this
updated for 10 years following placement on the market.

The
preparation of the DoC itself is straight forward since this involves producing
a sheet of A4 setting out the applicable IM regulations, and commonly also a
list of the voluntary harmonised standards that have been applied in order to
meet the essential requirements.  However, there are administrative costs
associated with the regulatory checking and updating of DoCs due to the high
cumulative frequency of regulatory changes, both legislative and those
resulting from updates to harmonised technical standards.  Decision 768/2008
states that DoCs shall be kept “continuously updated”.

Internal
systems and procedures need to be put in place to ensure that these documents
are updated regularly. Updating DoCs between two and four times each year –
depending on the firms’ internal procedures – is a significant burden in terms
of human resource costs. Industry noted that although producing an individual
DoC was not difficult, the cumulative effects can be burdensome, since global
firms have hundreds of different product models (and variants of each product
model) and each DoC then has to be kept under continual review.

In
Firm A, the dedicated European compliance team working on IM regulations
includes 4 staff solely involved in the development and updating of compliance
documentation, with regular internal review procedures put in place for (i)
checking, maintaining and updating DoCs and (ii) checking that technical files
are as complete as possible. This was regarded as resource-intensive.

There
was a perception that there is now a longer timeframe to check that product
documentation is administratively compliant with the applicable IM
regulations.  It was noted that while it previously took 5 days to undertaken
an internal procedures to review DoCs and technical documentation and check
that these are up to date, the procedure now takes up to 20 days. This was
attributed to IM legislation becoming more numerous and complex, for instance,
as a result of the introduction of the RoHS, EuP and Ecodesign Directives.

Although some firms viewed the requirement to provide a paper copy
of the DoC together with the product under the R&TTE Directive as
burdensome, the administrative costs are not that significant thanks to an
agreement with TCAM[24] for manufacturers to use the so-called
“short form of a Declaration of Conformity”. This is an abbreviated compliance
statement localised in all languages and a weblink is provided to the full
declaration which is available in English only, but can be translated at the
specific request of MSAs.

Translation requirements for DoCs – uncertainty for
manufacturers?

Two
laptops manufacturers interviewed commented that they faced legal uncertainty
since it is unclear whether there is a formal requirement that DoCs should be
translated into local languages or should continue to provide a local language
version of a DoC upon request as has been the case for many years.

The
wording in the NLF has led to uncertainty for industry as to what translation
requirements apply to DoCs in order to meet compliance requirements. There is
ambiguity in the wording in Decision 768/2008 which states that “The DoC shall
be translated into the language or languages required by the Member State in
which market the product is placed or made available”. This ambiguous wording
causes uncertainty for the laptop industry, which had previously produced DoCs
in English only.  One firm commented that “If a translation requirement were
to become compulsory, this would be administratively burdensome. Also, for
whose benefit would this be, since regulatory compliance information – unlike
an instruction booklet which is directly is concerned with consumer
safety –is only to help facilitate the work of MSAs”. The argument put
forward is that it is cheaper for global businesses to produce DoCs in English
only and the benefits of translating the DoC are minimal given that the
applicable legislation is well known and is available translated in all EU
languages.

A
further concern related to translation was that since the NLF, upon reasoned
request by a Market Surveillance Authority (MSA), part of the technical file
may be required to be translated. While the reasons for this were understood,
since many test reports and other important information for MSAs may not even
be in a European language, there were concerns that this could constitute a
significant administrative burden for manufacturers. The problem is that there
is no clear definition as to what constitutes a “reasoned request”.

Step
5 - Other activities related to IM information obligations.

Traceability
requirements

The
Commission has strengthened traceability requirements for industrial products
in order to better enable MSAs to trace the provenance of products and to be
able to contact the manufacturer to obtain regulatory compliance information,
and parts of the technical file such as tests reports more easily. In Decision
768/2008, there is a specific requirement for products (at least for the
packaging) to provide addressee information for the manufacturer and importer(s).

The
move towards strengthening traceability is understandable since so many
products are manufactured in third countries and MSAs need to be able to
contact the manufacturer that produced the product more easily. However,
industry has concerns about the administrative burdens that this might impose
and also the constraints on product design if such information has to be
provided on the product itself.

However,
both the industry association and two firms were concerned about the potential
administrative burdens of traceability requirements and the difficulty of
conforming with such requirements, while at the same time producing attractive,
consumer-appealing products. This point extends beyond laptops alone to other
products such as smart phones. It was argued that traceability requirements may
risk compromising product aesthetics from an industrial design point of view
(in instances where labelling has to be provided on the product itself).
E-labelling was viewed as a possible solution to avoiding having to have too
much information on products and packaging.

A
further issue identified relating to information obligations related to marking
requirements under the R&TTE Directive. This affects laptops using Class II
Wifi devices.

Table 6: Marking requirements affecting laptops
using Class II wifi devices

Alongside the CE mark, an additional alert mark (a circle with an exclamation mark in the middle) has to be provided on laptops next to the CE mark.  This was regarded by Firm C, which follows the R&TTE-D alone as unnecessary first because the CE mark should already cover all safety-related aspects of products and secondly since the alert mark is not understood by consumers. Although the costs involved in adding labels to products are small, the multiplication of labelling requirements (linked to IM regulations and product safety, but also energy-efficiency, waste disposal) has cumulative effects. For example, it places constraints on manufacturers as to where the marking and labelling information should be placed in order to ensure compliance, and may serve to detract from producing an appealing product (again, this depends whether there is scope to put such information discretely on the product e.g. on the underside of the product, under the battery, etc).

5. Assessment of costs of IM legislation for
the whole sector

In
this section, we provide an assessment of the costs of complying
with IM legislation in the laptops sector. The data is
based on data and supporting qualitative information provided by four
manufacturers. Although the analysis is based on a small number of firms, these
can be considered as representative, since they collectively account for a
significant share of the market. In the case of laptops, the three firms that
took part collectively account for 45-50% of the market and all four
participants are global manufacturers.

There
were challenges in carrying out the analysis since there were data limitations
as regards the costs of product testing, for reasons already explained in our assessment
of the five steps in Section 4. Nevertheless, it was possible to arrive at
quantitative estimates, since some manufacturers were able to provide more
detailed information than others.

Extrapolation of costs and cost saving from
the firms to the sector

The
following table summarises the costs per unit and total estimated costs for
industry. A list of key assumptions made is provided in footnotes. The cost
estimates take into account information provided by the firms that took part in
relation to the five process steps described in Section 4.

The
costs are related to turnover. In the first column, we seek to distinguish
between different types of costs. The distinction between one-off
and recurrent costs has been taken into account in the analysis, and some
costs, such as the costs of purchasing laboratory equipment have been
annualised[25].

Table 7 – Summary of main costs of compliance for
laptops manufacturing industry

Types of cost || Unit of measurement || Unit cost[26] || Total quantity || Total costs (annualised)

Compliance with admin. requirements || || || ||

Familiarisation ||  (Manufacturers  / cost per year) || € 402,000 || 10[27] || € 4,020,000

Preparation of DoC and technical documentation ||  (Manufacturers  / cost per year) || € 1,206,000 || 10 || € 12,060,000

Standards purchase || No. of standards || € 80 || 30-40 || € 5000[28]

Substantive compliance and Conformity assessment (internal)[29] || || || || € 9,000,000

R&D and Product design || Models || € 800,000 || 10[30] || € 8,000,000

Testing (internal) || Models || € 5,000 || 200[31] || € 1,000,000

Testing equipment[32] || || || || No data

Conformity assessment (external) || || || || € 3,000,000

Consultancy/advisory services (product design) || || || || € 0

3rd party Conformity Assessment by notified bodies || Models || € 15,000 || 200 || € 3,000,000

Total (excluding testing equipment) || || || || € 28,080,000

The
total estimated costs of regulatory compliance by the laptops industry are in
the order of 28m EUR on an annualised basis.  However, it should be noted that
there was difficulty in obtaining data from firms on all the variables (for
reasons explained in our assessment of the five steps in Section 4 and in some
cases, further expanded upon below). For example, there were difficulties in
obtaining estimates of BAU and for the purchase of testing and laboratory
equipment.

Business
as Usual (BAU) costs were not taken into account in the calculations (these are
the costs that firms would be undertaking anyway regardless as to whether
internal market legislation was in place, for instance product performance
testing and safety testing as part of internal quality management procedures).
The main problem was the lack of consistency in the estimates provided by firm
and the absence of firms being willing to provide quantitative estimates
generally in two cases.

Among
the two firms that did provide data, there was divergence in interpretation
among firms as to whether compliance costs meet the requirements of IM legislation.
Firm A estimated that approximately 30% of the time spent by internal
staff on regulatory compliance would be necessary anyway as part of the
internal planning and quality management procedures necessary to ensure a safe
product and to produce documentation about the product and safety elements.
Conversely, Firm C commented that “since all compliance-related activities
are ultimately related to IM legislation, there is no element of compliance
costs that can be considered as BAU”.

Some
costs are one-off costs, whereas other costs are recurring. Other types of
costs are more nuanced, and represent a combination of one-off and recurring
costs. Examples of costs that are clearly one-off include the purchase of
laboratory and testing equipment, R&D costs, third party conformity
assessment costs and the purchase of standards. Other costs are evidently
recurrent, such as the recalibration of testing equipment. However, the picture
is more nuanced for other types of compliance costs, which are both one-off and
recurring. For example, the cost of the preparation of a DoC and technical
documentation mainly occurs prior to a product being placed on the market. 
However, in addition to these one-off costs, there are also recurring costs
linked to the need to update and maintain a DoC for 10 years post-placement on
the market. In addition, there is a need to update technical documentation, for
instance, to reflect new spare parts and components that are introduced as
replacements once a product is already on the market.  As regards product
design, the costs are mainly one-off, but there could also be recurrent costs
if regulatory changes are made and modifications to product design are needed
once the product is on the market.

With
regard to the total estimate of firm size, although the total number of firms
in the industry was estimated to be approximately 60, the top 10 firms account
for a very high market share, so the calculations have been made based on
compliance cost data provided by leading global firms and then extrapolated. It
was estimated that compliance with administrative requirements amounts to 57.2%
of total costs (14.3% for the familiarisation stage and 42.9% for the
preparation of technical documentation associated with the product and the DoC.
Another major cost was the substantive compliance costs associated with the
R&D and product design phase to ensure that compliance requirements are
factored into new product development. These were significant and estimated to
be circa 8m EUR per annum (28.5% of the total).

No
substantive compliance costs were identified linked to withdrawing laptops from
the market and making modifications to products due to changes in regulatory
requirements and/ or in technical standards among the firms that participated
(although one or two examples of product withdrawals resulting from regulatory
requirements were identified through the desk research. The low incidence of
product withdrawals and design modifications reflects the fact that leading
global; manufacturers are fully aware of regulatory changes well in advance of
these being introduced, and factor these into the R&D and design phase. 
This is made possible due to the fact that there are relatively short
development lead times for laptops, so current models on the market do not have
to be replaced, since they rapidly become old models and are superseded by new
models that are compliant with new regulatory requirements.

A
further significant cost was carrying out conformity assessment. Although the
SDoC procedure was usually followed by manufacturers, as noted earlier, several
interviewees stated that they made use of a combination of in-house laboratory
and testing facilities and external conformity assessment services. This
depended on the individual Directive concerned. For instance, it was common to
outsource at least some aspects of testing for standards relating to the LVD
Directive to a third party, since these relate to electrical safety.

As
noted earlier, it was difficult to obtain data on the costs of setting up
testing laboratories (one-off costs) and on the recurrent annual costs of
recalibration. The reasons for the absence of data were explained earlier and
include the commercial sensitivity of the data, the lack of data availability
internally within organisations  because the information is not shared between
different business divisions globally and because testing costs are hidden due
to the use of OEM and ODM suppliers.

The
costs of internal testing were estimated to be 3.5% and the costs for external
testing in the region of 10.7% of the total regulatory costs of compliance.  
However, the estimates of internal testing costs are probably an under-estimate
and reflect the staff time involved in carrying out testing and some laboratory
costs.  The quantification exercise took into account information concerning
the ‘Business as Usual’ (BAU) scenario, i.e. the estimated percentage of
compliance costs linked to IM regulations that related to activities that the
firm would undertake anyway irrespective of whether there was Union
harmonisation legislation.

6. The benefits of internal market legislation

It
is important that the benefits of IM legislation are considered and not only
the costs. It is difficult to establish a counterfactual since the laptops
industry mainly emerged after the internal market came into being.
Nevertheless, those interviewed confirmed that it was preferable to have a
single set of internal market legislation across the Union rather than
different pieces of national legislation.

Although
the administrative costs of complying with IM regulations appear quite high
overall, the benefits of IM regulations can help to offset the costs. Firm A
and Firm C pointed out that there are benefits for laptop manufacturers in
complying with IM regulations through “leverage” on their investment in
regulatory compliance in the EU. The manufacturers that took part sell millions
of units per year in Europe alone.  They are able to leverage and recoup some
investment in compliance through tapping into cost synergies achieved by using
compliance with IM regulations as the basic building block for meeting
compliance requirements across different jurisdictions globally. Test data and
the results of conformity assessment procedures and technical documentation can
be used, at least in part, even if the precise specifications may differ due to
differences in technical standards. This helps manufacturers to offset the
costs of regulatory compliance in other jurisdictions globally.

Firm
D commented that it made significant investment in being compliant with RoHS in
advance of European legislation coming into force. Since the firm was
RoHS-compliant, this then allowed the firm to leverage its investment since
more than 40 different jurisdictions have subsequently adopted a RoHS-type
regulatory regime and changes to the recast RoHS Directive in Europe have
subsequently often been made to other regulatory regimes.

Further
examples of benefits were identified, such as energy-efficiency savings and
environmental benefits from energy-saving requirements, both those common to
all electrical appliances (e.g. requirements for stand-by power mode). The new
Ecodesign implementing regulation –for computers (desktops & laptops) and
computer servers has the potential to bring about cost reductions through
energy savings. Although such requirements can be costly for part of the
industry [ecodesign typically means redesign for 20%
of the existing models] at least during the early stages of implementation,
there are potential benefits in terms of strengthened industrial
competitiveness through promoting investment in innovation to make products
more energy-efficient.

7. Analysis of simplification options

Gaps or
loopholes, inconsistencies or duplication in IM legislation.

Before providing an assessment of possible simplifications,
we first summarise the extent to which there were gaps or
loopholes, inconsistencies or duplication in IM legislation.

As
noted earlier, there are differences in the requirements for the DoC between
the R&TTE, LVD, and EMC Directives. The requirement to provide a DoC
together with the product under the R&TTE Directive is inconsistent with
the requirement under the LVD-D and EMC-D where the DoC does not have to be
placed with the product, but must be available on request by an MSA.

This
issue is well known to both industry and the Commission. The intention through
the NLF (Decision 768/2008) is to use a common template for a DoC in future. 
This is being implemented through the Alignment Package. However, a final decision
has not yet been taken as to whether this requirement under the current
R&TTE-D will be dropped when the recast Directive is aligned.

Manufacturers
are well aware of minor differences in requirements at least under longstanding
core IM directives applicable to laptops (and other electrical products). Such
anomalies in information requirements for DoCs between IM Directives) have
existed for many years.

However,
there can be unintended consequences that may increase industry costs due to
legal uncertainty and possible delays in products reaching the market. 
Manufacturers can face uncertainty since they do not know how familiar MSAs and
customs in different Member States are with differences in requirements for
DoCs between IM regulations. This can create a situation in which MSAs and / or
customs may mistakenly believe there to be administrative non-compliance
because the DoC is not together with the product, even if this is not needed
because the R&TTE Directive is not applicable to the specific products
being transported, or in instances where laptops are being transported and are
part of mixed packages. If there is incorrect interpretation of the
requirements, even temporary, this imposes costs on industry through time
delays in products reaching wholesalers and / or the retail marketplace.

For
example, Firm A, which manufacturers laptops, printers and other electronic and
IT equipment, noted that there have been instances when inconsistent approaches
have been applied by MSAs and customs authorities. The absence of a DoC
together with some products has been questioned, and this has held up shipments
or product containers.

An
interviewee commented that “Retail packaging is usually specific to a
product, whereas wholesale packaging when shipping products into Europe may
contain a mix of different products batched together in boxes. Some of these
products may fall under the scope of the R&TTE Directive, while others do
not. This can cause uncertainty for industry as to what labelling should be
placed on packaging and which documentation should be included to satisfy the
authorities”.

Apart
from this issue, the desk research and interviews did not identify any major
gaps or loopholes, inconsistencies or duplication in IM legislation affecting
laptops.

Scope for regulatory and
administrative simplification

Through
the discussions, manufacturers were asked about the extent to which there was
scope for regulatory and administrative simplification within IM regulations. A
review of feedback in respect of possible simplifications is first provided,
followed by an assessment of the potential benefits of these simplifications
and the possible cost savings.

Although
there is a requirement for the DoC to be placed together with the product under
the R&TTE-D, an agreement has been reached between industry and TCAM[33]
so that laptop manufacturers are only required to provide a short-form
version of the DoC together with the product. The full DoC is then made
available electronically. This not only saves printing costs but is a more
efficient way of organising the review and updating of DoCs.

Global
laptop manufacturers were in favour of the provision of as much regulatory
compliance information online as possible to reduce administrative costs.
They already provide a lot of regulatory information online through dedicated
compliance websites listing all the applicable legislation and technical
standards applied to the product. Such websites often also provide access to
more detailed compliance information not only the full DoC for each product
model. Examples of such websites are provided as a footnote[34].

For
instance, Firm A provides a searchable database of the DoCs for all its
models online but also provides for the German market a statement of voluntary
conformity assessment with the Geprüfte Sicherheit ("Tested Safety")
or GS mark, a voluntary certification mark for technical equipment.   Firm B
provides various compliance documents online such as the DoC, technical
information on product safety, evidence of compliance with the EMC and
environmental safety sheets.

The
provision of such information online is designed to ensure that Market
Surveillance Authorities (MSAs) are able to obtain further regulatory
information about product models.  It was argued that electronic labelling or
e-labelling [35]
should be adopted more widely in future by manufacturers so as to strengthen
the efficiency and effectiveness of the EU’s Market Surveillance System. 
Having access to this information online would help to:

·
Reduce
paperwork costs  -  printing DoCs and user instructions.

·
Reduce
inefficiency in requests by MSAs for compliance information from economic
operators
(general) – the NLF has led to a shift in responsibility away
from manufacturers alone through the setting of common definitions and
obligations for economic operators (including importers and distributors).
However, there is a need to ensure that information is requested in the first
instance directly from the manufacturer. It was viewed as inefficient for MSAs
to approach importers for technical information about the product that only the
manufacturer has access to. An email address or weblink direct to the
manufacturer would eliminate unnecessary contact with other economic operators.

·
Reduce
inefficiency in requests by MSAs for compliance information from manufacturers
- there
is a risk that MSAs turn to branch offices in Member State to request basic
compliance information, where there may only be a sales and marketing function
in the given Member State. However, this fails to appreciate how global firms
operate or manage compliance[36].
When contacting global firms, MSAs need a mechanism for requesting information
directly from the compliance department. This would save resources both for
MSAs and manufacturers. Ensuring that manufacturers provide direct email
contact to their compliance department is essential.

·
Provide
as much compliance information online as possible -
information should be more easily accessible to MSAs and a
cultural change is needed in that MSAs should be less insistent on receiving
information in paper copy. This would strengthen efficiency by avoiding
unnecessary requests for basic compliance information such as the full versions
of DoCs by MSAs if the DoC for each model can be downloaded instead through a
dedicated website for regulatory compliance or a compliance section of a
corporate website.

Similarly,
in regard to the provision of technical documentation to MSAs upon request, there
could be efficiency savings (reduced printing costs, less time to respond to
requests) if this were as a rule to be done electronically. Currently, some
MSAs may accept the provision of such technical information online but others
prefer to receive information in paper form. It would be more efficient if
manufacturers were able to provide information through secure data
transmission when requested to provide part or all of a technical file.

The
requirement to provide instructions for use in paper copy was regarded
as costly. Instructions
for use are already available in electronic form in most instances. The
possibility of only having these available electronically in future
was raised.
This has already been ‘piloted’ for professional users under the Medical
Devices Regulation.  Arguments in favour are that most consumers have access to
broadband internet, and this could potentially lead to cost reductions and
environmental benefits.  However,
even if industry supports this idea, there could be concerns that providing use
instructions information online only could undermine consumer safety for those
affected by the “digital divide”. Although the vast majority of consumers have
access to high-speed internet, not all do so. Digitally excluded groups of
consumers could not do without a paper copy of the instructions.

The
most realistic possible simplifications identified by laptops manufacturers,
and the potential benefits are summarised in the following table:

Table 8: Proposed simplification measures, benefits
and possible savings - laptops

Proposed simplification || Explanation || Benefits

Removal of unnecessary marking requirements on the product itself[37], such as the Alert Sign. || Currently, under the R&TTE-D, laptops with Wifi Radio Module Class 1 and 2 must include an alert mark next to the CE mark. The Alert symbol is regarded as superfluous by industry. CE marking covers all aspects of product safety for consumers and the information is relevant to MSAs and Member State authorities responsible for radio frequency. It is not useful for consumers. || Less marking requirements on product Reduced cost of product marking (less familiarisation costs, printing the mark itself).

Eliminate inconsistencies between IM legislation in requirements for DoC. No longer require DoC to be placed with the product (R&TTE-D only). || There are currently differences in administrative requirements for the DoC between the R&TTE-D, EMC-D and the LVD-D respectively. These are already being tackled through the Alignment Package. || Reduced costs of a single common template for a DoC (rather than multiple templates) Reduced uncertainty for manufacturers (eliminate risk of delays to product shipments)[38].

E-labelling and wider provision of compliance information electronically. Basic information – full DoC, technical standards that have been applied, safety data sheets could be provided online. Technical documentation could be provided through secure data transfer, given commercial sensitivities. || More regulatory compliance information could be made available by manufacturers online specific to particular models. The market surveillance system needs to be overhauled so that manufacturers are to provide most regulatory compliance information online, rather than in paper copy. || For manufacturers Reduction in printing costs (e.g. DoCs) Reduction in human resource costs of responding to requests from MSAs for info. For MSAs Easier and more efficient access to regulatory compliance information specific to each model. Resources freed up to carry out more technical checks.

Although difficult to quantify, based on the
feedback received about the order of magnitude of efficiency savings, possible
reductions in the costs of compliance for the laptops industry if these savings
were to be implemented is now provided.

Table 9 – Estimates of possible reductions in the
costs of compliance - laptops

|| Unit of measurement || Reduction per unit || Total quantity || Total cost reduction

Removal of unnecessary marking requirements on the product itself , such as the Alert Sign.[39] || Market share || € 32.160 || 10 || € 321.600

Eliminate inconsistencies between IM legislation in requirements for DoC. No longer require DoC to be placed with the product (R&TTE-D only).[40] || Market share || € 241.200 || 10 || € 2.412.000

Total || || || || € 2.733.600

The
order of magnitude of cost savings from simplification measures is relatively
modest compared with the total estimated compliance costs. This partly reflects
the fact that there are not any major problems with current legislation, but
rather a concern with eliminating minor inconsistencies in administrative
requirements.

However,
there could potentially be more promising cost savings for industry from a
gradual transition towards providing more compliance information online. However,
these savings are very difficult to quantify. Reduced printing costs are
only a small element of the potential cost savings since the transition to
electronic compliance is more about improving organisational efficiency for
manufacturers in updating compliance information and facilitating access to up
to date compliance information for MSAs. There would be savings from being able
to contact the right department directly through email contact, with efficiency
savings for both the manufacturer and the MSA.

 (ii) Measures to improve the effectiveness and
efficiency of the regulatory landscape and help to remove uncertainty.

In
addition to possible simplification measures, manufacturers noted that the
costs of compliance could in some cases be kept in check if the Commission were
to take steps to ensure that current ambiguities in the IM regulatory framework
are eliminated, since this would remove legal uncertainties with regard to what
the requirements are.  In particular, legal clarity should be provided that
DoCs do not need to be translated into all EU languages. This would help to
avoid the risk that over time, MSAs start to demand the translation of DoCs
into all EU languages as a compliance requirement, which would result in
significant additional costs.

8. Overall Conclusions

·
Laptop
manufacturers appreciate the flexibility provided by IM legislation
and
the fact that there are alternative routes to achieving regulatory compliance
(following the R&TTE Directive alone vs. a modular approach).

·
The
compliance costs for manufacturers that follow several individual
pieces of IM
legislation
under
the modular approach are broadly similar to the costs of following a single Directive
(R&TTE-D), since
similar product safety tests are required under the R&TTE-D (e.g. to
ensure electrical
safety, electro-magnetic compatibility).

·
A
modular approach can however be advantageous in allowing compliance
responsibilities to be divided up between different manufacturers specific to
the part
of the laptop that they produce and the
corresponding applicable module, while the manufacturer retains
ultimate responsibility for compliance of the final whole product.

·
There
were difficulties in obtaining data on substantive compliance costs during the
R&D and product design phase, especially for testing costs.
This was due to commercial sensitivity reasons in some cases, and the extensive
use
of ODM
and OEM
suppliers
by most laptop manufacturers in others.

·
Qualitative
feedback suggests that substantive costs are lower
for laptops than for certain other types of industrial
products (e.g. air conditioners) when regulatory
changes are
introduced because
the lifecycle of
a laptop
model is shorter. Therefore, new requirements can be built into the development
and customisation of new models, rather than having to adapt or replace components
or to adapt product platforms used as the basic building block for developing
new products variants.

·
There
is strong support among manufacturers for the increased provision of compliance
information to Market Surveillance Authorities (MSAs) and
users/ consumers electronically and for e-labelling. This may offer scope for
efficiency savings and a reduction in the administrative costs of updating
compliance information.

·
There
are concerns that since the adoption of the NLF, there is legal uncertainty for
manufacturers resulting from the ambiguous wording in Decision 768/2008 as to
the translation requirements for DoCs.

·
Since
the DoC is primarily intended for MSAs rather than for users/ consumers, if
this requirement were to be interpreted in a stricter way in future, then there
is a risk that this would result in considerable additional administrative
costs. The current practise is that the translation of DoCs is only available
upon request by MSAs.

·
Divergent requirements for DoCs between IM regulations can cause
uncertainty when manufacturers are shipping mixed products in large containers,
some of which require a DoC together with the product under the R&TTE-D,
while other products do not because they do not contain a radio part. There is
a risk that different administrative requirements for different types of
products may confuse customs authorities and lead to unnecessary and costly
delays.

9. Sources of information

References

● Eurostat Structural Business Statistics
Database and PRODCOM

● Data from the 2011 Euromonitor report for
computers.

● Lot 3 Personal Computers (desktops and
laptops) and Computer Monitors Final Report (Task 1-8)

● Guidance documents on the LVD and EMC
Directives

Interviews

● Interviews with 4 global manufacturers, 3
of laptops and one of computer chips

● Several interviews with the European
industry association, Digital Europe.

Annex 1
–Mapping of IM Legislation (Laptops)

Table 10: Mapping of applicable IM legislation and
administrative requirements for manufacturers

Name of legislation || Main issues addressed (safety, environment, other) || Main administrative requirements for manufacturers || Relevant standards (note: illustrative only)

Core legislation

Low Voltage Directive (LVD) -  2006/95/EC || Health & Safety  (electrical) || Supplier’s Declaration of Conformity (SDoC) Testing according to relevant harmonised standards or alternative means of achieving presumption of conformity Preparation of technical file Declaration of conformity and CE marking Installation instructions and manual for final consumer (with translations) || 10. EN 60950-1:2006 Information technology equipment - Safety -- Part 1: General requirements 11.

Electromagnetic Compatibility Directive (EMC) 2004/108/EC || Electromagnetic compatibility || Testing according to relevant harmonised standards or alternative means of presumption of conformity Development of technical file Declaration of conformity and CE marking || Electrical safety standards IEC 60950 (IT equipment safety), EN 60950 (and American standard UL 60950)[41]. EN 55024:2010 IT equipment (Immunity characteristics) Limits and methods of measurement CISPR 24:2010 EN 61000-3-2:2006 - Part 3-2: Limits for harmonic current emissions (equipment input current <= 16 A per phase) EN 55022, (Radiated emissions), IEC 61000-2-2 and IEC 61000- 3-3, EN 61000-3-3:2008 - limitation of voltage changes, voltage fluctuations and flicker in public low-voltage supply systems, for equipment with rated current <= 16 A per phase and not subject to conditional connection IEC 61000-3-3:2008[42].

Radio equipment and Telecommunications Terminal Equipment R&TTE Directive (1999/5/EC) || Radio bandwidth frequency || Manufacturers must carry out testing to ensure that R&TTE devices do not cause any harm to PST Networks and do not violate power and frequency spectrum allocations on a country by country basis. Declaration of conformity and CE marking || The R&TTE is applicable to laptops that include radio devices e.g. modems and/or wireless communications interfaces (e.g. WiFi, Bluetooth). 12. EN 55024:2010 Information technology equipment - Immunity characteristics - Limits and methods of measurement 13. CISPR 24:2010 14. EN 55022:2010 Information technology equipment - Radio disturbance characteristics - Limits and methods of measurement CISPR 22:2008 (Modified)

RoHS Directive (2011/65/EC) || Use of hazardous chemicals || Collect compliance statement from suppliers (material declarations) Technical file with supplier declarations and own analysis tests Declaration of conformity to be kept for 10 years || Although the 2002 RoHS Directive did not require CE marking, the new 2011 Directive does so.

Ecodesign for Energy-related Products Directive (ErP) 2009/125/EC. || Ecodesign requirements  || || The ErP establishes a framework for setting Ecodesign requirements for energy-related products (ErPs). Through product-specific Implementing Measures, mandatory, Ecodesign requirements are set. Two implementing measures are currently applicable under the ErP. · External power supplies that are shipped with the notebook (Regulation 278/2009/EC with regard to ecodesign requirements for no-load condition electric power consumption and average active efficiency of external power supplies) · General requirement applicable to electrical electronic office equipment on standby  and off-mode power consumption (Regulation 1275/2008/EC with regard to Ecodesign requirements for standby  and off-mode electric power consumption of electrical and electronic household office equipment. · The above are applicable to general electrical products. However, for laptops these implementing regulations will be superseded by Regulation 617/2013 (Ecodesign requirements for computers and computer servers) which will be mandatory from 01.07.2014.  ·

Wider applicable legislation where CE marking does not apply

REACH Regulation  (EC 1907/2006) || Use of chemicals || REACH compliance statement from suppliers || 15.

Packaging and packaging waste (2004/12/EC) || Packaging || Declaration of Conformity || 16.

Annex 2 - Voluntary
environmental labels

In
addition to Union harmonisation legislation, there are a number of voluntary
environmental labels at European and national levels relevant to laptops such
as the EU Ecolabel for portable computers[43].  Examples of the requirements in order to qualify and be able to
display energy efficiency markings on products are that “Power management
settings should be 10 minutes to screen off (display sleep); 30 minutes to
computer sleep”.

There
are also national voluntary labelling schemes within the EU such as Blue Angel
(Der Blaue Engel), a German certification system for environmentally-friendly
products and services and Nordic Swan, the official sustainability Ecolabel for
the Nordic countries. There are also international voluntary energy-efficiency
labels such as Energy Star (US), which is for office equipment also applied in
the EU. Other schemes include TCO Certified, an international sustainability
certificate for IT products which incorporates a range of criteria to ensure
that the manufacturing, use and recycling of IT products is carried out in an
environmentally-friendly, socially responsible and sustainable manner. Such
labelling initiatives have strong potential to promote resource efficiency, and
are often adhered to by major manufacturers, even if there is no regulatory
requirement to do so. There are links here with IM regulations that require
manufacturers to assess the energy efficiency of products, notably the
Ecodesign implementing regulation for computers and computer servers, for which
the setting of the requirements took into account the work done for the development
of Energy Star.

Case
study 3 – Domestic Refrigerators and Freezers

1. Introduction – objectives of the
study

The product groups
examined in this case study are refrigerators and freezers for domestic use,
also known as cold appliances. The aim is to analyse the applicable IM
legislation, assess the costs associated with the implementation of the
applicable IM legislation, identify areas of overlaps and conflicts between the
different parts of the legislation that may lead to problems and costs to
industry and identify and assess the benefits of possible simplifications. The
rationale for the selection of these product groups was that:

-
Refrigerators and
freezers are covered by a large number of IM Directives and Regulations, 8 in
total;

-
The sector is dominated
by a few (around 20) large manufacturers; and

-
The conclusions drawn
from an assessment of these specific products could be used to draw conclusions
on the compliance costs for a broader category of electric domestic appliances
since most of the products within this group are covered by the same pieces of
legislation.

The case study is
based on desk research, the interview with the EU industry association
representing manufacturers of refrigerators and freezers (CECED) and three
detailed interviews with manufacturers of domestic appliances, one medium size
firm (350 employees and total turnover of 150 million) and two large
multinationals selling over 2million units and occupying more than 2000
employees. The final text of the analysis was reviewed by CECED that provided
additional comments. However, this should not be considered as an endorsement
of the conclusions from the side of CECED.

2. Product definition and
description of the sector
Product
definition (products included/excluded)

The product group
examined in this case study are refrigerators and freezers for domestic use,
also known as cold appliances. According to standard EN 153 they are “electric
mains-operating refrigerating appliances”. According to standard EN 15502:2006
refrigerating appliances are “factory-assembled insulated cabinets with one or
more comportments and of suitable volume and equipment for household use,
cooled by natural conversion or a frost-free system whereby the cooling is
obtained by one or more energy consuming means”. There are two main type of
refrigerating appliances, compression type and absorption type. The main
appliance categories are:

● Simple refrigerators (no freezer
compartment);

● Refrigerator-freezer (with at least one
refrigerator and one freezer compartment);

● Food freezers; and

● Frozen-food storage cabinets

Data on the market
size of the specific product group are derived mainly from Eurostat PRODCOM
database and are complemented by market studies. In the PRODCOM database the
specific products are covered under the code 27.51.11 (Refrigerators and
freezers of household type) with the following subcategories:

● 27511110 - Combined refrigerators-freezers,
with separate external doors

● 27511133 - Household-type refrigerators
(including compression-type, electrical absorption-type)

● 27511135 - Compression-type built-in
refrigerators

● 27511150 - Chest freezers of a capacity
<= 800 litres

● 27511170 - Upright freezers of a capacity
<= 900 litres

According to PRODCOM
database data for 2011 the total market for refrigerators was close to 24.6
million units with a value of the market of EUR 4.8 billion sold/annum. Other
data sources suggest a somewhat smaller market size of 17-20 million[44] cold appliances sold on an annual basis.
Refrigerators represent around 42% of the market, combined units 38% and
freezers 20%.

The majority of
domestic refrigerators are electric powered. However, gas refrigerators and freezers
(of the absorption type) are also available used either as mobile (e.g. for camping,
recreation vehicles and boats) or fixed at home. Data on the specific market
segment are not available since PRODCOM codes do not differentiate depending on
the source of power. According to the Evaluation of the gas appliances
Directive[45]
there are a few large firms in Europe producing gas refrigerator. The 2005 preparatory
study for the development of Ecodesign implementing measures for domestic
refrigerators and freezers[46]
refers to a total of 0.7-0.8 million of absorption refrigerators sold annually in
Europe, 0.3 million of which were gas refrigerators. A according to the
competitiveness report of the gas appliances sector they do not have a
noteworthy role in the total market.[47]

Available PRODCOM
data also indicate that the total volume of production within Europe is around
15 million units with a value of €3.8 billion. Of these, 3.4 million units are
exported (value of €0.9 billion) while there are also around 12.7 million units
imported from third countries (estimated value of €1.9 billion). Thus,
according to the PRODCOM, imported refrigerators represent around 50% of the
market of refrigerators and freezers. However, it should be noted that a
significant part of leading refrigerators and freezers brand are designed in
Europe but manufactured outside Europe and subsequently imported.

Industry
structure

Concerning the
structure of the industry, Eurostat Structural Business Statistics are not
particularly helpful. The relevant NACE statistical code covers the whole range
of domestic appliances (27.51 - Manufacture of domestic appliances[48]) and as a result they do not allow developing
an accurate picture of the sector (e.g. number of firms, turnover, employment).
Nonetheless, there were 2,200 enterprises[49]
active in the manufacturing of electric domestic appliances (annual turnover of
41 billion and close to 195 thousand people employed in 2011), 31,000
wholesalers of electric appliances (€159 billion turnover and 267,000 people
employed). Some guidance on the share of the refrigerators and freezers
sub-sector may be provided by PRODCOM data according to which refrigerators and
freezers represented around 15% in terms of value sold of all domestic
appliances[50]. This would imply a total number of 29,000
employees in the manufacturing of refrigerators and freezers.

Table 1 – Data on market size and industry structure
for cold appliances

Parameter || Data

EU Market size || PRODCOM (2011): € 4.8 billion (24.6 million units)   Market reports: 17-20 million (2010)

Production volume/value in Europe || PRODCOM (2011): € 4.8 billion (15 million units)

Imports  || PRODCOM (2011): €1.9 billion (12.7 million units)

Exports || PRODCOM (2011): €0.9 billion (3.4 million units)

Number of enterprises (2010) || Market reports: 10 large multinational firms with multiple brands cover around 85% of EU market sales Eurostat: Manufacturing (NACE 27.51): 2,212 (all electric domestic appliances); Wholesale (NACE 46.43): 30,900; Retail (47.54): 54,500

Number of employees (2010) || NACE 27.51: 194,200 (all electric domestic appliances) Wholesale (NACE 46.43): 267,000 Retail (47.54): 269,000

Source:
Eurostat

According to data
from Euromonitor market research for 2012, 10 large size companies – most of
them present in the market with multiple brands – represent more than 85% of
the market in Western and Eastern Europe. At the product/brand-name level the
market is rather fragmented since only 1%[51] of the models are sold under the same name in all EU
markets.

Additional
information for the number of firms can be derived from the ORBIS database of
Bureau Van Dijk. From the total of 2,568 enterprises active in the 27.51 a
search within the economic activity description field using the keywords
“refrigerators” OR “freezers” produced 101 records. The list included all major
producers as well as smaller manufacturers some of which are active in the
commercial refrigerators and freezers market. A market share list from
Euromonitor market research database suggested that 22 manufacturers capture
98% of the market in Western Europe and 90% in Eastern Europe (including non-EU
countries). Thus, we consider that a total number of 100 firms provide an upper
limit in terms of firms affected by the relevant IM legislation for
refrigerators and freezers.

3. Analysis of applicable
IM legislation and standards

On the basis of desk
research and the input from firm interviews we have identified the list of
applicable pieces of Internal Market legislation, the basic administrative
requirements and the relevant harmonised standards that can be used by
manufacturers to meet the essential requirements. According to the input from
industry 95-99% of manufacturers do make use of the standards in the case of
refrigerators, and more general for domestic appliances.

Refrigerators are
covered by 9 different pieces of IM legislation covering a range of aspects:

·
Health and safety (Low Voltage Directive, Regulation on
materials and articles that come in contact with food, RoHD Directive on
hazardous chemicals,). In the case of gas refrigerators and freezers the Gas
appliances Directive is applicable.  Furthermore, the Pressure Equipment
Directive (97/23/EC) applies for those refrigerators and freezers that include
piping and other pressure vessels (compressors, containers of refrigerants, heat
exchangers) with internal pressure above 0,5 bar.

·
The General product
safety Directive is also applicable but does not introduce additional
requirements to refrigerators since these are covered by the other more
specific pieces. It does introduce however other obligations, mainly of
administrative nature;

·
Electromagnetic
compatibility (EMC
Directive); and

·
Energy consumption
and noise (Eco-design and
Energy labelling Directives and the respective implementing measures).

In addition, certain
requirements arise from the F-GAS Directive concerning the use of fluorinated
gases used in refrigerators, as downstream users of chemicals included in
articles under REACH Regulation and also in relation to the use of packaging
(Packaging Directive).  We should also note that the WEEE 2002/96/EC Directive
is also applicable to refrigerators - and is identified as rather burdensome
for manufacturers - but it is a piece of legislation that is outside the scope
of this study.

Table 2 – Summary of IM legislation covering
refrigerators and freezers and the relevant standards

Name of legislation || Main issue addressed || Requirements for economic operators || Relevant standards

LVD  2006/95/EC || Health & Safety  (electrical, flammable refrigerants) || Testing according to relevant standards or alternative solutions Development of technical file Declaration of conformity and CE marking Include information ensuring that the product can be used safely and in applications for which it was made || IEC/EN 60335-1 IEC/EN 60335–2- 24

Directive 2009/142/EC on Appliances Burning Gaseous Fuels (GAD) || Health and safety of gas appliances || Testing according to relevant standards or alternative solutions Development of design documentation Declaration of conformity and CE marking || EN 732

General product safety Directive || Health & Safety || Provide identification of the product by a product reference Carry out sample testing of products, keep a register of complaints and keeping distributors informed of such monitoring (voluntary) Inform authorities of dangerous products and actions taken to prevent risk Co-operate with the authorities upon request ||

Pressure equipment Directive || Health & Safety || Testing according to relevant standards or alternative solutions Development of design documentation Declaration of conformity and CE marking || EN 378-2:2008+A2:2012[52] EN 12178:2003[53] EN 12263:1998[54] EN 12284:2003[55] EN 14276-1:2006+A1:2011[56] EN 14276-2:2007+A1:2011[57]

Regulation on materials and articles that come in contact with foodstuff 1935/2004 and Regulation 10/2011 on plastic materials and articles intended to come into contact with food || Health & Safety || Chemical analysis and migration tests of the materials used (in cabinet, door, shelves and accessories) Establish information collection system providing information on the source of materials (traceability) Declaration of compliance ||

EMC  2004/108/EC || Electromagnetic compatibility || Testing according to standards Development of technical file Declaration of conformity and CE marking || EN 55014-1 EN 55014-2 EN 61000

Eco-Design Directive  2009/125/EC  (Implementing Regulation 643/2009 related to domestic cold appliances) || Noise || Testing Declaration of Conformity and CE marking Information in instruction manual for minimising noise || IEC 60704-1 IEC 60704-2-14 IEC 60704-3 ISO 8960

|| Energy consumption/ efficiency || Testing Technical file with results of studies and explanations of design choices made and the management system Declaration of Conformity to be kept for 10 years and CE marking Information in instruction manual for minimising energy-use || EN 62301 - IEC 60301 EN 153/ EN ISO 15502

Energy Label Directive 2010/30/EU  and implementing Regulation 1060/2010 || Energy consumption/ efficiency || Testing according to harmonised standard Technical file with results of studies and explanations of design choices made and the management system Development of product fiche Placing of energy label || IS015502

F-GAS  on fluorinated gases 842/2006 || Climate change || Information on the gas contained in the instruction manual and relevant label on product ||

RoHS (2011/65/EC) || Use of hazardous chemicals || Collect compliance statement from suppliers (material declarations) Technical file with supplier declarations and own analysis tests Declaration of conformity to be kept for 10 years ||

REACH || Use of chemicals || Collect statement from suppliers stating that he is compliance with requirements REACH compliance statement ||

Packaging and packaging waste (2004/12/EC) || Packaging || Declaration of Conformity || Standard EN 13427

The analysis and the
discussions with manufacturers did not indicate the presence of conflicting
requirements that could be seen as creating either or uncertainty or
problematic trade-offs in relation to the design of the product.

Turning to the
administrative requirements, a number of applicable pieces of IM legislation
(LVD, EMC, Eco-design and Energy-Label, Regulation concerning articles in
contact with foodstuff, RoHS) require the development of a technical files
following testing, which in most cases is done according to the specific
technical standard. The discussions did not point to any conflicts or
overlapping activities in relation to the development of these technical files.
The main concern is the size of these files and the work required to develop
and update them. It is also often difficult to keep all the required
information and to get from suppliers the complete technical files. Suppliers
sometimes send only parts of the technical file (e.g. the test reports, energy
consumption reports) or do not provide technical information at all (only the
DoC) due to concerns about confidentiality and this means that certain testing
needs to be redone.

The General Product
Safety Directive also introduces certain requirements including the mandatory
product identification or the voluntary conduct of tests of marketed products
and the keeping of a register of complaints.

The review of the
requirements of the Declaration of Conformity indicate minor differences in
terms of the terminology used (e.g. under the LVD there is a reference to the
“description of the product” whereas under the EMC, the “identification of the
apparatus”) or similar but the same requirements in terms of the information to
be provided (e.g. under LVD it is required to provide the date when the CE mark
was affixed to the product whereas under the EMC, the date that the declaration
of conformity was signed). However, the discussions so far did not suggest any
conflicts or problems for the manufacturers.

4. Analysis of costs of compliance with IM legislation

The information
presented in this section is based on the in-depth interviews with 3
manufactures, one small and two large size firms[58].

Table 3 - Basic information on the firms interviewed

Firm || Firm size || Annual sales from product in the EU || Main markets

A || Small (ca. 350 employees) || Ca. 350 thousand units || Ca. 100% of sales in the EU

B || Large (>1000 employees) || 2 million units || Ca. 100% of sales in the EU

C || Large (>4000 employees) || 1.8 million units || 80% of sales in the EU

On the basis of the
discussion with firms the process followed by manufacturers of refrigerators to
ensure compliance with the IM legislation includes:

● familiarisation with the applicable IM
legislation and the respective requirements, identification and purchase of
relevant standards and in some cases other preparatory actions in training of
staff.

● introduction of changes to the product
design and the production process to ensure compliance with the requirements

● conformity assessment procedures including
the relevant testing and the development of the technical file, the use of
notified bodies for certification if/when required, preparation of declaration
of conformity (DoC), CE marking and placing in the market

● other activities in response to requests of
the market surveillance activities

Preparatory
actions: Familiarisation with relevant legislation and purchase of standards

A common practice
among most economic operators (not only manufacturers but also distributors) is
to develop a database where all applicable legislation is indicated, the
relevant harmonised standards are listed along with links to the technical file
which demonstrates how the essential requirements are met (see below). The
databases are continuously updated to reflect changes in the legislation, to
standards or any information related to the technical files. In the case of
both small firm A and large C around 1 FTE is allocated solely to the
management and update of the database which covers all domestic appliances
products produced by the firm. Additional staff working in product development
and testing makes use of the database and contribute to maintaining and storing
information in the database.

Sophisticated relational
databases are also used among larger size companies[59] in order to manage the complexity of keeping track
with IM legislation, standards and amendments, but equally ensuring that
relevant links are kept under each product group to technical documentation
required by the firm itself for monitoring regulatory compliance, risk
management and quality assurance purposes.

The majority of
manufacturers in the sector rely on the use of European harmonised standards in
order to meet the essential requirements. In the case of refrigerators the
number of mandatory harmonised standards is around 20 but additional standards
(e.g. related to quality management) are also often used by firms. While there
is no fixed period for revisions of those standards, their average life span is
around 6-8 years. Data from two firms indicate that the average annual
expenditure for purchase and/or update of technical standards is usually in the
range of €700-1,000.

Compliance
with the applicable IM legislation

Ensuring compliance
with the applicable IM legislation often requires changes to existing product
design or new product development. Furthermore, the introduction of new
products requires product design work and testing to ensure that the new
products are in compliance with requirements.

The small size firm
A indicated that in total around 7-8 engineers work full time in product design
and quality for all products in the production line, around 10% of which
focusing on refrigerators (0.8 FTE). However, since Firm A outsources most of
the manufacturing to OEM suppliers in third countries, suppliers absorb most of
the compliance costs in their own design process prior to production.
Nonetheless, around 0.5-1 FTE is allocated to the testing of all products which
includes testing according to harmonised standards and also reliability checks
on a periodical basis. Tests for the EMC and LVD Directives take place in the
firm’s premises while other tests are conducted outside. It was estimated that
the total annual costs for testing and certification for all products produced account
to €200k/year including the expenditure for testing equipment with costs for
refrigerators around €20-30K for the 20-30 models of refrigerators that are
placed in the market on an annual basis (around €1k/model).

For large firms B
and C, 5% of the total number of employees in the specific product line is
working on product development activities, around 100 for firm B and close to
300 for Firm C.  For the development of a new product Firm B usually spends 1-1.5
year (i.e. 100-150 FTE), 80-90% of which is allocated to the product
development and product quality testing. Firm C indicated that a typical
product development project - leading to basic model with multiple variants –
has duration of 3 years and a budget of up to €100 million. For the large size
firm B, testing for product quality and internal market legislation are rather
closely linked and it was not possible to get specific estimates of testing
costs.

Thus, some of the
above costs are not directly linked to IM legislation and firms select to incur
as part of their own product quality strategy. However, it was not possible to
get estimates of the shares of costs that should be linked to IM legislation.
For Firm C more than 60% of the total costs are linked with product design
activities, around 50% of which (€30 million) is directly linked to compliance
with Internal market legal requirements.

Among the different
tests, the firms made reference to those related to RoHS which require an
examination of the substances in the materials used for fridge appliances. 
Firms B and C stated that the most costly tests linked to the IM legislation
are those related to the Ecodesign Directive for energy efficiency and noise. 
A typical noise chamber costs around €1 million while for the costs of equipment
for energy efficiency testing for the Ecodesign Directive – which is used for a
range of products – are around €100 k. Of course, these are generally one-off
investments on equipment that may last for more than 5 or 10 years. The tests
for EMC and LVD Directives were also considered as costly due to equipment
costs but no specific figures were made available. According to Firm B a rather
problematic point appears to be the tests concerning the Regulation on the materials
and articles the come in contact with foodstuff. The current provisions of the
legislation are considered as rather unclear (making reference to materials
that “may” come in contact with foodstuff) and often lead firms to perform a broader
range of tests than what could be the case if the provisions were more
specific.

Conformity
assessment procedures

The last part of the
process includes the preparation of the technical file, the inspection of the
notified bodies and certification, preparation of the DoC and the required
information manual and the placing of the CE marking.

The results of the
necessary tests is also brought together in a technical file and the remaining
documentation, parts of which also need to be translated to English. According
to the IM legislation this information needs to be stored for at least 10 years
and updated whenever there are changes. Significant time is often dedicated for
the collection of information from suppliers of specific components or finished
products.

While not necessary
for all the pieces of applicable IM legislation, Firm A uses the services of a
third party (Notified body) for conformity assessment. This is part of the
firm’s risk management strategy and introduces costs that are higher than those
necessary to meet the minimum requirements imposed by IM legislation. The costs
for certification for all products is included in the €200k/year indicated
earlier.

Large Firm B
indicated that around €100k is spent on an annual basis for third party services
that most often go beyond the minimum required (e.g. testing of production
facilities) while Firm C tries to keep the costs of third party to the minimum
and spends no more than €10-20k for third party certification. Firm C also
stated that there are 3 FTE working on the preparations of DoCs and ensuring
that CE marking is appropriately applied in all products.  In total, while a
specific figure was not provided, Firm C estimated that the conformity
assessment procedures and preparation of documentation represents no more than
15% of the total budget allocated to the development of a new model. Firm C
also indicated that the requirement for placing an energy label on each
appliance adds a cost of around €1/appliance.

Firm A suggested that
there is some confusion in relation to the information and level of detail to
be included in the DoCs and whether legislation and the relevant standards need
to be included but this was not shared by the representatives of large Firms B
and C. Still, even for small Firm A this part does not represent a sizeable
cost. The firms interviewed did not indicate any problem with the requirement
for a single declaration. However, CECED indicated that some of manufacturers may
find it problematic as they have separate departments each having
responsibility for preparing conformity statements within their own competence.
In such case, the requirement for a single DoC may introduce some costs for
changes to structures and procedures. Unfortunately, none of the firms was able
to provide more specific estimates of the time and resources allocated to these
activities. However, on the basis of the information provided this did not
appear to represent sizeable part of the total costs.

In
relation to gas refrigerators falling under the Gas Appliances Directive, the
evaluation of the Directive found that the introduction of GAD led to
additional costs, particularly with regard to testing/certification and
labelling/CE marking. [60]
However, the costs of testing and certification for all types of gas appliances
– not only gas refrigerators – were estimated at around 0.1% of the annual
sales value of gas appliances. Response to market surveillance authorities

Market surveillance
authorities make requests for technical information and possibly for testing of
products approximately once a month although this varies significantly among
countries. The amount of time dedicated to respond to enquiries from
market surveillance authorities varies depending on the nature of the request
(e.g. what information is required from the technical file, which Directive the
request relates to, or whether information in relation to conformity of all
applicable legislation has been asked for). Typically, authorities give to
firms 10 days to respond to requests. The Ecodesign, RoHS, EMC and energy
labelling Directives are those for which there are most often requests for
information by the market surveillance authorities. A common perception is that
big firms tend to be asked more frequently than SMEs to provide technical
information. The large firm interviewed indicated that the related resources
dedicated are difficult to estimate but are generally part of the work of the
10 FTE dedicated to compliance.

Business
as usual

All firms indicated
that they would probably conduct large part of the tests, primarily those
related to product safety, even in the absence of the legislation and that
production quality management would still be part of internal procedures
irrespective of the regulatory framework requirements. Even parts of the costs
for tests from third parties could be considered as part of a business as usual
(no IM legislation) scenario. Even more demanding product reliability tests –
that are voluntary under the GPSD - are often conducted by established firms that
want to ensure the quality of their products. Similarly, given that issues such
as energy efficiency are the focus of consumer organisations related tests
would also have to take place – even if not demanding – in the absence of
relevant requirements under the Ecodesign and Energy labelling Directive. Thus,
large parts of the testing costs incurred – on average up to 50% - are
considered as business as usual. Even the product design is in most respects
not driven by the legislation but primarily by the general product development
process. The main concern for manufacturers is when requirements introduced do
not provide sufficient lead time in which case these design costs cannot be
integrated in the product design cycle.

5. Assessment of costs of
IM legislation for the whole sector

On the basis of the
information provided we have attempted to estimate the costs of compliance for
the whole refrigerators sector. The provided figures include the information
concerning the Business as usual scenario. Assumptions have been made
concerning the number of firms affected since, besides the 10 large firms
indicated by EGMF there are also a number of smaller size manufacturers
particularly in the professional market segment. As indicated in section 2, the
calculations for the whole sector were based on an estimated number of 100
firms, an annual turnover of €4.8 billion and a number of units sold/year of
€24.6 million.

The table overleaf summarizes
the analysis of the costs for different aspects. The main point is that the
estimated cost for compliance activities for the whole of the domestic
refrigerators and freezers sector is around €160 million/year. Around 60% of
this (€86 million) is considered as directly resulting from the internal market
legislation while the remaining 40% are costs that would most probably occur
even in the absence of legislation.  Total substantive compliance costs –
product designs related activities, testing and testing equipment – are
estimated between 80-90% of the total compliance costs while administrative
costs (information collection, preparation of technical files, DoC) represent
10-20%.

Table 4 – Summary of main costs of compliance for
domestic refrigerators industry

|| Unit of measurement || Average cost/unit || Total quantity || Industry wide costs/year

Own human resources occupied on compliance activities || || || ||

Total || Per annual turnover || 2.9% of turnover || €4.8 billion || €140 million

Familiarisation with legislation || || || || 5-10%

Share of product design and testing activities || || || || 80-90%

Conformity assessment (technical file preparation, information manual, DoC and CE marking) || || || || 5-10%

Share of human resources costs in absence of IM legislation (BaU) || || || || 40%

Net human resources compliance costs || || || || €86 million

Costs of testing equipment || || || ||

Total || Per annual turnover || 0.33% of turnover || €4.8 billion || €16 million

Share of expenses even in absence of IM legislation || || Ca. 48% || ||

Net costs for testing equipment || || || || €8.3 million

Costs of third parties || || || ||

Total || Per annual turnover || 0.5% of turnover || €4.8 billion || €2.6 million

Net third party costs – only for IM || || 60% || || €1.8 million

|| || || ||

Total annual compliance costs || Per firm || €1.59 million || 100 || €158.6 million

Total net compliance costs  || || € 0.86 million || 100 || €86 million

Substantive compliance costs || || || || 80-90%

Administrative costs || || || || 10-20%

Share in total industry turnover || || || || 0.2%

Basic assumptions: || Total units sold: 24.6 million/year Market size: €4.8 billion Number of firms affected: 100 (20 large and 80 small)

6. Benefits of Internal
Market legislation

The discussions with the three firms and CECED underlined the
contribution of the EU legislation in relation to its prime objective, the
creation of the internal market for goods. Two of the firms and CECED,
indicated that there have been cost savings in comparison to the situation when
they had to comply with different pieces of national legislation covering the
same aspects in different ways and with different procedures. For the third
respondent, however, any such benefits are offset by the increasing compliance
costs of the more demanding requirements of the EU legislation.

Another benefit identified is the opportunity provided through the
participation of CECED and the large size manufacturers in the CENELEC and IEC
standard setting procedures,  to avoid or reduce any contradictions between EU
and international standards. This contributes, to a certain extent, towards the
development of of rather similar requirements at an international level and
facilitates the access to even broader markets.

On the other hand, firms were sceptical of the contribution of the
legislation to new product development and innovation, even though it was
recognised that the Ecodesign Directive – together with the Energy labelling
Directive has had a role in promoting the development and adoption of more
energy efficiency appliances.

7. Analysis of simplification options

While the
administrative costs are reported to be rather sizeable, the discussions with
firms did not point to significant potential for changes to the internal market
legislation that could lead to measurable benefits. The common concern of firms
whenever they were asked to identify possibly simplification or improvement
options was that the focus should be on proper enforcement of internal market
legislation, particularly in relation to the Ecodesign Directive. There is a
general view – albeit with no specific data to support this – that issues like
energy efficiency performance are not given priority by authorities and that
non-compliance can provide a competitive advantage, especially in the low cost
market segments[61].

The input from the
interviews pointed to only two examples of possible change in the legislation
that should be expected to bring sizeable costs savings. The first concerned
the need for clarifications of the materials and articles that need to be
tested under Regulation on materials and articles that come in contact with
foodstuff 1935/2004. Addressing the existing ambiguity as to which materials
need to be considered could save costs from additional tests. Not all interviewees
identified this as a problem but, according to one large manufacturer, up to
50% of the costs of the tests related to the specific Regulation could be
avoided. Specific figures were not made available and the specific tests are
not considered particularly costly and the potential savings are not expected
to be more than a few thousands Euros per firm and, at most, a few hundred
thousand for the whole sector[62].  More
generally though, CECED suggested that clearer provisions can ensure that firms
do not have to spend unnecessary time and resources.

A second proposal
made by one manufacturer was the removal of the requirement for the provision
of an energy label in each refrigerating product. The manufacturer claimed the
energy label costs €1/appliance. For the estimated 24.6 million appliances sold
in 2010 this would mean annual savings of up to €24 million for the whole
sector. There was however no detailed evidence presented to corroborate this by
industry. . However, unless another equally effective and less costly approach
is identified to provide this type of information to consumers, we consider
that such a cost cutting measure is neither desirable nor justified. The use of
energy labels is a particularly effective tool for providing information to
consumers and promoting energy efficient consumer products and this is a view
supported by CECED. Still, possible improvements to the Energy Labelling
Directive are currently under investigation[63].

More
relevant though, CECED indicated that the more extensive use of pictograms
like the energy label can bring important savings in terms of translation costs
for information manuals. CECED did not provide estimates of the possible
savings from such a measure but, on the basis of information from other sectors,
translation costs of these manuals to cover all EU countries are around €3,000
for each model. For large firms with more than 100 models this may means costs
above €100k in total over a period of 3-4 years. Additional costs may arise if
there are significant changes to the legislation of the standards. While the
use of pictograms will not eliminate the costs for translation, reducing them
by 20-30% can still lead to considerable savings for firms that sell across
Europe, as most large manufacturers do.

Our own analysis of
the legal framework did not indicate obvious duplications or overlaps among the
applicable Directives and the discussions with industry representatives did not
indicate problematic areas. CECED made reference to problems arising from the
use of the terms “placing on the market” and “making available” in the RoHS
Directive[64].
While there have been clarifications in the form of the guidance there are
still cases that national authorities and manufacturers interpret these terms
differently, causing problems to manufacturers. Since there is no information
on the frequency of the occurrence of any such problems and the specific
implications it is not possible to estimate specific cost savings for the
sector.

Finally, in relation
to the existing proposal for mandatory single Declaration of Conformity under
the New Legislative Framework, the input provided by CECED and all firms
interviewed was that maintaining flexibility – namely allowing manufacturers to
decide whether to use a single or multiple DoCs – is preferable for firms in
the sector. The organisation structure of some manufacturers often means that
different units deal with different Directives and a single DoC could be
problematic. With the modern IT systems we consider that this should not be a
problem for manufacturers although it would require some initial adaptation
costs. More important though is that the discussions did not indicate
measurable cost saving from such a change. The small benefits from less
paperwork could also be counterbalanced by a more frequent need to upgrade the
single DoC whenever there are changes to the relevant standards or the
legislation.

On the basis of the
above saving potentials were estimated for each individual firm and, where
possible, for the whole sector.

Table 5 - Summary of simplification/improvement
options examined

Change proposed || Expected benefit/problems || Estimated savings potential

Remove requirement for provision of energy label in each product || Saving of costs of up to €1/appliance Loss of information concerning energy efficiency Loss of competitiveness for manufacturers of high-quality products || Total of up to €24 million\* for the sector

Use of pictograms (such as the energy label) for the provision of information in a standard common format across the whole of the EU. || Saving of translation costs for information manuals. || €3,000/model – Depending on firm size possible savings of up to €100k/firm

clarification of materials and articles to be tested under in relation to Regulation on materials and articles that come in contact with foodstuff 1935/2004 || Eliminate some of the additional tests conducted due to the ambiguity what parts are covered || Expected to be no more than a few thousand Euros/firm and a few hundred thousand for the whole sector

Mandatory single Declaration of Conformity || Reduced paperwork More frequent need to upgrade the single DoC whenever there are changes to the relevant standards || Overall, no significant (if any) cost savings expected

\*note – the estimate of €1/appliance was made by a
manufacturer of domestic refrigerators and has been used for the simplification
estimates. However, this could not be corroborated through the other
interviews.

8. Overall conclusions

The product groups
examined in this case study are refrigerators and freezers for domestic use,
also known as cold appliances. The total market for refrigerators in 2011 was
close to 24.6 million units with a value of the market of EUR 4.8 billion
sold/annum. Refrigerators represent around 42% of the market, combined units
38% and freezers 20%.  The total volume of production in Europe is around 15
million units with a value of €3.8 billion while imports represent around 50%
of the market. Significant part of leading refrigerators and freezers brand are
designed in Europe but manufactured outside Europe and subsequently imported.
In total, around 10 large size companies – most of them present in the market
with multiple brands – represent more than 85% of the market in Western and Eastern
Europe and 22 manufacturers capture 98% of the market in Western Europe and 90%
in Eastern Europe (including non-EU countries).

Cold appliances are
covered by 9 different pieces of IM legislation that cover health and safety
aspects (Low Voltage Directive, Regulation on materials and articles that come
in contact with food, RoHD Directive on hazardous chemicals), electromagnetic
compatibility (EMC Directive), energy consumption and noise (Ecodesign and
Energy Labelling Directive). The Gas appliances Directive and Pressure
Equipment Directive are also applicable to a small share of cold appliances.

The analysis
suggests that cost for compliance activities for the whole of the domestic
refrigerators and freezers sector is around €160 million/year, representing no
more than 0.2% of annual turnover. Around 60% of this (€86 million) is
considered as directly linked to the implementation of the internal market
legislation while the remaining 40% are costs that would most probably occur
even in the absence of legislation (business as usual).  Substantive compliance
costs – costs related to product design, testing and testing equipment – are
estimated between 80-90% of the total compliance costs while administrative
costs (information collection, preparation of technical files, DoC) represent
10-20% of the total. The compliance costs are driven primarily by the
compliance with environmental legislation (mainly the Ecodesign Directive)
which, in contrast to health and safety aspects, is not considered as business
as usual.

The discussions with
firms did not point to significant potential for changes to the internal market
legislation that could lead to measurable cost savings. The priority – from the
point of view of industry- is to ensure the proper enforcement of internal
market legislation, particularly in relation to the Ecodesign Directive, to
ensure fair competition.

Specific
improvements identified concerned the need for clarifications of the materials
and articles that need to be tested under Regulation on materials and articles
that come in contact with foodstuff 1935/2004 that could save up to 50% of the
testing costs related to this Regulation. An extensive use of pictograms like
the energy label is also expected to bring measurable savings (of a possible
order of tens of thousands of Euros for large firms). There is also no clear
view as to possible savings from the adoption of a mandatory single Declaration
of Conformity. Maintaining flexibility – namely allowing manufacturers to
decide whether to use a single or multiple DoCs – is considered preferable for
many firms in the sector and there are no measurable cost saving from such a change.

The firms in the sector underlined the contribution of the EU
legislation in creating an effective internal market for goods that have led to
cost savings in comparison to a situation in which they had to comply with
different pieces of national legislations. However, the increasing compliance
costs linked to more demanding requirements of the EU legislation may have
offset these savings. The industry also benefits from the participation in the
standard setting procedures that helps avoid contradictions between EU and
international standards. Firms are sceptical concerning the contribution of the
IM legislation to innovation even though it is recognised that the Ecodesign
Directive has had a role in promoting the development and adoption of more energy
efficient appliances.

9. Sources of information
References

● Eurostat Structural Business Statistics
Database and PRODCOM

● Euromonitor Market research data on
consumer appliances

● Text of applicable IM legislation and
relevant standards

● Guidance documents of LVD and MC Directives

● Input from one medium and one large
manufacturer/importer of refrigerators and freezers.

Interviews

● Interview with industry association: CECED

● 3 interviews with manufacturers of
refrigerators/freezers

Case
study 4 - Lifts

1.
Introduction - objectives of the case study

This
case study assesses how IM legislation affects different economic operators 
involved in the manufacture, import and distribution of
lifts for persons (covered under the Lifts Directive 95/16/EC). In order to
help shed light on the interaction between different types of IM legislation,
and issues around whether there are sufficiently clear demarcations between
such legislation, it also however addresses other types of lifts covered
through the Machinery Directive 2006/42/EC, including lifting hoists, lift
platforms and escalators and certain types of lifts for goods not covered by
the Lifts Directive. The applicable Union harmonisation legislation specific to
each product is mapped out and an assessment of gaps, loopholes,
inconsistencies and duplication is provided. The administrative costs – and to
the extent possible substantive compliance costs – in meeting these regulatory
requirements are then assessed.

The
rationale for the selection of lifts was that:

·
The
lifts sector, while dominated by four large firms, has a large number of small
and medium-sized enterprises (“SMEs”);

·
The
lifts sector has longstanding experience of implementing IM legislation since
the Lifts Directive was adopted in 1995;

·
The
Lifts Directive 95/16/EC is one of nine Directives that form part of the
Alignment Package. It is important to examine stakeholder views on how the
alignment process has had an impact on strengthening the coherence of IM
legislation; and

·
The
case demonstrates the advantages of having a clear delimitation in IM
legislation in defining the borderline between different Directives in order to
ensure legal clarity for economic operators.

The
case study is based on interviews of EU-level and national industry associations,
manufacturers and installers of lifts and manufacturers of safety components
for lifts, as well as analysis of key legislative documents and published
reports.

2.
Product definition and structure of the
sector

The
lift industry is dominated by four very large companies (Kone, Otis, Schindler,
ThyssenKrupp Elevator), of which three are European (one non-EU) and one from
the USA. These four companies and their subsidiaries have a high combined share
of the European market, estimated at 60%.

The
lifts industry has undergone substantial changes as a result of globalisation,
with evidence of increased industry consolidation in statistics on market
structure.[65]
The
estimated size of the lifts market in Europe, according to the Europe SME lifts
association (EFESME) was about €15 billion in in 2009. However, this extends
beyond manufacturing and the placing of products on the market (covered by IM
legislation). Lift manufacturing and installation only accounts for one third
of the total market size, while the remainder is made up of after-sales
services (maintenance 41%, repair 7%, and modernisation 18%). The total number
of lifts in operation in the EU was estimated at about 4.7 million units.
Further data has been obtained for 2009 from NACE and PRODCOM on the size and
structure of the lifts industry. “Lifts and escalators” fall within the NACE
classification “manufacture of lifting and handling equipment”.

NACE
data shows that there are over 9,500 enterprises in the lifts sector, the great
majority of which are SMEs, although there has been a decline in the number of
lifts companies in the 2008-2010 period (the latest period for which data was
available), reflecting on-going industry consolidation processes.

Table
1: Number of enterprises – lifts sector

Nace Code || 2008 || 2009 || 2010

28.22 || 9,970 || 9,720 || 9,525

·
Source:
Eurostat

The
production value of lifts is shown in the following table. The data shows that
in parallel with the economic and financial crisis there was a major downturn
in the lifts industry but that the production value has since stabilised.

Table 2: Production value of the lifts sector (€
thousands)

Nace Code || 2008 || 2009 || 2010

28.22 || 59,072.38 || 42,603.23 || 43,688.83

·
Source:
Eurostat

In
the following table, Prodcom data shows that a total of about 255,000 lifts (and
skip hoists) were produced in Europe in 2012, of which the majority were
electrical lifts and the remainder hydraulic.[66]

Table
3: Sales volumes for lift manufacturing industry (2012)

|| Units || Median price (€) || EU27 production value (€000)

Sales volumes || || ||

28221630 (electrically-operated lifts and skip hoists) || 133,000 || 18,242 || 2,157,000

28221650 (lifts and skip hoists excluding electrically-operated) || 122,000 || 14,207 || 802,766

Total sold volume || 255,000 || - || 2,959,766

·
Source:
Eurostat

Manufacturing
in the lifts sector is strongly export-oriented and has generated a significant
volume of exports, although the interviews found that a lot of manufacturing
that used to take place within the EU has been moved to lower-cost producer
countries outside the EU. The table below provides a summary.

Table 4: Production value – lifts sector (2010)

|| Export values (000s) || Import values (000s) || Production Value (000s) || Apparent consumption (Production+ Imports- Exports)

28221630 - Electrically operated lifts and skip hoists || 599,774,450 || 37,947,640 || 2,343,821,623 || 1,781,994,813

28221650 - Lifts and skip hoists (excluding electrically operated) || 165,383,210 || 17,338,000 || 628,899,470 || 480,854,260

Total || 765,157,660 || 55,285,640 || 2,972,721,093 || 2,262,849,073

·
Source:
Eurostat

With
regard to employment, various industry surveys indicate a total European
workforce in the lifts for persons sector (manufacturing, installation and
servicing) of between 15,000-18,000 people.[67]

3.
Analysis of applicable IM legislation and
standards

This
section maps out relevant Union harmonisation legislation since the study seeks
to provide estimates of the costs associated with complying with IM legislation
(dividing these costs into administrative costs and substantive compliance
costs). Reference is also made to applicable environmental legislation where
this has a major impact on manufacturers of industrial goods. However, in the
quantitative analysis, we do not seek to quantify the impact of such
legislation, rather only IM legislation for industrial products.

In
the first table, relevant applicable IM legislation for lifts for persons is
mapped out. The table shows that, unlike some of the other product cases, the
lifts sector is subject to relatively few pieces of Union harmonisation legislation.

Table 5: Legislation applying to lifts

Applicable legislation || Scope of products included || Main administrative requirements for economic operators

Lifts Directive 95/16/EC || Lifts for persons, persons and goods or goods alone (if the carriers is accessible) with speeds of more than 0.15 m/s || · Conformity assessment - obligation of the installer of lifts or manufacturer of safety components · Produce a DoC (note: DoC required for both installation of lifts and for each safety component) · Keep technical documentation copies of EC type-examination certificates and their additions for a period of 10 years from the date on which the safety component was last manufactured or the date on which the lift was placed on the market · ‘CE’ marking - must be visibly affixed to lifts or to certain safety components of lifts · Rules relating to manufacturing apply to both installers of lifts and to manufacturers of lift safety component (or authorized representatives)

Lifts Directive (COM(2011) 770 final) Proposal for a Directive on the harmonisation of the laws of the Member States relating to making available on the market of lifts and safety components for lifts (recast) || As above || All economic operators Traceability obligations - identify name of installer, manufacturer, name / ID number of Notified Body having carried out conformity assessment Installers and manufacturers Conformity assessment remains the obligation solely of the installer or the manufacturer of safety component Importers · Verify that the manufacturer of safety components has carried out the applicable conformity assessment procedure and has drawn up a technical documentation. · Verify that the safety components for lifts are correctly marked and accompanied by the required documents. · Keep a copy of the DoC and indicate their name and address on the product, or where this is not possible on the packaging or the accompanying documentation.

EMC Directive || Applies to lifts for persons || Testing products for Electromagnetic Compatibility interference Conformity assessment procedure for apparatus mandatory CE marking on apparatus required in accordance with Annex V.

Machinery Directive 2006/42/EC || Lifts for goods only Slow-moving lifts (speed less than 0.15 m/s) Construction site hoists Lifting platforms for persons with impaired mobility || Manufacturers · Ensure conformity assessment procedure for lifting machinery carried out · Produce a DoC (note: DoC required for both installation of  lifts and for manufacture of each safety component) · Keep technical documentation copies of EC type-examination certificates and their additions for a period of 10 years ‘CE’ marking - must be visibly affixed to lifts or to certain safety components of lifts · Construction file and risk assessment. The latter should contain: (i) a list of the essential health and safety requirements applied and fulfilled; (ii)  the description of the protective measures implemented to eliminate identified hazards or to reduce risks; (iii) the standards and other technical specifications used, indicating the essential health and safety requirements covered by these standards; (iv) any technical report giving the results of the tests carried out either by the installer or manufacturer or by a body chosen by the manufacturer or his authorised representative; and (v) a copy of the assembly instructions for the partly completed machinery.

The
Lifts
Directive covers Lifts for persons (and goods). Article 1(1) states
that the lifts to which the Directive applies are those “serving buildings and
constructions”. The Directive is clear as to whether spare parts and components
are included, since it covers both lifts and safety components for lifts, both
of which must be CE-marked. Likewise, other Directives that apply to different
types of lifts such as Directive 2000/9/EC relating to Cableways (e.g. chair
lifts, drag lifts) also applies to safety components and also to sub-systems.

A
number of different types of lifts are excluded from the Directive’s scope,
namely:

lifting
appliances whose speed is not greater than 0,15 m/s;
construction
site hoists;
cableways;
including funicular railways;
lifts
specially designed and constructed for military or police purposes;
lifting
appliances from which work can be carried out;
mine
winding gear;
lifting
appliances intended for lifting performers during artistic performances;
lifting
appliances fitted in means of transport;
lifting
appliances connected to machinery and intended exclusively for access to
workstations including maintenance and inspection points on the machinery;
and
rack and
pinion trains, escalators and mechanical walkways.

The
legislation applies to goods alone if the carrier is accessible i.e. a person
may enter it without difficulty, and fitted with controls situated inside the
carrier or within reach of a person inside the carrier. Other types of lifts to
carry goods are included within the scope of the Machinery
Directive 2006/42/EC.

A
Guide to the Application of the Lifts Directive 95/16/EC has been drawn
up by the Commission following consultation between the Member States and lifts
industry representatives, standardisation bodies, Notified Bodies and users of
lifts. The guidance takes into account practical experiences of the Directive’s
implementation and draws widely on the discussions and conclusions of the Lifts
Working Group.

The
guidance sets out which types of lifts fall within the directive’s scope and
which are excluded. This was viewed as being helpful for economic operators in
ensuring that there is a clear understanding about the delineation between
Directives. For example, the scope of the Lifts Directive and the Machinery
Directive are mutually exclusive, but the Lifts Directive includes relevant
requirements of the MD. Moreover, since 29 December 2009, Article 24
(1) of the revised Machinery Directive modifies the list of exclusions of the
Lifts Directive. For example, the lifts with a travel speed not greater than
0.15 m/s are now excluded from the scope of the Lifts Directive and are subject
to the Machinery Directive. Construction site hoists are excluded from the
scope of the Lifts Directive. They are no longer excluded from the scope of
Machinery Directive.

Process of revising and updating legislation

Before
considering whether there are any gaps, overlaps,
inconsistencies and duplication in IM legislation affecting the lifts sector,
it is necessary to review how the regulatory framework has evolved. Two main
legal developments can be noted relevant to EU legislation affecting lifts:

·
The
Lifts Directive has been subject to regulatory amendments to make the
definition of product scope – and the delimitation between the Lifts Directive
and the Machinery Directive – clearer. The consolidated legal text reflects
this.

·
The
current legal framework has been reviewed and through the Alignment Package, a
recast Lifts Directive will be adopted (circa 2014).

Since
the Lifts Directive was adopted in 1995, the former Machinery Directive
(89/392/EEC) was updated through regulatory amendments to reflect the
provisions in the Lifts Directive. In particular, Recital 27 of the recast MD
states that “The application of the Directive to a number of machines
intended for lifting persons requires a better delimitation of the products
covered by this Directive with respect to those covered by Directive 95/16/EC”.
Consequently, an amendment was made to the Lifts Directive 95/16/EC to
clarify the borderline between the two Directives’ scope.

Directive
95/16/EC is now being aligned with the NLF through the Recast Directive
2011/0354 (COD) on the harmonisation of Member States’ laws relating to making
available on the market of lifts and safety components for lifts. Although most
changes to the Lifts Directive as a result of the alignment package will be
minor, such as stronger coherence through common definitions and
responsibilities for economic operators, there may be some safety benefits.

Analysis of gaps, overlaps, inconsistencies and
duplication

Overall,
the evidence suggests that IM legislation affecting the lifts sector is
coherent. First, unlike some other Union harmonisation legislation, the
delimitation between directives (e.g. the Lifts Directive and Machinery
Directive) has been clearly specified by the recast of the Machinery Directive
in 2006. This ensures that there is mutual exclusivity between the Directives,
which provides clarity for economic operators. Whilst the Lifts Directive does
not distinguish electrical and hydraulic lifts, such a distinction is made in
the relevant standards and is viewed as a logical by manufacturers, installers
and other industry stakeholders.

A
minority of the companies interviewed also highlighted obstacles caused by
legislation relating to construction products and/or buildings. For example,
one company suggested that the Construction Products Regulation was not
consistent in terms of its references (or lack thereof) to steel structures
used in lifts or to the fire-testing of lift landing-doors. Another mentioned
that the application of “local building standards” to buildings hosting lifts
could serve as a barrier to the free movement of lift units across Europe.

4.
Analysis of costs of compliance with IM
legislation

Feedback
was obtained on how companies in the lifts sector ensure compliance with the
relevant Directives (listed in Table 5 above). In order to ensure their
compliance with the legislation, the large manufacturers tend to employ
specialist staff at their research and development centres and production
sites, as well as in their distributing companies (typically nationally-based)
that are responsible for installation, service and maintenance. Compliance must
be ensured at the design and development stage (typically a one-off task for
each new or revised product) as well as at the installation stage for each
individual lift unit. It should be noted that the EU legislation only relates
to new products; service, maintenance and renovation (including of lifts
pre-dating the Lifts Directive) is covered by national legislation that differs
from country to country.

Lifts
differ from many other industrial products in that compliance has to be
undertaken in three main phases, which may take place at different sites in
different countries. New lift models are, firstly, designed to take into
account IM legislation. For the big four manufacturers, design tends to be
undertaken at specialist research and development (R&D) centres, given the
obvious economies of scale. For example, one of the firms interviewed has eight
R&D centres globally, of which three are in the EU. Second, new lifts must
be manufactured to comply with the legislation. Again, the manufacturing
of lifts may often be done centrally to make use of economies of scale. The
same firm has multiple global production sites, of which three are in the EU.
Last, the installers of lifts must ensure that installed products
satisfy a proper conformity assessment undertaken on site before they become
operational. In contrast to the design and manufacturing of lifts, installation
is typically done by nationally-based firms given the need for proximity. The
four large firms have operating companies or authorised distributors in each of
the 27 Member States and in many other countries worldwide. SMEs clearly differ
from the four global players in that respect, since design and production is
more likely to take place at the same site.

At
each phase, the task of ensuring compliance is very different. Designing a new
lift product or model is clearly a lengthy task, undertaken some considerable
period before the product is placed on the market. The design process involves
intensive testing, whether required by the legislation or not. At the design
stage, the requirements of the legislation must be taken into account and thus
limit the options for design but without creating a specific additional stage
in the process; the requirements are “designed in” to the product. The
manufacture of lifts in compliance with the legislation is relatively
straightforward, provided that the product has been designed to comply and
provided that the lift is made according to the specification. However, the
installation of lifts tends to require numerous refinements to ensure the lift
functions well within its environment. These refinements result in a
corresponding need for repeated checks to ensure compliance with the
legislation, as well as with health and safety requirements in general.

The
particular nature of this production chain also creates specific costs and
benefits compared to other products. There is the need for specialist staff
that have expert knowledge of the legislation at all sites, i.e. the locations
where R&D, production and installation take place. This is in contrast to a
product such as mobile phones, for which there is no separate “installation”
phase; once such products leave the production site, the manufacturer can be
sure that the product is compliant (unless it is tampered with at a later
stage). Compliance is thus a “decentralised” task, creating the need for
communication between disparate sites at different points in the production
chain, e.g. for feedback from installers to designers about the practical
difficulties faced in complying with the legislation at the point of
installation. However, the nature of the product (i.e. physically large and
fixed in a certain location) facilitates enforcement of the regulation and
market surveillance; products can be tracked and traced much more easily than
other products, making it hard for rogue or ill-informed manufacturers to place
non-compliant products on the market. Similarly, end-users are unlikely to
purchase non-compliant products inadvertently, e.g. via a website.

The
size of the four largest manufacturers enables them to employ specialist
compliance staff in-house. As a result, the general approach in the lifts
industry is to gain approval of the installer’s full quality assurance system
under Module H, which avoids the need for EC type-approval of each unit
installed. However, the system used tends to vary according to the nature of
the building; other Modules tend to be used for unusual buildings. Two of the
companies interviewed pointed out that they would tend to comply with the harmonised
standards as much as possible, reflecting the fact that the Lifts Directive
covers a very specific product, unlike some other directives. Compliance with
harmonised standards also makes exporting easier to third countries that have
unilaterally adopted the EU standards (e.g. many of the Asia-Pacific countries)
and also simplifies maintenance.

Feedback
from industry associations was that European standards play an important role
in supporting the compliance of SMEs with EU legislation, since almost all SME
producers of lifts use ropes and follow such technical standards. However, the
four large manufacturers
do
not use standards in order to comply with the essential requirements, since
they use belts. There is a reluctance among the biggest industry players to be
involved in standardisation because of concerns about maintaining competitive
edge and because newer types of lifts are patented.

Preparatory
actions: familiarisation with relevant legislation and purchase of standards

For
the two large companies interviewed, the process of familiarisation with
legislation was not unduly costly. Their very large size makes it
affordable to employ staff specialising in EU and other legislation. For
example, such staff are a very small part of the workforce for the big four
players with more than +40,000 employees worldwide. Moreover, the availability
of specialist staff allows the large companies to be well-connected to the
European Commission and to participate in various forums and working groups at
EU level, which helps familiarisation.

The
greatest costs related to familiarisation with the legislation tend to occur
when there are changes in the harmonised standards or in the interpretation of
those standards, e.g. by national authorities. One interviewee reported that
the cost of familiarisation with applicable requirements was not particularly
costly, nor was purchasing the relevant standards. (Standards in the UK
typically cost between £50 and £300 each). However, reviewing the existing
harmonised standards could take time, as could the process of familiarisation
across a large company, given the need for constant communication of the
information obligations of the legislation to a much wider group of people. For
example, the requirements of the legislation are just one part of the knowledge
required by those installing lifts; those staff would not necessarily be as
pro-active as the compliance officers in ensuring that their knowledge remained
up-to-date, hence the need for continued communication as well as regular
training. None of the companies interviewed incurred costs in using external
consultants to support preparatory work.

Compliance with
the applicable IM legislation

Changes
to the requirements of the legislation or to the standards have the greatest
potential to impose costs on manufacturers where they require changes in processes
and product design. Indeed, the nature of lifts requires very considerable
investment to be undertaken in the design and development of new products over
long time-periods. Where changes occur in the legislation on a regular basis or
at short notice, they have the potential to impose substantial costs on
manufacturers.

However,
the companies interviewed pointed out that the costs of adapting processes and
product design are much less where changes in the legislation are announced
some time before they come into effect. In general, lift products are
continually evolving, e.g. in response to technological innovations and the
R&D centres of the large companies are constantly seeking to improve their
products, whether through new models or new versions of existing models. The
development process involves constant checking of prototypes to ensure safe and
effective functioning, as well as compliance with the legislation. Whilst such
checks are time-consuming, they are seen as part of the overall development
cost. Indeed, it becomes hard to separate out the cost of checking compliance
with the legislation from the cost of other checks. As one interviewee stated,
“the product specification is not costly as you have to do it anyway; in that
sense, the Directive just limits your options, it doesn’t create costs”.

Conformity
assessment procedures

The
companies interviewed were unanimous in highlighting the additional costs
imposed by conformity assessment procedures both in development and
installation. The development of a new or revised model tends to require
continual refinements to the product. When a product is designed, it has to be
considered by a notified body and go back each time it is revised (as part of
the overall development process). Manufacturers/installers are required to
retain the product certification at each stage of development, which creates a
cost. It would appear therefore that it is not so much the cost of the developing
a product that conforms to the legislation which is burdensome but the cost of
checking conformity. Such costs tend to be additional and therefore costly. As
noted above, approval of the installer’s full quality assurance system under
Module H avoids the need to have each individual unit checked.

Within
the conformity assessment procedure, it would appear that the main costs are
imposed by the requirement to collect all information required for technical
reports. For example, collecting information from third party suppliers of
components can be particularly burdensome due to the lifecycle of the product.
The compilation of test reports is equally important and burdensome but tends
to be viewed as a “business as usual” cost, since the manufacturers operate
their own test procedures and compile test reports in any case. Similarly,
product identification requirements (e.g. serial number) and the maintenance of
technical information for at least ten years tend also to be seen as “business
as usual” costs, in the latter case, because the life-cycle of a lift is 25-30
years. It may be possible to reduce some costs by allowing increased use of
electronic documentation.

The
large manufacturers tend to undertake their own tests themselves, using
in-house staff and following quality assurance systems approved under Module H.
Clearly, such costs are significant, given the need for full-time staff.
However, the cost of notified bodies tends to be modest; one manufacturer
reported that third party notified body inspections are only used to verify its
quality assurance system. No company reported their own internal reviews of
technical documentation to be particularly burdensome, given the availability
of in-house staff; one of the companies mentioned that such reviews were
undertaken by the global headquarters. In the case of lifts, periodic
inspections of installed products are the responsibility of the customer and,
in any case, fall under national rather than EU legislation.

Declaration of
Conformity and CE marking

Overall,
the Declaration of Conformity and CE marking do not appear particularly
burdensome for manufacturers, except for the requirement to keep information up
to date, e.g. in relating to changes in the harmonised standards or in the
legislation. Since each lift installed represents a unique product, the
information has to be created every time, which creates an administrative
burden if the DoC is to be kept up-to-date. However, since the CE marking and
DoC also have to cover the equipment and environment surrounding the lift, this
step can be particularly burdensome in a minority of installations. Since,
typically, the lift manufacturer will not have constructed the surrounding
environment, e.g. the hoistway, the process of issuing the DoC and CE marking
can prove problematic. For example, one company reported that some customers
may pressure the lift installer to issue a DoC (e.g. by withholding payment) in
cases where the customers themselves have not fulfilled their own obligation to
develop a compliant environment for the lift.

Other activities
necessary to comply with IM legislation

None
of the companies interviewed referred to costs resulting from any other
activities required by the legislation.

Analysis of
administrative costs for each relevant step indicated

Since
the Lifts Directive refers to a very specific product, this Directive accounts
for the majority of administrative costs. However, the administrative costs
tend to be minimised by the fact that the harmonised standards of the Lifts
Directive have been developed to take into account the regulatory compliance
requirements applicable to lifts set out in other relevant directives, notably
the Electromagnetic Compatibility Directive (EMC). This means that if a
manufacturer follows the standard and carries out a conformity assessment based
on the standard, they will have met their regulatory obligations across all
relevant pieces of legislation.

Similarly,
products covered by the Machinery Directive (e.g. escalators) and using the
harmonised standards of that Directive will in meeting these requirements have
also complied with the EMC requirements since they are incorporated into the
standard. Two companies referred to the need to take into account the Ecodesign
Directive, with respect to the buildings in which lifts are installed. One of
the companies also referred to the need to comply with the ATEX Directive on
occasions, i.e. in potentially explosive atmospheres.

None
of the firms were able to provide detailed costs for every step in the process.
However, we can make some statements based on the evidence available.

·
Familiarisation
with legislation is undertaken in-house by the large companies using
specialist staff; one company stated that each of its national subsidiaries had
at least one compliance officer and one final inspector, both of which would
possess in-depth knowledge of the legislation and would keep themselves
up-to-date; the same company estimated that the total number of compliance and
inspection officers across the EU to be around 100. The other company referred
to six specialist staff (“Blue collar” operators, i.e. technicians and
associate professionals) in one of its nationally-based distributing companies
(in a medium-size country).

·
Processes
and product design: the large manufacturers tend to
undertake their own tests, using in-house staff and following quality assurance
systems approved under Module H, which serves to minimise cost; in addition,
one large company suggested that changes to the legislation could incur costs
of €550k-€600k if they require changes to the reference numbers for lift
products.

·
Conformity
assessment procedures: The Lifts Directive is the most
burdensome piece of legislation, particularly the requirement for compulsory
third party conformity assessment procedures and the supporting technical
documentation; this is much more detailed than the other Directives. Lift
manufacturers undertake their own extensive testing of their products both in
development and in installation to ensure quality and safety; in most cases,
such checks can readily encompass the requirements of legislation. To a large
extent, the testing required by conformity assessment would therefore tend to
represent a “business as usual” cost rather than an additional cost imposed by
the legislation.

·
The
administrative requirement related to conformity assessment procedures
undertaken in the product development stage are quite high initially, but occur
only once (for each model or version). The larger companies do not incur costs
of notified bodies in the installation of lifts, except in special cases where
those lifts do not follow the harmonised standards; one national subsidiary in
a medium-sized country referred to the need to use a notified body for the
certification of lift units around 3 or 4 times per year at a cost of €500 per
time, i.e. €2k per year – a cost described as “minimal compared to the cost of
installing lifts”. The administrative burden associated with conformity
assessment is quite high as inspections have to be undertaken for each new lift
installed. There is also the cost of buying and maintaining testing equipment;
one subsidiary of a large company reporting that cost to be around €5k per year
depending on the frequency of tests.

·
Declaration
of Conformity and CE marking: in general, this task is not seen as
particularly costly, except that gathering the information required for the DoC
takes time. The possibility to issue a single DoC covering all Directives
significantly reduces the administrative costs of this step.

Compliance costs

As
for administrative costs, most compliance costs relate to the Lifts Directive,
which in any case requires compliance with the EMC Directive. Again, no firm
was able to provide detailed costs for every step in the process. However, we
can make some general statements based on the evidence available.

Where
changes occur in the legislation on a regular basis or at short notice, they
have the potential to impose substantial costs on manufacturers in the design
and development of products and production processes. For example, one
manufacturer suggested that any technical adaptation required by the
legislation would cost around €500k-€1m in terms of new product development;
such costs would relate to ensuring conformity of design, a physical examination
of 8-10 different product platforms to be certified, additional documentation
for the conformity assessment process, costs for sales companies, training for
sales and production staff, updating sales literature.

In
the long run, particularly where changes in the standards or in the legislation
are introduced with sufficient notice, the costs of compliance are inseparable
from the “business-as-usual” costs of designing and developing new products and
production processes. It may be that the legislation or the standards exclude
some options for design or production that would have delivered cost-savings,
but these potential “missed savings” were not specifically mentioned by the
companies interviewed.

Conclusions

It
would appear that the main determinants of the level of compliance costs are
the regularity and notice period of any changes in the legislation or in the
harmonised standards. New or revised models are continually being designed and
developed to reflect technological advances. Provided that changes are not made
too frequently and are signalled well in advance, manufacturers appear able to
design and develop compliant products without incurring additional compliance
costs; to a certain extent, compliance is “designed in”. Changes brought in at
short notice can impose very significant costs, as units already in production
have to be revised; this can prove particularly problematic where contracts
have already been agreed with customers. Frequent changes in the legislation
or, particularly, in the harmonised standards also impose a significant
compliance cost by requiring extensive information and retraining of staff to
ensure that “front-line” staff, e.g. lifts installers are aware of, and apply
the revised standards.

For
the large companies interviewed, it is clear that the administrative burden
represents a somewhat modest financial cost compared to total costs/turnover,
as evidenced by the number of specialist staff compared to the total workforce.
SMEs may face a difficult choice between incurring the overhead involved in
having specialist staff and not keeping up to date with changes in the
legislation. Moreover, they rarely have the capacity to engage in the various
processes at EU level related to setting standards.

Overall,
it would appear that the various Directives applying to lifts are consistent
and streamlined, i.e. compliance with harmonised standards of the Lifts
Directive implies compliance with the other Directives. This consistency limits
the costs of compliance and, particularly, the administrative burden associated
with the legislation. It may therefore be safe to conclude that any negative
cumulative impacts of the legislation are modest. Moreover, it is reasonable to
assume that most, if not all, Member States would introduce legislation
covering lifts in the absence of the Lifts Directive, given the risks to safety
inherent to this product. The EU legislation may therefore have reduced
compliance costs and the administrative burden by enabling the application of
harmonised standards and a consistent compliance process across all 27 Member
States. However, EU legislation does not apply to services, maintenance and
renovation. Any risks to safety must therefore be covered by national
legislation, which will inevitably vary from country to country. It may be
worthwhile for the Commission to explore the possibility of bringing service,
maintenance and renovation of lifts within the scope of EU legislation or to
find ways to encourage a gradual, voluntary convergence in the requirements of
national legislation.

5.
Assessment of costs of IM legislation for
the whole sector

On
the basis of the information provided, we have attempted to estimate the costs
of compliance for the installation of lift units, including
electrically-operated (NACE 28221630) and other (NACE 28221650). In offering
such estimates, we have taken into account certain characteristics of the
sector and of firms therein.

First,
companies involved in the manufacture and installation of new lifts typically
also undertake modernisation, repair and maintenance, which are not subject to
EU legislation. For that reason, we have estimated costs of compliance as a
proportion of production value rather than of the total revenues of such
companies. Total revenues for manufacture and installation are based on
multiplying median prices (sourced from PRODCOM) against the total number of
units sold by each company.

Second,
the estimates in the table below do not include data from manufacturers of
components.  Of course, the manufacturers of components must comply with the
relevant legislation and this imposes a certain cost. However, those compliance
costs differ in nature from the costs incurred by manufacturers and installers
of lift units and are therefore excluded from the table.[68] For example,
conformity assessment of new components is a one-off event, whereas each new
lift unit must be assessed at the installation stage. Information from the
interviews of such companies has instead informed the qualitative text above.

Third,
the companies interviewed were generally unable to separate substantive
compliance costs (in product design, manufacture and installation) from
business-as-usual costs. All interviewees agreed that changes in the
legislation or in the standards introduced at short notice tended to impose
very significant substantive compliance costs. In particular, any units already
in production or already manufactured but not yet installed required technical
adaptations in order to be compliant with the legislation, which proved costly.
However, the level of any short-term adaptation costs would depend entirely on
the precise nature of the change. Moreover, manufacturers are continually
innovating in search of higher quality and lower costs (not least in response
to demand) and average production costs tend to be falling (e.g. due to
increasing economies of scale). In this dynamic situation, the companies
interviewed tended to report that, given time to adjust, they could “design in”
the requirements of the legislation without necessarily incurring substantive
compliance costs. None of the companies was able to state how their products
would be different in the absence of legislation. For those reasons, the table
below offers no estimate of substantive compliance costs.

Fourth,
the companies interviewed stressed that they undertake extensive testing during
the installation process for reasons of safety and quality and would do so in
the absence of EU legislation. Although the conformity assessment process
imposes a significant cost in terms of staff time required to check
installations (e.g. under Module H) and compile technical reports, such costs
tend to be inseparable from business-as-usual costs. In that sense, it might be
possible to conclude that the conformity assessment process determines the
format of testing during the installation without necessarily being more
expensive than the tests that installation companies would undertake in the
absence of EU legislation. SMEs may differ in that respect, as they are more
likely to use Notified Bodies and thus incur a direct financial cost, which can
be significant; of course, many reputable SMEs would submit their products for
third-party testing in the absence of EU legislation, so it is impossible to
determine the additional burden imposed by the legislation.

The
table below suggests that the costs of compliance may be around £26m p.a. for a
production volume of 255,000 units. This represents around 0.89% of total
revenue of €2,960m from manufacture and installation of whole units in the EU.
To this cost must be added the significant but unquantifiable costs just
described. However, the companies interviewed were unanimous in reporting that
the cost of complying with EU legislation was less than under a “benchmark”
scenario in which national legislation differed from country to country.

Table 6: Summary
of main costs of compliance for installation of lift units

|| Unit of measurement || Average cost/unit || Total quantity || Industry wide costs/year || Explanatory notes

Human resources expended on compliance || || || || ||

Familiarisation with legislation || Per annual turnover || 0.26% || €2,959.766m || €7.696m || Staff responsible for participating in EU-level processes, identifying legislative requirements and informing the wider company, e.g. Codes Officers.

Informing and training staff in legislative requirements || || || || || Significant cost but impossible to quantify, typically consisting of small amounts of time spent by a large number of individuals

Product design and testing activities || || || || || Inseparable from business-as-usual costs. Significant in the short-term (i.e. adaptations to changes in the legislation or in the standards). Negligible in the long-run.

Checking compliance in design and production || Per annual turnover || 0.16% || €2,959.766m || €4.736m || Compliance and inspection officers at sites responsible for R&D & production

Conformity assessment (technical file preparation, information manual) || || || || || Inseparable from business-as-usual costs

Declaration of Conformity & CE marking || Per annual turnover || 0.00% || €2,959.766m || €0.000m || Negligible

Total human resources compliance cost || || || || €12.432m || In addition to non-quantified costs of training, product design and testing, etc.

Costs of testing equipment || || || || || Cost of testing for reasons of quality, health & safety are impossible from costs of testing required by the legislation. Production sites typically serve EU and global markets, therefore impossible to separate cost of testing equipment required by EU legislation from testing equipment that would be needed in the absence of legislation.

Costs of third parties || || || || ||

Purchasing standards[69] || Per annual turnover || 0.01% || €2,959.766m || €0.296m || Typical cost = €2k per company per year.

External consultants || Per annual turnover || 0.00% || €2,959.766m || €0.000m || No reported instances of use of external consultants

Notified Bodies (Module H) || Per annual turnover || 0.04% || €2,959.766m || €1.184m || Typical cost is €25-30k for a national subsidiary of a major manufacturer (responsible only for installation).

Notified Bodies (fees for testing specific products) || Per unit || €200-1000 || n/a || n/a || Units deviating from the standards require specific approval but typically form a very small proportion of total installations.

Total annual compliance costs || Per annual turnover || 0.89% || || €26.344m ||

Total net compliance costs  || || || || n/a || Inseparable from business-as-usual costs.

Substantive compliance costs || || || || n/a || Inseparable from business-as-usual costs.

Administrative costs || || || || €26.344m || Excludes substantive compliance costs, which are inseparable from business-as-usual costs

Share in total industry turnover || || || || 0.89% ||

Basic assumptions: || Total units sold: 255,000 units per year (NACE: 28221630 and 28221650) Market size: € 2959.766 million (PRODCOM) Weighted median  price per unit: €16,312 (NACE 28221630 and 28221650)

6. The benefits of internal market legislation

It
is important that the benefits of IM legislation are considered and not only
the costs. It is impossible to establish a counterfactual since it cannot be
known how the industry would have developed in the absence of legislation. They
highlighted the following benefits.

First,
the firms and industry associations interviewed were unanimous in the view that
it was preferable to have a single set of internal market legislation across
the Union rather than different pieces of national legislation. Costs
of components have also been kept down, where suppliers can provide a
certificate from a Notified Body, which prevents the need for the manufacturer
to undertake additional checks, which would be necessary in the absence of EU
legislation.

Second,
the legislation was reported to have helped drive up safety standards across
Europe. There has there been a “levelling up” of what were different national
standards, with EU standards set at a high level. The legislation has also
introduced new requirements that have driven up safety even beyond the level of
the previous best of the national standards; the requirements relating to
emergency telephone systems were mentioned in that regard.

Third,
EU legislation has provided opportunities for export to third countries.
Indeed, many third countries were reported to be basing their legislation on
the Lifts Directive, which helped EU companies exporting into those countries
as well as third countries exporting into the EU; of course, this is
also of particular benefit the largest companies, who operate globally, with
R&D, production and installation distributed across companies in different
countries worldwide.

Fourth,
the replacement of national legislation with EU legislation had enabled
economies of scale to be captured by producers, leading to consolidation of the
market. The
New Approach Directives have tended to support the competitiveness of EU
industry.

7.
Analysis of simplification options

The
interviewees identified limited scope for regulatory or administrative simplification.
A common view was that the legal framework worked well and that it would not be
appropriate to make frequent changes to the EU regulatory framework since
manufacturers benefit from a stable legal framework. However, it was recognised
that there would be some benefits and minor administrative cost savings from
certain changes being made to the legislation. For instance, a number of
potential benefits can be noted in relation to the proposed recast Lifts
Directive – the first three changes suggested in the table below. Some
practical tools may also help reduce costs for industry, such as making
abstract versions of standards freely available and creating national databases
of lifts.

Table 7: Summary
of proposed simplifications/changes and expected benefits

Change in regulatory and administrative requirements || Potential impacts/ benefits || Estimated saving potential

Common definitions || Better understanding of product scope and delimitation between different types of lifts || Unquantifiable

Common text on the responsibilities of economic operators || Clearer definition of responsibilities of economic operators will strengthen the legislation’s coherence.  Benefits for economic operators marginal, but potential safety and health benefits || Unquantifiable

Retain current numbering of the Annexes to the Lifts Directive || Reduced cost of updating documentation || Unquantifiable

Free provision of abstract versions of standards || Reduced unnecessary expenditure on standards || Indicative saving of €60-€350  per standard unnecessarily purchased

8.
Overall conclusions - lifts

Lifts
for persons are a harmonised product group for which there is one overarching
piece of legislation. The Lifts Directive 95/16/EC (LD) incorporates different
elements of product safety (including electrical safety) that for other product
groups would be covered separately by the LVD. Other Directives, such as the
EMC Directive also apply. IM legislation affecting the lifts sector was found
to be coherent with no specific gaps overlaps, inconsistencies or duplication
identified. The Machinery Directive 2006/42/EC (MD) applies to certain types of
lifts, but the delimitation between the two Directives is clearly specified in
the 2006 recast of the MD. This ensures mutual exclusivity between Directives
and clarity for economic operators.

The
“big
four” lift manufacturers account for some 60% of the EU market, estimated
at €15 billion in in 2009 (EFESME). NACE data shows that there are
over 9,500 enterprises in the lifts sector, the majority of which are SMEs. A
particular characteristic of the lifts sector is that the manufacturing of
lifts only
accounts for one third of total market size, while the remainder is made up of
after-sales services (maintenance 41%, repair 7%, and modernisation 18%).
Whereas manufacturing activities and initial installation are regulated through
IM legislation, once installed, lifts fall under national in-service inspection
regimes. The costs of lifts maintenance and the costs linked to periodic
servicing once in use are a significant cost, but are note linked to European
legislation.

The
Lifts Directive accounts for the majority of administrative costs, although
such costs are minimised by the fact that the relevant harmonised standards
take into account the compliance requirements of other relevant directives,
notably the Electromagnetic Compatibility Directive (EMC). This means that if a
manufacturer follows the standard and carries out a conformity assessment based
on the standard, they will have met their regulatory obligations across all
relevant pieces of legislation. Familiarisation with legislation is undertaken
in-house by the large companies using specialist staff. When developing
products, the large manufacturers tend to undertake their own tests, using
in-house staff and following quality assurance systems approved under Module H,
which serves to minimise cost. The requirement for compulsory third party
conformity assessment procedures and the supporting technical documentation
tends to be the most burdensome requirement of the legislation. However, the
firms emphasised that much of the required testing would be undertaken in the
absence of legislation, for reasons of product safety and quality. The
administrative requirement related to conformity assessment procedures
undertaken in the product development stage are quite high initially, but occur
only once. In contrast, the administrative requirement related to conformity
assessment procedures in the installation process are higher, as as
inspections have to be undertaken for each new lift installed. The task of
producing the Declaration of Conformity and CE marking is not particularly
costly.

Based
on the research, the costs of compliance may are estimated at €26m p.a. for a
production volume of 255,000 units across the EU. This represents around 0.89%
of total revenue of €2,960m from manufacture and installation of whole units in
the EU. However, the companies interviewed were unanimous in reporting that the
cost of complying with EU legislation was less than under a “benchmark”
scenario in which national legislation differed from country to country.
Clearly, these costs are more onerous for SMEs than for large companies that
can spread
compliance costs among a large number of units.

There
is limited scope for simplification of the legislation and
manufacturers currently benefit from a stable legal framework. Some minor
administrative savings could be realised in the recasting of the LD, namely
providing common definitions of different types of lifts, providing common text
on the responsibilities of economic operators and retaining the current
numbering of the Annexes to the LD. Some practical tools may also help reduce
costs for industry, such as making abstract versions of standards freely
available which would save companies around €60-€350 per abstract purchased
unnecessarily (out of a total cost of around €2,000 spent each year by a
typical company).

9.
Sources of information

References

Eurostat Structural Business
Statistics Database and Prodcom
Text of applicable IM legislation
and relevant standards
Guidance documents of Lifts
Directive and Machinery Directive
Dispan, J. (2007), Industry report
- Lifts and escalators – an industry in flux, IMU Institute Stuttgart
Elevators and Escalators - A Global
Strategic Business Report 10/12

Interviews:

3 EU industry associations:
European SMEs in the lift industry (EFESME), European Lifts Association
(ELA), European Lifts Components Association (ELCA)
1 national lift association
8 manufacturers of lifts
2 manufacturers of lift components

s

Case
study 5 – Gardening equipment

1. Introduction –
objectives of the study

The case study
examines gardening equipment with focus on three specific categories, chain
saws, lawn mowers and brush cutters. Gardening equipment can be electric,
battery powered or petrol based and they are used both by consumers and
professionals.

The aim is to
analyse the applicable IM legislation, assess the costs associated with the
implementation of the applicable IM legislation, identify areas of overlaps and
conflicts between the different parts of the legislation that may lead to
problems and costs to industry and identify and assess the benefits of possible
simplifications. The rationale for the selection of these product groups was
that:

●
Lawn mowers are covered
by a rather large number of IM Directives and Regulations, 8-10 depending on
the type of product;

●
The sector is dominated
by a few large manufacturers; and

●
The conclusions drawn
from an assessment of these specific products could be used to assess with some
level of confidence the administrative and compliance costs to the broader
category of domestic appliances since most of the products within this group
are usually covered by the same pieces of legislation.

The case study is
based on desk research and interviews with the EU industry association
representing manufacturers of gardening equipment (EGMF) and five in depth
interviews with manufacturers of gardening equipment operating in Europe, two
large manufacturers, two medium and one small.

2. Product definition and
description of structure of the sector

The focus of case
study has been three types of gardening equipment, chain saws, lawn mowers and
brush cutters. These categories represent the main sales volume of the broader
garden machinery equipment group of products that also includes various types
of trimmers, vacuums and blowers, leaf blowers, leaf collectors, motor hoes
(<3 kW), scarifiers, shredders/chippers and pruners. Gardening equipment are
used both by consumers and professionals although there are often differences
in terms of engine power and features and some products that are typically used
by professionals (e.g. garden tractors). The following paragraphs provide a
more formal definition of the three products under examination on the basis of
the relevant EN standards:

Lawn
mowers[70]

According to EN
standard EN836 a lawnmower is “a walk-behind or ride-on grass cutting machine
or a machine with grass-cutting attachment(s) where the cutting device operates
in a plane approximately parallel to the ground and which uses the ground to
determine the height of cut by means of wheels, air cushion or skids, etc., and
which utilises an engine or an electric motor for a power source. The cutting
devices are either rigid cutting elements or non-metallic filament line(s) or
freely pivoting non-metallic cutter(s)”. A lawnmower may be a walk-behind or
ride-on grass cutting machine or a machine with grass-cutting attachment(s)
where the cutting device is rotating about a horizontal axis to provide a
shearing action with a stationary cutter bar or knife (cylinder mower).

Chain
saws

A chainsaw (or chain
saw) is a portable mechanical saw, having teeth that are linked to form an
endless chain, rotated about two pivot points by a power mechanism that can be
an electric motor, a gasoline engine, compressed air, hydraulic power.

Brush
cutters[71]

A brush cutter is a
combustion-engine driven portable hand-held unit fitted with a rotating blade
made of metal or plastic intended to cut weeds, brush, small trees and similar
vegetation. The cutting device operates in a plane approximately parallel to
the ground.

Market
size and industry structure

Data available from
Eurostat PRODCOM database already provide relatively detailed data on the level
of production and trade of chain saws, lawnmowers and cutters. The following
PRODCOM codes fit rather well with the specific product groups under
examination:

● 28241180 - Electro-mechanical hedge
trimmers and lawn edge cutters

● 28304010 - Electric mowers for lawns,
parks, golf courses or sports grounds

● 28304030 - Mowers for lawns, parks or
sports grounds, powered non-electrically, with the cutting device rotating in a
horizontal plane

● 28304050 - Motor mowers for lawns, parks or
sports grounds, powered non-electrically, with the cutting device rotating in a
vertical plane or with cutter bars

● 28304070 - Non-motorized mowers for lawns,
parks, golf courses or sports grounds (such as push cylinder mowers) (excluding
with the cutting device rotating in a horizontal plane)

● 28241123 - Electro-mechanical chainsaws

● 28241260 - Chainsaws with a self-contained
non-electric motor

The data analysis
suggests a total market size (production+ imports – exports) of around €2.5
billion for those categories with a total volume of 23 million chain saws, lawn
mowers, trimmers and cutters sold. Imports are, according to PRODCOM, close to
60% of to total consumptions. Our interviews with manufacturers suggest that
this is a reflection of the important role of non-EU producers (US firms are
particularly strong in certain segment) but also the fact that many EU
producers have transferred part of their production capacity outside Europe but
with most of the production re-imported to the EU. Along with the US market
(50% of the global sales), the European market remains the most important
market for gardening equipment (35%).

Table 1 – PRODCOM data for Lawn mowers, trimmers,
cutters  and chain saws (2010)

Product code || Export quantity (000s) || Export value (millions) || Import quantity (000s) || Import value (million €s) || Production quantity (000s) || Production Value (million €s) || Total quantity (000s) || Total Value (million €s)

28241180 || 650 || 23 || 5,881 || 122 || 1,510 || 63 || 6,741 || 162

28304010 || 340 || 28 || 1,461 || 64 || 2,826 || 169 || 3,947 || 205

28304030 || 264 || 62 || 1,774 || 389 || 3,375 || 862 || 4,885 || 1189

28304050 || 7 || 11 || 194 || 88 || 21 || 36 || 208 || 113

28304070 || 49 || 4 || 187 || 6 || 150 || 23 || 288 || 25

28241123 || 180 || 16 || 1,317 || 49 || 517 || 51 || 1,654 || 84

28241260 || 99 || 13 || 2,817 || 192 || 2,341 || 564 || 5,059 || 743

Total || 1,589 || 157 || 13,631 || 910 || 10,740 || 1,768 || 22,782 || 2,521

Source: Eurostat

Data from the
European garden machinery federation (EGMF) deviate slightly from PRODCOM suggesting
a EU market size of around 15.1 million gardening equipment products of which
around 6 million are lawnmowers and 3 million are brush-cutters. There are also
3 million hedge-trimmers and 4.5 million chainsaws sold on an annual basis[72]. According to another study[73], around 4.5 million lawnmowers are sold
annually in the EU with chain saws, hedge trimmers and lawn trimmers also being
at a 7-digit level.

According to an earlier
study[74] around 90% of sold lawnmowers on the
European market are of the walk-behind type with cutting blade widths up to 50
cm, while the sales of ride-on is around 300,000 units.

Data from the UK[75] indicate that the consumer market
represents around 60% of the total gardening products market with the remaining
directed to professional users. Another study[76] raised the consumer segment in the whole of the EU to
75%. Lawn mowers represent around 40% of the consumer gardening equipment
market in the UK (based on retail sales) with another 35% going to various
types of power tools such as chain saws, cutters and trimmers.

Professional
equipment has a relatively short lifespan of 2 years with an average usage of
150 hours per year. Consumer equipment has a lower usage rate of around 5 hours
per year with a typical lifespan of several years[77].

Table 2 – Data on market size and industry structure

Parameter || Data

EU Market size (2012) || EGMF: 10 million units for the whole Europe (39 countries) PRODCOM : 22.7 million units, € 2.5 billion

Production in EU27 || PRODCOM : 10.7 million units, € 1.8 billion

Imports  || PRODCOM : 13.6 million units, € 0.9 billion

Exports || PRODCOM : 1.6 million units, € 0.16 billion

Number of enterprises (2010) || 20 large firms

Number of employees (2012) || 30,000 employees (EGMF) 120,000 in dealers

Source: Eurostat

Industry
structure

Eurostat data are
not particularly useful when it comes to analysing the structure of the
industry. There are two relevant NACE codes (28.24 - Manufacture of power-driven
hand tools; 28.30 - Manufacture of agricultural and forestry machinery) which
are much broader in scope and do not allow for meaningful conclusions.

The information
provided by EGMF suggests that the consumers market is dominated by 20 large size
companies that occupy around 30,000 employees. This has been the result of a
significant consolidation phase in the last twenty years which has led to few
large players bringing together small and medium size manufacturers while
retaining the brand names and the production units across Europe. Brand
awareness is relatively high among consumers, and technological barriers also
make it difficult for new competitors to enter the market. The tendency is explained by the high fixed
costs faced by individual product lines. According to one estimates that
development costs correspond to 5% of its turnover[78]. The 13 members of EGMF- including both large
multinationals and smaller size firms - cover almost 75% of the European
market. The main players in the market – although this may differ in the
different sub-sectors – are Husqvarna (SE), Stihl (DE), Bosch (DE), Global
Garden Products (IT), MTD (US), Toro (US), John Deere (S), Stanley Black and
Decker (US), Echo (DE), TTI (HK) and Makita. [79]

In the professionals
market there are a few SMEs producing a wide variety of models and there are
147 brands and 1500 models for lawnmowers. Still, around 80% of the European
market for professional handheld internal combustion engine powered equipment
is covered by 4 European companies. SMEs are niche players, with specialised
knowledge of specific client needs.

3. Analysis of applicable
IM legislation and standards

Chain saws, lawn
mowers and brush cutters (gardening equipment) are covered by a large number of
IM Directives and Regulations covering a range of aspects:

● Health and safety: The Machinery Directive (2006/42/EC) is
the main applicable legislation for all products. In the case of
electricity/battery powered products requirements of the Low Voltage also apply
but not the procedures and information obligations that are covered by the
Machinery Directive. In the case of lawn mowers, brush cutters
self-certification (Module A) can be used for conformity assessment. In the
case of chain saws which are included in Annex IV,  third party certification
from a notified body is required.

● The General Product Safety Directive
(2001/95/EC) is also applicable but does not introduce
additional requirements to refrigerators since these are covered by the other
more specific pieces of legislation. It does introduce however other
obligations, mainly of administrative nature;

● Electromagnetic compatibility: The EMC Directive (2004/108/EC) applies
to all powered gardening equipment.

● Noise: The Outdoor Noise Directive (2000/14/EC) is particularly
relevant to gardening equipment and introduces requirements concerning the
sound power level which needs to be measured under specific conditions. It also
requires that manufacturers submit a copy of the Declaration of Conformity
(DoC) to the Member State authorities and the Commission.

● Pollutant Emissions: Gardening equipment have been covered by
the Directive 2002/88/EC on Gaseous Emissions of non road mobile machinery
(NRMM) since 2004. It covers spark ignited (SI) engines (petrol engines) up to
18 kW for engines installed in and held and non-handheld equipment such as lawn
and garden machines. Certain small SI engine applications (including some
trimmers) were exempted from the Stage II emission limits but these exemptions
expired at the end of the first quarter of 2011. However, it should be noted
that many manufacturers of gardening equipment purchase the engines from
dedicated suppliers which have the responsibility to ensure compliance with the
NRMM.

● Chemicals: Both RoHS Directives and REACH Regulation certain
obligations to manufacturers of gardening equipment in terms of the chemicals
included in the equipment. As downstream users, under REACH gardening equipment
manufacturers need to ensure that the products do not contain substances of very
high concern and, if they do, they need to pass information to their customers.

In addition, for
certain type of gardening equipment products there are additional pieces of IM
legislation applicable:

● for battery based products the Directive
2006/66/EC on batteries and accumulators and waste batteries and accumulators

● for products with remote control features
using wireless technology, the RTTE Directive is also applicable

The following table
analyses the main requirements arising for economic operators as a result of
the different pieces of IM legislation and indicates the relevant harmonised
and other standards applicable.

Table 3 – Summary of IM legislation covering
refrigerators and freezers and the relevant standards

Name of legislation || Issue addressed || Requirements for economic operators || Relevant standards[80]

Machinery (2006/42/EC) || Safety || Requirements concerning safety and health of lawn mowers   Information warnings and pictograms Conformity assessment on the basis of self-certification (module A) – Except for chain saws Develop technical file to be available upon request of authorities Declaration of conformity Marking of product (CE marking, name of manufacturer, type, series, year of construction) || EN 836 [81] EN ISO 5395-1/2/3 [82] EN 11681-2[83] EN ISO 11806 EN 60335-2-91/ EN 60335–2-77/EN 60335-2-107/EN 60745-2-13

LVD  2006/95/EC || Health & Safety  || Testing according to relevant standards  or alternative solutions (other requirements under Machinery) || EN 60335-1

General product safety Directive || Health & Safety || Provide identification of the product by a product reference Carry out sample testing of products, keep a register of complaints and keeping distributors informed of such monitoring (voluntary) Inform authorities of dangerous products and actions taken to prevent risk Co-operate with the authorities upon request ||

EMC  (2004/108/EC) || Electromagnetic compatibility (for electric powered equipment) || Testing according to standards Development of technical file Declaration of conformity and CE marking || EN 61000-6-1 EN 61000-6-2 EN 61000-6-3 EN ISO14982

NRMM Emissions (97/68/EC and amendments) || Emissions of ride-on combustion engine powered lawn mowers || Application for type approval of engine or engine type Information dossier Testing of engines Approval by technical service Affix label with EC type approval marking with ID number and information on engine type and trade mark ||

Outdoor noise Directive (2000/14/EC) || Noise || Meet sound level requirements (Stage II levels for most gardening equipment) Conformity assessment (Modules   A and control by notified bodies, G,H) Declaration of conformity Place CE marking and marking of the guaranteed sound power level Send copy of DoC with information on measured and guaranteed sound to national authorities and the Commission (complete information in database) || EN ISO 3744: 1995 [84] ISO 10884:1995/ISO 9207:1995/ISO 11094:1991[85] EN ISO 22868[86]   EN ISO 11094[87] EN ISO 4871[88]

REACH || Use of chemicals || Collect statement from suppliers stating that products are in compliance with requirements concerning chemical content of components Test the content of articles of products for substance of very high concern (not mandatory) Issue REACH compliance statement ||

RoHS || Use of hazardous chemicals || Collect compliance statement from suppliers (material declarations) Develop technical file with supplier declarations and own analysis tests Declaration of conformity to be kept for 10 years ||

Batteries Directive (2006/66/EC) || Heavy metal content and labelling of batteries || Forbids placing on the market batteries/ accumulators containing mercury or cadmium Design products so that batteries can be removed Information on the type of battery used Contribute to costs for establishment of battery collection schemes at national level (applies in some cases) ||

Packaging and packaging waste || Packaging || Declaration of Conformity || Standard EN 13427

The review of the
various requirements and the discussions with manufacturers pointed to a few
issues in relation to the implementation of the legal framework and the
requirements:

·
large number of
applicable pieces of legislation makes the whole system complex and increases
legal uncertainty. The changes to the different pieces of legislation or the
relevant standard in different periods also means that, quite often, firms need
to introduce changes to product design, procedures, declaration forms or
produced information manual which larger or smaller cost implications;

·
an area of concern
indicated by some firms is the problematic relationship between the Machinery
and the outdoor noise Directive. A key issue indicated is that for the
measurement of sound power level which falls under the Outdoor Noise Directive
there is still reference to the outdated 1995 version of the ISO/EN 3744
standard while, for those products not covered by the outdoor noise, but
covered by the Machinery Directive the most recent 2010 version is used.  More
generally, in the recent consultation[89] 80% of the respondents expressed the wish
to merge the methods of measuring noise emissions required under both
directives into a single Harmonised Standard;

·
duplication in parts of
the certification process – mainly the fees to the third parties - in the case
where manufacturers sell to other firms products similar to those they sell
under their own brands with only minor- cosmetic – differences (e.g. different
color).  For these products, which are identical with those that have already
undergone conformity assessment but have a different name (model number),
manufacturers are required to pay additional fees;

·
firms indicate that,
while there have been clear benefits from the harmonisation of the applicable
legislation, there are significant problems with market surveillance which, in
their view, means that much cheaper, lower quality and arguably non-compliant
products circulate in the market;

·
the review of the
requirements of the Declaration of Conformity indicate minor differences in
terms of the terminology used or the type of information to be provided. However,
the discussion with industry did not suggest important conflicts or problems.
Still, the alignment process across all Directives is considered rather
welcome.

4.
Analysis of costs of compliance with IM legislation

The information
presented in this section is based on the in-depth interviews with 5
manufactures of gardening equipment. The firms range in terms of size and
production volume. They also have different approaches in terms of the level of
testing and other R&D activities they perform that are not a direct result
of the legislation which is a reflection of their size and position in the
market.

Table 4 - Basic information on the firms interviewed

Firm || Specific product considered || Firm size || Annual sales from product || Main markets

A || Brush cutters || Large (>1000 employees) || 1 million units || 50% of sales in the EU

B || Lawn mowers || Large (>1000 employees) || 1 million units || 90% of sales in the EU

C || Lawn mowers || Medium (250-500 employees) || 200,000 units || 90% of sales in the EU

D || Lawn mowers || Small (<250 employees) || 15,000 units || 100% of sales in the EU

E || Chain saws || Medium size (250-500) || 100,000 units || 50% in the EU

On the basis of the
discussion with firms the process followed by manufacturers of gardening
equipment to ensure compliance with the IM legislation includes:

● familiarisation with the applicable IM
legislation and the respective requirements, identification and purchase of
relevant standards and in some cases other preparatory actions in training of
staff.

● introduction of changes to the product
design and the production process to ensure compliance

● conformity assessment procedures including
the relevant testing and the development of the technical file, the use of
notified bodies for certification if/when required, preparation of declaration
of conformity (DoC), CE marking and placing in the market

● other activities in response to requests of
the market surveillance activities

Preparatory
actions: Familiarisation with relevant legislation and purchase of standards

Familiarisation with
IM legislation and the respective requirements represents a first task for all
firms. Almost all firms indicated that this is not a particularly demanding
part of the process and it usually corresponds to no more than 0.1-0.2 FTE of a
member of the legal compliance team.  However, most firms also indicated that
the R&D or homologation departments try to monitor developments in the
legislation and one of them even performs a scenario analysis aiming to prepare
for alternative scenarios.

All firms
interviewed indicated that they maintain a database of the relevant pieces of
legislation which is continuously updated and also includes information in
relation to the relevant/applicable standards. Maintenance and update of the
database usually occupies an employee of the firms compliance/homologation
department on a part-time basis. The sophistication of the database tends to be
greater for larger size firms.

In relation to use
of standards all firms consider them crucial in the conformity assessment
process. The information provided suggest that firms typically spend
€500-€2,000 on an annual basis for the purchase and update of standards and the
reading licences for their various departments for a single product line (e.g.
lawn mowers), for which 15-20 different standards are applicable.

Compliance
with the applicable IM legislation.

Ensuring compliance
with the applicable IM legislation often requires changes to existing product
design or new product development. Furthermore, the introduction of new
products requires product design work and testing to ensure that the new
products are in compliance with requirements. While in most cases new product
development is driven by market demand there are also cases where product
development and R&D activity are primarily driven by legal requirements. More
specifically, most firms indicated that the Non-Road Mobile Machinery (NRMM)
and the Outdoor Noise Directives have led to significant level of investment.
In the case of the NRMM, some firms purchase the combustion engines from
suppliers and do not perform own research.

Large size Firm A
indicated that around 3% of its annual R&D budget of €50-60 million
invested to the development of a new product is directly related to ensuring
compliance with internal market legislation (circa €4 million). On top of that
they have made one of investments of around €10 million in tooling/equipment
during the last five years. Small size firm D indicated annual costs for
product design of €200-300k while medium size Firm C around €2 million. The
amounts invested on product design vary depending on the firms’ size but, on
the basis of the data provided, the total investment on an annual basis is around
€500,000 for every 100,000 units of production.

Testing of products
is an important part of these costs. It includes tests directly related to the
IM legislation but also product performance and durability. For the large scale
producers, these tests take place primarily in-house on an ongoing basis while
for smaller firms these are often outsourced. Firm B suggested that around 15%
of the budget and time of the 30 researchers and engineers working full time in
the R&D department with around 30 FTE allocated to tests required by IM
legislation for product homologation. The other firms indicated costs in the
range of €200-700k.

Certain directives
(NRMM, Outdoor noise) require specific testing facilities. Large size
manufacturers may purchase for their internal controls while in other cases
these may be outsourced to specialised labs. Estimates for the one-off costs
for the purchase of testing equipment from large Firm A are around €30 million
covering all products in the product line and all applicable Directives. €5
million were spent for chemical analysis equipment for REACH testing and €5
million for a sound chamber for outdoor noise tests. However, it should be
noted that REACH related testing is not mandatory and it reflects the specific
policy of this company that is not replicated among the smaller size
manufacturers. Most other firms indicated smaller size investments in the range
of 100-1,000,000 which were also confirmed from another data source (€0.6
million for noise measuring room).

The discussion with
firms suggest that, on average, around 50% of the testing activities are
directly related to IM legislation while the remaining is part of the quality
and durability testing of products. The outdoor noise and the NRMM are for most
firms the pieces of IM legislation that introduce most costs.

Conformity
assessment procedures

The information
provided from manufacturers is that the whole process of conformity assessment
of a new product tends to last around 9 months in total. This includes the
preparation of the technical file, the inspection of the notified bodies and
certification, preparation of the DoC and the required information manual and
the placing of the CE marking.

The estimated time
for the preparation of technical file for a single product ranges from 40-100
hrs[90] with around half of the time required
whenever there are significant changes to legislation.

In terms of the use
of notified bodies, which is mandatory in the case of the Outdoor Noise
Directive, all firms indicated that they are used even when a third party is
not mandatory. The data provided suggest that the annual budget of firms for
services of Notified Bodies is in the range of €30-80k, around €4,000 for a
single product.

The costs for
notified bodies increase for firms that produce multiple variants of the same model
with the same technical characteristics. Customs authorities often do not allow
the placing of products on the market if the model is not the same as that
indicated in the label attached. As suggested, the current label does not allow
for the provision of information that will allow to identify both the basic
model and its variant. There is additional administrative work created for
every new variant of the same basic model (i.e. same product with only
differences in colours and brand name). This also means costs for new labels,
changes to relevant references in the instruction manual and fees (around
€700/product and additional time of around 4 weeks) to notified bodies every
time they need to certify that the initial technical file is also appropriate
for the new model.

The interaction of
the CE marking with other labelling appears also somehow problematic for some
of the firms and introduces costs that, in principle they need not incur. More
specifically Firm B indicated that while the firm did not consider it necessary
to apply for the German GS mark, it was in practice obliged in order to be able
to sale in the German market as many retailers do not accept products without
the GS mark. The cost for the GS mark certification of each model is around €1,200
and this needs to be renewed every 5 years for a bill of around €700. There is
also a €800 annual fee charged by GS. In total, the annual bill for Firm B to
get the GS mark certificate for all its lawn mower products placed in the
German market is around €32,000.

Provisions of
relevant information in the instruction manuals are also included in all
Directives. There were no specific data provided for the time to develop the information
manual. For most firms these are seen as part of the overall time for the
conformity assessment process. Translation costs are also relevant here with
average costs of around €3,000 for each different model.

In the case of
products covered by the Outdoor Noise Directive additional information
provision obligations arise since firms are required to submit information
included in the DoC to the national and European authorities. One firm
estimated that it can take up to 80 hours for the 20 different brush cutter
models in its production line.

Certain information
collection obligations arise from REACH Regulation. The main work is the
collection of information from suppliers to ensure that no SVHCs are included.
In the case of Firm A, around one FTE is allocated to the collection of this
information from suppliers. One of the firms also conducts its own testing of
the chemical content of certain components with annual costs for all products
are around €500k. However, this is rather the exception. Most other firms are
limited to the collection of declaration of conformity from their suppliers
which is the responsibility of the purchases department.

Finally, under the
NRMM there is the obligation to submit data to the national and European
Database. While there are some problems with the process – sometimes difficult
to update and problematic when introducing a new model with lower noise
emissions – firms could not provide specific data on the specific time
allocated and suggested that it is part of the work of the
compliance/homologation department.

Business
as usual

The discussion with
firms indicates that a rather important part of the activities and the
respective costs would not have taken place in the absence of the legislation.
Firms estimated that, in total, between 10% and 35% of the compliance costs
(substantive and administrative) would have incurred even in the absence of any
legislation

5. Assessment of costs of
IM legislation for the whole sector

On the basis of the
information provided we have attempted to estimate the costs of compliance for
the whole of the gardening equipment sector. The provided figures include the
information concerning the Business as usual scenario (i.e. the fact that
10-35% of the product development costs should be expected to occur
irrespective). Certain assumptions have been made concerning the number of
firms affected since, besides the 20 large firms indicated by EGMF, there are
also a number of smaller size manufacturers particularly in the professional
market segment.

The table below
summarizes the main costs per unit and for the total of the industry. As is
evident costs for product design and testing represent more than 85% the total
costs of compliance.

Table 5 – Summary of main annual costs of compliance
for gardening equipment manufacturing industry

|| Unit of measurement || Average unit cost || Total quantity || Industry wide costs/year

Familiarisation with legislation/support actions || || || ||

-  human resources || per manufacturer || € 11,520 || 100[91] || € 1,152,000

- costs of purchase of standards || per manufacturer and per product line || € 1,250 || 500[92] || € 625,000

Compliance with IM-legislation requirements || || || ||

- Product (re)design and testing || per 100.000 units || € 500,000 || 22.7 million/year || € 113,500,000

Share of product design and testing costs that would apply even in the absence of the legislation || || || || 10-35%

Net product design and testing costs || || || || 73,775,000-€102,150,000

- Testing equipment[93] || per manufacturer || € 100,000 || 10021 || € 10,000,000

Share of product design and testing costs that would apply even in the absence of the legislation || || || || 10-35%%

Net costs for testing equipment || || || || €1,000,000- €3,500,000

Conformity Assessment || || || ||

- Preparation of technical file || per single model || € 2,100 || 375[94] || € 787,500

- Costs of notified bodies || per single product || € 4,000 || 37523 || € 1,500,000

- requirement for new labelling || per single model (once in four years) || € 700 || 37523 || € 262,500

- translation costs || per single model (once in four years) || € 3,000 || 37523 || € 1,125,000

Other || || || ||

- Submission of information for outdoor noise Directive || per manufacturer || € 2,400 || 10021 || € 240,000

- Collection of REACH information || per manufacturer || € 25,000 || 10021 || € 2,500,000

Total || || || || €85,467,000- 111,342,000

The
estimated costs for the sector are in the range of €85-112 million/year which
represent 3-5% of the total annual turnover of 2.5billion of the sector. This
is a rather high share but the administrative costs – namely excluding product
design and testing - are no more than 10%-15% of the total costs and less than
0.3% of the annual turnover of the sector.

6. Benefits of Internal
Market legislation

The
discussions with industry representatives and individual firms provided quite strong
support of the success of the IM legislation towards achieving its prime
objective, the creation of the internal market for goods and the avoidance of
the costs arising from having to comply with different pieces of legislation
covering the same aspects in different ways and with different procedures. According
to one firm the harmonisation of EU legislation has possibly saved up to 80% of
administrative costs for a firm selling across the EU. In the past there firms
employed personnel travelling around Europe on an ongoing basis to ensure that
products meet requirements and also had to send specimen of each new products
to be tested in each of the EU Member States.  These were important costs that
the harmonised EU legislation has significantly reduced.  As indicated by two of
the firms interviewed, mainly as a result of these costs in the past firms
would not enter markets where they expected only very few sales. From their
point of view, the IM legislation has significantly reduced the threshold for
exporting in other EU countries.

In
terms of access to global markets, the views of the industry representatives
was that there is still quite some work to be done towards the alignment of
international requirements.  Lastly, as regards the role to new product
development and innovation the general view is that the requirements introduced
are technologically neutral and do not pose specific barriers.

7. Analysis of simplification options

The discussions with
industry pointed to a few areas where changes to the internal market
legislation could lead to sizeable savings and in some cases it was possible to
make an estimate of possible cost savings. The simplifications examined are
analysed below.

Merging
Machinery and Outdoor noise Directives

This is a proposal
that has come from various sources and there is currently a dedicated study
examining this proposal in detail. In general the industry appears positive
towards such a development on certain conditions. The EGMF representative
suggested that a merger with the Machinery Directive can bring important benefits
only if there is no actual change to the Machinery Directive and the relevant
outdoor noise requirements are only added as an appendix to the Machinery
Directive. This will also mean that Module A (self-certification) will be
available for ensuring conformity with the outdoor noise requirements, that the
relevant and updated harmonised standards related to the Machinery Directive
will be used.

It
is also expected to bring savings in relation to paperwork for DoC, reduce – if
not eliminate - the cost of notified bodies, streamline the market surveillance
procedures and also ensure that testing of products take place on the basis of
the more up-to-date harmonised standards in the Machinery Directive and
outdated limits and test codes included in the text of the Outdoor Noise
Directive are avoided. Three of the five firms interviewed indicated that they
expect savings from fewer tests for sound testing (up to 20% of the total of
the noise tests required for the Machinery and the Outdoor noise Directives
according to large Firm A) needed and the human resources for the preparation
and update of the documentation involved. Furthermore, on the basis of the data
provided, a small reduction of testing costs (5%) could lead to sizeable
savings of €3.5- €5 million annually, around 4% of the estimated total
compliance costs for the sector. To that one could add the savings from a
reduction of human resources allocated to preparation of technical files and
Declarations of Conformity and the costs of notified bodies. Nonetheless, given
the small share of administrative costs in the total compliance costs
(10-15%any simplifications will not have a sizeable impact on the costs for the
sector. Even a sizeable 20-30% reduction of administrative costs will not bring
more than 2% reduction to the total compliance costs. For the whole gardening
equipment sector this could be an equivalent of €1.6-2.3 million savings on an
annual basis.

It should also be
noted though that an alternative scenario where the requirements and processes
of the Outdoor Noise Directive are adopted (e.g. mandatory third part
certification) is expected to lead to higher costs and not to savings[95].

Single
harmonised standard covering all pieces of legislation

Most firms are in
favour of a single standard covering all applicable legislation. Besides the
savings from the purchase of standards – which represent a very small cost –
industry representatives referred to greater legal certainty and the benefit
for firms – particularly SMEs that lack technical expertise – of working with a
single document. The potential cost savings are mainly related to the costs of
familiarisation with requirements and a possible efficiency savings in the
testing of products and the development of technical files. There were no
estimates of the expected cost savings from the introduction a single standard
provided by the firms interviewed. However, on the basis of the costs estimated
provided above, a 20% efficiency savings in relation to the human resources and
time for familiarisation with legislation, the purchase of standards and
conformity assessment procedures could not lead to a cost reduction of more
than 0.2% of the total turnover of the sector. However, at the firm level a
possible saving of up to €3,000 annually can be significant for small firms.

On the other hand, one
firm also pointed to the significant one-off costs for the industry for the
development of the relevant standard. More important though, there is also the
danger that the standard development process – already often considered slow,
complicated and not accessible to firms with limited resources – will become
more complex and the process for the development of the standard even longer.

Reduce
frequency of changes to standards

Four
of the five firms interviewed and EGMF indicated that a possible reduction in
the frequency of changes to harmonised standards as a possible cost saving
measure. There have been frequent changes to harmonised standards related to
outdoor noise in the last year almost once a year – although on average the
analysis of the frequency of update of the harmonised standards is around 4-5
years.

From
the administrative costs side it can lead to less frequent changes to
Declarations of conformity and replacement of manuals which can possibly lead
to savings of up to €5k/firm. For large firms it also means less human
resources allocated to the standards development process. In addition, less
frequent changes to standards will lead to less frequent need for investment in
testing equipment investments and product design activity to meet new
requirements for existing models. The savings in such case may be significant. In
theory an increase in the period of renewal from 5 to 6 years for all standards
could possibly lead to a reduction of compliance costs linked to testing and
product design of up to 17% although in practice this would probably be smaller
due to the fixed costs involved irrespective of the frequency of changes to
standards and requirements.

However,
although in terms of cost savings such a measure could be justified in the case
of very frequent changes, as a general principle it is probably not
appropriate. Given the central role of standards in the implementation of the
legislation and the integration of new technological development there are
important concerns that less frequent changes will hinder technical progress
and essentially award firms that are not investing in new technologies.

Include
information on Declarations of conformity to identify model variants

As
indicated in the analysis of the costs of compliance firms that produce
products to be sold under their clients brand names often need to produce new
labels, change references in instruction manuals and pay fees to notified
bodies for each variant. It is suggested that a change to the DoC to include
references to variants to basic models that will identify the product even if
sold under a different brand will bring savings to firms of €700-1000/model.
Given that there are no data on the share of the OEM market and the number of
products under this label it is not possible to estimate the possible savings.
The EGMF representative indicated that share of such products is rather high in
the low quality and cheap segment of the market.

Clearly,
for firms selling only products with their own brand there will be no savings.
For firms selling as OEMs the annual savings will depend on the number of
different variants sold to different clients. On the basis of the information
provided it could be up to a few thousand Euros annually. The share of such
products in the market is also not clear. Furthermore, it depends as to whether
the OEM transfers these costs to the final dealer or manufacturer that sells
under their own brand and which are the ones ultimately responsible for the
product.

Table 6 - Summary of simplification/improvement
options examined

Change proposed || Expected benefit/problems || Estimated saving potential

Introduce single standard covering all IM legislation || Increase clarity/easier to work (especially for SMEs) Reduce costs for standards Longer/more complicated process for the development of standard || Saving of €500-1,000 annually on purchasing of standards Total efficiency savings for testing and conformity procedures of up to €3,000/firm One-offs costs for industry for development of standards

Merging of Machinery and Outdoor noise Directives || Different definitions and test codes will be abolished Reduction of costs of notified bodies if self-certification under Machinery Directive is adopted Possible efficiencies for testing Efficiencies in relation to the Declarations of Conformity and technical files || Cost savings of up to 4-5% of testing costs (€3.5-5 million/year) But limited overall savings expected (no more than 1.2% of total costs)

Reduce frequency of changes of standards/coordinate changes || Reduce uncertainty Reduced costs for replacement of all manuals Saving on investment for testing equipment and product design expenditure || Up to €5k/firm for administrative costs Up to 17% savings in product design and testing costs from an increase in the period for renewal of standards by one year.

Changes in the in DoC allowing to identify a model and the variants || Reduce costs for conformity assessment for firms operating as OEMs || Up to €1000/model. A few thousand Euros annually for small number of firms.

A
final suggestion made by a couple of manufacturers was the possibility to include
footnotes within the text of the applicable pieces of legislation to explain
and clarify the intentions of the different provisions. This is expected to
improve readability and address any uncertainties that may lead to lost time –
in terms of human resources - during the various stages of the process. The
manufacturers could not provide indications as to what would be the possible
time savings from this. Given the cost estimates provided earlier and the fact
that human resources represent only a small part of these costs, the possible
savings are most probably less than 1% of the total costs. Furthermore, we
should note that is not very different from the guidance documents that have already
been developed for a number of Internal Market Directives.

8. Conclusions

Gardening equipment
covered in this case study includes chain saws, lawn mowers and brush cutters.
These categories represent the main sales volume of the broader garden
machinery equipment group of products which also includes various types of
trimmers, vacuums and blowers, leaf blowers, leaf collectors, motor hoes,
scarifiers, shredders/chippers and pruners.  The total annual market size of
gardening equipment is estimated at around €2.5 billion for those categories
with a total volume of 23 million sold. The consumer segment of the gardening
equipment market is dominated by 20 large size companies while in the case of
professional equipment there is a greater number of SMEs serving niche
segments.

Gardening equipment is covered by more than 10 different pieces
of IM legislation (Directives and Regulations) covering a range of aspects
including health and safety, environmental aspects (noise, pollutants, toxic
from batteries).

For
the whole sector the estimated annual costs are in the range of €85-112 million
which represent a rather significant 3-5% of the total annual turnover of
€2.5billion of the sector. This is driven by the high compliance costs
associated with the environmental IM legislation (outdoor noise, outdoor
emissions) both of which required changes in the design and rather sizeable
costs for testing equipment (one-off) and on-going testing of products, only a
small proportion of which is considered to be “business as usual” for most
firms. Administrative costs – such as costs for documentation, fees to notified
bodies, the preparation and updating of technical files, purchasing standards,
the development of manuals - are no more than 10%-15% of the total costs and no
more than 0.3% of the annual turnover of the sector.

The analysis also
identified a number of possible simplification options with sizeable cost
saving potential. The merging of the Machinery and Outdoor Noise Directives
could bring relatively sizeable cost savings if it were to integrate the
outdoor noise requirements within the Machinery framework and maintaining the
key aspect of self-certification that can bring important savings in terms of
costs for testing and for notified bodies. Since administrative costs are still
no more than 10-15% of the total costs the possible savings will not be more
than 1-2% of the total compliance costs. Other possible simplifications
examined were the possibility of adopting a single standard covering all
applicable pieces of legislation and a reduction of the frequency of updates.
Both can have important costs savings but also introduce the risk in terms of
the effectiveness of the standard development process.

Additional
cost savings may arise - in terms of reduction of fees to notified bodies - by
introducing changes to the DoC to include references to variants to basic
models. This will affect primarily the low end of the market that very often
includes OEM products produced by a manufacturer that are then sold by the
clients brand names. The savings may be up to a few thousand Euros per firm
annually.

Irrespective
of the sizeable costs of compliance, industry is rather supportive in terms of
the role of IM legislation towards developing an internal market for goods and
eliminating the costs arising from having to comply with different pieces of
national legislation. As indicated by some the firms, as a
result of these costs firms often not enter markets where they expected only
very few sales. The legislation is also seen as technology neutral and does not
pose specific barriers. There is however, more work to be done towards the
alignment of international requirements.

9. Sources of information
References
- Sources

1.
http://www.egmf.org/en/economic-information/

2. ‘Lawn
Mover Noise and Vibration Control’ study (Tetteroo & Bockhoff, 2006) cited
in http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/iastudy\_noise\_finrep\_en.pdf

3. NOMEVAL
(TNO, 2007), http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/tno\_nomevalrep12-12-07\_en.pdf

4.  http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/smetest\_noise\_finrep\_en.pdf

5.
Euromonitor international: Home and
Garden market analysis

Interviews

- Industry association :
European Gardening equipment manufacturers associations (EGMF)

- 5 interviews with
manufacturers of lawn mowers, chain saws and brush cutters

Case
study 6 – Fuel Dispensers (Measuring Instruments)

1. Introduction -
objectives of the study

This
case study focuses on fuel dispensers which are classified as instruments and
appliances for measuring, testing and navigation (hereinafter measuring
instruments) and are covered under the Measuring Instruments Directive
2004/22/EC. The manufacturing of fuel dispensers is also regulated by a number
of other pieces of EU legislation, such as ATEX and the Petrol Vapour Recovery
Directives.

The
rationale for the selection of fuel dispensers was that:

·
The
sector, while dominated by four large firms, also includes a large number of
SMEs;

·
The
legislation allows for the use of internationally-agreed normative documents,
as an alternative to the use of harmonised standards;

·
The
MID 2004/22/EC is one of ten Directives that form part of the Alignment
Package; and

·
The
case has the potential to demonstrate the advantages of coherent interaction
and clear demarcations between different pieces of legislation, in order to
ensure legal clarity for economic operators.

The
information presented in this case study was obtained from a variety of sources
including Eurostat data, official EU documents, industry association documents
and interviews with four major firms in the sector.

2. Product definition and
description of structure of the sector

Product definition

Fuel
dispensers are classified under NACE code 28.13 (manufacture of other pumps and
compressors) and correspond solely to the PRODCOM Code 28131105: petrol and oil
dispensing pumps.

Fuel
dispensers are described as machines combining a pump and point-of-sale (POS)
system and pumping fuel into motor vehicles. A Point of Sale
(POS) system is a system for managing the sales of goods. The term refers to
the software and hardware associated with check -out stands, and all of the
bundled features which are included.

A
modern fuel dispenser is typically divided into two main parts: an electronic
part containing an embedded computer to control the action of the pump, drive
the pump's displays, and communicate to a sales system; and secondly, the
mechanical section which in a self-contained unit has an electric motor,
pumping unit, meters, and valves to physically pump and control the fuel flow.

Market size

Fuel
dispensers have an annual life cycle of 12 years and, on this basis, there are
currently around 300,000 fuel dispensers installed across the EU[96].
The size of the European market can be estimated on the basis of a total
production value of around €360 million in 2012 based on a unit price of around
€1,100[97].
According to PRODCOM data on fuel dispensers, around 16% of the production of
Europe is exported outside EU while imports represent no more than 3% of the
market.

PRODCOM
data shows that a total of about 350,000 petrol and oil dispensing pumps were
produced in Europe in 2012. Manufacturing in this sector is strongly
export-oriented and has generated a significant volume of exports, although the
interviews found that a lot of manufacturing that used to take place within the
EU has been moved to lower-cost producer countries outside the EU.

Table 1:
Production and value of petrol and oil dispensing pumps in EU27 in 2012 –
PRODCOM Code 28131105

Export Quantity (Units) || Export Value (€) || Imports Quantity       (Units) || Imports Value (€) || Production Quantity            (Units) || Production Value           (€) || Consumption Value € (Production + Imports - Exports)

347,309 || 148,672,970 || 245,102 || 15,171,090 || 349,038 || 357,890,334 || 224,388,454

Source:
Eurostat

Industry structure

There
are around 20 producers of fuel dispensers for petrol stations[98]. The major
manufacturers include Gilbarco, Tokheim, Petrotec and Dresser Wayne with a
presence across Europe and more than 60% market share[99]. The
remaining manufacturers are present in only a few Member States. It is also
estimated that the main companies in the sector employ around 10,000 employees
without referring to importers or local distributors[100]. Altogether,
the petrol pump sector employs about 14,000 to 16,000 workers[101].

3. Analysis of applicable
IM legislation

As
noted above, the manufacture of fuel dispensers is covered by the Measuring
Instruments Directive 2004/22/EC and by a number of other Directives, such as
ATEX and the Petrol Vapour Recovery Directives. The table below provides a
summary.

Table 2: EU Legislation applicable to fuel
dispensers

Applicable legislation || Issue addressed || Requirements for economic operators

Directive on Measuring Instruments (MID) 2004/22/EC || Legal metrological control || · Conformity assessment: obligation of the installer/manufacturer · Produce a DoC · Keep technical documentation copies of EC type-examination certificates and their additions for 10 years · CE marking and additional metrology marking must be visibly affixed to products

ATEX Directive (94/9/EC) || Risks relating to equipment used in potentially explosive atmospheres || · Conformity assessment – either by the manufacturer or a subcontractor of the manufacturer to a Notified Body · Produce a DoC · Keep technical documentation copies of EC type-examination certificates and their additions for a period of 10 years · CE marking must be visibly affixed to products · Additional markings of certain components for safety purposes

Petrol Vapour Recovery Directive (94/63/EC) || Reduction of emissions || · Conformity assessment with administrative fee charged by the Member State · Marking (pictogram sticker) certifying the equipment includes a petrol vapour recovery system

National Emission Ceiling Directive (2001/81/EC) || Reduction of emissions || · Same as above given that the directive relates to the reduction of emissions of volatile organic compound (VOC), i.e. petrol vapour · Administrative requirements depend on specific national measures

EMC Directive (2004/108/EC) || Electromagnetic compatibility (for electric powered equipment) || · Testing products for Electromagnetic Compatibility interference · Conformity assessment procedure for apparatus mandatory · CE marking on apparatus required in accordance with Annex V.

LVD (2006/95/EC) || Health and safety || · Conformity assessment – either by the manufacturer or a subcontractor of the manufacturer to a Notified Body · Develop a technical file (see Annex IV of LVD) · Produce a DoC · Keep technical documentation copies of EC type-examination certificates and their additions for a period of 10 years · CE marking must be visibly affixed to products · Provide installation instruction manual for installers

The
nature of fuel dispensers is such that they require regulation covering different
perspectives, notably accuracy and reliability in measurement, minimisation of
the risks of explosion and protection of the environment. This inevitably
requires multiple pieces of legislation, creating the risk that the overall
framework is not coherent.

The
interviews with the major companies in the sector suggest that the EU
legislative framework pertaining to fuel dispensers has in fact become more
coherent over the years, albeit with some gaps and inconsistencies remaining.
Whilst EU legislation on measuring instruments dates back to the early 1970s,
MID represented a considerable simplification, since it replaced eleven
previous directives, all covering different products.

The
ATEX Directive was introduced in 1993. Hitherto, manufacturers were required to
satisfy different national legislative requirements in each country in which
they operated, whilst meeting European requirements on MID. Since the
introduction of ATEX, each manufacturer has been able to gain certification
from one Notified Body for its sales across the EU. MID and ATEX side-by-side
have thus served to reduce barriers to the free movement of goods in the
internal market – as evidenced by the process of consolidation in the industry
over the last two decades, as manufacturers exploit economies of scale. Indeed,
the technical parts of fuel dispensers now tend to be the same across different
Member States. Moreover, the credibility of this legislative framework has also
assisted manufacturers in their efforts to export to third countries. MID was
also reported to be consistent and complementary to the more recent RoHS
Directive.

The
consistency of the legislative framework for fuel dispensers is also enhanced
by the use of internationally-agreed normative documents, namely those of the International
Organization of Legal Metrology (OIML). This has tended to make European
products immediately marketable to third countries that apply the OIML
standards. The one downside of this approach is, however, that EU manufacturers
exert less influence on the specification of the standards than they do on EU
standards, such as those of the ATEX Directive.

Despite
this generally positive situation, there are still some inconsistencies among
the applicable Directives and Regulations. More specifically, the definition of
“large-scale fixed installation” within RoHS is criticised as being too vague.
Definitions applicable to fuel dispensers also appear to differ between
Directives, with for instance the EMC Directive treating a dispenser as a
single machine, whereas MID treats it as a collection of several measuring
instruments[102].The
MID Annex MI-005 distinguishes between individual measuring systems (i.e. fuel
dispensers) and self-service arrangements (of fuel dispensers).

There
remains debate over the desirability of having an annex of the MID devoted
exclusively to fuel dispensers. Annex MI-005 covers
“measuring systems for continuous and dynamic measurement of quantities of
liquids other than water”[103] and
defines and covers all the relevant essential requirements for metrology (and
refers to voluntary standards that give presumption of conformity can be more
specific). It therefore can be applied to the case of fuel dispensers and,
indeed, it defines flow ranges specifically for fuel dispensers. However, the
industry associations and manufacturers consulted were of the view that an
annex specifically devoted to fuel dispensers would be preferable and ease the
process (and thus the costs) of compliance.

It
was also reported by the companies interviewed that some fuel dispenser
products or components covered by ATEX and PED are not covered by MID, e.g.
automatic feed nozzles and pressure valves. Although these components are not
directly relevant to measuring, they can have an effect on accuracy of
measurement. As a result, certification requirements can differ for each piece
of legislation. According to the companies and industry associations
interviewed, this can lead to conflicts between approval bodies which results
in an unnecessary multiplication of conformity tests and an increase in
administrative work.

A
major issue is the fact that EU legislation does not address the connection
between fuel dispensers and forecourt point-of-sale (POS) systems, which are
not covered by EU legislation. Indeed, it was reported that it
was impossible for MID-approved fuel dispensers to be connected to equipment
with national certificates only such as pre-MID POS systems. . Since retailers,
including small supermarkets, have contracts with POS systems providers, this
can cause difficulties[104].
Moreover, the legislation does not cover the provision of regular
checks and recalibration of fuel dispensers once installed; as with other New
Approach Directives, MID is only concerned with the placement of a product on
the market and its installation. Whilst this does not affect the free movement
of products, it does affect the free movement of services, with such services
tending to be provided mostly by nationally-based operators.

It
was also proposed by some of the companies interviewed that the legislative
framework (notably MID) needs to be extended to cover additional types of fuel
dispensers, particularly compressed natural gas dispensers
(CNGD), which are currently subject to national legislation. Although mutual
recognition under Art 34 of the TFEU applies to CNGD, this is only valid when
countries accept this. CNG is regulated under OIML R139[105] and for
many years, each country has required its own type approvals. Whilst mutual
recognition could be a means of allowing products to circulate freely, the risk
is that national authorities to allow such products to be placed on the market
in the absence of national certificates. In contrast, liquid natural
gas dispensers
(LNGD) are subject to MID despite accounting for lower volumes of trade. There
are around 5,000 to 10,000 petrol stations equipped with CNGD while there are
only around 100 stations equipped with LNGD across Europe. CNG is for cars
while LNG is for trucks. CNGD are available in petrol stations along with
normal MID-approved fuel dispensers and LPG dispensers, while LNGD are most
likely to be found in dedicated petrol stations. Given the barriers to the
circulation of CNGD products, the risk is that manufacturers face higher costs
than if such products were covered by EU legislation and are be unable to
exploit economies of scale in production.

4. Analysis of costs of
compliance with IM legislation

Analysis
of the costs of compliance has been based on interviews with four large
companies that serve the EU27 market and export globally, as well as two
industry associations. The table provides information on the firms interviewed.

Table 3: Basic
information on the firms interviewed

Firm || Specific/main product (if a specific sub category) || Firm size || Annual sales from product || Main markets

A || Pumps & dispensers || Large (4,000 employees) || 10,000 units || 50% of sales in the EU

B || Pumps & dispensers || Large (>1,000 employees) || 15,000 units || 82% of sales in the EU

C || Gasoline Dispensers, payment solutions for petrol stations || Large (5,400 employees globally) || Not known || 60% of sales in the EU

D || Fuel management and dispensing systems, service station hardware || Large (3,200 employees) || 15,000 units || 33% of sales in the EU

Step 1: Familiarisation with the legislation and
relevant obligations, as well as preparatory actions

For
all the companies interviewed, identifying and reviewing the requirements of
the legislation, the relevant standards and the resultant information
obligations is a relatively costly activity. Two companies offered an estimate
of the relative share of this task in the overall cost of Step 1: 50% and 60%
respectively. Membership of the relevant industry associations at EU and/or
national level, e.g. CECOD, is vital to this task and, of course, involves a
membership fee. Whilst membership of industry associations serves a wider
purpose (and is thus a business-as-usual cost), much of the rationale for and
benefit of membership is related to receiving information about the legislation
and the standards – and also to being able to influence the legislation and the
standards at the EU level.

As
well as receiving information through the industry associations, all the
companies employed at least one staff member dedicating most or all of their
time to this task. These individuals typically participate in the various
working groups and committees relating to the legislation (e.g. through CEN)
and within the relevant industry associations. Although such participation is
costly, this investment of time is considered to be worthwhile by the companies,
given the benefit arising, i.e. in terms of being able to influence the
legislative process and receive information in good time.

For
the companies interviewed, the cost of identifying the legislation and the
relevant standards and reviewing its requirements mostly consisted of the staff
costs of these individuals. For example, Firm A employed three staff (out of
4,000) with responsibility for overseeing compliance: one in the UK (also the
European head office), one in Germany and one in Italy. Firm D employed one
person in each of the 5-6 different national offices, each spending perhaps 50%
of his/her time on this task. Similarly, Firm C employed between 3 and 5 heads
at senior engineering level (out of a total workforce of 5,4000) to understand
the legislation and train manufacturing people and QA people – as well as to
undertake tasks related to other steps, i.e. checking the manufacturing
process, finding practical solutions to compliance issues, gaining approvals,
etc.

Training
staff was seen as the next most costly element of Step 1. It is routinely
provided by all the companies interviewed, for new staff and for existing
staff, as and when there are changes to the legislation and/or the standards.
The true cost of such training can be hard to identify, since it may often be
incorporated into wider training of staff. One Firm suggested it accounted for
15% of the costs of Step 1, whilst another suggested a figure of 25%.

Use
of external consultants to aid the familiarisation and preparatory process appears
to vary widely between the companies interviewed. Two companies stated that
they very rarely used consultants, whilst two others suggested that the use of
consultants accounted for around 10% of the costs of Step 1. One Firm stated
that it only used consultants when entering new national markets, which might
thus explain this discrepancy. It might be safe to conclude that consultants
are rarely used for the “routine” task of ensuring familiarity with the
legislation but can be used when additional support is needed to identify the
requirements relating to new products or new markets.

Purchasing
the standards (of Directives other than MID) also presents a direct financial
cost for all companies interviewed (although the MID normative documents are
made available free-of-charge on the Europa website), although participation in
standards committees at EU level sometimes provides access to the standards
free-of-charge. For the companies interviewed – all large – the cost of
standards was not seen as prohibitive. Two suggested it accounted for only 5%
of the costs of Step 1. Another quoted a figure of €1.2k for each standard
purchased, which was not seen as particularly burdensome relative to its
revenues. However, such costs would inevitably be more burdensome for SMEs.

Two
companies, as well as one EU-level industry association, highlighted that the
most significant costs in Step 1 resulted from having to address differing
interpretations of the legislation and of the standards in different countries.
Such difficulties were said to arise not from the text of the legislation or of
the standards, but from insufficiently clear guidance or, indeed, a lack of
guidance. The resulting costs tended to relate to the time spent negotiating
with national authorities, market surveillance authorities and Notified Bodies,
as well as delays in placing products on the market (although neither firm was
able to specify the precise cost, which is not therefore included in the table
below).

Overall,
all the companies and the industries associations interviewed highlighted the
fact that most of the costs incurred in Step 1 were no higher than the previous
situation in which national legislation applied. Indeed, the fact that the MID
standards are also based on the internationally-agreed OIML normative documents
means that there has been a degree of continuity in the processes followed,
with the EU legislation reducing costs by bringing a more uniform approach.
Given this situation, it would seem that the main scope for reducing costs
associated with Step 1 relate to facilitating a more uniform interpretation of
the legislation applying to fuel dispensers (i.e. MID, ATEX, EMC, etc.) and
encouraging a more consistent application and enforcement in different Member
States.

Step 2: Changes to product design and production
processes to ensure compliance with substantive obligations

The
nature of fuel dispensers and related products is such that design, development
and manufacture require extensive testing for the purposes of safety, accuracy
and reliability. It is clear that national legislation already imposed quite
stringent requirements in most countries, particularly those where national
standards were based on internationally-agreed normative documents. The EU
legislation also places stringent requirements on manufacturers, with a
consequent need for extensive testing and risk analysis, as well as subsequent
changes to product design and production processes. For example, the one firm
offering an estimate of substantive compliance costs, Firm B, reported that
substantive compliance costs had amounted to €3.2m over the last five years
(equal to around 3% of turnover), of which €2m on changes to product design and
€1.2m on changes to production processes. Whilst these are one-off costs for
each specific product that is certified, the fact that each large firm is
continually bringing new products to market mean each incurs such costs on an
annual basis.

It
is, however, impossible to separate such costs from the business-as-usual
scenario, particularly in a context of on-going technological development and
innovation. Indeed, reputable manufacturers of high-quality products undertake
extensive testing and risk analysis of any new product in any case. To a
certain extent, such activities therefore represent a business-as-usual cost.
Overall, the legislation has perhaps represented more of a burden for
manufacturers of poorer-quality products, who have had to operate to higher
standards, with less potential to undercut other suppliers on the basis of low
price.

Of
the companies interviewed, all agreed that testing related to compliance with
substantive obligations posed a considerable cost. Indeed, testing and risk
analysis is undertaken throughout the year at all the companies interviewed,
involving a mix of internal staff and external costs. Firm D suggested that
testing might account for up to €1m of its annual revenue of €15m (i.e. just
less than 7%). Firm B reported that testing accounted for around €500k out of
annual revenues of €20m (i.e. 2.5%). Firm C reported annual testing costs of
€50-€150k for each of its four European factories, i.e. €200-600k p.a. Whilst
such costs are clearly significant, it is not possible to separate them from a
situation in which national legislation prevails or from the
“business-as-usual” cost, given the emphasis that reputable manufacturers would
place on product safety, accuracy and reliability.

In
general, the companies were unable to give accurate data on the cost of testing
equipment related to compliance with the EU legislation. For example, Firm D
stated that most testing was undertaken at the firm’s main laboratory in the
USA; the cost of testing for the EU market was therefore inseparable from the
cost of testing products for all global markets – particularly, where
international, rather than EU standards apply. Firm A reported that it spent
around €40k p.a. on testing equipment for the purposes of compliance (mostly
linked to the EMC Directive) in relation to sales of around 10,000 fuel pumps
per annum (equivalent to an average cost of €0.25 per unit).

Firm
A did, however, highlight one very specific cost arising from the legislation
and which could not be considered as a business-as-usual cost. One effect of
the MID has been to require calibration of fuel dispensers (e.g. to match
fuels) to take place in the factory rather than on-site (i.e. at the fuel
retailer’s forecourt). Previously, this calibration would take place on site,
with the appliance then checked by a local trading standards officer, which Firm
A considered to be easier. Although the fee for the local trading standards
officer was not cheap (e.g. €50 per nozzle, so €300 for a pump with six
nozzles), it was paid by the customer. However, under Module B (type approval)
of MID, the Notified Body now has to verify the product and the calibration has
to be undertaken at the factory. This creates difficulties as the precise
conditions of the installation environment (i.e. the retailer’s forecourt)
cannot be known and recreated in the factory. Enforcement authorities tend not
to allow subsequent adjustments to be made on site, whereas previously the
manufacturer could send staff to tweak the product on site. Whilst Module F
allow verification and calibration at the forecourt, this option

As
a result, Firm A reported that it was required to spend a lot of time in the
factory, continually refining weights and measures equipment to ensure the
product is legal. Overall, the legislation was reported to have introduced a
liability for the manufacturer, for which no obvious practical solution had
been found. The consequent cost included €120k on testing facilities for LPG,
as well as around €250k in staff time over the last six years, equivalent to
perhaps €100 extra per dispenser under MID compared to the previous situation.

Step 3: Conformity assessment procedures

Under
the MID, manufacturers can choose from a number of conformity assessment
procedures, namely Modules B+F, B+D, H1 or G. This creates a variety of
approaches and therefore differing costs, with some manufacturers subject to
periodic inspections of their quality systems by Notified Bodies (e.g. under
Modules D and H1) and others having the conformity of specific products
verified, e.g. under Modules B and F.

The
companies interviewed were unanimous in reporting that the fees of Notified
Bodies represented the costliest element of Step 3. The one firm that offered
an estimate of the proportion of total costs in this step accounted for by
Notified Bodies fees suggested a figure of 55%, of which 35% relating to
initial inspections and 20% to periodic inspections. All the companies offered
estimates of the financial costs of the fees of Notified Bodies and those
estimates demonstrating a degree of consistency. An initial inspection of a
fairly routine nature (e.g. permeation tests or other minor adjustments) was
said by two companies to cost up to about €4k, whereas testing of components
such as valves, motors or junction boxes was said by another firm to cost
€10-20k. The same firm reported that it undertook around six of such tests each
year, representing a total cost of about €100k in Notified Body fees (i.e. 0.5%
of total turnover). More extensive tests for entirely new products or processes
might cost €40k-50k each. In addition to the initial inspections, it is also
necessary for each firm to have periodic inspections by Notified Bodies in
order to retain their certification. Figures quoted by one firm included
€15k-25k for both the MID and the ATEX Directives, with another firm quoting a
figure of around €30k for such periodic inspections across its three European
facilities for the same two Directives.

Whilst
the cost of Notified Bodies’ fees was reported to be high, the companies agreed
on the benefits of gaining certification. One firm made a favourable comparison
to the situation prevailing before the introduction of the New Approach
Directives, stating that the current costs were relatively low. The same firm
reported that it was able to use its MID and ATEX certification globally, in
the former case because of the use of OIML standards by MID. Moreover, it was
also reported that OIML certification from some EU Member States tended to have
more credibility than certification gained in some third countries.

Manufacturer’s
own internal checks were also reported to be costly, albeit less than the cost
of Notified Bodies. However, to a large extent, these tended to be a
business-as-usual cost, with such checks undertaken continuously and routinely
– and likely to be undertaken in the absence of legislation.

Similarly,
the preparation of technical documentation in advance of conformity assessment,
compilation of test reports, production identification requirements and
maintenance of technical information for ten years were reported to be costly
in terms of internal staff time. Indeed, one firm suggested that such
activities could account for several hundred thousand euros each year in staff
time, whilst another suggested that such activities could account for around
35% of the total costs of conformity assessment. Preparation of technical
documentation related to ROHS was said by one firm to pose a particularly high
cost. In addition, two companies reported very high costs of translation of
documents related to conformity assessment, although such costs may be
inextricable from the general costs of translating instruction manuals –
estimated at around €100k p.a. by one firm (against sales of 10,000 units and
turnover of “tens of €millions” per year).

Step 4: Declaration of Conformity and CE marking

The
companies interviewed were unanimous in reporting that the Declarations of
Conformity and use of the CE marking were much less costly than Steps 1, 2 and
3. However, the preparation of a Declaration of Conformity could be made more
complicated – and therefore more costly – by the need to collect information,
DoCs and compliance statements from suppliers of components. Depending on the
number of components and of suppliers, this could in some cases be costly and
manufacturers need to build such requirements into their contracts with
suppliers.

The
compliance statements that will be required under ROHS and REACH were expected
by one firm to impose a significant cost as and when they become mandatory.
However, at this stage it was not possible to estimate the cost of producing
such statements.

The
requirement to apply CE marking was reported by all the companies to pose very
little cost. Indeed, it was easily incorporated into the manufacturing process.
None reported any particular additional financial cost. However, the companies
and industry associations reported some confusion around the application of CE
marking. This included a lack of clarity around whether the CE marking needed
to be placed only once on each pump installation or on each nozzle. It was also
suggested that consumers had limited awareness of the significance of the CE
marking, with national standards, such as the British Standard markings, being
more widely-recognised in each country.

As
with the technical documentation, translation of the Declaration of Conformity
was reported to be expensive. Three of the four companies reported a very high
cost of translation, whilst another reported it to be moderately high. One firm
reported that it was necessary to translate Declarations of Conformity four times
a year, at a cost of around €8k p.a. In order to minimise costs and the
potential for error, another firm reported that it replicated the text from the
various language versions of the official documentation as far as possible.
Again, such translation costs are bound up with the wider cost of translating
instruction manuals. However, given that fuel dispensers are sold only to
businesses and not to consumers, one firm suggested that there should perhaps
be flexibility over the requirement (imposed by most Member States under the
terms of Article 6 of the MID) to provide such documentation in the language of
the customer, provided that the customer has sufficient numbers of staff fluent
in the language proposed by the manufacturer. In that way, it might be possible
to reduce the number of translations required, particularly into the
less-spoken EU languages where it less difficult to spread the cost of
translations over a large volume of sales.

Conclusion/Summary

Overall,
Directive 2004/22/EC on measuring instruments (MID) is appropriate for the
sector. It provides a good legal and technical base, which allows technical
progress to take place. In order to reflect technical progress, the
instrument-specific annexes might need amendment from time-to-time via the
comitology process set out in Article 16 (Functions of the Measuring
Instruments Committee).

On
average, around €800k per year are spent by major manufacturing groups on
activities linked to compliance. Direct administrative compliance costs
represent just over 10% of the total costs of compliance-related activities.
Investments in terms of product design, manufacturing equipment represent major
compliance-related expenditures (around 35-40%).

5. Assessment of costs of
IM legislation for the whole sector

On
the basis of the information provided, we have attempted to estimate the costs
of compliance for the whole sector. The figures in the table below include
information concerning the “business-as-usual” (BAU) scenario.

Table 4: Summary
of main costs of compliance for the firms interviewed

|| Firm 1 || Firm 2 || Firm 3 || Firm 4 || Average || Total

Turnover || € 20m || € 20m || € 600m || € 15m || || € 1,091,666,667

Compliance Costs FTE || || || || || ||

- costs FTE yearly || € 72,000 || € 260,000 || € 420,000 || € 330,000 || ||

- costs FTE yearly / turnover || 0.36% || 1.30% || 0.07% || 2.20% || 1% || € 5,372,250

Business As Usual (BAU) FTE || || 30% || 30% || || 30% || € 1,611,675

Compliance costs FTE || || 70% || 70% || || 70% || € 3,760,575

Compliance Costs - third party fees || € 41,667 || € 500,000 || € 500,000 || € 1,000,000 || ||

- costs third parties / turnover || 0.21% || 2.50% || 0.08% || 6.67% || 2.4% || € 12,367,014

Business As Usual (BAU) third parties || || 50% || 50% || || 50% || € 6,183,507

Compliance costs third parties || || 50% || 50% || || 50% || € 6,183,507

Compliance Costs - testing equipment || € 160,000 || € 100,000 || € 500,000 || || ||

- costs testing equipment/turnover || 0.80% || 0.50% || 0.08% || || 0.46% || € 2,773,519

Business As Usual (BAU) test equipment || || 20% || 20% || || 20% || € 554,704

Compliance costs test equipment || || 80% || 80% || || 80% || € 2,218,815

Total compliance costs || € 273,667 || € 860,000 || € 1,420,000 || € 1,330,000 || || € 20,512,782

Business As Usual (BAU) || || €348,000 || €476,000 || || 41% || € 8,349,886

Compliance costs || || €512,000 || €944,000 || || 59% || € 12,162,897

Total compliance costs as % of Turnover || 1.5% || 4.5% || 0.25% || 9% || ||

The
assessment of costs of IM legislation for the whole sector is based on the
figures obtained from the four major companies in the sector representing 60%
of the market. The figures in the far right column are an extrapolation of the
data obtained from the four major firms and represent the total turnover and
compliance costs for the whole of the EU petrol pumps sector.

The
annual turnover for the whole sector is estimated at €1.1bn. Total compliance
costs are estimated at €20.5M for all the companies in the sector, representing
around 2% of their combined turnovers. For the largest of all four companies
(firm 3) compliance costs represent 0.25% of the turnover. For the smallest
(firm 4), compliance costs amount to around 8.5% of the total turnover. Across
the four companies, around 60% of the compliance costs relate to compliance
with EU Internal Market legislation.

Administrative
compliance costs FTE represent around 0.5%-1% of companies’ annual turnover on
average. Costs range from just under €100,000 to over €400,000 for larger
companies. On average, they make up 30% of Business As Usual costs to a firm on
a yearly basis. The remaining 70% relate to EU IM legislation compliance
requirements.

Administrative
and non-administrative compliance costs towards third-parties are of around
€500,000 on average for the companies in the sector. These costs represent
around 2.5% of companies’ annual turnover and make up 50% of their Business As
Usual costs.

Testing
equipment costs for compliance activities averaged around €100,000 per firm
annually. For larger companies, testing equipment can cost over €500,000. These
costs are also dependent on the number of factories owned by companies. These
costs represent around 0.5% of companies’ annual turnover in the sector and
make up 20% of Business As Usual costs. In other words, testing equipment
expenditures at firm level mostly relate to the necessity to comply with the
MID requirements and other environment-related requirements introduced by
various EU legislative measures.

According
to PRODCOM data, the production value of each individual petrol pump unit
ranges between €1,000 and €2,000. This corresponds with the data obtained from
the individual companies when dividing their annual turnover by the number of
units they produce per year. When dividing the individual companies’ annual
turnover by their total compliance costs, it is possible to see that compliance
costs account for between 0.25% and 9% of the production value of a single unit
(See Table 4).

6. The benefits of internal
market legislation

It
is important that the benefits of IM legislation are considered and not only
the costs. It is impossible to establish a counterfactual since it cannot be
known how the industry would have developed in the absence of legislation. They
highlighted the following benefits.

First,
the firms and industry associations interviewed were unanimous in the view that
it was preferable to have a single set of internal market legislation across
the Union rather than different pieces of national legislation. This was
highlighted as being particularly important for the ATEX Directive, which
replaced very differing, and therefore burdensome, national legislation. As a
result of MID,
the technical parts of petrol pumps tend to be the same in each Member State,
which also helped limit the cost of maintenance, serving and repair. Costs of
components have also been kept down, where suppliers can provide a certificate
from a Notified Body, which prevents the need for the manufacturer to undertake
additional checks, which would be necessary in the absence of EU legislation.

Second,
EU legislation has provided opportunities for export to third countries, such
as Turkey and the USA. Again, the ATEX Directive in particular was seen as
being beneficial in that respect; it is considered to be highly recognised and
respected in non-EU jurisdictions, with some third countries using it to inform
the design of their own legislation and/or accepting ATEX certificates issued
in the EU. For example, the USA was reported to be changing its
explosive standard in line with the international explosive standard which is
already well-aligned with those of the ATEX. This provides
export opportunities for EU producers and helps keep production costs down.
Moreover, accreditation in respect of MID also promoted global exports as the
standards are the same as those of OIML.

Third,
the ATEX standards were seen as not only safe but also as reasonable for
manufacturers. This reflects the possibility of industry to help set the standards.

Fourth,
the replacement of national legislation with EU legislation had enabled
economies of scale to be captured by producers, leading to consolidation of the
market. The
New Approach Directives have tended to support the competitiveness of EU industry.
Although the large manufacturers retain their strength in their home markets,
the legislation has enabled a degree of consolidation and economies of scale.

7. Analysis of
simplification options

The
analyses of the applicable legislation and the discussions with firms and
industry representatives have indicated some areas for possible improvements
and simplification.

Introduction of a specific annex for fuel dispensers
in MID directive

There
is no specific annex on fuel dispensers in the MID Directive (although MI-005
does cover such products, as part of its wider focus on “liquids
other than water”). In particular, manufacturers report that MID does
not adequately address the connection between fuel dispensers and forecourt POS
systems and that additional national certification is often required. A
specific annex for fuel dispensers should prevent different interpretations by
the manufacturer and Notified Bodies in respect to the devices permanently
connected to a meter, which needs to be considered during a conformity
assessment. Overall, this would clarify the scope of the MID with respect to
fuel dispensers.

It is estimated that creating a specific annex for
fuel dispensers in the MID directive would result in a significant reduction in
compliance costs overall. For example, one firm suggested that
its compliance costs might fall by as much as 35%. Full-Time Equivalent (FTE)
compliance and third-party compliance costs[106]
in particular would be reduced as a specific annex on fuel dispensers would
facilitate compliance work through greater harmony in Member States’
interpretation of certification requirements.

Understand SSD as sub-assemblies for petrol stations

Simplification
efforts should focus on adapting the sub-assembly definition in order to
introduce the possibility to certify sub-assemblies in more categories of
measuring instrument, including fuel dispensing systems, and keep the necessity
to certify nevertheless the complete measuring instrument.

The
sub-assembly approach is for the time being very limited in MID as it is not
foreseen in some fields such as measuring systems of liquids other than water
although these instruments are modular in most cases. Fuel dispensing systems
are by essence composed of parts manufactured separately by different providers
and assembled by the manufacturer of the complete instrument.

The
lack of a sub-assembly approach for measuring system for quantities of liquids
other than water deeply complicates the application of the MID for
manufacturers, not only for the self-service devices linked to fuel dispensers,
but for all kind of measuring systems. This is mainly due to the fact that
manufacturers of complete measuring systems are not able to demonstrate the
compliance of some critical parts that they do not manufacture.

If
such a modification is accepted it would facilitate the approval process for
manufacturers. It would also mean fewer problems in the MID application for
manufacturers of fuel dispensers. It would especially facilitate the revamping
of some measuring instruments and it would remove unclear situation concerning
the responsibility of the conformity of the complete instrument.

WELMEC
guide 8.8 provides an appropriate base for this implementation. It is desirable
that its application is ruled by European Commission in order to be recognised
and applied by all Notified Bodies in European countries with no distortion.

Considering
Self-Service Devices as sub-assemblies of fuel dispensing systems, thus not
requiring separate MID certification, would lead to a 5-10% cut in compliance
costs, particularly in testing equipment costs. The current MID interpretation
is driving up compliance activities and costs across the industry, including
extending national approvals. It also slows down investment in technology.

Address link to Points-of-sale

Still
in relation to sub-assembly, there is a particular issue of combining old
non-MID certified points of sales with new MID-certified fuel dispensers in
petrol stations (and the reverse) which is seen as a major limitation for the
development of the market in a number of countries. This is also commonly known
as the ‘mix and match’ issue, which broadly concerns the capacity to combine
old and new components whereby a system approved under old national legislation
cannot be upgraded with an MID certified component without first seeking MID
approval for the complete system. This means new components of a system cannot
be installed without the manufacturer of the fuel dispenser upgrading the
system. Petrol station owners that want to revamp part of a system are forced
either to upgrade old non-MID dispensers or points of sale stations or to buy
complete new systems. An extension of the sub-assembly principle in the MID to
measuring instruments other than water would certainly remedy this problem.
However, this situation is only provisional and will end in 2016 (Art 23 MID),
after which date no assemblies can be put into use that are not fully compliant
with the MID. In fact, many Member States are already requiring this to be the case,
as a matter of consumer protection.

Addressing this problem would also reduce companies’
compliance costs by around 5%-10%. Expenditures on
testing equipment would be reduced and companies’ administrative burden
relating additional certification procedures would be alleviated.

Create a central site that gives manufacturers for
each specific product a general view of the minimum requirements for compliance
with European directives and standards

Currently,
the online information on minimum requirements for compliance with IM
legislation is categorised according to each piece of IM legislation as opposed
to product type. In other words, manufacturers are first required to know which
pieces of IM legislation apply to their product before they can check minimum
requirements. Organising information on minimum requirements by product type
would save manufacturers a considerable amount of time.

This
would imply a reduction of between 50% to 75% in the time and cost spent by
manufacturers on this task. This reduction in administrative compliance costs
would depend based on the organisational and staff structure of the individual
companies. This is a function that can normally be achieved by means of a EN
standard. This task could be undertaken by the CEN.

Develop a European database for product certificates
that could be consulted by all entities involved

Some
further practical steps could be taken, such as setting up an EU-wide database
for product certificates allowing for quick cross-checking that certificates
have been officially delivered. This may require the merging of existing
different databases on market surveillance that feed into Member State
reporting requirements to the Commission. The EC should investigate whether
merging of databases is possible and should study the value added of each
database.

This
effort of data simplification might reduce the time (and associated cost) spent
by manufacturer’s explaining and informing local verifiers/authorities,
regarding certificates issues by up to 50%. Again, any reduction in costs would
depend on the organisational and staff structure of the individual companies.

Table 5: Summary
of proposed simplifications and expected benefits

Change proposed || Expected benefit/problems || Estimated saving potential

Creating a specific annex for fuel dispensers in the MID directive would result in a || A specific annex on fuel dispensers would facilitate compliance work through greater harmony in Member States’ interpretation of certification requirements. || 35% reduction of compliance costs overall. FTE compliance and third-party compliance costs in particular would be reduced as

Consider Self-Service Devices as sub-assemblies for petrol stations. || The current MID interpretation is driving up compliance activities and costs across the industry, including extending national approvals. It also slows down investment in technology. || Consider SSD as subassemblies would abolish the requirement of separate MID certification for critical parts and therefore lead to a 5-10% cut in compliance costs, particularly in testing equipment costs.

Abolish the need for multiple certifications for systems combining old non-MID certified points of sales with new MID-certified fuel dispensers in petrol stations (and the reverse). || Petrol stations would no longer encounter problems for upgrading to MID. Expenditures on testing equipment would be reduced and companies’ administrative burden relating additional certification procedures would be alleviated.     || Addressing this problem would also reduce companies’ compliance costs by around 5%-10%.

Create a central site that gives manufacturers for each specific product a general view of the minimum requirements for compliance with European directives and standards || Online information on minimum requirements is categorised according to each piece of IM legislation as opposed to product type. Organising information on minimum requirements by product type would save manufacturers a considerable amount of time. || This would save considerable time and money from an administrative point of view.

Develop a European database for product certificates that could be consulted by all entities involved || Merge existing databases into an EU-wide database for product certificates allowing for quick cross-checking that certificates have been officially delivered. || This would save considerable time and money from an administrative point of view.

Other
proposed simplifications for which benefits are not quantifiable:

Introduce compulsory checks following installation
of new fuel dispensing systems

Concerns
have been raised about the lack of awareness of the need to re-verify after a
new POS has been fitted and frequently it was discovered that such changes had
been made without re-verification. (It should be noted that where the POS
contains metrological software it concerns a new instrument in the sense of
MID). Problems have arisen with dispensers that had been factory verified and
installed without further checks being made, whilst it appears that legislation
permits this. It is necessary to make re-verification compulsory to guarantee
that newly-installed POS are operating as accurately as possible. This follows
reports that some retailers have suffered high losses from newly installed
dispensers, before the error was discovered through routine stock
reconciliation.

Extend MID to cover Compressed Natural Gas (CNG)
dispensers

Given
the evidence of trade barriers in the sense of Art 34 TEU the MID could be
extended to cover Compressed Natural Gas (CNG) dispensers given the large market
expansion for natural gas vehicles caused by the rise in petrol prices and
efforts to reduce air pollution emissions (See Section 3). The MID already
covers cryogenic Liquefied Natural Gas (LNG), however its market remains
limited compared to the CNG market. Companies would be able to invest in
CNG-based technology and exploit economies of scale. No cost savings here would
occur but firm profits could potentially rise.

Extend possibilities of amendments
via comitology

Extending
possibilities of amendments via comitology would avoid future problems and
create a better understanding between different stakeholders. Any suggestions
for new proposals should be made in consultation with industry stakeholder
committees in line with smart regulation whereby full account is taken of all
alternatives to regulation. For instance the field of water and heat meters,
the legal framework is “fit-for-purpose”, particularly because of the
possibilities for amendments via comitology.

8. Overall conclusions

This
case study focused on fuel dispensers which are machines combining a pump and
point-of-sale (POS) system and pumping fuel into motor vehicles. In other
words, fuel dispensers combine an electronic part containing an embedded
computer measuring fuel sales and a mechanical section to physically pump and
control the fuel flow.

There
are around 20 manufacturers of fuel dispensers in Europe, amongst which are
four major players with more than 60% of the market share in Europe and a
significant presence worldwide. The total production value for petrol pumps in
Europe was of around €360 million in 2012 based on a unit price of around
€1,100. A total of about 350,000 petrol and oil dispensing pumps were produced
in Europe in 2012.

The
manufacture of fuel dispensers is mainly covered by the MID and by a number of
other Directives, namely: ATEX, the Petrol Vapour Recovery Directive, the EMC
Directive, the Low Voltage Directive and the National Emissions Ceiling
Directive. The nature of fuel dispensers is such that regulations covering
different perspectives are required, notably on accuracy and reliability in
measurement, minimisation of the risks of explosion and protection of the
environment.

The
assessment of costs of IM legislation for the whole sector was based on the
figures obtained from the four major companies in the sector representing 60%
of the market. Total compliance costs are estimated at €20.5M for the four
major companies in the sector, representing around 2% of their combined
turnovers. Around 60% of the compliance costs relate to compliance with EU
Internal Market legislation (€12M) whilst the remaining €8.5M relate to
business-as-usual compliance costs.

Administrative
and non-administrative compliance costs towards third-parties are of around
€500,000 on average. Familiarisation costs are reported to be significant in
this particular sector. This is due to the need for company to address
differing interpretations of the MID legislation and of national standards in
different countries. Testing equipment costs for compliance activities averaged
around €100,000 per firm annually. For larger companies, testing equipment can
cost over €500,000. In summary, investments in terms of product design,
manufacturing equipment represent major compliance-related expenditures (around
35-40%) for companies in the sector.

Overall,
the MID Directive was deemed to provide a good legal and technical base
enabling technical progress. The stakeholders interviewed recognised that
harmonised internal market legislation can be very cost-effective, particularly
in relation to the ATEX Directive, which replaced differing and burdensome
national legislation. Furthermore, thanks to the MID, the technical parts of
petrol pumps tend to be the same in each Member State, which therefore limits
the cost of maintenance and repair. In general, the replacement of national
legislation with EU legislation had enabled economies of scale to be captured
by producers, leading to consolidation of the market.

As
regards simplification, efforts should focus on adapting the sub-assembly
definition. Manufacturers have estimated that considering Self-Service Devices
as sub-assemblies of fuel dispensing systems, thus not requiring separate MID
certification, would lead to a 5-10% cut in compliance costs, particularly in
testing equipment costs. Simplification should also address the ‘mix and match’
issue whereby a system approved under old national legislation cannot be
upgraded with an MID certified component without first seeking MID approval for
the complete system. The manufacturers interviewed estimated that addressing
this problem would also reduce their compliance costs by around 5%-10%.

9. List of interviews
2 interviews with industry
associations: CECOD, PEIMF
5 interviews with manufacturers
1 interview with the European
Commission DG Enterprise and Industry

Case
study 7  – Air Conditioners

1. Introduction – aims of
the case study

Common aims

The
aim of the case studies is to assess the way in which IM legislation
for industrial products affects different economic operators across selected
product groups. Union harmonisation legislation applicable to each product
group is first mapped out and an assessment of any gaps, loopholes,
inconsistencies and duplication is provided.  The compliance costs in meeting
these requirements are then assessed.

Specific aims of case

The
rationale for the selection of air conditioners and air conditioning systems as a product
group was that:

·
Air
conditioners and air conditioning systems are a significant industrial sector,
particularly in southern European countries, with a large volume of products
sold.

·
There
are only a relatively small number of firms overall in most market segments,
and large firms dominate the market.

·
The
sector is one in which there is a high level of internationalisation in
manufacturing and non-EU firms dominate some segments of the European market
(especially for smaller and portable air conditioners). This has allowed market
access issues to be considered.

The
case study was carried out using a combination of desk research and interviews.
The main data sources used were Eurostat SBS (2 digit NACE code level)
and Prodcom data (8 digit NACE), sectoral studies and market research reports.
Work carried out recently on Ecodesign requirements for air conditioners and
air conditioning systems was also used, since this provides useful data on
market size and structure[107].

2. Product definition and
description of market structure

This
case study focuses on air conditioners and air conditioning systems (both
comfort air conditioning in buildings and portable air conditioning systems). 
There are a number of different types of air conditioners such as air‐to‐air,
water‐to‐air,
evaporatively-cooled, split and multi-split air conditioners air‐to‐air,
water‐to‐air,
and VRF (Variable Refrigerant flow) systems. Industrial chillers are also
covered, wherever these incorporate air conditioning systems. The focus is on
electrically-driven air-conditioning appliances although gas burning appliance
designs placed on the market were also taken into account, since a different
legal regime applies under the GAD.

Selected
sub-sectors within the wider HVAC industry, and heat and industrial pumps have
also been included, but only where these are part of air conditioning and
heating systems.  There is a trend towards convergence of cooling and heating
systems so air conditioning manufacturers often produce these items.

Data
and information sources

An
overview of sectoral data and key trends is now provided, drawing on Eurostat
Structural Business Statistics (SBS) and Prodcom data. Since Eurostat datasets
can be misleading in that they present data at a very high level of aggregation,
we have also drawn on market research reports. Where data gaps have been
identified, for instance, an accurate estimate of manufacturing employment in
the sector, we have taken feedback from industry associations and individual
manufacturers into account about since they have provided insights on market
size
and structure, recent industry developments and market trends.

Industry
structure and employment

In
the first table, we provide an overview of the sector, although it should be
noted however that the data is at a higher level of aggregation than for air
conditioners and air conditioning systems alone. Eurostat SBS data under NACE
28.25 includes the manufacture of refrigerating or freezing industrial
equipment, including assemblies of components, the manufacture of
air-conditioning machines, including for motor vehicles, non-domestic fans,
heat exchangers, machinery for liquefying air or gas manufacture of attic
ventilation fans (gable fans, roof ventilators, etc.).

Table 1: Manufacture of non-domestic cooling and
ventilation equipment sector (NACE 28.25)

|| 2008 || 2009 || 2010

Number of enterprises || 9,913 || 8,984 || 9,190

Number of employees || 254,200 || 228,800 || 219,700

Production value || 48,083.16 || 37,624.77 || 38,645.77

Source: Eurostat’s SBS

The
European industry association – Eurovent – speculated that Eurostat data may
also extend to firms and employment relating to the installation and
maintenance of air conditioners and air conditioning systems, not only to
manufacturing. Given the unreliability of official data sources on the number
of enterprises and employment, it has therefore been necessary to rely on
market studies that provide industry data and on information provided by
industry associations.

The
manufacturing industry for small air conditioners (<12 KwH) and comfort
cooling systems is dominated by a small number of global manufacturers,
especially from East Asia. The market for single and multi-split air
conditioners is dominated by Asian manufacturers and brands.[108] The five
largest brands of air conditioners for domestic use in Europe are all Asian:
Mitsubishi (Japan), Daikin (Japan), LG Electronics (South Korea), Hitachi
(Japan) and Toshiba (Japan). Outside East Asia, a number of other international
manufacturers have a strong market share of the global air conditioner market
such as Amana, Carrier, Lennox and Trane (US). In BRIC economies, such as China
and India, there are also large manufacturers with high sales volumes, such as
Haier, Gree and Midea (China) and Blue star and Voltax (India). Chinese
companies also export a lot of small air conditioning products to Europe under
an array of different, less well known brands.

It
was not possible to obtain accurate data on the level of employment within the
sector. However, it was noted by the industry association that there is a
significant level of employment – greater than in manufacturing – relating to
the installation, servicing and maintenance of air conditioners and air
conditioning systems. Employees in these sectors are only indirectly affected
by IM legislation, they are much more affected by environmental legislation,
for instance, European legislation pertaining to the F-Gas regulation and
pursuant legislation[109] setting out
minimum requirements and the conditions for the mutual recognition for the
certification of companies and personnel.

Some
data on employment in Europe by international manufacturers was however
obtained. It
is important to point out that although non-EU firms dominate many areas of
manufacturing and although a significant proportion of manufacturing also takes
place outside Europe, manufacturers originating from East Asia have made a significant
investment in setting up some manufacturing facilities in Europe,
which has created a significant amount of European direct employment
and indirect employment (suppliers/subcontractors of e.g. pumps and fans.
According to Eurovent, an EU industry association, about 5000 direct jobs have
been created and an estimated 15000 indirect jobs. A significant proportion of
total employment in the EU in the air conditioning sector is for the
subsidiaries of large international companies. Japanese, Korean and US air
conditioning companies are well-represented.

For
instance, the market leader Daikin has a factory in Belgium and two in the
Czech Republic. Mitsubishi Electric has a factory in Scotland, whilst Hitachi
has a factory in Spain. Among the reasons why global
manufacturers are investing in developing manufacturing capabilities in Europe
are: proximity to market, a need to strengthen their market share in Europe and
to embed their position in the European market. Consequently, these companies
are keen on monitoring and participating in European decision making processes,
including the development of Ecodesign and Energy Labelling regulations.

It
is difficult to obtain a clear picture by country of origin of the brands of
air conditioning manufacturers since lesser-known brands sold on European
markets can be subsidiary companies of international holding companies.
However, a previous study for DG ENTR on the air conditioning sector citing
Eurovent data[110]
estimated that East Asia (particularly Japan and Korea), have a dominant market
share with 60% and 13% respectively. These data estimates were checked, for
instance with JRAIA (The Japan Refrigeration and Air conditioning Industry).
They estimated that Japanese manufacturers share of the market is in the region
of 50-60% in Europe.

The
US has a 10% share of production, the EU has only an estimated 7% share, whilst
Israel has 6% and China 5%. Notwithstanding the points above regarding
international manufacturers setting up manufacturing facilities in the EU, a
2008 market study for the Commission confirmed that the majority of small air
conditioners for domestic use are manufactured and assembled outside Europe[111],
with the exception of mini-chillers, where Europe has a stronger manufacturing
base (although international manufacturers with manufacturing plants in Europe
are also present in the market).

Although
in absolute terms, Europe’s market share is relatively low, European
manufacturers have a higher market share in the production of high-end air
conditioning systems produced in lower volume, and in specialised market
segments. For example, an interviewee from a European manufacturer commented
that “while East Asian manufacturers dominate small air-conditioning systems
for comfort and office cooling, European manufacturers have a higher market
share of large-scale industrial cooling systems. Europe also has a significant
market share for other types of air conditioners such as precision air
conditioning and chillers. For instance, the UK and Germany have a strong
market position in respect of precision air conditioning (such as cooling
systems for data centres). Although disaggregated data is difficult to obtain,
interview feedback found that European manufacturers and the US also have a
strong market share in respect of industrial refrigeration. For instance, Italy
is strong in the chillers market. It is not possible to provide accurate data on
the percentage of firms that are SMEs in the air conditioning industry. As
noted above, at 4 digit NACE code level, it is difficult to obtain sufficient
disaggregation through Eurostat. Discussions with industry associations
confirmed however that at least for smaller air conditioners for domestic use,
small comfort coolers and for portable air conditioners, the market is
dominated by large firms.  A further market study from 2012 (Lot 6, Ecodesign)[112]
was only able to identify small numbers of SMEs manufacturing air conditioning
systems, chillers and fan coils (not quantified).

Market
size

Before
providing information on the European air conditioner and air conditioning
systems market, we first provide an indication of the size of the market
globally.

Market
research data was obtained by CSES directly from the industry on the air
conditioning market globally in 2013. The data shows the relative importance of
different geographic markets in million units and their respective global
market share.

Table 2: World market for air conditioning in 2013

Geographic region || No. of units (m. units) || Percentage share

China || 41.2 || 42.0

United States || 14.35 || 14.6

Japan || 9.58 || 9.8

Latin America || 6.95 || 7.1

Europe || 6.65 || 6.8

South East Asia || 6.2 || 6.3

India subcontinent || 4.87 || 5.0

Middle East || 4.57 || 4.7

Africa || 2.86 || 2.9

Oceania || 0.91 || 0.9

Total || 98.14 || 100.0

Source: JARN, the “Japan Air Conditioning, heating
and refrigeration news” magazine, 25 May 2013

The
data shows that 98.1m units were sold globally annually. The data confirms that
China is the world’s largest air conditioner market, although, as noted
earlier, Japan and Korea are the biggest manufacturing companies for air
conditioners sold on the European market. The estimate of 98.1m units sold
globally compares with about 6.65m units sold in Europe in 2012, according
to Eurovent figures.   As will be demonstrated below, although European
manufacturers have a relatively low market share globally in terms of sales
volume, they have a higher market share for non-domestic air conditioning
systems and for chillers.

Eurostat
PRODCOM data provides an estimate of the total size of the air conditioners
market for non-domestic air conditioners and ventilation. There is no
equivalent data for domestic air conditioners and ventilation however. Data for
2010 suggests a total market of around €4.6 billion, with imports representing
38% of this total. In the case of window or wall air conditioning systems,
imports are more than 50% of the total.  It also demonstrates that air
conditioning is quite a significant industrial sector, with total market size
of almost 4.6bn EUR.

Table 3: EU 27 Value of exports, imports and
production value in 2010

Prodcom code || Category || Value of exports (€s) || Value of imports || Production value (€s) || Total (Production + imports- exports)

28251220 || Window or wall air conditioning systems, self-contained or split-systems || 119,059,590 || 667,189,720 || 682,292,212 || 1,230,422,342

28251250 || Air conditioning machines with refrigeration unit (excluding those used in motor vehicles, self-contained or split-systems machines) || 508,839,700 || 880,691,590 || 1,651,035,022 || 2,022,886,912

28251270 || Air conditioning machines not containing a refrigeration unit; central station air handling units; || 327,782,600 || 206,526,710 || 1,465,437,087 || 1,344,181,197

Total || || 955,681,890 || 1,754,408,020 || 3,798,764,321 || 4,597,490,451

Source:
Prodcom,2010, Note: PRODCOM data refer to production sold.

In
addition to Eurostat and Prodcom data, various market studies have also been
consulted. A study undertaken for the Commission in 2008[113] noted that
Southern European countries accounted for a large share of demand within the
EU, reflecting climatic factors as a key demand driver.  In the figure below, a
breakdown of the market share for different air conditioning systems by type
and cooling capacity is provided. The figure shows that chillers with
air conditioning in them account for 59% of the market, and other types of air
conditioning a much lower proportion. Single splits and VRF splits (ducted
splits are not so easy to install in European households since most do not have
duct space) each with a 14% share of the market respectively.

Figure 2: Market Share - Air Conditioning Systems by
type and cooling capacity

Source:
Sustainable Industrial Policy – Building on the Ecodesign Directive, July 2012
(Note:
single splits below 12 kW are excluded from the graph.)

A
2012 study[114]
on the impact of the Eco-design Directive provides an assessment of current
market size and structure. However, according to the study “Extra
EU-27 trade and Intra EU-27 trade are only available in Prodcom at the even
more aggregated level of Procom code 28251 Non-domestic cooling and ventilation
equipment. The Prodcom data are therefore of limited value for this analysis,
being too aggregated”[115].

Prodcom
data in respect of different types of air conditioning systems is now provided.
The “apparent production” values are derived from the reported figures and do
not take into account possible stock levels between production or import and
sale). The first category of Prodcom data relates to air conditioning systems,
self‐contained
or split‐systems.
The data shows that European manufacturing exports account for a small
proportion of total sales.

Table 4:  Window or wall air conditioning systems,
self‐contained
or split‐systems, Prodcom category
28251220, Million Euros

Year || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009

Exports || 87 || 96 || 98 || 147 || 173 || 155 || 119

Imports || 620 || 1,032 || 924 || 944 || 1,389 || 1,255 || 668

Production || 1,148 || 1,343 || 1,264 || 1,101 || 1,396 || 935 || 682

Apparent consumption || 1,681 || 2,279 || 2,089 || 1,898 || 2,612 || 2,034 || 1,231

Source:
Eurostat, Prodcom

Prodcom
data in respect of air conditioning machines with refrigeration units is now
provided. Again, the level of imports considerably exceeds exports.

Table 5:  Prodcom category 28251250: air
conditioning machines with refrigeration unit (excluding those used in motor
vehicles, self‐contained or
split‐systems
machines), million Euros

|| 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009

Exports || 375 || 404 || 422 || 430 || 502 || 631 || 509

Imports || 1,299 || 1,949 || 1,594 || 1,203 || 1,657 || 1,384 || 881

Production || 1,607 || 1,779 || 1,566 || 1,699 || 2,095 || 2,364 || 1,651

Apparent consumption || 2,532 || 3,324 || 2,738 || 2,473 || 3,250 || 3,117 || 2,023

Source:
Eurostat,  Prodcom (note – data on exports was not available in earlier years).

Lastly,
the third Prodcom category examined was air conditioning machines not
containing a refrigeration unit. Here, unlike in the first two areas, European
manufacturing is comparatively stronger, with exports considerably exceeding
imports.

Table 6:  Prodcom 28251270: Air conditioning
machines not containing a refrigeration unit; central station air handling
units; vav boxes and terminals, constant volume units and fan coil units,
million Euros

|| 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012

Exports || 188 || 215 || 244 || 270 || 344 || 390 || 328 || 344 || 467 || 459

Imports || 167 || 292 || 251 || 254 || 357 || 274 || 207 || 224 || 258 || 200

Production || 1,474 || 1,270 || 1,253 || 1,531 || 1,682 || 1,777 || 1,465 || 1,550 || 1,676 || 1,736

Apparent consumption || 1,453 || 1,347 || 1,260 || 1,516 || 1,696 || 1,661 || 1,344 || 1,429 || 1,466 || 1,477

Market
research data

In
the following table, data on the number of units sold annually in the EU based
on
product
sales data from market research are now provided. The
Prodcom figures are larger, which reflects the wider scope of Prodcom
classifications.

Table 7: Comparison of Prodcom and Market Research
Data (2009)

Air conditioning products || Market Research (no. of units sold annually in EU) || Prodcom value || Prodcom category

Chillers || 85000 || 2384000 || 28251250

AHUs for air conditioning and fan coil units || 184,000 + 1,140,000 = 1,324,000 || 1716000 || 28251270

Source:
Market research data and Prodcom, Analysis presented in Sustainable Industrial
Policy – Building on the Ecodesign Directive (DG ENTR).

The
data presented above from the market research report draws on a number of
sources, such as Eurovent sales data for EU27 for 2008 and 2009, market
research reports from BSRIA for six countries (an extrapolation was made for
EU27). Although the data is from 2008 and 2009, market research data provides a
more accurate picture than Prodcom data since it is disaggregated for air
conditioning and fans and for chillers[116].

Key
industry trends and challenges

A
number of key industry trends were identified through the research. These are,
in summary:

·
The
adverse impact on the market of the global economic and financial crisis, with
a significant drop in the numbers of air conditioning units sold in the
European Union in 2008, 2009 and 2010, albeit with a recovery in 2011 and 2012.

·
Convergence
of cooling and heating products and systems.

·
The
integration of more energy-efficient technologies into air conditioners and
cooling systems.

Annual
turnover in the sectors under review has declined due to the global economic
and financial crisis, in particular due to lower levels of construction
activity. This has led to reduced demand for new air conditioning systems.
However, demand for maintenance and repair services has been relatively steady
during this period. Although initiatives to reduce energy consumption at EU and
Member State level will help to boost demand for the installation of new,
energy-efficient units in future, the number of units sold in the European
market has declined overall in the past five years. The number of units has
fallen sharply across the EU to 9.2m units in 2007, and further still to only
5m units in 2009. It has recovered somewhat during 2010 and 2011, but declined again
to 6.65m units in 2012 (source: Eurovent).

There
has been a trend towards convergence in cooling and heating systems,
with integrated solutions becoming more common. Discussions with two air
conditioning associations found that more diverse air conditioning
solutions are needed.

A further key
driver has been the transition towards the use of more energy-efficient
technologies and parts and components in air conditioners and cooling
systems. This has been driven globally by European legislation on Ecodesign
implementing regulations to eliminate the worst-performing products.

.

3. Summary of applicable
IM legislation and standards

A
mapping exercise was undertaken to identify applicable IM legislation and
standards relevant to the air condition sector. The mapping of
IM legislation was based on desk research and discussions with individual
manufacturers and the information has been verified by industry associations.
The main applicable legislation, is in summary:

Low Voltage Directive (LVD)
-  2006/95/EC
Electromagnetic Compatibility
Directive (EMC) 2004/108/EC
Machinery Directive
(2206/42/EC)
Implementing Regulation on
Ecodesign requirements[117],
Regulation  206/2012 EC for air conditioning equipment below 12 kW.
Regulation Ecodesign
requirements for fans (327/2011 EC)
Regulation Energy Labelling 
Air conditioners  and comfort fans  (626/2011 EC)
Directive 2002/31/EC energy
labelling of household air-conditioners
Pressure equipment Directive
97/23/EC (PED)
REACH Regulation  (1907/2006
EC)
RoHS Directive
(2011/65/EC)
Packaging and packaging
waste (2004/12/EC)
Regulation Ecodesign
requirements electric motors (640/2009 EC)
Regulation Ecodesign
requirements glandless circulators (641/2009 EC)
Regulation Ecodesign
requirements water pumps (547/2012 EC)
The Gas Appliances Directive
(2009/142/EC) “GAD”, which applies to gas-fired air-conditioning units

It should be
noted that whereas
for electrically-powered air conditioners, among the core applicable
legislation is the LVD and the EMC, for gas-fired air-conditioning and/or heat
pump appliances, the GAD may provide the main legal framework. The focus in
this case however has not been on gas-fired air-conditioning. Since the HVAC
sector is very large, we have sought to focus on other types of
air–conditioning systems.

A more detailed
mapping of the applicable legislation is provided as an annex to this case
study. This provides a summary of the main issues addressed through the
legislation (e.g. product safety, energy-efficiency), key administrative
requirements for manufacturers and examples of relevant standards.

Although
environment legislation is formally out of scope, an overview of applicable
environmental legislation affecting air conditioners and air conditioning
systems has been mapped out and is provided in annex, since the interaction
between IM legislation and European environmental legislation has cumulative
effects.

Assessment
of gaps and loopholes, overlaps and inconsistencies

The
study required an examination of the extent to which there were gaps or loopholes
within specific pieces of IM legislation and overlaps and/ or inconsistencies
between different IM legislation. The desk research and interviews found that
there were no major problems, either in the air conditioning sector or for
industrial chillers. However, a number of specific issues were however
identified, although some of these have already been resolved.

For
instance, there was legal uncertainty as to whether the original
RoHS Directive (2002) should be applied to all air-conditioning systems or only
to portable units. During a public consultation on the Directive’s revision,
some industry stakeholders argued for a clearer distinction in the RoHS
Directive between ‘appliances’ and ‘systems’. In the recast RoHS Directive
(2011), it has now been clarified that there is an exclusion from RoHS for
fixed installed cooling, air conditioning and refrigerating systems and heating
systems designed for non-residential use. This has eliminated the legal
uncertainty that existed prior to the recasting exercise.

One
issue that does not yet appear to have been resolved is the need to develop
more consistent definitions in IM legislation that affect the air conditioning
industry so as to make the demarcation between the Machinery Directive (MD) and
Low Voltage Directive (LVD) clearer. Although the Commission has taken steps in
this regard previously and has incorporated clarifications into the guidance
documents on the MD and the LVD respectively, two of the air conditioning
manufacturers interviewed stated that there remains confusion among industry as
to whether these directives are mutually exclusive, or whether both directives
are applicable for certain types of products.  A large European air
conditioning manufacturing company commented in this regard that “whilst it
is clear in the legal text of the MD (2006) that there is mutual exclusivity
i.e. manufacturers should not apply both the LVD and the MD, there are no such
references in the legal text of the LVD to the types of product groups where
the MD is not applicable”[118].

Firm
C noted that there can be temporary regulatory gaps due to the lead times in
developing standards following the entry into force of new IM legislation. To
respond to this challenge, manufacturers typically use the closest available
standard in the first instance, and then the correct standard once available
can be used by designers at a later stage in the design process.

A
further issue related to divergence in the descriptions of similar technical
requirements across industrial product legislation. An issue was identified in
respect of possible duplication in technical standards.  A number of
manufacturers expressed the view that there are too many EN and ISO standards
overall for air conditioners, and this can causes confusion for economic
operators, since there are also overlaps between some standards.  Manufacturers
could be helped to select the most appropriate standards, for example, Firm D
stated that ‘there are many standards and sometimes
there are common elements in the text that repeat themselves. There needs to be
further consolidation and merging of standards’.

4. Analysis of costs of
compliance with IM legislation

10
interviews have been carried out as part of this case study, eight with firms,
of which six firms provided sufficient quantitative data to be able to quantify
the costs of compliance with IM legislation. Through the interviews, a good mix
was achieved between firms of different size and market share. Two out of the
top five global manufacturers were interviewed, as well as a large European
manufacturer of air conditioners and an SME producing chillers. In addition,
two interviews with industry associations have been carried out (see Section 8
– information sources). Comments and data have also been provided by an
international industry association (JRAIA - the Japan Refrigeration and Air
conditioning Industry). In the following table, basic information
about the firms interviewed is summarised:.

Table
8 - Basic information on the firms interviewed

Firm || Product category || Firm size || Annual turnover and sales from product in the EU || Main markets

A || Air conditioners & air conditioning systems || Large || Turnover £600m – 800,000 units || 98% of sales in EU28

B || Air conditioners & air conditioning systems || Large || Turnover (UK) €100m >200 units || Europe, the Middle East and Africa

C || Air conditioners & air conditioning systems || Large || NA but production in EU numbers in millions of units || 80% of sales in EU28

D || Industrial chillers || Small || 100 units || Ca. 100% of sales in EU28

E || Air conditioners & air conditioning systems || Large || 500,000 units || 33% EU 66% outside EU

F || Air conditioners & air conditioning systems || Large || €520m – 300,000 units || 50% sales EU28 50% outside EU (mainly Russia)

G || Air conditioners & air conditioning systems || Large || Turnover £42m - 2,500 precision aircon / 500 chillers || 80% UK 20% RoW (EU and Middle East (10%))

H || Air conditioners & air conditioning systems || Large || Turnover €200m No. of units not available || Europe, Asia, USA – evenly split

It should be
noted that sufficient data was obtained for SCM purposes from firms A, B, C, E,
F and G. Firms D and H were not included in the SCM analysis. In the case of
Firm D, this was because although data on human resources involved in
compliance and testing was provided, this was an outlier as a % of staff costs
compared with the total. In the case of Firm H, no data was available because
they currently outsource manufacturing to ODM suppliers so do not have any
information about compliance costs including testing.

In
this section, a summary of how compliance with IM regulations is managed in
enterprises in the air conditioners and air conditioning systems sectors is
provided. This sets out the main steps required in order to place an air
conditioner or air conditioning system on the market and considers the internal
business processes necessary. This provides important contextual information
for interpreting the costs of complying with IM legislation.

Overview
as to how compliance is managed by air conditioning manufacturers

As
mapped out in Section 3, a number of different pieces of IM legislation are
applicable to air conditioners. This includes longstanding New Approach
directives such as the LVD-D and EMC-D (applicable to all electrical
appliances) and more recent legislation adopted in the last decade, such as the
Ecodesign requirements (implementing regulations for air conditioners and fan
coolers), Energy Labelling requirements and requirements under RoHS and REACH
relating to substances used in the manufacture of air conditioners.
Additionally, air conditioners are subject to environmental legislation such as
the F-Gas Regulation 842/EC/2006[119]
and its different implementing regulations and the Energy Performance of
Buildings Directive 2010/31/EU (EPBD).

Large
firms and SMEs manage the process of ensuring regulatory compliance with IM
legislation in broadly similar ways. In large firms, there are commonly
separate divisions dealing with different aspects of regulatory compliance: a
regulatory compliance manager or department with overall responsibility for
compliance (including following EU legislation-making and standardisation
processes and familiarisation with the introduction of new and the revision of
existing IM regulations and the applicable administrative requirements), a
division dealing with research and development and product design, and a
division responsible for carrying out conformity assessment procedures through
product testing within in-house R&D and/ or testing laboratories.

Large
firms are in an advantageous position compared with SMEs however since they can
devote staff
to the earlier preparatory stages in the development and recasting of IM
regulations and in the development and revision of harmonised standards in
order to anticipate and respond to regulatory developments. SMEs also try to
follow and to anticipate regulatory developments.

SMEs
also try to follow and to anticipate regulatory developments but they have less
resources available to dedicate to this step. The European industry association
pointed out that there is anecdotal evidence to suggest that smaller
air-conditioning companies are leaving the market because of the complexity
/cost of the regulation. It was difficult to verify this assertion since the
smaller size segment of air conditioning companies were generally unwilling to
take part in the case (although one small chillers firm did participate – and
they were managing compliance with IM legislation). Five main steps
were identified in the process of achieving regulatory compliance for the study
and these have been used in order to quantify the current costs of compliance.
The steps are:

·
Familiarisation
with applicable/relevant obligations

·
Introduction
of processes or changes to product design and production processes to ensure
compliance with substantive obligations

·
Conformity
assessment procedures and relevant documentation

·
Declaration
of conformity or other statement of compliance and CE marking

·
Other
activities related to obligations posed by authorities

Firms
interviewed commented that while these five steps broadly reflect the processes
involved in achieving regulatory compliance, for large firms, there is in
addition a preparatory step that can involve significant time resources, that
of “keeping track of EU legislation and standards”.

Any
differences between firms in their approach to managing compliance are
commented on and the extent to which these differences are dependent on firm
size and on the number of products/models being produced.

The
companies interviewed were asked to assess the proportion of time FTEs spend on
each of the five steps of the above process.   Each firm provided slightly
different information on this aspect as a result of their internal set-up
considering factors such as the extent to which they relied on third party
testing services, as opposed to carrying out conformity assessment tests
in-house.

However,
familiarisation with IM legislation and the applicable administrative
requirements was generally seen as quite time consuming (e.g. firm G mentioned
that 30% of time was concentrated on this activity).  The introduction of
changes to product design and carrying out conformity assessment procedures
were also seen as time-intensive (e.g. firm D invests 60% of time in total on
these items).  However, the production of a declaration of conformity and other
activities stemming from regulatory obligations were generally seen as less
time consuming (e.g. Firm A spends 20% of time in total in this regard).  Staff
specialising in regulatory compliance spend more time on familiarisation
processes with IM legislation and less on the other five steps, whereas for
laboratory staff (engineers working in R&D and in testing) the majority of
their time is spent on carrying out product testing and on conformity assessment.

Familiarisation
with relevant legislation and purchase of standards

Preparatory steps – taking part in EU
legislation-making and standardisation processes

Several
of the larger air conditioning manufacturers interviewed stated that they
invest resources in following EU legislation-making and standardisation
processes. The aim is to enable them to shape and influence the development of
new and the revision of existing IM legislation.

This
enables them to anticipate legislative changes so that new regulatory
requirements or changes to existing requirements (and forthcoming updates to
technical standards) can be incorporated from as early a stage in the product
design process as possible.  This enables them to minimise substantive
compliance costs by factoring in new requirements from as early a stage in the
product design and R&D process as possible.

Large
firms interviewed often have dedicated staff specialising in regulatory
compliance. They are therefore able to actively contribute to EU legislation-making
processes, for example by participating in the work of EU industry associations[120],
responding to public consultations, attending workshops with industry
representatives in order to establish a consensus industry position on new
legislative proposals and taking part in EU standardisation processes.

Taking
part in this preparatory step involves time and human resource costs. Several
of the large firms interviewed have full-time regulatory compliance teams
consisting of between two and four FTEs.   A senior manager at a large European
manufacturer estimated that “Contributing to the policy debate regarding
Eco-labelling and Ecodesign took several years from the start of the
discussions until the adoption of these regulations. Given that both regulations
potentially have a significant impact on the air conditioning industry, during
the 2 year period leading up to their adoption was the most intensive, and the
amount of time spent on these regulations alone amounted to 0.5 FTE”.

However,
there are clear benefits for industry in actively following regulatory
development and standards-making processes. This enables large firms to
influence policy and legislative-making processes likely to affect them.
Industry may not always be happy with the end result, but at least has the
opportunity to influence the process.  More generally, this facilitates
regulatory compliance because large firms are then able to anticipate
forthcoming legislative changes and updates to technical standards. This
investment in participating directly in EU policy and legislative making
processes gives large firms a competitive advantage over their smaller rivals,
who typically follow regulatory developments but lack the resource to follow
new developments closely.

Familiarisation with applicable legislation and
administrative requirements

Familiarisation
activities are required to ensure that air conditioning firms are aware of the
applicable legislative and administrative requirements. At least in middle and
larger sized firms, this step requires input from dedicated regulatory
compliance staff who assume responsibility for keeping track of regulatory
changes and updates to harmonised technical standards. They are then
responsible for briefing different business divisions about new regulatory
developments,  such as product engineers, product managers and sales teams.

In
large firms, such as firm F, there is a division of 2-3 people providing
specialist in-house expertise on compliance matters. Another large company,
Firm B, mentioned that they employ a full-time regulatory specialist and one of
their main tasks is to update product managers, engineers and country sales
teams on new legislative developments and how these will affect different
product categories. They also provide guidance to colleagues on how new IM
legislation and changes to existing regulations should be interpreted. Whist
only a small number of full-time regulatory specialists are employed,
familiarisation with legislation is an activity that cuts across a number of business
functions (e.g. country sales teams and product engineers).  Consequently, it
was estimated that the total number of FTEs involved in familiarisation with
the legislation is equivalent to 15 full time staff.    However, Firm H tended
to use product safety consultants to provide specialist advice and consultancy
support to assist them in the familiarisation process with new legislation. It
should however be noted that there is an intention to move this function
in-house in the near future.

In
SMEs, familiarisation requires a significant effort, but there are less
dedicated resources available. Firm D, an Italian firm manufacturing chillers
employs a full-time manager who specialises in regulatory compliance to keep
track of regulatory developments. The person concerned estimated that
approximately 50% of their time was spent on familiarisation activities.  The
owner of the company also spends about 20% of their time on compliance matters
(of which about half on familiarisation).

Several
interviewees commented that familiarisation with more IM directives and
regulations introduced in the past five years take up a lot more time than
other pieces of legislation. Whereas the legal and administrative requirements
for long-established Directives such as the LVD and EMC are well-known to
manufacturers and have not changed fundamentally in years , a lot more time is
required for compliance specialists to familiarise with the requirements set
out in more recent legislation, especially legislation with either environmental,
consumer protection or energy-efficiency objectives, such as RoHS and the
Ecodesign implementing regulations.

Currently,
Ecodesign requirements only apply to small air conditioners under 12 kW and
comfort fans under 125W. There is a separate measure that applies to fans of
between 125 W and up to 500 kW even if they are included as a component in
larger equipment, as detailed in the following sub-section.

Introduction
of changes to product design and production processes to ensure compliance with
substantive obligations The introduction of new legislative requirements under
Union harmonisation legislation may require changes to be made to products
either during the R&D and design phase, during the production process and
in the case of fans integrated into products, also to  products that have
already been placed on the market.

The
costs of making such changes depend how far in advance air conditioning
manufacturers are aware about forthcoming changes and on the length of the
product life
cycle.
The research showed that it is much more costly for manufacturers to make
design changes to existing product platforms than it is to incorporate new
requirements into new product platforms or those at a very early stage in their
development.

An
Ecodesign preparatory study noted that the life cycle of air conditioning
platforms is typically between 10 and 12 years.  The life cycle of an
individual air conditioning model is longer than for other types of industrial
products[121]. Therefore,
the introduction of substantive obligations has a more significant impact on
air conditioners.

Since
basic air conditioning platforms form the basis on which products are updated
through the development of new models and variants, there can be major costs if
design modifications have to be made or particular components are withdrawn. 
Eco-design requirements were regarded as the most administratively burdensome
piece of IM legislation.  Implementing regulations setting out
ecodesign requirements for air conditioners and comfort fans (Regulation EU
206/2012) applied from January 1st 2013 to units of
<12KW. Since ecodesign targets the worst-performing products, redesign is
necessary only for approximately 20% of existing models.

 .

Even
though large air conditioning units and systems have not yet been made subject
to ecodesign legislation, the main implication has been that
lower-performing fans integrated into larger air conditioning systems and units
have had to be replaced or taken off the market for testing,
adaptation or permanent removal.

A
large European manufacturer of air conditioning systems, Firm G, commented that
although they only produce large air conditioning systems over 12 12 kW, they
have already been affected by the implementing regulations. “Ecodesign
requirements have meant that changes have had to be made to replace fans in
older products. Sometimes, fans have had to be withdrawn by suppliers because
they no longer meet the required performance threshold for energy efficiency” .
In such cases, the firm has then had to identify alternative energy-efficient
fans to incorporate as components into larger products, such as air
conditioners used for cooling purposes in data centres.

This
in turn requires updating the corresponding technical documentation and DoCs and
further testing has had to be carried out. Both Firm F and Firm G confirmed
that are indirect impacts as a result of fan products used as components being
withdrawn, such as a finished unit having to be retested under the EMC
Directive, because the old fan originally included as a component when the
product was placed on to the market is no longer compliant and a new type of
fan has had to be installed. Firm F commented however that ‘it is difficult to
quantify such substantive compliance costs’ since no data is kept on the total
costs incurred across a number of different products due to the replacement of
fans.

The
comments made confirm the findings from an earlier evaluation of the Ecodesign
Directive undertaken by CSES that there are some specific issues in respect of
the compatibility of ecodesign requirements for fans when these are integrated
into other types of products such as machinery and air conditioning systems and
larger air conditioners.

Firm
C suggested that since the core product safety directives applicable to air
conditioners change infrequently that the introduction of new (and updating of
existing) technical standards is a greater administrative burden than the
legislation itself. Firms A and B had difficulties in determining the exact
number of FTE involved in carrying out conformity assessment procedures under
IM legislation internally since  a significant proportion of manufacturing
takes place in Asia. It was therefore difficult for them to know the exact
number of engineers involved, especially since the engineers work on products
designed for the global market, which will then be designed and tested to meet
dual or multiple regulatory requirements.

There
can be difficulties for manufacturers in meeting regulatory requirements, while
at the same time addressing end-user and consumer needs. For instance, the aim
of increasing energy-efficiency is not always compatible with that of reducing
indoor and / or outdoor noise.

Conformity
assessment procedures

The
Supplier's Declaration of Conformity (SDoC) can be applied by manufacturers for
most types of air conditioners. Most manufacturers therefore carry out the
majority of product testing in internal laboratories, but may also use an
external third-party (on a voluntary basis) to carry out some aspects of
testing. The use of a third-party provides a useful external validation that
helps to ensure an additional guarantee for the enterprise.

A
European industry association indicated that although the SDoC procedure can be
applied to the LVD, most manufacturers prefer to use a third party. In
addition, some firms also make use of external product safety consultants in
order to provide advice and to help project manage the testing and compliance
process. For example, Firm H uses 2 consultants who work on a
working part-time basis for the company for approximately 3 months a year
advising on regulatory compliance linked to testing.

Firm
D (an SME with 64 staff) employs 7 FTE that deal with regulatory compliance /
conformity assessment, 2 of who deal with following regulatory compliance
requirements and 4 of who work in the internal testing department. Whereas the
EMC and the LVD were believed to be the least burdensome, Ecodesign, the MD and
the PED were regarded as the most costly pieces of legislation.  The firm has
invested in accreditation for internal production control under the PED in
relation to chillers which has limited its reliance on third parties.

Given
the relatively low number of units manufactured by the SME, the costs of
complying with IM legislation per unit are higher when compared with large
companies. This message was reiterated by Eurovent, the air conditioning
industry association that SMEs face much higher regulatory costs per unit. In
comparison, large
air conditioning manufacturers are able to spread the costs of compliance
across a large number of units produced and sold in European markets.

In
Firm E, 11 FTE are employed as regulatory and conformity assessment
specialists, 5 staff work on internal testing and R&D for air conditioning
and 4 staff perform similar activities but working for heaters. Firm E
suggested that the initial set-up costs for establishing internal testing
functions is expensive. This includes for safety tests (€30,000 to €40,000) and
performance tests (€30,000 to €40,000) and room and equipment instrumentation
(€200,000).  Annual costs include calibration services for instrumentation
(€20,000) and replacing instrumentation, estimated at between €30,000 and
€50,000.

Firm
F commented that Ecodesign particularly in relation to fans is the most costly
piece of legislation, followed by the EMC and the LVD. The MD was viewed as
being less costly.  In total, part of the job description of 20 product
engineers is to work on compliance-related matters and this equates to about
10-15% of their time e.g. 2-3 FTEs. The firm spends on average €1 million on
external testing per annum and this includes carrying out testing in respect of
the EMC-D and the LVD-D.  In addition, there are one-off costs associated with
the purchase of equipment  (€50,000) and annual costs for calibrating equipment
(this relates to €20,000 for IM regulations).

In
the case of the LVD Directive, one of the oldest New Approach Directives, most
testing is carried out by an in-house laboratory with a 3rd party technician
being present. However, many SMEs do not have such a laboratory facility and
therefore have to send samples to a 3rd party for testing. This means that
testing costs can be significantly higher, both in absolute terms and when
spread across the total number of units sold.  Perhaps surprisingly since the
legislation is long-standing and well-embedded, Firm E suggested
that the LVD was the most costly IM legislation[122] on
the grounds that even if  third party testing is not required,
there is a need to validate internal test results and to use a notified body to
test a random selection of products so as to provide
additional reassurance that the product is safe.

In
Firm G, conformity assessment procedures cut across the work of two specialised
departments that have a combined annual budget of approximately €1.4 million.
The development department is composed of 20 electrical and mechanical
engineers and CAD designers. The test centre is composed of 6 engineers that
evaluate designs and performance functionality. Overall, it is estimated that 3
FTE engineers spend 20 - 25% of their time ensuring that products are
compliant. This includes the development of technical reports and product
testing. With regard to salaries of staff working on compliance, one engineer
has a salary of approximately €60,000 per annum; the costs of annual testing
equipment were estimated in the region of €25,000.

Firm
G commented that the Machinery Directive and Low Voltage Directives were less
costly since the SDoC procedure can be applied. It was noted that some types of
industrial air conditioning units must comply with the Pressure Equipment
Directive (PED) .  Here, complex tests need to be carried out by third parties,
or if testing is carried out internally, there is a mandatory requirement that
this must be carried out by a third party[123].

Declaration
of conformity (DoC) or other statement of compliance and CE marking

Producing
a DoC and CE marking was seen as less costly compared with the previous steps
described. However, it was recognised that the minor administrative costs
involved at the end of the compliance process are only possible once the
preceding steps have been completed, which require investment by air
conditioning firms.

Firm
E stated that producing the DoC is neither problematic nor costly.  Firm H
stated that producing the DoC itself does not take up a lot of time, since the
information contained in the DoC can typically be fitted on to one sheet of A4
paper.  Rather, the conformity assessment procedures leading up to the DoC and
the development of a technical file are the most time consuming aspect.

Other
information obligations and administrative costs

Other
administrative requirements under Union harmonisation legislation can however
be costly. For instance, the requirement to translate instruction manuals into
all EU languages was viewed as costly. Under the LVD Directive, an instruction
manual must be supplied in the language where the product is sold. Some
interviewees noted that instruction manuals are becoming bigger and more
complex, with a requirement to “provide an ever-increasing number of safety
warnings to consumers”.  Firm E suggested that industry would prefer to
minimise the amount of text needed on products and to use pictorial symbols or
warnings rather than written text that needs to be translated. This would help
to reduce costs and reduce the length of compliance and other documentation
that has to be provided with products.

Another
point raised was that the administrative costs of producing energy labelling
(as opposed to the testing of products to check their energy efficiency which
is a substantive obligation and can be costly) have been kept to a minimum due
to the use of pictograms rather than text. Pictograms were viewed as
facilitating communication with consumers across the EU's multilingual market,
without the need to spend money on translation or on producing lots of paper to
accommodate translations into multiple languages.

5. Assessment of costs of
IM legislation for the whole sector

An assessment was
undertaken of the compliance costs of IM legislation for manufacturers in the
air conditioners and air conditioning sector.  As noted earlier, one chiller
company was also included. Since the wider HVAC sector is very wide, not all
categories of firm were interviewed (e.g. heating pumps firms). The aim was to
have a narrower focus on air conditioning.

As
noted in Section 4, the assessment was carried out on the basis of quantitative
information provided by six manufacturers (from the eight interviewed in
total). The
costs are related to turnover. In the first column, we seek to distinguish
between different types of costs. The distinction between one-off
and recurrent costs has been taken into account in the analysis, and some
costs, such as the costs of purchasing laboratory equipment have been
annualised[124].

A
summary of the estimated costs of compliance is provided below (it should be
noted that the costs presented in the table represent the net costs after
a deduction for “Business as Usual” costs has been taken into account).

Table 9 – Summary of main costs of compliance for
air conditioners manufacturing industry

|| Unit of measurement || Average cost/ year (total) || Estimated no. of firms || Total costs (annualised)

Compliance with administrative requirements || || || || € 17.198.600

Familiarisation || Manufacturers || € 64,617 || 100[125] || € 6,461,700

Preparation of DoC and technical documentation || Manufacturers || € 106,169 || 100 || € 10,616,900

Standards purchase || Manufacturers || € 1,200 || 100 || € 120,000

Conformity assessment (internal) || || || || € 23.524.975

Product design || Manufacturers || € 96,597 || 100 || € 9,659,650

Testing (internal) || Manufacturers || € 53,653 || 100 || € 5.365.325

Testing equipment || Manufacturers || € 85,000 || 100 || € 8,500,000

Conformity assessment (external) || || || || € 9,360,000

Consultancy/advisory services (product design) || Manufacturers || € 18,720 || 100 || € 1,872,000

3rd party conformity assessment by notified bodies || Manufacturers || € 74,880[126] || 100 || € 7,488,000

Total || || || || € 50.083.575

We now provide a
short overview of the key assumptions made in order to arrive at the above
annualised calculations.

The firms
interviewed provided data on the level of human resources involved in
compliance, for instance on familiarisation with the legislation and technical
standards and on how much time and FTE staff are involved in the preparation
and updating of DoCs and technical documentation. With regard to estimated salary
costs for staff working on regulatory compliance, there were considerable
differences between firms. As explained in Section 4, there were even major
variations in staff costs within firms, depending which aspects of
compliance were carried out in Europe and Asia. In order to provide a better
basis for comparison between firms, we therefore sought information on human
resources and applied a standard tariff using Eurostat data on average
salaries. The figures used were €30 an hour, which equates to about €50000 year
FTE.

Several firms were
also able to provide data on the internal and external costs of testing.
Where data was missing, imputations had to be made using data from those firms
that did provide data. For instance, one of the top 5 global players provided
data on their expenditure on third party conformity assessment, whereas the
other was unable to, since testing and conformity assessment was carried out in
Asia and the data was not available even internally. We therefore used data
from those firms that were able to provide estimates and used this as the basis
for assumptions about the level of expenditure for other firms (taking into
account other data that was provided, such as the volume of sales units
produced and sold in the European market, annual turnover and the number of
product platforms manufactured annually).

Firms were asked to
provide data on the costs of carrying out conformity assessment testing
in-house, for instance their annual expenditure on conformity assessment
procedures carried out internally(again taking into account the number of
product platforms manufactured annually), and the one-off and recurrent costs
linked to testing. This includes the one-off purchase of laboratory equipment
and the annual (recurrent) costs of calibrating testing equipment. Not all
firms were able to provide this data, either because of commercial sensitivity
considerations, or because the information was not shared internally by
particular divisions carrying out the testing (especially for the larger Asian
manufacturers). Nevertheless, sufficient data was obtained to be in a position
to make assumptions about the level of costs in a typical firm, depending on
its size, sales volume and the number of product platforms manufactured per
year.

In
quantifying the annualised costs of compliance, we attempted to take into
account which compliance costs were one-off and which were recurring. 
It is important to note that the distinction is often blurred between the two
in the case of compliance with IM legislation.   Examples of one-off costs are
the purchase of laboratory and testing equipment, R&D costs, third party
conformity assessment costs. Other costs are evidently recurrent, such as the
recalibration of testing equipment. However, the picture is more nuanced for
other types of compliance costs, which are both one-off and recurring. For
example, the cost of the preparation of a DoC and technical documentation is
mainly incurred prior to a product being placed on the market.  However, in
addition to these one-off costs, there are also recurring costs linked to the
need to update and maintain a DoC for 10 years post-placement on the market.
There is a need to update technical documentation, for instance, to reflect new
spare parts and components that are introduced as replacements once a product
is already on the market.  As regards product design, the costs are mainly
one-off, but there could also be recurrent costs if regulatory changes are made
and modifications to product design are needed once the product is on the
market.

 “Business as
Usual” (BAU) costs were also taken into account.  A number of air
conditioning manufacturers stated that a certain proportion (typically 20% to
30%) of product safety testing that they carry out can be considered as BAU
since it forms part of internal quality assurance procedures. A number of firms
stated that some testing would have been carried out anyway so as to minimise reputational
risk even if there is no legal requirement to involve a third party in
conformity assessment and the Supplier's Declaration of Conformity (SDoC) can
be applied. It was common among manufacturers interviewed to involve a third
party in testing for the Low Voltage Directive.

However, there was
wide variance in estimates of BAU between firms. A number of firms suggested
that approximately 50% of the human resources and cash costs of compliance were
BAU, whereas other firms interviewed estimated the proportion to be lower, at
15-25%. An interesting finding was that several manufacturers noted a
distinction in BAU depending on the objectives of different pieces of IM
legislation. A distinction can be drawn between safety requirements, which were
seen as an integral part of BAU and those IM regulations that related to
environmental requirements, which were viewed as imposing additional compliance
costs that would not occur in the absence of IM regulations.  The most commonly
cited example in this regard were the eco-design requirements.

Although firms may
consider some types of environmental requirements as part of BAU, for instance,
as part of their marketing strategy to differentiate products from competitors,
the % of BAU costs was much lower.  Firm C pointed out that the business as
usual case is hypothetical and that it was difficult to provide an accurate
quantitative estimate given that without EU regulation, national legislation
would apply for safety and environmental requirements. It was suggested that
this would create a more complex and fragmented regulatory landscape than is
currently the case.

6. Benefits of Internal
Market legislation

The
research also indicated some important benefits for economic operators from the
IM legislation. Air conditioning manufacturers do not have to design products
that meet 28 sets of different national legislative and technical requirements.
IM legislation has facilitated market access both for European and
international manufacturers selling across the Single Market. Although the
internal market has opened up competition to international manufacturers by
reducing market access obstacles, it should be noted that as explained in
Section 2, international manufacturers have also invested significantly in
setting up European manufacturing plants, and this has created direct and
indirect employment (estimated at 5000 and 15000 jobs respectively).

Another
benefit identified was the notion of “leverage on investment” from compliance
with Union harmonisation legislation. Large air conditioning manufacturers – by
dint of their global scale and scope - are in a position to leverage investment
in regulatory compliance in the EU through the development of product platforms
that are compliant with IM legislation and then customising products that are
designed to meet stringent European safety, environmental and consumer
protection requirements and either designing products for dual or tripe
regulatory jurisdictions (e.g. the EU, the US and China) or utilising some of
the results from the conformity assessment and testing process as the starting
point for achieving compliance in other global  jurisdictions, even if
differences in technical standards mean that some adaptations / customisation
of the product and / or retesting to different specifications may be necessary
to meet the different regulatory requirements across different markets.

A
further benefit of IM legislation is that it has encouraged the industry to
speed up the integration of energy-saving technologies into air conditioners
and air conditioning systems. Making air conditioning units and fans integrated
into air conditioners more energy-efficient should help to reduce energy
consumption and greenhouse gases. The Ecodesign regulations should also
stimulate the use of inverters technologies in Europe. These enable air
conditioning units to operate more efficiently by varying the speed of the
compressor according to its thermal load. Again, there is potential here to
contribute to reducing CO2 emissions.

Although
interview feedback found that industry views the Ecodesign regulations as
having led to increased costs, the regulations should over the medium-long term
provide an impetus to strengthening competitiveness by encouraging the “phasing
out” of older models and components.

7. Analysis of
simplification measures

 Through
the discussions, air conditioning manufacturers were asked about the extent to
which there was scope for simplification of IM legislation and administrative
requirements for economic operators.

Simplification
measures

There
was support among interviewees to reduce the number of (voluntary) technical
standards that manufacturers follow, since evidence of duplication between
standards was identified (which could be eliminated through a review process to
streamline standards). Although the use of such standards to meet the essential
requirements is voluntary, in practise, most manufacturers use harmonised
standards. Therefore, the costs associated with complying with these
regulations are seen as being part of overall compliance costs.

Although
responsibility for the development of standards is the responsibility of ESOs
under a mandate from the Commission, several firms stressed that it can be
difficult and time-consuming to determine which standards are applicable and
most relevant to their specific product group. A possible means of overcoming
this problem would be to develop product-specific standards for different types
of air conditioning products. Using a single ‘off-the-shelf’ standard would help
to reduce the amount of time firms spend in familiarising with multiple
technical standards.  The SME in the industrial chillers sector also supported
the idea of developing a single integrated standard for industrial chillers
that took into account all the relevant legislative requirements (e.g. the PED,
Machinery Directive, LVD and the EMC).

A
further suggestion to reduce the costs of compliance suggested by some large
air conditioning firms that export globally was to explore the scope for mutual
recognition schemes with third countries. This would facilitate exports and
avoid products having to be subject to further conformity assessed in different
jurisdictions, which is duplicative.  For example, it was noted that in
Australia, there is a requirement for third party testing of air conditioners
and air conditioning systems, whereas the SDoC procedure can be applied in
order to place a product on the internal market in Europe.  A mutual
recognition agreement between Europe and key trading partners such as the US,
Russia, Australia and the BRICs would help to minimise the costs incurred by
European industry in exporting air conditioning products to new jurisdictions.

A
summary of possible simplifications identified through the interviews with air
conditioning manufacturers is now provided. This provides a qualitative
assessment of possible benefits:

Table 10: Proposed simplification measures, benefits
and possible savings

Proposed simplification || Explanation || Benefits

Review technical standards to eliminate duplication and overlap between standards || There is a need to consolidate technical standards wherever these overlap so as to limit the overall number of technical standards. || Reduction in number of standards followed by manufacturers Time saving in familiarisation costs with standards

Integration of measurement methods for all IM legal requirements into a single technical standard. || Development of product-specific standards encompassing all[127] || Time saving in familiarisation costs with standards

Setting up mutual recognition schemes for conformity assessment procedures with major global jurisdictions || Whereas the SDoC is accepted under most IM regulations, 3rd party conformity assessment is mandatory in other jurisdictions (e.g. US, Australia). This can result in manufacturers having to retest products that have already been placed on the European market. || No double testing of products for conformity assessment purposes Reduced need for third party conformity assessment services.

In
the following table, we then provide estimates of possible cost
savings from these simplifications in so far as these were possible to
quantify.

Table 11: Estimates of possible cost reduction costs
of compliance for air conditioners manufacturing industry

|| Unit of measurement || Reduction per unit || Total quantity || Total cost reduction

Review technical standards to eliminate duplication and overlap between standards[128] || Manufacturers || € 400 || 100 || € 40.000

Integration of IM legal requirements into a single technical standard[129] || Manufacturers || € 9.693 || 100 || € 969.255

Setting up mutual recognition schemes for conformity assessment procedures across key global jurisdictions (e.g. EU, US, Russia, China, etc.)[130] || Models || n.a. || || € 374.400

Total || || || || € 1.383.655

It
should be noted that the estimated simplification savings are approximate. It
is difficult to quantify savings because manufacturers are themselves unable to
quantify the expected level of benefits and cost reductions. Moreover, there is
a lack of baseline data on many types of costs.  For instance, in order to
accurately quantify the cost savings of implementing a mutual recognition
scheme, it would be necessary to have data on the costs of third party
conformity assessment in third countries and the comparable costs in the EU for
manufacturers of following the Supplier's Declaration of Conformity (SDoC)
procedure. Estimating the latter is complicated by the fact that even when
manufacturers use SDoC, they often carry out some testing themselves, while
using a third party to undertake some aspects of testing on an outsourced
basis. .

Measures
to improve the effectiveness and efficiency of the regulatory landscape and
help to remove uncertainty.

In
addition to possible simplification measures, manufacturers noted that
compliance costs could in some cases be kept in check if the Commission were to
take steps to ensure that current ambiguities in the IM regulatory framework
are eliminated, since this would remove current legal uncertainty with regard
to what the requirements are.  In addition, access to relevant information
could be made more accessible thereby enhancing the efficiency of the
‘familiarisation with the legislation step.

Familiarisation
with legislation is a major cost for manufacturers. Currently, regulatory
compliance specialists need to continually engage with industry associations,
attend industry events and speak with their suppliers in order to keep track of
upcoming regulatory developments.  Manufacturers are consulting national
standardisation authorities to ensure that they keep abreast with ongoing
updates and developments.  A number of different sources are drawn upon to
ensure that firms are fully informed.  As a result, a lot of time and effort is
being invested in this area and it is likely that not all firms are equally
engaged in the process.  To address this issue, the Commission could set up a
centralised online repository for keeping track of the introduction of new, and
changes to existing IM directives and regulations and updates in the applicable
standards. This could provide details for individual product groups. This could
reduce the human resources needed by manufacturers to keep track of regulatory
changes. The familiarisation step is clearly an area where the Commission could
help to create a level playing field for market participants and ensure that
there is equal access to the latest regulatory information and development in
the fields of standards.

In
addition, the point was made that there is some ambiguity in the wording in the
NLF as to the translation requirements for DoCs.  The industry is accustomed to
producing DoCs in EN and this has met the needs of Market Surveillance
Authorities since the introduction of the New Approach.  However the wording in
the NLF is ambiguous as to whether the use of the relevant national languages
is required or is EN is permissible[131]. Clarifying
this matter with a view to retaining the longstanding linguistic approach of
using EN would remove any ambiguity and sustain the current level of efficiency
in this area.

Table 12: Proposed efficiency enhancing measures and
benefits

Proposed measure  || Explanation || Benefits

Provide clarity as to whether DoCs need to be translated into all EU languages || There is a need to remove ambiguity as to whether DoCs can be translated in EN for the EU market or if Member States translations are required. || Ambiguity for manufacturers will be reduced and the currently level of efficiency in producing DoCs will be maintained.

Development of an online repository of regulations and indication of the relevant standards (and where they can be purchased) for specific product groups and providing an overview of (future) updates and developments.  || Currently ensuring that firms are up to date with legislation and standards requires investment in keeping abreast with developments in multiple areas with information being retrievable from several sources.  This could be centralised and made more coherent. || Familiarisation with the legislation and standards represents a major cost for industry. Providing the most up to date information located in a single source will help to reduce costs in this area.

8. Overall conclusions

This
case study focused on air conditioners and air conditioning
systems. Since the HVAC industry is very broad, it was not possible to include
all categories of air conditioner.

There
were difficulties in obtaining reliable data on the air conditioning sector in
Europe since Prodcom data was only available at a high level of aggregation.
However, global market data shows that the manufacturing of small air
conditioners (<12 KwH) and comfort cooling systems is dominated by a small
number of global manufacturers, especially from East Asia (the EU has only an
estimated 7% share).  According to data on the size of the world market for air
conditioning in 2013, global production was 98m units in 2013, whereas the size
of the European market was about 6.65m units sold in 2012. European
manufacturers have a stronger market share in niche markets such as chillers
and high-end data cooling systems.

IM
legislation applicable to air conditioners and air conditioning systems
includes some of the core product safety directives such as the Low Voltage
Directive (LVD) and the Electromagnetic Compatibility Directive (EMC). In
addition, IM legislation with an environmental focus is applicable, for
instance the Ecodesign implementing regulations for small air conditioners and
comfort fans <12kwH. From 2015, the extension of ecodesign requirements
through Lot 3 Ecodesign Implementing Regulations for larger air conditioners is
likely to result in extra administrative costs for industry. These future costs
are expected to be quite high compared with well-established IM legislation.

On
the basis of information provided by the eight companies interviewed, most of
whom were able to provide quantitative information, the costs of compliance
with IM legislation were estimated at around €50.8 million, equivalent to c.a.
1% of annual turnover. Administrative compliance costs (familiarisation with
the legislation and applicable administrative requirements, the preparation of
a DoC and technical documentation) were estimated to be approximately €17.2
million. Substantive compliance costs, such as integrating IM regulatory
requirements into product design and carrying out testing as part of conformity
assessment procedures (internally and externally) were estimated at € 23.5
million per year.

The
interviews with firms were consistent in pointing to the Ecodesign Directive as
one the main current cost drivers of compliance-related activities. It was
acknowledged however that the costs of the introduction of new legislation,
whilst high in the short-term tend to diminish over time as the legislation
becomes better embedded. The need to replace fans integrated into larger air
conditioning systems already in the development pipeline or about to be placed
on the market was a particular industry concern, since many fans do not meet
eco-design requirements.

The
air conditioning industry was broadly supportive of internal market legislation
in providing a regulatory framework that avoids country-specific divergence
across different national markets. However, they were concerned that
their industry is especially impacted by the high administrative costs of IM
legislation that has a strong environmental focus.

As
regards the possible scope for simplification, there were no suggestions
relating to IM legislation itself. Rather, proposed measures related to the
need to eliminate duplication due to perceived overlap between different
technical standards. The possibility of integrating all IM legal requirements
into a single technical standard so as to overcome duplication was raised by
two firms.  Total potential savings were these and other measures, such as
strengthening the mutual recognition of conformity assessment across different
jurisdictions, were estimated to be €1.4 million.

9. Sources of information
- interviews
References
- Sources

·
Preparatory
study on the environmental performance of residential room conditioning
appliances (airco and ventilation), Economic and Market analysis, July 2008.

·
Market
research data and Prodcom, Analysis presented in Sustainable Industrial Policy
– Building on the Ecodesign Directive (DG ENTR).

·
A
comprehensive overview of applicable legislation in the area of Ecodesign, the
Energy Performance of Buildings Directive and the Energy Labelling Directive
was produced recently as part of an Ecodesign preparatory study for air
conditioning equipment above 12 kW – see www.ecohvac.eu, task 1, page 128-160.

·
JARN,
the “Japan Air Conditioning, heating and refrigeration news” magazine, 25 May
2013  Prodcom data, 2010.

Interviews

- 1 with a national association in the UK (FITA), and
1 with an EU Industry association (Eurovent).

- 7 interviews with manufacturers of air conditioners,
1 interview with a manufacturer of chillers (6 of the 8 discussions yielded
quantitative data.

Annex - Applicable IM legislation and
standards

This
Annex provides information that supplements the summary overview of the applicable
IM legislation and standards in Section 3 of the case.

A
mapping exercise was undertaken to identify applicable IM legislation relevant
to the air conditioning sector. An overview of relevant legislation and of
relevant technical standards is now provided. This draws on desk research and
has subsequently been verified by industry associations and enterprises. There
are differences in the applicable legislation and technical standards depending
on the size of the air conditioning system and its intended purpose (e.g.
domestic, industrial, fixed installations vs. portable air conditioners). For
example, Ecodesign implementing regulations have only so far been introduced
for air conditioning systems <12 kW, although as will be shown in this case
study, the withdrawal of non-compliant fan products can also affect
manufacturers of larger air conditioning and precision engineering systems
which integrate such fans into their products. The PED is only relevant to
larger air conditioning systems for industrial use.

Table 13: Overview of IM legislation and standards
applicable to air conditioners and conditioning systems

Name of legislation || Main issue addressed (safety, environment, other) || Administrative requirements for economic operators || Relevant standards

Core legislation

Low Voltage Directive (LVD) -  2006/95/EC || Health & Safety  (electrical) || Testing according to relevant safety standards Development of technical file Declaration of conformity and CE marking Installation instructions and manual for final consumer (with translations) || Two applicable standards to achieve presumption of conformity for portable and household air conditioning: Part 1 EN 60335-1 (general standard applying to household and similar electrical appliances) Part 2 EN 60335-2-40 Particular requirements for electrical heat pumps, air-conditioners and dehumidifiers EN 50564:2011 Ecodesign – stand by and off mode:

Electromagnetic Compatibility Directive (EMC) 2004/108/EC || Electromagnetic compatibility || Testing according to relevant technical standards Development of technical file Declaration of conformity and CE marking ||

Machinery Directive (2206/42/EC) || Safety || Development of technical file Declaration of conformity and CE marking Installation instructions and manual for final consumer (with translations) || Only applicable to air conditioning systems intended for industrial and/ or commercial use Requirements of the directive for cooling generators of ENTR Lot 6 are covered under the following standards: - EN 12693:2008 Refrigerating systems and heat pumps - Safety and environmental requirements - Positive displacement refrigerant compressors -  EN 378-2:2008+A1:2009 Refrigerating systems and heat pumps - Safety and environmental requirements - Part 2: Design, construction, testing, marking and documentation

Gas Appliances Directive (GAD) 2009/142/EC || Specify the safety level required of appliances burning gaseous fuels by specifying design, operating characteristics and inspection procedures. || || Two harmonised European standards have been cited in the OJEU under the GAD: (1) EN 12309-1:1999: Gas-fired absorption and adsorption air-conditioning and/or heat pump appliances with a net heat input not exceeding 70 kW - Part 1: Safety; and (2) EN 12309-2:2000: Gas-fired absorption and adsorption air-conditioning and/or heat pump appliances with a net heat input not exceeding 70 kW - Part 2: Rational use of energy[132]

RoHS Directive (2011/65/EC) || Use of hazardous chemicals || Collect compliance statement from suppliers (material declarations) Technical file with supplier declarations and own analysis tests Declaration of conformity to be kept for 10 years || Note: since the 2011 recast Directive, there is an exclusion from RoHS for fixed installed cooling, air conditioning and refrigerating systems and heating systems designed for non-residential use. CE marking has been applicable since the 2011 RoHS II recast.

Implementing Regulation on Ecodesign requirements[133]:   Regulation  206/2012 EU for air conditioning equipment below 12 kW and comfort fans. || Energy consumption/ efficiency || Testing according to harmonised standard Technical file with results of studies and explanations of design choices made and the management system Development of product fiche Declaration of conformity and CE marking Installation instructions and manual || EN 14511:2011 Determination of Full load energy  efficiency EN 14825 2011  Determination of part load energy efficiency EN 62301:2005 (CEN) Standby power consumption EN 12102:2008 Sound power level (CEN) Notes: · Applies from 1st January 2013. A regulation on Ecodesign requirements for equipment above 12 kW is in preparation.

Regulation Ecodesign requirements for industrial fans (327/2011 EU) || Fan efficiency || Development of technical file Declaration of conformity and CE marking Installation instructions and manual for final consumer (with translations ||

Regulation Energy Labelling  Air conditioners  and comfort fans   (626/2011 EU) || Energy consumption/ efficiency || Technical file with results of studies and explanations of design choices made and the management system Development of product fiche Placing of energy label || EN 14511:2011 Determination of Full load energy  efficiency EN 14825 2011  Determination of part load energy efficiency EN 62301:2005 Standby power consumption (CEN) EN 12102:2008 Sound power level (CEN)

|| || ||

Other legislation

|| || || ·

|| || ||

|| || ||

|| || ||

Pressure equipment Directive 97/23/EC  (PED) || Safety of pressurized systems || Development of technical file Declaration of conformity and CE marking Installation instructions and manual for final consumer (with translations) || EN 378: 2012 environmental & safety requirements Note: only applies to larger air conditioners

REACH Regulation  (1907/2006 EC) || Use of chemicals || Collect statement from suppliers stating that product is in compliance with requirements REACH compliance statement ||

Packaging and packaging waste (2004/12/EC) || Packaging || Declaration of Conformity ||

Regulation Ecodesign requirements electric motors (640/2009 EC) || Motor efficiency || Development of technical file Declaration of conformity and CE marking Installation instructions and manual for final consumer (with translations ||

Regulation Ecodesign requirements glandless circulators (641/2009 EC) || Circulator efficiency (chillers) || Declaration of Conformity CE marking ||

Regulation Ecodesign requirements water pumps (547/2012 EU) || Circulator efficiency (chillers) || Declaration of Conformity CE marking ||

The
European Union’s Ecolabel Regulation 66/2010 is a voluntary labelling scheme
and can be awarded to products and services that have a lower environmental
impact compared with other products in the same group. The label criteria were
devised using scientific data on the whole of a product’s life cycle, from
product development to disposal. There is a link between the voluntary Ecolabel
and compliance with Ecodesign regulations in that products bearing the
Community eco-label are presumed to comply with the Ecodesign requirements
stated in the applicable implementing measures.

Although
EU environmental legislation is not formally within study scope, such
legislation is particularly important in the air conditioning industry since it
forms part of the overall body of EU legislation with which manufacturers must
comply. A summary of the main environmental legislation that applies to air
conditioners is summarised below:

Table 14:  Overview of
applicable environmental legislation affecting air conditioners and air
conditioning systems

Name of legislation || Main issue addressed (safety, environment, other) || Notes and references to relevant standards

F-Gas Regulation (2006/842/EC) || Containment of greenhouse gases || F-gas regulation and its 10 supporting implementing regulations (leakage, certification personnel, labelling, etc.). Note: legislation under revision due to proposal to revise F-gas Regulation, COM(2012) 643 The aim is to reduce the emissions of fluorinates greenhouse gases covered by the Kyoto Protocol.

Implementing Regulations for  the F-Gas Regulation Labelling F gas (1494/2007 EC) || Labelling Certification of technical personnel and companies Leakage || Personnel & company certification is mandatory and concerns personnel who install, maintain or service systems; leak check systems

Energy Performance of Buildings Directive 2010/31/EU (EPBD) || Energy Performance in buildings || Articles 15,16,17,18 deal with the inspection of air conditioning systems, but also the impact of national/ regional calculation methods e.g. SAP in UK, En EV in D, RT 2012 in F There are also a set of related standards developed under CEN TC 113 and CEN TC 228 Energy Performance of Buildings Directive. CEN Standard EN15251 (comfort conditions regarding temperature and humidity).

WEEE Directive (2012/19 EC) || Waste of electrical equipment || The scope is defined in the IA Annex of the WEEE directive (2002/96/EC). Air-conditioning products are dealt with in the IB Annex under ‘Large household appliances’, as ‘Large cooling appliances’, ‘Air conditioner appliances’, ‘Other fanning, exhaust ventilation and conditioning equipment’.

Case
study 8 – Integrated Circuits

1. Introduction –
objectives of the study

The
product groups examined in this case study are integrated circuits. This covers
a wide variety of products, sub-components and final applications as explained
further in section 2, below.

The
aim is to analyse the applicable IM legislation, assess the costs associated
with the implementation of the applicable IM legislation, identify areas of
overlaps and conflicts between the different parts of the legislation that may
lead to problems and costs to industry. This case will also identify and assess
the benefits of possible simplifications. The rationale
for the selection of these product groups was that:

·
Integrated
circuits are a fully globalised product group, with important centres of European
expertise integrated into the global value chain and which are directly
impacted by European legislation

·
Integrated
Circuits are manufactured in stages, with a number of processes between the
first step and the final application in a product. Costs are incurred at each
stage of the production process

·
Integrated
Circuits are perhaps the single most prominent Key Enabling Technology, and are
one of the key factors to realise the overall policy objectives of Europe 2020.
As such, integrated circuits are the subject of a newly-released European
strategy for micro- and nonelectrical components and systems

·
Integrated
circuits are a key input into a number of additional products and are used
primarily by professional users.

This
case study is based on desk research and qualitative interviews. In the first
phase of the project, structured desk research was carried out in to establish
an overview of the integrated circuit industry, identify relevant pieces of
legislation and standards, and to identify companies within the industry. An
interview with The European Semiconductor Industry Association (ESIA) was then
carried out. Thirty-five companies were contacted for interviews. In
the end, eight interviews with firms were carried out. The
interviews covered one of the largest European-based manufacturers of
integrated circuits, another large European manufacturer, one of the largest
global manufacturers, based in Asia, and inputs from five smaller ‘fabless’
manufactures in a variety of applications. A number of companies declined to
participate in the study, citing difficulty in assessing costs or, in many
cases, confidentiality reasons.

2. Product definition and
description of structure of the sector

According
to the standardised language adopted by the International Electrotechnical
Commission, a semiconductor is a device whose essential characteristics are due
to the flow of charge carriers within a semi-conductor. According to IEC
521-10-03, this includes any microcircuit in which all or some of the
circuit elements are inseparably associated and electrically interconnected so
that it is considered to be indivisible for the purpose of construction and
commerce. This includes a number of applications. The following PRODCOM
categories have been used to outline the scope of the product group.

Products within scope

26112240 - Photosensitive semiconductor devices; solar cells, photo-diodes, photo-transistors, etc

26113003 - Multichip integrated circuits: processors and controllers, whether or not combined with memories, converters, logic circuits, amplifiers, clock and timing circuits, or other circuits

26113006 - Electronic integrated circuits (excluding multichip circuits): processors and controllers, whether or not combined with memories, converters, logic circuits, amplifiers, clock and timing circuits, or other circuits

26113023 -Multichip integrated circuits: memories

26113027 - Electronic integrated circuits (excluding multichip circuits): dynamic random–access memories (D RAMs)

26113034 - Electronic integrated circuits (excluding multichip circuits): static random–access memories (S–RAMs), including cache random–access memories (cache–RAMs)

26113054 - Electronic integrated circuits (excluding multichip circuits): UV erasable, programmable, read only memories (EPROMs)

26113065 - Electronic integrated circuits (excluding multichip circuits): electrically erasable, programmable, read only memories (E²PROMs), including flash E²PROMs

26113067 - Electronic integrated circuits (excluding multichip circuits): other memories

26113080 - Electronic integrated circuits: amplifiers

26113091 - Other multichip integrated circuits n.e.c.

26113094 - Other electronic integrated circuits n.e.c.

As is clear by
the range of product types, the product category of integrated circuits
contains a number of sub-types. In general, integrated circuits are the
building blocks of a number of technologies that make up micro- and
nano-electronic components and systems. This includes the semiconductors used
in all types of digital application used in electronics, automotive, and
medical devices. In addition, integrated circuits are moving into an additional
range of applications that further complicate the sector. New technologies such
as wearable applications are driving breadth of integrated circuits into new
product types.

Market
size and Industry Structure

The
global turnover of the semiconductor sector has been estimated at €230 billion
in 2012, while the value of products comprising micro- and nanoelectronic
components represents around € 1,600 billion worldwide and has grown by 5% per
year since 2000.[134]

The
starting point for the size of the European market is the Eurostat PRODCOM
database, supplemented by additional market studies. In the PRODCOM database
the specific product are covered under the code 261130-XX. Based on data,
turnover is in the range of EUR 56.8 billion. Other sources
suggest a somewhat smaller industry, with European turnover in 2011 amounting
to EUR 30,3 billion.[135]  The most
comprehensive report outlining the profile of the Integrated Circuits market is
the EU Trade in Electronics Sector Fiche, which is cited by the Industry
Association as an authoritative source of market information. The Sector Fiche
indicates a market size of

Industry Structure

Semiconductor products
are multinational composites, and the industry is highly decentralised and
diverse. The
process of manufacturing can be broken down into discrete steps, with up to 600
sequential operations for each circuit. Final products
are based on wafer processing, testing, and assembly, which generally take
place in different places, often in different regions across the globe. The
value chain is very complex and long, with the industry moving into even
greater levels of fragmentation.

Developing
newer generations of chips, becoming smaller and more powerful at an
exponential rate, requires a high degree of precision in the fabrication
process and higher levels of investment. In the 1980s, a new business model
emerged to help solve the need for constant investment, called the “foundry”
model, comprised of different types of manufactures. Large foundries, called
“fabs” are able to increase the volume of their production to a sufficient
scope to allow them to update assembly and photolithography systems, and are more
commonly located in the Asian Pacific region. The Taiwan
Semiconductor Manufacturing Company (TSMC) is the world's largest dedicated
independent semiconductor foundry, with its headquarters and main operations
located Taiwan. As a corollary industry, the “fabless”
semiconductor company model, is comprised of firms focused on design,
marketing, and sale of circuits while benefitting from lower capital costs
while concentrating their research and development resources on the end market.

The
industry continues to bifurcate into two types of integrated circuit producers:

·
Integrated
Device Manufacturers (IDM) that design, manufacture and sell
their chips. This includes firms in the United States (e.g. Intel), Asia (e.g.
Samsung), and in Europe (e.g. STMicroelectronics, NXP, Infineon).

·
Fabless
manufacturers that design components and provide integrated
circuit products and services to customers but outsources manufacturing to
foundry companies. Fabless manufacturers often source their products from
multiple foundries to optimise their supply chain and secure constant access to
materials.

·
A
hybrid ‘fab-light’ model has also emerged, which is based on maintaining
some high-value manufacturing in-house but outsourcing the rest to a foundry.

The
continued migration of production to ‘low cost’ labour countries combined with
the continued high rhythm of technological change has driven companies to focus
on core competencies, meaning that European firms are increasingly specialised
in one component of the value chain.[136] The
emergence of a networked model has allowed for – and subsequently encouraged –
a greater degree of specialisation and opportunity for new entrants in
highly-innovative areas of design, logistics, services, and computer-supported
manufacturing.

This
globalisation of the industry has also created a very long and complex supply
chain in which European firms increasingly focus on collaboration and
industrial partnerships. It is common for companies to rely on supply chains
for most subcomponents, with third party testing occurring at various stages
along the production phase, depending on the product type, country of origin,
and intended final application.

The European
industry is driven by a high research-intensity, with the highest R&D
intensity of any sector in Europe, at 14.8 percent.[137]
Industry clusters are important in the integrated circuits sector, given the
high R&D intensity and the need to specialise. The most significant
European clusters are located around Grenoble (France), Eindhoven (Netherlands),
Dresden (Germany) and Dublin (Ireland), but other European clusters such as
Catania in Italy also have global presence. It also appears that the leading
clusters will reinforce their position as technology transitions to a new
platform based on 450 mm wafers.[138] To sustain
these clusters, European-wide supply chains have developed, with additional
high-tech clusters in increasingly specialised fields (such as Helsinki and
Vienna). Table
1 outlines key descriptive data on the European market.

The
largest manufacturer is located in Taiwan (TSMC). Within the top 20 producers
in terms of worldwide sales, only three are located in Europe:
STMicroelectronics, Infineon, and NXP. Global rank among the largest European
manufactures is provided in Table 2, below.

Table 2: Top European manufacturers - 2010

Global Rank || Company || Country || Revenue (million USD) || Market Share (percentage)

7 || STMicroelectronics || France/Italy || 10, 290 || 3.4

13 || Infineon || Germany || 6,226 || 2.0

17 || NXP || Netherlands || 4,021 || 1.3

While
European manufacturers do not command a large global share, some producers of
integrated circuits have established sites in Europe, including sales, design,
and research along with some production as well capacity. In 2011, European
production represented less than 10 percent of global production, down from a
high of 16 percent only a decade earlier. Nevertheless, in
Europe, micro- and nanoelectronics is responsible for 200,000 direct and more than
1,000,000 indirect jobs. [139]

Table 1 – Data
on market size and industry structure

Parameter || Data

EU Market size || Market reports (2011) EUR 30.3 billion

Production volume/value in Europe || PRODCOM – Production Value (2010) – EUR 49.2 billion PRODCOM - Production Quantity: 11.415.218.521 units

Imports  || PRODCOM - Value of Imports: 11.174.225.410 units

Exports || PRODCOM - EUR 8.8 billion

Number of enterprises || PRODCOM (2010) 6,984

Total Turnover || PRODCOM - EUR 56.8 billion

Number of employees || ESIA (2012) 200,000 direct employment PRODCOM (2010) 215,000

Source: Eurostat and market reports

The
Final Report of the High-level Expert Group on Key Enabling Technologies[140]
estimates that the European sector will enjoy a compound annual growth rate of
13 percent over the next years. But the industry data itself does not tell the
complete story of the value of the integrated circuits sector to the overall
European and global economy. Integrated circuits constitute a Key Enabling
Technology (KET) and are valuable for the economic potential, their
value-adding and enabling role, as well as their technology and capital
intensity in terms of R&D and initiation investment costs.[141] The
image below outlines the economic impact of the sector, both in terms of
providing a market for suppliers of materials and equipment, moving up into
direct employment and the subsequent industries enabled by the presence of
software.

Figure
3: Value of Enabling Technology

Source:
ESIA, 2010

3. Analysis of applicable
IM legislation and standards

On
the basis of desk research and input from firm interviews, we have identified
the list of applicable pieces of Internal Market legislation, the basic
administrative requirements and the relevant harmonised standards that can be
used by manufacturers to meet the essential requirements.

In
response to the internal market legislation, a number of standards have
been developed, as outlined in table 2, above. Integrated
circuits are highly technical and subject to broad international
standardisation. Extensive standards exist. Given that the range of potential
applications and sub-groups is limitless, only the major product-specific
regulations have been reviewed. The table is meant to illustrate key standards
that are aligned with specific requirements from internal market legislation,
and is far from comprehensive.[142]

Standards
vary according to the organisation issuing them. A number of standard-setting
organisations exist, such as industry-led bodies (JEDEC), as well as the IEC
and ISO/CEN. The IEC have been active in developing recent standards for the
industry, as it focuses on the electronics industry.

Table 2 –
Summary of IM legislation covering Integrated Circuits

Name of legislation || Main issue addressed || Requirements for economic operators || Relevant standards

RoHS (2011/65/EC) || Use of hazardous chemicals || Collect compliance statement from suppliers (material declarations) Technical file with supplier declarations and own analysis tests Declaration of conformity to be kept for 10 years || EN 50581:2012   IEC62321

General product safety Directive || Health & Safety || Provide identification of the product by a product reference Carry out sample testing of products, keep a register of complaints and keeping distributors informed of such monitoring (voluntary) Inform authorities of dangerous products and actions taken to prevent risk Co-operate with the authorities upon request || CENELEC: EN 60950-1:2006/A12:2011

EMC  2004/108/EC || Electromagnetic compatibility, mostly in the downstream applications of some integrated circuits || Testing according to standards Development of technical file Declaration of conformity and CE marking || IEC 61000 IEC 61967 IEC 62132

Packaging and packaging waste (2004/12/EC) || Packaging || Declaration of Conformity ||

REACH || Use of chemicals || Collect statement from suppliers stating that compliance with requirements REACH compliance statement || IEC 62474

The review of the
various requirements and the discussions with manufacturers pointed to a few
issues in relation to the implementation of the legal framework and the
requirements:

-
Of
the regions that produce integrated circuits, Europe is the most
highly-regulated region in the world and plays a key role in the development of
global standards. Given the globalised nature of the industry, with highly
developed supply chains, undue or particularly burdensome regulation can cause
shifts in production location. The initial analysis suggests that most
Directives place rather similar obligations on industry; namely, revise the
design of some products and then subsequent requirements to test, document, and
declare conformity to specific requirements.

-
This
uniformity in across the sector was pointed out in the interviews with firms as
being a positive aspect of the current framework. The industry is in general
agreement that the legislation and the surrounding legislative framework are
fairly positive. However, specific instances of duplication and inconsistencies
have been identified.

-
The
most specific piece of legislation relating to integrated circuits is the RoHS
Directive, which has been in effect since 2006. It was recently updated, known
as RoHS2 (2011/65/EU), to address some uncertainties raised by industry and to
increase market surveillance. RoHS2 bans new electrical or electronic equipment
containing lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl
and polybrominated diphenyl ether flame-retardants above specified thresholds
and places documentation requirements throughout the supply chain.

-
The
interviews with firms consistently pointed to the RoHS Directive as the main
driver of compliance-related activities. However, the interviews also
emphasised that the RoHS-related procedures are part of a larger change to the
industry that is now so deeply integrated in to the supply chain that it could
not be isolated, even hypothetically.

-
RoHS
applies to integrated circuits produced in Europe as well as those entering the
EU that are manufactured abroad. Due to the global nature of the industry, RoHS
has become a de facto global regulation. China recently adopted most of
the provisions through ‘China RoHS,’ which applies to the bulk of manufactured
products. The RoHS concept is thus deeply integrated into the global industry
and provides a framework for much of the supply chain.

-
RoHS
provisions are also reinforced and complemented by REACH, Directive No
1907/2006 concerning the Registration, Evaluation, Authorization and
Restriction of Chemicals. The General Product Safety Directive
introduces mandatory requirements concerning the product identification,
cooperation with authorities when requested and a voluntary conduct of tests of
marketed products, and the keeping of a register of complaints.

4. Analysis of costs of
compliance with IM legislation

The
information presented in this section is based on the in-depth interviews with
eight producers of integrated circuits. The firms range in terms of size and
production volume and a located at various points along the production chain.

Given
that the integrated circuits industry is completely globalised, turnover has
been estimated from the turnover from Europe or from the European subsidiary of
global companies. Information has been taken from corporate reports. It should
also be noted that even though turnover is from Europe, the overall activity is
fully global, such as R&D taking place in Europe with manufacturing
happening in other regions, generally in Asia).

Firm || Product/Application || Firm Size || Annual turnover from product (global) || Share of EU market (% of total firm turnover)

A || Fabrication || Large (>1000 employees) || 3,900,000,000 || 33

B || Fabrication || Large (>1000 employees) || 17,100,000,000 || 10

C || Fabrication || Large (>1000 employees) || 4,368,000,000 || 20

D || Fabless - telecommunications || Medium size (250-500) || 388,000,000 || 32

E || Fabless – consumer electronics || Small (<250 employees) || 2,400,000,000 || 10

F || Fabless –touchscreen components || Small (<250 employees) || 3,000,000 || 100

G || Fabless - general || Small (<250 employees) || 6,000,000 || 15

H || Fab-lite - general || Medium size (250-500) || 1,800,000,000 || 66

On the basis of discussion with
the integrated circuit producers, IM legislation generates impacts on the
following stages of the production process:

·
Familiarisation
with legislation and the purchase of standards

·
Development
of alternative designs and the associated testing of materials

·
Seeking
authorizations and exemptions, if needed, from RoHS and REACH lists of restricted
substances

·
Documentation
of c
Documentation
of compliance -  Testing, technical file and certification

·
Monitoring
the suppliers in the supply chain for compliance and switching to avoid non-compliance

·
Declaration
of conformity, CE marking and instruction manual

·
Response
to market surveillance activities

A
number of caveats are necessary.

·
It
should also be noted that while costs have been suggested at specific points
along the path towards compliance with EU Internal Market legislation, specific
data on the costs is not available for each step.

·
The
interviews have produced limited information on the specific impact. One key
reason is that, as a result of the dominant use of the foundry model, much of
the compliance costs are absorbed throughout the supply chain and not by an
individual company. OEM suppliers in third countries are required to adhere to
restrictions while also complying with design requirements set out by fabless
producers.

·
Compliance
testing occurs very early in the supply chain and it is not possible to
disaggregate compliance costs for the IC firms. In addition, firms have not
been able to estimate the amount of resources involved in the design process
linked directly to regulatory compliance versus design procedures relate to
quality, reliability, or adherence to regulations and standards set out at an
international level.

The
general process followed by manufacturers to ensure compliance with the IM
legislation includes the following closely interlinked steps, and any specific
data on costs has been identified and noted.

Familiarisation
with relevant legislation and purchase of standards

The
introduction of new legislation places costs on firms, including the time and
resources used to familiarise themselves with the legislation.

The
purchase of standards is one approach to learning about the implications of
specific relevant legislation, which generates financial costs. Interviews with
firms suggest that no standard ‘familiarisation period’ can be feasibly created
due to the differences in the requirements. Manufacturers, suppliers,
distributors, and end producers of consumer products develop administrative
systems or databases applicable requirements are organised. Databases are being
developed to manage the complexity of keeping track with IM legislation,
standards, and amendments.

However,
the costs association with each of these features is dependent on the specifics
of legislation, of the new provisions, the intended end use of the
semiconductor, and of the product portfolio. Therefore, no general average can
be derived, according to the interviews. Indeed, the interview respondents
suggest that databases and tracking systems are a normal part of working in an
industry with a long supply chain and diffuse set of suppliers.

The
smaller fabless firm states that they rely on their suppliers as well as their
customers to inform them of implications of the various pieces of legislation.
Third party testing occurs, but it varies depending on the production chain. In
terms of their suppliers, fabless manufacturers tend to create industry
partnerships with ‘fabs’ that produce the raw inputs into the integrated
circuits. In general, there are fewer and fewer producers and the fabs are
highly involved in the discussions of standards and legislation. On the
customer side, the main market for European producers includes some of the most
highly-regulated industries, which are careful to conform to legislation.
Therefore, according to the interview with a fabless manufacturer, the industry
has knowledge of how to comply and this knowledge is shared up and down
stream.

Under
REACH, the substance of very high concern (SVHC) "candidate list" can
be updated annually and functions as a "living list".[143]
As soon as a SVHC appears on the "candidate list", suppliers of
articles containing the SVHC must forward information on the listed SVHC
contained in the article (above a concentration of 0.1%) to recipients. The
list is updated every 6 months, and even the larger firms have a very difficult
time managing the speed with which the list is updated, though the industry has
not produced data to demonstrate the burden. The European Chemical Agency
(ECHA) engages in a highly structured public consultation every year, with
consultation period of 45 days.[144] However, the
participation of industry representatives is highly context- and
product-dependent; nevertheless, this period of consultation generates
discussion in advance of the introduction of changes, which allows for some
familiarisation with the legislation.

According
to the interviewees, manufacturers rely on standards to meet the
essential requirements. Standards vary according to the organisation issuing
them. A number of standard-setting organisations exist, such as industry-led
bodies (JEDEC), as well as the IEC and ISO. The IEC have been active in
developing recent standards.

Two
interviews with small fabless producers suggest that smaller companies rely on
standards, but that often changes are generally clearly articulated by
customers and additional standards are not always purchased. The firm indicated
that standards are purchased as needed, with some periods of time requiring the
purchase of standards, as well as significant variation depending on the
product line. Moreover, industry standards are often translated into customer
specifications. Even in the absence of specific standards, producers would need
to comply with customer specifications.

New
costs have been introduced since the industry has shifted from voluntary
industry standards created by JEDEC, which were free, to the IEC standard EN
50581:2012 was made available in 2012 by CENELEC related to “Technical
documentation for the evaluation of electrical and electronic products with
respect to restriction of hazardous substances.” This standard must be
purchased. The current prices for the identified standards covering a majority
of the sector include:

Relevant Standard || Price (EUR) [145]

EN 50581:2012 || 43

IEC62321 || 252

EN 60950-1:2006/A12:2011 || 277

IEC 61000 || 187

IEC 61967 || 122

IEC 62132 || 122

IEC 62474 || 204

Given that the
range of potential applications and sub-groups is limitless, only the major
product-specific regulations have been reviewed (see table 1 above).

Development
of alternative designs and the associated testing of materials

Internal
market legislation generates two distinct costs on firms in terms of design
choices. First, some manufacturers have had to redesign products to comply with
restrictions on materials. Second, under the two most applicable internal
market directives, RoHS and REACH, companies have an opportunity to petition
for an exemption or authorisation from some of the limitation imposed by the
legislation. Because two separate lists are created, with separate procedures
for exemptions/ authorisation, there is a duplication of effort combined with a
high degree of uncertainty about certain substances.

In
terms of redesign, one important source of compliance costs has been the
requirements of the RoHS Directive in relation to the use of lead, which
is used in a number of components in the manufacture of integrated circuits.
The industry is still in the process of phasing out lead. There were
significant upfront costs for the conversion to lead-free packaging, and until
recently the unique functionality of lead soldering was required for some
components and packaging.

Exemptions
have been obtained under RoHS to allow for the continued use of some lead in a
limited number of applications. Thus, testing for compatibility and replacement
programmes has been an ongoing activity for firms. A number of companies
outlined a ‘conversion roadmap’ to demonstrate progress towards converting
their product line towards compliance with RoHS.[146]

Large
companies initiated compliance programmes in response to European regulations
(especially RoHS) relatively early, while many smaller producers did not have
the capacity or inclination to develop substitutes and only recently started to
address this issue. RoHS compliance presents many product management and design
decisions such as whether to bring products into compliance or to make them
obsolete, or whether to make use of the currently granted exemptions.[147]

RoHS generated upfront costs of material substitution, given that
many types of integrated circuits used lead soldering. While the interviews
would not confirm the cost, some studies of the impact of RoSH suggest that the
impact equals 1.9% of total turnover,[148]
which is generated by the upfront costs of switching to lead-free components.
This is roughly in line with a 2008 study which estimated that, generally, the
average past and future one-off cost impact of RoHS lies between 1 and 2% of
total turnover. However, these studies did not focus exclusively on integrated
circuit manufacturers, nor did they document the precise source of costs.

Interviews with firms could not provide further information, though
the interview with a large producer suggested that the RoHS compliance
programmes are among the most pressing R&D and compliance issues for the
industry, especially given the unique functions played by some substances, such
as lead.

Seeking
authorizations and exemptions

In
terms of the authorization and exemption processes, some materials are
critically important to the integrated circuits, both in terms of some harmful
substances used in the production process while others are found in trace
amounts in the final product due to their unique functionality in achieving
performance goals for the product. The material development cycle in
the semiconductor industry is typically 10-15 years, consisting of fundamental
research, hazard and risk evaluation, demonstration and integration with
manufacturing equipment (and sometimes the development of new manufacturing
equipment or processes), and production. Where chemicals already used in
manufacturing need to be replaced, ample time must be provided to develop
substitutes for these chemical uses.

The
large manufacturers stated in interviews that the requirements often serve as
an impediment that is eventually overcome rather than a true barrier. No
examples of specific instances could be presented where the use of a key
substance could not be substituted or an exemption obtained. A review of
company websites outlines the continued use of hazardous or dangerous materials
in the production process, even though the substance does not end up in the
finished product.

Nevertheless,
the exemption and authorisation processes are very costly, according to the
interviews, though no fixed amount is available. There are two aspects of the
duplication that cause substantive costs. RoSH 2 and REACH apply to some of the
same substances in the same products and processes, sometime resulting in
duplication of administrative burdens. RoHS 2 provides rules on the restriction
of certain hazardous substances in Electrical and Electronic Equipment (EEE),
while REACH is a more general act regulating or restricting chemical
substances. In terms of specific duplication, in a position paper from March
2013, Orgalime points out[149] that there is
some overlap in the Directives. Four substances highlighted under RoHS2 for
priority assessment, namely plasticisers BBP, DBP, DEHP and flame retardant
HBCDD featured in the REACH Candidate list back in 2008 and are now also included
in the list of substances subject to REACH authorisation in Annex XIV.

When
seeking exemptions, there are two separate procedures that need to be followed
and the two Directives do not recognise each other’s lists of banned
substances. In some cases, an exemption can be obtained in one list but not in
another; in some of these cases, there could be a delay in obtaining the second
exemption.

There
appears to be inconsistency in the application of RoHS and REACH, especially in
terms of valid procedures that are consistent for both Directives. The
industry association, ESIA, points out that lists based around the REACH
processes that target substances for potential likely action without any
upfront risk review on whether or not the risk is managed in how the
semiconductor sector uses the substance. This uncertainty creates barriers to
product development without a full risk-based assessment taking place.

The
overlap and inconsistency cause a duplication of effort and significant
uncertainty for the industry, with the greatest effects in product development.
So
far, the interviews have produced limited information on the specific impact.
One key reason is that, as a result of the dominant use of the foundry model,
much of the compliance costs are absorbed throughout the supply chain and not
by an individual company. OEM suppliers in third countries are required to
adhere to restrictions while also complying with design requirements set out by
fabless producers.

Compliance
testing occurs very early in the supply chain and it is not possible to
disaggregate compliance costs for the IC firms. In addition, firms have not
been able to estimate the amount of resources involved in the design process
linked directly to regulatory compliance versus design procedures relate to
quality, reliability, or adherence to regulations and standards set out at an
international level.

 Documentation
of compliance - Testing, technical file and certification

Testing
has long been a normal procedure in the integrated circuits industry, either
in-house or by specialised testing houses. With the emergence of RoHS and
REACH, third party testing houses have emerged to fill the gap in internal
capacity of some smaller fabless manufacturers. IDMs have in-house testing
capabilities, and increasingly have started to offer testing services to their
industry partners to help consolidate some of the processes within the supply
chain.

Both
RoHS and REACH require the development of a technical file following testing,
most often following a specific standard created by the industry. RoHS2
introduces new requirements for companies to maintain technical files. This is
a significant difference compared to the first version of the RoHS Directive,
which did not prescribe any requirements for manufacturers to maintain
compliance documentation.

Under
the original RoHS, firms along the supply chain did not have this obligation;
the final OEM manufacturer or importer who puts the finished branded equipment
on the market in the EU incurred all the costs of managing the supply chain.[150]

As
a result of major end users being required to monitor the supply chain,
suppliers have long been encouraged through market pressure to maintain
technical files, and this has long been a well-established practice in the
integrated circuits industry.

However,
the practice remained ad hoc and incomplete, according to the large
manufacturer interviewed. RoHS2 now puts more of a structured framework in
place. Standard EN 50581:2012 was made available in 2012 by CENELEC related to “Technical
documentation for the evaluation of electrical and electronic products with
respect to restriction of hazardous substances"[151]
to meet the needs of technical documentation.

Information
obligations add an additional administrative cost. An important source of
administrative costs is with REACH Regulation. REACH places a legal obligation
on all EU suppliers to provide substance declaration information when they
supply their outputs (components and sub-assemblies) to the next manufacturer
in the supply chain. This could extend to contract manufacturers when they
supply equipment to OEM clients, drawing on information which component
suppliers are required to disclose to the contract manufacturer. However, the
costs vary depending on the unit type and the size of the order.

There
are also certain synergies in the databases since many of the requirements are
the same and industry standards are able to cover both Directives. A single
technical file system can capture information pertaining to both RoHS and
REACH. The General Product Safety Directive introduces mandatory requirements
concerning the product identification, cooperation with authorities when
requested and a voluntary conduct of tests of marketed products, and the
keeping of a register of complaints.

Firms
provided direct estimates of human resources dedicated to managing the
technical files. The resources dedicated to managing these files vary
significantly according to firm size and location in the production chain. For
example, a small fabless producer (focusing on design and sales) with 25
employees reported that 1 FTE was required to address requests for
documentation. A large global producer, with a staff of 24,000, stated that
there are approximately 50 FTE dedicated specifically to compliance. In this
latter case, approximately half of the staff time is normally dedicated
specifically to RoHS. However, the total responsibility for maintaining the
files is distributed across a number of additional staff resources, including
sales staff, R&D, quality assurance, and management. Another large producer
stated that the European-based team has a large legal team, with 42 people and
one in-house council that focus on, among other domains, export compliance.

Monitoring
the suppliers in the supply chain for compliance and switching to avoid
non-compliance

Linked
to the certification costs, firms in the downstream stages of the supply chain
are required to verify the certification of their suppliers and then pass this
information onto their clients. This places significant burdens throughout the
supply chain. Although REACH and now ROHS2 place obligations on companies to
pass on information, in practice it is the demands of customers that cause
companies to collect stringent information, up to the standards of the eventual
end-users.

A number of
approaches have been adopted to monitor the supply chain. Downstream firms,
especially larger firms operating with many suppliers, require relevant
supplier to pre-register substances and preparations used in industrial
(including engineering) processes and will monitor and support registration by
suppliers.

As
integrated circuits move from one producer to the subsequent stages of
development, the common practice is to use a bill of materials (BOM) to
document the materials and substances contained in the circuit. Ideally,
suppliers will issue a Full Materials Declaration, which states all of the
elements and substances that are contained in an integrated circuit. According
to desk research and interviews, this is not consistently practiced.
Confidentiality was raised as one potential barrier in obtaining all relevant
information. In some cases, re-testing is required where there is a ‘break in
the chain’ from one stage to the next. Confidentiality was also cited as one of
the impediments to obtaining precise estimates; given that efficient management
procedures are part of the value proposition of some companies, details were
not forthcoming.

The main concern
is the amount of detail that needs to be carried forward along the development
process of integrated circuits. One difficulty that was mentioned by a large
manufacturer was that there are potentially dozens of suppliers in any single
component, and that it is often a problem if one of the intermediary suppliers
has not kept adequate records. Often, the level of detail of a company’s record
system is actually a selling point in terms of the appeal of using a specific
supplier.

Some
companies are encouraging smaller suppliers to pre-register their Bills of
Materials on private platforms that offer industry-wide databases to manage
certification and declarations of compliance. BOMCheck is the most developed
platform.[152] Under this
system, suppliers can create a vendor account and the purchasers can apply for
a subscription that allows for verification of records. For the BOMCheck
system, the subscription fee for suppliers is an annual fee of EUR 300. [153]
More than one million RoHS and REACH Materials Declarations from over 3,100
suppliers have been uploaded to the system, as of June 2013.[154]

Declaration
of conformity, CE marking and instruction manual

Based
on a review of the websites of a wide sample of the industry, it appears that
the standard practice is to post Declarations of Conformity on the company
webpage. This does not appear to be particularly burdensome, and the interviews
suggest that this is a common practice that is recognised by firms in the
sector. Indeed, the introduction of REACH and RoSH2 could potentially
redistribute costs across the supply chain rather than place all costs on the
single point at which the final product is placed on the market, meaning that
costs are transferred rather than altered.

Manufacturers
within the EU must obtain a declaration of ROHS compliance for all the parts,
components, and materials that they are using, while importers need to obtain a
declaration of compliance from their suppliers.

The
set-up costs do, however, include the time to carry out the conformity
assessment and check that standard documentation has been obtained. Some of the
larger downstream companies facilitate this process on behalf of suppliers, and
it ensures a smoother process for identifying required documentation. Based on
the interviews with firms, the CE Marking is recognised as a normal cost of doing
business and is not seen as unduly burdensome.

The
industry has adopted Design for RoHS compliance guidelines, though this is
internal for each company and differs based on the application. The large
manufacturer uses this design guideline internally, while the small fabless
manufacturer relies on the foundry to check for the compliance of its designs
before shipment.

Response
to market surveillance activities

RoHS2 includes
obligations for all EU Member States to perform systematic market surveillance
including "appropriate checks on product compliance on an adequate
scale, by means of documentary checks and, where appropriate, physical and
laboratory checks on the basis of adequate samples". In contrast,
RoHS1 did not prescribe any enforcement procedures that Member States were
required to implement.

While the
documentation requirements for compliance are burdensome, interviews did not
yield specific instances of particular burdens with market surveillance beyond
what would be expected under typical regulation. Under RoHS, firms have 28 days
to provide sufficient documentation of conformity, and there is no suggestion
in the available information that this is particularly burdensome.

Both
the fabless and the IDM interviewed state that while there are some occasions
that surveillance authorities request information, by far the largest burden is
on supplying information to client downstream, such as manufactures of
electronics, automotive, or other industries. The interview respondents state
that given the highly-regulated nature of the end manufacturers (automotive,
industrial processes, telecommunications industries), some of which are very
tightly regulated in Europe and other countries, there is a high burden on the
supply chain to maintain records.

Large firms
maintain structured protocols for responding to surveillance requests while the
smaller firm relies on an ad hoc approach, rarely exceeding the 1 FTE
that has been allocated to maintaining the technical file, reacting when
necessary to supply information. Details of the document management system were
not shared, though the firm was clear in that a standard approach to managing
supplier documentation is sufficient for responding to requests. It was also
stressed that requests from clients are normally the key source of inquiries
and far outweigh any burden from surveillance agencies.

Business as usual

Some
of the costs indicated above should be considered as part of a business as
usual scenario, especially those related to information sharing. While the
interviews focused on the impact of RoHS and REACH, all interviews stated that
quality management would still be part of internal procedures irrespective of
the regulatory framework requirements, and the information requirement would
remain just as burdensome. The large company stated that in some instances, the
Directives and corresponding standards are helping to simplify the information
as it moves through the supply chain as common standards are imposed for all
companies. Product reliability tests are often conducted by established firms
that want to ensure the quality of their products, so information will always
need to be shared.

Furthermore,
the presence of significant legislation in other countries (e.g. China and
Japan) means that important part of the documentation required and the
significant costs of maintaining sophisticated databases would likely have been
incurred even in the absence of EU legislation.

5. Estimation of
Assessment of costs of IM legislation for the whole sector

Disentangling
costs is limited, given the lack of information and the diffuse burdens across
the supply chain. The complex and very long supply chain creates impacts for
manufacturers far upstream and downstream, though it is difficult to estimate
the distribution of the burdens. Moreover, interviews suggest that the impacts
of pieces of legislation are highly context-dependent, ultimately differing
based on the product portfolio of a company (number and types of products), as
well as the location with the supply chain.

On
the basis of specific cost information from four of the interviews, we
estimated the administrative costs for the main cost elements identified and,
on the basis of certain assumptions, to extrapolate to the whole of the EU
industry. The interviews did not provide sufficient data to present cost
details. The following table presents some information. The average figures
from the interviews were upscaled using turnover.

Type of Cost || Estimated annual costs for the whole sector

Internal || € 7.6 million

Third parties || € 26 thousand

Testing equipment || € 10 thousand

Total || € 7.6 million

As is evident,
internal compliance costs represent the main cost element for the industry. The
interviews suggest that internal processes and activities related to compliance
were the highest share of the total costs. Compliance testing is linked to
companies’ R&D activities. Research and Development costs are inevitably
high in the integrated circuits industry, which is a major factor explaining   why
integrated circuits are the most R&D intensive industry in Europe,
according to the European Commission’s R&D Scoreboard. Third party testing
and testing equipment specifically for compliance with internal market
legislation is marginal in terms of the overall R&D budgets. Again, a
number of assumptions that have been made related to the costs need to be
further examined and discussed with the relevant association.

6. Benefits of Internal
Market legislation

The
industry is in general supportive of the impact of internal market legislation.
The major benefit is the degree of uniformity in application across the sector
and across the global production industry. The market legislation and the
surrounding legislative framework are fairly positive and appreciate the impact
that a standardised set of regulations has created.

The
logic of the system is supported by the interview participants. Producers at
the earliest points in the production chain are required to document materials
and processes, and then this information is passed forward and can be traced
all the way to the final application. Interviews with larger manufacturers of
integrated circuits are explicit in its praise for the design of the
regulations in that they do not distort competition, either in terms of location
or of the placement in the value chain.

The
system is applied to all stages of development and does not place unduly high
burdens on the final producer of products, as was the case under previous types
of regulatory instruments. Under national systems that previously had not
adopted the same approach as Europe, the final producer is required to monitor
the supply chain, while under the European system the supply chain fairly well
documented. Europe has essentially set the global standards for the industry.
This standardardisation has spread globally, and now major producing regions
have aligned their regulatory frameworks to align with Europe, with the China
RoHS being the most explicit example.

Market
access is greatly improved. The interviews suggest that it would be very
difficult to imagine a scenario with different standards in individual member
states, given the global nature of the industry and the composite nature of
manufacturing and application to specific products. For example, while some reservations
exist about the process to identify prohibited substances (with separate
systems under REACH and RoHS), the industry appreciates a single set of
procedures at the European level. Under separate systems, there would be a very
high level of monitoring of regulations and a constant threat that one
government would face pressure to ban a specific substance, which would disrupt
the global supply chain.

The
regulations help to standardise the information requirements throughout the
supply chain and across products. All producers state that records keeping and
monitoring of bills of material would be standard practice even in the absence
of European regulations. The large company stated the Directives and
corresponding standards are helping to simplify the information as it moves
through the supply chain as common standards are imposed for all companies.
Product reliability tests are often conducted by established firms that want to
ensure the quality of their products, so information will always need to be shared.
Information requests would still be sent from customers, and firms would still
need to keep files to track the supply chain. However, the use of a single
source of regulations has helped to standardise the types of information that
are required and has limited the variation in the types of requests that come
from later stages in the production chain.

Given
the globalised nature of the industry, with highly developed supply chains,
undue or particularly burdensome regulation can cause shifts in production
location. The initial analysis suggests that most Directives place rather
similar obligations on industry; namely, revise the design of some products and
then subsequent requirements to test, document, and declare conformity to
specific requirements. The interviews suggest that while there is some scope
for improvement at the level of implementation, the overall system has
generated simplification, a fair distribution of burden across the entire
production chain, and avoids creating location decisions based on lower
standards.

7. Analysis of
simplification options

All
respondents stated that the internal market legislation functions very well,
and that while there is room for improvement, the functioning of the internal
market legislation is well developed overall. Two concrete areas of focus
emerged through the interviews. While there was a general consensus among
interview participants that the two options would generate savings, the massive
difference in size of the firms as well as the variation along points of the
production chain meant that savings would be distributed differently for each
of the firms.

Merger
and simplification of exemption and authorization process under RoHS and REACH

There
is an opportunity to simplify aspects of RoHS and REACH. The most immediate
opportunity for simplification identified is the elimination of duplication
found in the exemption and authorisation process for the same substance under
both REACH and RoHS. The two processes could be made to recognise the list of the
other; exemptions under one list would be automatically applied to the other.
This would limit the duplication of the process of requesting authorizations or
exemptions while also limiting uncertainty by only having a single list to
manage. Firms at various points along the production chain emphasised that
responding to requests for documentation constituted the largest source of
ongoing costs, and that the presence of two lists with different cycles caused
unnecessary burden.

The
impact of this simplification is that firms would be able to manage a single
process, which would reduce familiarisation, design, and administrative costs.
It would also create consistency for the industry through a structured
regulatory cycle, which would facilitate long-term product development
planning, while limiting the amount of regulatory activity required by
enforcement agencies. While the benefits are clear, interview participants were
unable to estimate an approximate value for the savings.

Simplification
could also involve re-structuring the way in which new substances are added to
restricted lists. Interviews suggest that one of the reasons REACH compliance
is difficult is due to the dynamic SVHC list, which introduces upfront costs
but also high risk. The six month updating cycle causes a constant flow of
documentation requests from customers, which could be better managed if a
longer, more structured system existed.

.

Simplification
of information requirements

A second
opportunity is found in the sharing of information, which could be simplified
by limiting the types of information required so that a single validation or
declaration would apply to all EU legislation, although the interviews suggest
that these procedures are already part of the normal operation of a business in
the industry. The industry representatives stated that one of the major
benefits of European legislation is that it helped to standardise the reporting
systems throughout the industry. Without common requirements, reporting systems
would be splintered and would potentially place greater costs on the industry.

Given the
complex and decentralised supply chain, adequate tracking measures and supply
chain monitoring are in place for reasons other than EU internal market
legislation. Standard technical documentation would be required by end product
manufacturers in the absence of specific internal market legislation to comply
with quality standards as well as a range of additional requirements, depending
on the final application. China RoHS and the demands of end-users or final
products put pressure on the supply chain create costs that would not be
alleviated with any simplification.

Further
simplification of information requirements could help to reduce burdens of
collecting product information. Some industry-led measures to create a common
platform, such as BOMCheck, could be supported by the relevant EU authorities,
either by compelling its use or by strengthening cooperation with platforms.
This would simplify the passing of information along the supply chain and
improve the consistency of data.

8. Overall conclusions

This
case study examined the role and costs of IM legislation for integrated
circuits, the building blocks of a number of technologies that make up micro
and nano-electronic components and systems. According to PRODCOM data, the
European market for integrated circuits has a total market size of €56.8
billion while other sources suggest that the industry is somewhat
smaller industry, around €30 billion. European manufacturers do not command a
large global share and European production represented less than 10 percent of total
global production in 2011.

The
applicable IM legislation covers issues related to product safety only
indirectly (through the General Product Safety Directive), electromagnetic
compatibility (EMC) and focuses more on environmental impacts (REACH and RoHS
Directives).

On
the basis of information provided by some companies, the administrative costs
for the sector were estimated at around €7.6 million. The interviews
with firms consistently pointed to the RoHS Directive as being the main driver
of compliance-related activities. However, the analysis also emphasised that
RoHS-related procedures are part of broader changes within the industry that are
now so deeply integrated into the supply chain that the compliance costs
specifically linked to internal market legislation cannot be easily isolated.  The
industry generally believes that internal market legislation has had a positive
impact and appreciates the fact that there is harmonised product legislation in
this area. A major benefit is the degree of uniformity in application across
the sector and across the global production industry.

Nonetheless,
some potential scope for simplification was identified, in particular, the
possibility of simplifying certain aspects of RoHS and REACH so as to eliminate
duplication in the exemption and authorisation process for the same substance.
A second area is the possible use of a single type of validation or declaration
form to cover all EU legislation. Unfortunately, no estimates for possible cost
savings resulting from these simplifications were provided by manufacturers
interviewed.

9. Sources of information

-
Eurostat
Structural Business Statistics Database and PRODCOM

-
Text
of applicable IM legislation and relevant standards

-
Policy
and strategy documents published by the European Commission or relevant
industry associations

-
Industry
Association: The European Semiconductor Industry Association (ESIA)

-
Interviews
with eight firms, varying in size, market share, and product applications.

Case study 9 –Snow-ski
footwear

1. Introduction –
objectives of the study

This
case study focuses on the non-harmonized product group snow-ski footwear.
While the product group is non-harmonized, some elements of the product are
covered by harmonized legislation; namely, the Labelling of materials in
footwear (1994/11/EC) directive and the Packaging and packaging waste
(2004/12/EC) directive. Since the products are primarily non-harmonized,
the aim of this case study is to assess the impact of national legislation and
its consequences for the industry, including substantive and administrative
compliance costs. Furthermore, the case study will cover the impacts of the two
above mentioned IM directives as well as highlighting the important role of
international standards in the production phase.

The main reasons
for choosing the snow-ski footwear product group are:

-
The snow-ski footwear category
illustrates how regulations affects non-harmonized products and create both
visible and hidden compliance costs for manufacturers;

-
Although represented by relatively few
economic operators the industry is comprised of a selection of both large
manufactures as well as SMEs;

-
Snow-ski footwear products are products
with a high level of technical sophistication and have experienced rapid
products development in recent years;

-
Snow and ski footwear is a
non-harmonized products category and thus does not have any specific
regulations concerning only this product group. However, because it is
non-harmonized product group there can arise problems in regards to differing
IM standards.

Methodology

The
findings of this case study are based on desk research and qualitative
interviews. In the first phase of the project, structured desk research was
carried out in order to establish an overview of the snow-ski footwear
industry, identify relevant pieces of legislation and standards as well as
identify companies within the industry.

Two
interviews have been conducted with The Federation of the EU Sporting
Goods Industry (FESI), which is the European industry association for snow-ski
footwear producers; one in the beginning of the research phase and one
in the final phase to verify collected data. Additionally, five interviews have
been conducted with companies within the industry. Two large manufactures and
three SME’s have been interviewed As companies were regarded as an important
source of information for the development of the case, a structured approach to
recruiting companies was applied. Initially FESI contacted
their members by email and phone, to inform about the study and set up
interview appointments. Simultaneously, all identified non-FESI members were
contacted by email and a minimum of two subsequent follow-up calls. All
companies have received one email and a minimum of two subsequent telephone
calls. For the companies where contact was established and relevant
person/department was identified we have followed up with 3-4 phone calls. As
mentioned above, five companies have agreed to participate.

2. Product definition and
description of structure of the sector
Study scope (products
included/excluded)

The
product group snow-ski footwear includes footwear products related to
activities involving downhill and cross-country skiing. The primary products
include alpine ski boots, cross country ski boots, snowboard boots and touring
boots. The differences
in the production methods and materials used between the various product types
means that the applicable legislation and standards differ between the
different product types. Snow-ski footwear is unlike other
skiing equipment, such as helmets and goggles, defined as a recreational product
and not a as a protective equipment.

According
to the PRODCOM database the total size of the EU27 market for snow-ski footwear
in 2011 was 4.93 million units (pairs) and a total EU production value of EUR
330 million. Figure 1 shows the development of the production value since 2005.

Figure 1: Annual production value of snow-ski
footwear production in EU27 (PRODCOM)

Source:
Eurostat

The
PRODCOM code for snow-ski footwear is 32.30.12 which is a sub-category
of manufacture of sports goods (32.30). There are no subcategories
within snow-ski footwear and it is therefore not possible to analyze PRODCOM
data for the different product types separately. The data presented in this
section therefore captures the combined numbers for the manufacturing and production
of all types of snow-ski footwear.

The
vast majority of snow-ski footwear is alpine ski boots. FESI estimates that
alpine ski boots represent around 90% of the total snow-ski footwear product
category in terms of market size. The remaining product types (cross-country,
snowboard, and touring boots) constitute small shares of the total market.

PRODCOM
data for imports and exports shows that there is substantial trade of snow-ski
footwear between the EU27 and the rest of the world. In 2011, the total EU27
export to the rest of the world amounted to 2.53 million units annually and a
production value of around EUR 140 million. Imports into the EU27 totalled 2.17
million units with a production value of around EUR 40 million. Thus, according
to the PRODCOM data, exports of snow-ski footwear products exceeded imports by
around 350,000 units.

The
numbers show that export value exceeded import value by almost €100 million and
that the value of EU27 exports where about 3.5 the size of the value of imports
into EU27. These numbers indicate that the value per unit exported is
substantially higher than the value per unit imported. This relationship
between the value of imports and exports is most likely due to the fact that
the factors of production are higher within the EU27 than other producer
countries, such as countries in Asia where a large share of imported products
are produced.

Figure
2 illustrates the value of imports and export in the EU27 from 2005 to 2011.
The graphs show that exports have recovered from the crisis-years and are now
back at pre-crisis level. Imports have remained almost stagnant during the
period, with a slight upward going tendency from 2007.

Figure
2:  Export & Imports of snow-ski footwear in EU27 (PRODCOM)

Source:
Eurostat

The PRODCOM
database does not contain data on the export destinations. However, the two
major markets for snow-ski footwear other than the European countries are the
US and Japan[155] and these
markets accounts for the vast majority of EU27 exports.

According
to FESI, the global market for snow-ski footwear products is on a general level
stagnating. This is mainly due to the fact that the alpine ski boot market,
which constitutes the majority of the market, has been stagnating in recent
years. The market for snowboard boots is currently declining whereas the
touring boots market, which constitutes a very small share of total production,
is growing.

Number
of employees/businesses

The
EUROSTAT structural
business statistics (SBS) do not provide data specific to
the snow-ski footwear industry[156]. The most
relevant data on industry demography and employment is therefore only available
for the manufactures of sports goods (PRCCODE 32.30), where snow-ski
footwear represents just one product category.

Looking
at the overall data for manufacturers of sports goods, Eurostat data shows that
in 2009 a total of 4,186 companies employed a total of 39,300 people[157].
The total production value of the manufactures of sports goods was EUR 3,562
million in 2011[158]. The snow-ski
footwear industry accounts only for a smaller share of this value.

A
rough estimate of the number of employees in the snow-ski footwear industry can
be developed by assessing the production value of the industry compared to the
entire sporting goods industry. Our estimate of the number of companies is
based on qualitative input from the European industry association (FESI). Comparing
the total production value of EUR 3,562 million in sporting goods industry with
the total production value of EUR 330 million in the snow-ski footwear industry
it can be observed that the snow-ski footwear industry accounts for a little
less than 10 % of the total production value in the sporting goods industry.
Applying this relationship would suggest a total number of employees of around
4,000. This is the most accurate estimate possible and has been supported by
FESI. Considering that Firm A interviewed for this study, which is one of the
largest manufactures within the industry, employs an estimated 620 people in
their ski-boot division, indicate that a total of 4,000 employees appears to be
a realistic estimate.

In
general, the snow-ski footwear industry is very competitive with only a small
number of manufactures. Based on desk research, as well as the interviews with
FESI, we estimate that the total number of snow-ski footwear producers in the
EU amount to around 20. These numbers, which have been verified by FESI,
includes all snow-ski footwear product categories. It should be noted that
since many large manufactures produce several brands, the number of snow-ski
footwear brands is higher than 20. On a global level an estimated 30 companies exist.

Industry
structure

According
to FESI, around 70 % of the world’s production of snow-ski footwear is located
in the EU. The countries with registered production include Italy, Romania,
Estonia, Slovenia, Hungary, Austria, Czech Republic, Germany, and France[159].
Of these countries Italy accounts for the largest share of the market with
around 50% of total production value. Historically these manufacturers have
been located in the Veneto Region in northern Italy near the town of
Montebelluna, where a textile and footwear cluster[160]
has developed several decades ago. This cluster developed amoung leather
production and as early ski boots were produced by leather materials production
developed here.

Romania
also accounts for a significant share of around 28% of total snow-ski footwear
production. The remaining 22% is divided between the remaining countries[161].
Italy used to account for an even larger share of total production but in
recent years some production has shifted towards Eastern European countries.  None of
the larger manufactures are headquartered in these countries but the production
is carried out through subsidiaries or intermediaries.[162]

The
remaining 30% of the global production outside Europe is mainly located in the
US and in Asia. In the US producers are mainly smaller manufactures
within the snowboard boot category. These are very specialized companies that
target a niche within the market.

The
companies within the snow-ski footwear industry represent on the one hand
larger companies which are responsible for several ski boot brands but also
small and medium sized companies. The larger companies, which often own several
brands, are a relatively small group of companies. Some of these larger
companies include K2 (Full Tilt) (US), the Tecnica Group (Nordica and Dolomite)
(IT), Amer Sports Group (Salomon and Atomic) (FI),
Völkl Sports GmbH (DE), Fischer Sports GmbH (AT), HEAD
Sport GmbH (AT), Burton (US) and the Rossignol Group (FR).

In
addition to the larger companies a range of smaller players within the snow-ski
boot industry exist. Despite the strong technological development of snow-ski
footwear products these smaller companies have been able to maintain a position
in the market (some minor companies, however, have been acquired or integrated
into the larger players). The small companies are often family owned businesses
that produce very specialized ski boots. Some of these smaller companies
include SCARPA (IT), Northwave (IT), Startex (Karhu) (FI), Andrew Shoes (IT),
Garmont (IT), Dalbello (IT) and Black Diamond Equipment
(US/IT), Dale Boot (US), Rome Snowboards (US), Mammut (CH), Ride (US).

Besides the companies mentioned here a range of very small
producers exist. These companies are niche players and produce only a very
limited amount of products.

To estimate the total turnover of the European snow-ski footwear
industry, the turnover from FESI’s members have been used.[163] The total turnover for
FESI’s members is between € 680-1620 million. Since the FESI-members represent
85% we can estimate that total turnover for the snow-ski footwear industry in
the EU is € 800-1900 million.

Table
1 summarizes the numbers presented above on the market size and industry
structure within EU27.

Table
1: Data on market size and industry structure – snow-ski footwear (PRCCODE:
32301200).

Parameter || Data

Market size (prod.value, EU27, 2011) || € 330 million (4.93 million units (pairs))

Imports (prod.value, EU27, 2011) || € 40 million (2.17 million units (pairs))

Exports (prod.value, EU27, 2011) || € 140 million (2.53 million units (pairs))

Total Turnover (EU27) || Manufactures snow-ski footwear:  € 800-1900 million (2012)

Number of enterprises (EU27) || Manufactures of snow-ski footwear:  20 companies

Number of employees (EU27) (2011) || Manufactures of snow-ski footwear: 4,000\*

Source:
Eurostat, FESI

\*Estimate

3. Analysis of applicable
IM legislation and standards

This
section outlines the relevant regulatory requirements that manufactures within
the snow-ski footwear industry face. Snow-ski footwear is primarily a
non-harmonized product group and therefore not covered by harmonized IM
legislation. Some aspects of the products, however, are covered by the
harmonized directives. These aspects will be outlined below. Also, reference
will be made to the applicable national legislation covering the product group.

In
addition to the regulatory requirements, technical standards are central in the
industry production. This chapter therefore also outlines the relevant
technical standards that are relied upon in the production of snow-ski
footwear.

Identification
of relevant legislation and directives

As
mentioned above the snow-ski footwear product group is a non-harmonized product
group. However, some aspects of the products are covered by the harmonized EU
regulations. The relevant directives and regulations are listed in Table 2.

Table 2: Overview of harmonized Union legislation
covering snow-ski footwear

Name of legislation || Main issue addressed || Requirements for economic operators

Labelling of materials in footwear (1994/11/EC) || Labelling of Materials used in main components for footwear || - Labelling must be in the language of the receiving states or a language of their choosing - The manufacturer is required to provide further textual information if requested by member states - Labelling have to be affixed within each pair

Packaging and packaging waste (2004/12/EC) || Packaging || - Limit the weight and volume of packaging to a minimum in order meet the required level of safety, hygiene and acceptability for consumers; - Reduce the content of hazardous substances and materials in the packaging material and its components; - Design reusable or recoverable packaging.

EC Regulation on chemicals and their safe use (EC 197/2006) REACH || Deals with the Registration, Evaluation, Authorisation and Restriction of Chemical substances || - The following information on the manufactured or imported substance shall be included in the dossier in order to unambiguously identify the substance: o  Substance name and related identifiers, molecular and structural formulae, if applicable o  Information on the composition and purity of the substance o  Spectral data and analytical information to verify the identity and composition of the substance o  Clear and concise description of the analytical methods

Mutual Regulation 764/2008 || Laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State || - See national legislation

Source:
EC Commission

As
the table shows the product category is only subject to relatively few
harmonized IM directives. These include the Labelling of materials in
footwear (1994/11/EC) and the Packaging and packaging waste (2004/12/EC)
directives. These are both directives that do not affect the specific
production process but are related to the post production labelling of the
products as well as the packaging of the finished products. Additionally, the EC
Regulation on chemicals and their safe use, also referred to as the REACH
regulation, also covers the production of snow-ski footwear. The specific
requirements are listed in the table.

In
addition to these pieces of legislation the snow-ski footwear products are
covered by the Mutual Recognition principle (764/2008). This means that
products compliant with legislation in one member state can, on the basis of
Mutual Recognition principle, also be legally marketed in other member states.

It
should be noted that the Personal Protective Equipment
(89/686/EEC) directive that applies to a range of sports equipment
categories does not apply to ski-snow footwear since ski and snowboard boots
have not been defined as protective equipment.

Since
national legislation applies on the basis of the Mutual Recognition principle
an assessment of the national legislation in the producing countries could be valuable.
This would allow a comparison of the national legislative requirements related
to snow-ski footwear in the producing countries.

Identification
of international and EU wide standards

As
indicated above international and EU wide standards are an important element in
the design and production phase within the industry. These standards are used
as a constant reference. Table 3 summarizes a list of the applicable standards
within the snow-ski footwear industry. The relevant standards are published by
both the International Standardization Organization (ISO) and the European
Committee for Standardization (CEN). It should be noted that some of the larger
producers also apply standards from national standardization organizations,
such as DIN[164] in Germany and
UNI[165] in Italy.
These standards, however, are applied in other production than snow-ski
footwear and have therefore not been included in the table below.

Table 3: Overview of applicable international
standards

Name of standard || Product addressed || Main issue addressed

ISO 5355:2005 || Alpine ski-boots –requirements and test methods || - Specifies the requirements, test methods and marking of ski-boots that are used with current systems of alpine ski-bindings with attachment at the boot toe and boot heel, the proper release function of which depends on the dimensions and design of the interfaces. - For ski-binding systems that function irrespective of the sole shape or that have different requirements for the sole dimensions, it is not always necessary for the ski-boot soles to comply with this International Standard in order to achieve the desired degree of safety.

ISO 9523:2008 || Touring ski-boots for adults – requirements and test methods || - Specifies the dimensions and characteristics of the interface, requirements, test methods and marking of ski-boots with a rigid sole which are used with current systems of touring ski-bindings with attachment at the boot toe and boot heel, the proper release function of which depends on the dimensions and design of the interfaces. - For ski-binding systems that function irrespective of the sole shape or that have different requirements for the sole dimensions, it is not always necessary for the ski-boot soles to comply with this International Standard in order to achieve the desired degree of safety. - It applies to rigid touring boots. Boots with softer shells like Telemark boots are excluded as they do not have the necessary shell stability to act as part of the release systems.

ISO 11088:2006 || Assembly, adjustment and inspection of an alpine ski/binding/boot (S-B-B) system || - ISO 11088:2006 specifies assembly, adjustment and inspection procedures for the binding mechanisms of skis, integrating in a practical way, the requirements of those International Standards which are related to skis, bindings and boots. - It is intended for all individuals and institutions concerned with those procedures, and especially for sports retailers. - ISO 11088:2006 is applicable to a ski/binding/boot/ system (S-B-B) for alpine skiing, of which at least one component is owned by the user.

ISO 11634:1996 || Snowboard boots – Interface with snowboard bindings || - Specifies the dimensions and characteristics of the interface zone of the sole and parts of the shaft of snowboard-boots, to provide defined attachment conditions for the snowboard-binding

ISO 14359:1997 || Winter-sports equipment || - Marking of parts made of polymer materials

ISO 22264:2006 || Telemark ski-boots for adults -- Interface with Telemark ski-bindings -- Requirements and test methods || - Specifies the dimensions and characteristics of the interface, requirements, test methods and marking of Telemark ski-boots with flexible sole which are used with current systems of telemark ski-bindings with attachment at the boot toe and boot heel, the proper function of which depends on the dimensions and design of the interfaces. - For Telemark ski-binding systems that function irrespective of the sole shape or that have different requirements for the sole dimensions, it is not always necessary for the Telemark ski-boot soles to comply with this International Standard in order to achieve the desired degree of safety.

ISO 14359:1997 || Winter-sports equipment -- Marking of parts made of polymer materials || - Specifies the marking of all separable parts made of polymer materials (plastics), which are used in winter-sports equipment (e.g. ski boots, ski-bindings). It is not applicable to compound materials with duroplastic components (e.g. skis). - This International Standard specifies the minimum requirements for identifying materials. This is to enable a complete separation of polymer materials for recycling

EN 13427 || Related to the Packaging - Requirements for the use of European Standards in the field of packaging and packaging waste || - This European Standard specifies requirements and a procedure by which a person or organization responsible for placing packaging or packed product on the market (the supplier) may combine the application of five (mandated) packaging standards and one (mandated) CEN report (in two parts). - These standards, along with the unrevised EN 13432:2000 'Requirements for packaging recoverable through composting and biodegradation – Test scheme and evaluation criteria for the final acceptance of packaging', were agreed to support the essential requirements of Directive 94/62/EC on packaging and packaging waste. They were developed under mandate from the European Commission.

Source:
International Organization for Standardization (ISO) and European Committee for
Standardization (CEN)

National
legislation does not appear to be relevant. Desk research in various national
databases and reports has not yielded any results. Similarly, interviewees have
not been able to provide information on the various national legislative
requirements. Rather than keeping track of national legislation companies are
much more focused on the relevant technical standards that apply to the
snow-ski footwear products.

Our
interviews with the firms indicate that national legislation does not seem to
be a primary concern among the companies, and does not appear to affect design
or production decisions. The companies do not allocate any significant share of
resources to keeping track of national legislation, and only marginal resources
to tracking European legislation. Hence, there seems to be limited problems
related to the adaptation to national legislation and, through the interviews,
it was indicated that no specific problems related to varying legislation
across different member states.

4. Analysis of costs of
compliance with IM legislation

This
section describes and analyses the substantive and administrative compliance
costs faced by companies. These costs were estimated based on the input provided
by five companies – two large companies and three SMEs[166].

Firm || Product/Application || Firm Size || Annual turnover from product (global) || Share of EU market

A || Sporting good, including snow footware || Large 1,500 || €161 million || Top three in Europe, with global reach

B || Snow foot ware || SME 25 || €8 million || Small, mainly Europe

C || Snow foot ware || SME 30 || Turnover not available || Small, mainly Europe

D || Snow footware || SME 30 || Turnover not available || Small, mainly Europe

E || Sports equipment, including snow footware || Large200-250 || N/A (3.4 million units sold) || Top Three in Europe, with global reach

The
processes and procedures applied by manufactures of snow-ski footwear to ensure
regulatory compliance with the applicable legislation include the following
steps which are analysed in detail below:

·
Familiarisation
with relevant legislation and standards

·
Purchase
of standards

·
Declaration
of conformity, CE marking

·
Customs
clearance

Familiarisation
with relevant legislation and standards

The
interviews have indicated that companies within the industry do not pay
particular attention to the national regulatory requirements. While the
preparatory actions that newly established companies perform in order to map
the regulatory environment would offer suggestions about the regulatory
barriers, few recent start-ups exist. The manufactures within the snow-ski
footwear industry are generally well-established companies that have been in
production for decades.

As
mentioned, some production of snow-ski footwear has recently shifted towards
selected Eastern European markets. One of the consequences is that the
production has been outsourced to specialized production companies that produce
products for a range of companies.

One
specific case is illustrative. One of the smaller companies (Firm C) interviewed
has outsourced production to a producer in Czech Republic. They did not
emphasise familiarization with national regulations in the production phase as
important but trust that their specialized sub supplier is in control of the
processes and the regulatory requirements. In this type of constellation, the
company, to ensure compliance in the production phase, spends resources on
occasional controls of the finished products to ensure compliance with regulatory
requirements. In this phase around 2-3 employees are allocated to regulatory
compliance control of the products. It was estimated that these employees spend
around 10 % of their time on regulatory compliance. Hence, the total amount of
time spent on regulatory compliance in the production phase for this one
company amounts to around 0.20-0.30 FTE. Within the brand owner, which has
outsourced production, there are not sufficient resources to monitor and follow
legislation. However, the interviewee pointed out that the specialized
producers, who manufacture products for several companies, are very aware of
the regulatory environment. In that sense the process of familiarization with
legislation in this type of constellation has been “outsourced” to the
specialized producer along with the actual production.

In
general, the allocation of human resources associated with regulatory
compliance for the smaller companies, however, is primarily related to the
design phase, where they represent a significant share of the costs. In the
design phase regulatory, requirements related to harmful substances, restricted
chemicals, or other limits on materials are considered. The primary focus,
however, is primarily on the technical standards.

In
the case of large firm A, an average of 3-4 employees work on ensuring that
sample products fulfil necessary technical requirements. The employees,
however, only spend about 25% of their  time on regulatory compliance. Hence,
the total amount of time spend on regulatory compliance in the design phase can
be estimated to around 0.75-1 FTE.

For
Firm C, a small firm, it was not possible to distinguish between compliance
costs in the design phase and the production phase. However, it was estimated
that the total level of human resources allocated to compliance costs amounts
to 0.2-0.3 FTE’s. This in turn represents less that 1 % of total turnover a
year (specific information on annual turnover was not disclosed).

Within
larger firms, familiarization and monitoring of relevant legislation is
structured within the company and monitoring of both national and EU
legislation is conducted.  In terms of human resources, the larger companies
allocate somewhat more resources than the smaller companies. For Firm A which sells
multiple brands, one full time employee (FTE) is allocated to regulatory
compliance. It was mentioned that the allocation of one full time employee does
not represent a significant share of the total staff costs for this specific
company (total of 640 employees). In addition to the one FTE, the company use
specialized consultancies with expertise in legislative requirements and
verification procedures. An estimate of these costs could not be provided.

Firm
E estimated that a total of 2-4 FTE’s were allocated to compliance issues.
These FTE’s were spread over different departments such as production (quality
control) (1 FTE), the legal department (1-3 FTE), and the sales department also
had ad hoc responsibility for checking on compliance issues based on requests
from customers.  In general, the firms in the sector did not indicate any specific
difficulties in terms of monitoring or complying with legislation across
different member states, nor have they pointed to specific problems in relation
to placing products on the market.

Purchase
of standards

As
mentioned above the use of technical standards is a key focus area within the
snow-ski footwear industry. The companies consulted in this study highlighted
technical standards as a central element in their production processes. For the
smaller companies there appear to be cost issues related to acquiring the
standards and in general it was mentioned that the purchase and adherence to
standards represents a major cost.

Within
the larger companies the application of standards is also a key element. One of
the companies interviewed, for example, has in-house UNI[167]
and ISO committees, which focus on the applicable standards. The relevant
standards for the snow-ski footwear industry have been outlined in Table 3
above. Table 4 summarizes the purchasing costs for the relevant standards.

Table 4: Price of relevant standards

Standard || Price

ISO 5355:2005 || 99,5 EUR

ISO 9523:2008 || 75 EUR

ISO 11088:2006 || 70 EUR

ISO 11634:1996 || 41 EUR

ISO 14359:1997 || 47 EUR

ISO 22264:2006 || 60 EUR

ISO 14359:1997 || 47 EUR

EN 13427 || -

Source: International
Standardization Organization

Requirements from market surveillance authorities
(Declaration of conformity, CE marking)

One
of the significant sources of regulatory costs highlighted by the companies is
the cost related to certifications by third parties. This process has proven
particular burdensome for the companies and costs have been allocated in the
budget to service these requirements.

One
of the major regulatory barriers the companies experience is the request for
certifications of materials and samples for tests. This is the primary source
of costs in estimating compliance costs during the design and production phase.
The larger companies listed this type of costs as the most costly stage that
the company faces in dealing with regulatory compliance obligations.

The
smaller companies pointed out that the process of obtaining CE marking is also
an extremely costly process. This is reinforced by the need to be tested
several times a year, which leads to substantial costs.

Furthermore,
Firm A experienced problems related to market surveillance activities outside
the EU. One of the companies had to modify the design of a product even though
it had fulfilled all the homologation tests, based on US regulations. While EU
legislation is particularly relevant for EU producers, compliance costs arise
from international sources of requirements.

As
the snow-ski footwear industry is non-harmonized the above mentioned
requirements are not set out in the IM directives. FESI states that such
requirements should be included in national legislation, though they were not
able to point to specific pieces of national legislation containing such
requirements.

Customs
clearance

In
general the issue of customs clearance does not seem to be a general concern
within the industry, though some companies highlighted customs barriers as
major sources of costs. In one of the interviews, for example, it was
highlighted that delivering supporting documents for customs clearance was one
of the stages of regulatory compliance that the company takes into
consideration when estimating the costs of regulatory compliance. From the
perspective of the company, there is little difference between the legislation
and the administrative barriers that the various pieces of legislation create.

Summary
of costs

The
companies interviewed for this study represent very different types of
companies in terms of turnover, number of employees and available resources.
The amount of resources allocated to administrative and substantive regulatory
compliance processes vary widely from company to company.

Most
companies interviewed do not disclose their total revenue, which means that it
can be difficult to estimate the impact of compliance costs versus normal costs
of doing business. The larger firm that allocates one FTE to regulatory
compliance generates a total annual turnover of around € 400 million and
employs 1,500 people. 41% of company revenue is generated from ski-boots. Thus
the turnover for ski-boots is approximately € 165 million and employment 615.
Taking these numbers into account the allocation of one FTE to regulatory
issues cannot be considered a major cost. This was also confirmed by the
interview. Furthermore, the interviewee estimated that the budget allocated to
certification, advice and testing represented around 1-2% of the total
investment budget.

The
burden of compliance falls disproportionately onto the smaller companies.  It  is
more difficult to separate the resources allocated to compliance issues since
many processes in small companies are interlinked and employees share a range
of different roles and responsibilities. However, resources dedicated to
compliance costs are allocated in both the design phase and the production
phase. Firm B has an annual turnover of €8 million while employing only 25
people. That makes this particular company a very small manufacturer within the
industry. This small company allocates almost as many resources in the design
phase (0.75-1 FTE) as one of the larger companies, which indicates that the
regulatory requirements are fairly high in relative terms for a small manufacturer
compared to a large manufacturer.

As
mentioned throughout the case, technical standards are important elements
within the industry both in the design and production phase, especially for
small producers. Smaller manufacturers appear to be impacted to a greater
extent than larger firms. The adherence to the standards was not mentioned
either as a main cost issue for the larger companies interviewed.

Variation
in national regulations or laws has not created problems for the industry.
Problems related to the practical application of the mutual recognition
principle and varying national legislation in different member states could
potentially cause problems for companies. This, however, does not seem to be
the case within the snow-ski footwear industry. None of the five companies
interviewed has experienced problems related to national legislation, neither
in terms of compliance nor in terms of placing products on the market in
different member states. The issues were also discussed with FESI. Problems related
to national legislation in different members states or the mutual recognition
principle have not been brought up in meetings or discussions with their member
companies. In general, therefore, there seem to be very limited, if any, costs
related to varying legislation across the member states as well as practical
problems with the ‘mutual recognition’ principle.

Business
as usual

Some
of the costs described in the section above could be considered so-called
business as usual (BAU) costs. This refers to costs that the company would have
had to bear even in the absence of specific legislation. However, the concept
of BAU costs does not apply in the same extent to snow-ski footwear since the
product group is non-harmonized. Therefore, the premise of the BAU cost
consideration applied in this study is to examine what costs companies would
face in the absence of harmonized IM legislation. Since the harmonized IM
legislation does not apply to the snow-ski footwear industry the premise of the
BAU consideration would be what costs companies would face in the absence of
national legislation.

Testing
processes in all companies include a focus on performance, compliance with
standards, and conformity with industry trends. Snow-ski footwear companies go
through testing procedures that are not limited to regulatory requirements.
These procedures are maintained to ensure product quality. In the snow-ski
footwear industry, ensuring durability is a central element and even smaller
producers go through intensive practical testing of the products, which
integrates standards as well as performance testing.

5. Possible benefits from
simplification or harmonisation

As
the product group for this case study is non-harmonized, the sections above
have used national legislation as a point of reference in examining the
administrative and substantive compliance costs. The input provided through the
interviews with companies and industry associations indicate limited problems
from national legislation in the different Member States.

Production
of snow-ski footwear is concentrated in relatively few European countries.
There are no significant challenges in terms of varying legislation that would
complicate the selling of the products and increase costs. Hence, there seems
to be no real demand or even potential for simplifying current national
legislation. On
the question of whether harmonizing legislation would lead to lower costs for
the industry, it was noted that since national legislation does not represent
major obstacles, there would be little costs savings related to a harmonization
of legislation.

Requirements
for testing and documentation to third parties companies within the snow-ski
footwear industry are a source of additional costs. In general, the companies
interviewed were positive towards the fact that formulated requirements exist.
However, it was stated that the requirements on the frequency and scope of
testing impose significant costs to the manufactures. Hence, there could be
scope for simplification of these procedures in order to reduce the processes
involved in testing and documentation to third parties. The costs associated
with these processes are particularly prohibitive in terms of developing new
products, according to one of the interviewees. Thus, companies are positive
towards requirements but would like to see them revised to decrease the costs
they impose, especially the need for repeated testing.

Extrapolation
of costs and cost saving from the firms to the sector

Given
the limited amount of data in the relevant databases on the number of
manufactures of snow-ski footwear within the industry, and possible variance
between Member States given different national legislative environments and
national standards, we have not attempted to extrapolate the substantive and
administrative costs across the total number of manufacturers in the EU.

6. Overall conclusions

This
case study covered snow-ski footwear which includes footwear products related
to activities involving downhill and cross-country skiing. Products such as
snow-ski footwear are regulated at national level, non-harmonised and covered
by the Mutual Recognition principle (764/2008). Certain aspects of the products
are covered by Union harmonisation legislation. This includes the labelling of
materials, packaging and also the use of chemicals under the REACH Regulation.

The
total size of the EU27 market for snow-ski footwear in 2011 was 4.93 million
units (pairs) with a total EU production value of EUR 330 million. The snow-ski
footwear industry is very competitive with only a small number of manufactures
with global reach. The total number of snow-ski footwear producers in the EU is
around 20, occupying around 4,000 employees and representing around 70 % of the
world’s production. Despite the absence of harmonised EU legislation in
this area, national legislation is not particularly relevant to snow-ski
footwear due to the globalised nature of the market. This means that all
products are developed with reference to, and in compliance with international
standards that tend to be followed EU-wide.

While
specific data on the compliance costs of meeting national regulations were not
available from manufacturers, the most significant compliance costs identified
were obtaining product certification from third parties and driven by the
frequency of testing required. Meeting the requirements set out in technical standards
was not mentioned as a key cost driver.

7.  Sources of
information

-
Eurostat PRODCOM

-
Eurostat Structural Business Statistics
Database and PRODCOM

-
International Standardization
Organization

-
European Committee for Standardization

-
European Commission

-
Input from interviews

o
Industry association: Federation
of the European Sporting Goods Industry

o
Five companies

Case
study 10 - Bicycles

1.
Introduction – objectives of the study

This
case study focuses on bicycles. Bicycles are covered by the Mutual Recognition
Regulation (Regulation 764/2008/EC). This regulation applies to products which
are not covered by Community harmonisation legislation, or to aspects of
products falling outside the scope of such legislation. The main purpose of
this case study is to assess the influence of the above mentioned regulation on
the bicycle sector. In the Impact Assessment of Mutual Recognition Regulation
in 2007 some cases in the bicycle sector were considered.[168]
Furthermore bicycles are subject to the General Product Safety Directive (GPSD
2001/95/EC), that resulted in European standards on safety requirements for
bicycles.

2.
Product definition and description of structure of the sector

Product and
market definition

This
case study focused primarily on “regular” bicycles (The term “regular” is used
here to distinguish them from Electrical Power Assisted Cycles, EPACs).

Since
the importance of Electrical Power Assisted Cycles has sharply increased in
recent years, certain aspects related to Electrical Power Assisted Cycles were
also examined. Based on Directive 2002/24/EC (concerning the type-approval for
two and three wheeled vehicles) the definition of an Electrical Power Assisted
Cycle can be determined. These so-called Electrical Power Assisted Cycles are
(article 1 (h)) "Cycles with pedal assistance which are equipped with an
auxiliary electric motor having a maximum continuous rated power of
0.25 kW, of which the output is progressively reduced and finally cut off
as the vehicle reaches a speed of 25 km/h (16 mph) or if the cyclist
stops pedalling.” Because of this exclusion, Member States define Electrical
Power Assisted Cycles as bicycles as well. Bicycles with more power do fall
under directive 2002/24/EC (concerning the type-approval for two and three
wheeled vehicles). Nevertheless several Directives are applicable to Electrical
Power Assisted Cycles (see below).

Market
size

The
following table makes use of PRODCOM data from Eurostat and shows information
on production, imports and exports within the EU for the year 2009. The total
European market has a value of 2.8 billion Euros. The table shows that the
largest part (in value) of the bicycles on the European market are produced in
Europe, that a large part is imported and that the export from Europe to third
countries is limited.

Table 1: Production, import and export value –
European bicycle sector (2009), PRODCOM CODE: 30921030 (Non-motorized bicycles
and other cycles, without ball bearings) and 30921050 (Non-motorized bicycles
and other cycles with ball bearings)

INDICATORS || Values (€)

Production || 2,012,629,673

Import || 925,093,260

Export || 96,857,400

Total EU market || 2,840,865,533

Source: Eurostat PRODCOM.

According
to a report[169] of
COLIBI and COLIPED (COLIBI is the Association of the European Industry and
COLIPED is the European Two-Wheeler Parts’ & Accessories’ Industry) around
20 million bicycles are sold on the European Market (EU-27) in 2011. This is a
decrease of 2% relative to 2010, but an increase of 5.8% relative to 2000.

Table 2: European bicycle sales (EU27), 2000-2011

Year || Sales (1,000 units) || Growth rate(%)

2000 || 18,945 ||

2001 || 17,745 || -6.33

2002 || 17,840 || 0.54

2003 || 20,206 || 13.26

2004 || 20,322 || 0.57

2005 || 20,912 || 2.9

2006 || 21,033 || 0.58

2007 || 21,344 || 1.48

2008 || 20,206 || -5.33

2009 || 19,582 || -3.09

2010 || 20,461 || 4.49

2011 || 20,039 || -2.06

Source: EUROPEAN BICYCLE MARKET 2012
edition, Industry & Market Profile (2011 statistics), COLIBI and COLIPED.

According
to the report, within the EU most bicycles are sold in Germany (20% of the
total volume), UK (18%) and France (16%).

Table 3: European bicycle sales (EU27) by country,
2011

Country || Sales (1,000 units) || Country || Sales (1,000 units)

Germany || 4,050 || Greece || 325

UK || 3,580 || Portugal || 320

France || 3,200 || Slovakia || 300

Italy || 1,750 || Slovenia || 250

The Netherlands || 1,171 || Hungary || 240

Spain || 780 || Lithuania || 115

Poland || 610 || Bulgaria || 103

Denmark || 550 || Ireland || 95

Sweden || 520 || Estonia || 65

Belgium || 468 || Latvia || 35

Austria || 405 || Cyprus || 35

Romania || 375 || Malta || 12

Czech Republic || 345 || Luxembourg || 10

Finland || 330 || EU 27 || 20,039

Source: EUROPEAN BICYCLE MARKET 2012
edition, Industry & Market Profile (2011 statistics), COLIBI and COLIPED.

Industry
structure

In
terms of industry structure (production), Eurostat data for the relevant NACE
category 30.92 (Manufacture of bicycles and invalid carriages) indicate
that 1,636 companies were active in the bicycle industry in 2010. The market is
characterized by a combination of both large and small companies. Many bicycle
producers are part of groups, which means that they produce several brands.

Table 4: Number of enterprises – bicycle and invalid
carriages sector (NACE 30.92)

Indicator || 2008 || 2009 || 2010

Number of enterprises || 1,654 || 1,555 || 1,636

Production value (in thousands) || € 5,040 || € 4,794 || € 4,892

Source: Eurostat

In
terms of production volume, according to the COLIBI/COLIPED report European
production (EU27) has decreased from around 14.5 million bikes in 2000 to
around 11.8 million in 2011.

Table
5: European bicycle production (EU27), 2000-2011

Year || Production (1,000 units) || Evolution (%)

2000 || 14,531 ||

2001 || 13,009 || -10.47

2002 || 12,272 || -5.67

2003 || 12,828 || 4.53

2004 || 13,232 || 3.15

2005 || 13,218 || -0.11

2006 || 13,320 || 0.77

2007 || 13,086 || -1.76

2008 || 13,246 || 1.22

2009 || 12,178 || -8.06

2010 || 12,241 || 0.52

2011 || 11,758 || -3.95

Source: EUROPEAN BICYCLE MARKET 2012
edition, Industry & Market Profile (2011 statistics), COLIBI and COLIPED.

According
to the report of COLIBI/COLIPED, within the EU most bicycles are produced in
Italy (20% of the total volume), Germany (19%) and the Netherlands (10%) which
are traditionally the three main producers[170].
Production of parts and accessories also takes place in Italy (32%), Germany
(16%) but also in Romania (15%). Still, at a global scale, over 60% of bicycles
produced today are made in China[171].

Table 6: European bicycle production (EU27) by
country (2011)

Country || Production (1,000 units) || Country || Production (1,000 units)

Italy || 2,310 || Greece || 133

Germany || 2,288 || Sweden || 129

The Netherlands || 1,200 || Belgium || 109

France || 900 || Denmark || 70

Poland || 892 || UK || 40

Portugal || 782 || Finland || 31

Bulgaria || 642 || Slovenia || 5

Romania || 422 || Ireland || 0

Hungary || 387 || Cyprus || 0

Czech Republic || 361 || Estonia || 0

Lithuania || 326 || Latvia || 0

Slovakia || 306 || Luxembourg || 0

Spain || 275 || Malta || 0

Austria || 150 || EU 27 || 11,758

Source: COLIBI and COLIPED annual report
(2011 statistics)

In terms of employment data from
the Industry & Market Profile report produced by COLIBI and COLIPED shows
that around 20.000 people work in the bicycle and the parts and accessories
industry. In total are working in the industry. The report does not clarify if
these numbers concern only production sector or also retailers[172].

Table 7: Total employment in the bicycle sector
(COLIBI data)

Country || Bicycle || Parts & Accessories || Total

EU 27 || 12,874 || 6,915 || 19,789

Germany || 2,450 || 1,200 || 3,650

Italy || 1,574 || 1,600 || 3,174

The Netherlands || 1,764 || 500 || 2,264

France || 1,150 || 900 || 2,050

Poland || 1,074 || 370 || 1,444

Romania || 400 || 800 || 1,200

Portugal || 690 || 500 || 1,190

Bulgaria || 1,010 || 10 || 1,020

Czech Republic || 460 || 480 || 940

Hungary || 482 || 50 || 532

Austria || 300 || 80 || 380

Slovakia || 280 || 90 || 370

Belgium || 220 || 150 || 370

Great  Britain || 250 || 70 || 320

Lithuania || 190 || 0 || 190

Spain || 180 || 0 || 180

Greece || 160 || 0 || 160

Finland || 60 || 45 || 105

Sweden || 90 || 0 || 90

Slovenia || 10 || 70 || 80

Denmark || 80 || 0 || 80

Cyprus || 0 || 0 || 0

Estonia || 0 || 0 || 0

Ireland || 0 || 0 || 0

Latvia || 0 || 0 || 0

Luxembourg || 0 || 0 || 0

Malta || 0 || 0 || 0

Source:
COLIBI and COLIPED annual report (2011 statistics)

3.
Analysis of applicable legislation

Bicycles are
non-harmonised products and are not covered by a specific EU legislation
(except Electrical Power Assisted Cycles). At the EU level the relevant piece
of legislation is the mutual recognition which is presented in the section
below. Additional information is provided on the development of the mutual
recognition guideline, especially the impact assessment (case studies for
bicycles). At the same time though, there are relevant EN standards, based on
the General
Product Safety Directive (GPSD 2001/95/EC). Furthermore, there are national
pieces of legislation. In this study we examined the legislation of three
Member States with a large bicycle tradition, namely (Germany, Netherlands and
the UK).

As
a separate part we also examined the legislation covering Electrical Power
Assisted Cycles.

Relevant
legislation: Mutual Recognition

Bicycles
are covered by the Mutual Recognition Regulation (764/2008/EC). The principle
of mutual recognition states that products lawfully sold and marketed in one
Member state, should also be allowed to be marketed in another Member state. This
statement holds, even when the product does not fully comply with the technical
rules valid in the Member State. This guideline removes the need for
harmonisation of all national technical rules. These rules state typically
requirements for packaging, size, composition, weight and labelling. One
exception to the mutual recognition guideline is when the Member State can show
that this is necessary for the protection of for instance the consumer safety,
public health or the environment and secondly that the required measures can be
shown proportional.

The
Mutual Recognition Regulation provides conditions and procedures which Member
states have to follow when they want to introduce a national law (technical
rule) which may disrupt the internal market[173].

General
Product Safety Directive and EN standards

Except
for the mutual recognition principle, bicycles are subject to the General
Product Safety Directive (GPSD 2001/95/EC). Based on the GPSD the sector itself
developed the standards. The EN standards provide safety standards for the
bicycles. These are captured under CEN/TC 333. The European standards for
bicycles are mandated by Commission Decision 2011/786/EC. This decision sets
out the specific safety requirements for bicycles, bicycles for young children
and luggage carriers for bicycles to be met by European standards pursuant to
Article 4 of Directive 2001/95/EC.

An
overview of the relevant standards is provided in the table below:

Table 8: Relevant EN Standards

Standards || Title

EN 14764:2005 || City and trekking bicycles - Safety requirements and test methods

EN 14766:2005 || Mountain-bicycles - Safety requirements and test methods

EN 14781:2005 || Racing bicycles - Safety requirements and test methods

EN 14872:2006 || Bicycles - Accessories for bicycles - Luggage carriers

EN 16054:2012 || BMX bicycles - Safety requirements and test methods

EN 14765:2005+A1:2008 || Bicycles for young children - Safety requirements and test methods

Source: European Committee for
Standardization[174]

According to all interviewees the
EN standards are used by all manufacturers inside Europe but also to a large
extent also by manufacturers outside Europe. Even Chinese manufacturers of
bicycles and components use the standards for their exports to Europe. Some
interviewed European producers mentioned that they use their own standards
which are often higher than the EN standards.

At
the moment ISO standards are developed. These standards are based on the EN
standards. When these ISO standards are ready, they will replace the EN standards.

Applicable
national regulations

As
stated above, the mutual recognition regulation does allow Member States to
enforce different technical rules. These rules form exceptions on the Mutual
Recognition principle and should be based on art. 36 TFEU. Examples include
public health and the environment.

The
United Kingdom has two specific regulations (technical rules) for
bicycles. The first regulation (Pedal Bicycles (Safety) Regulations (SI
2010/198))[175] is
concerned with safety and consumer protection. Examples from these regulations
are that the bike should be equipped with a bell, right hand should operate the
front brake and the incorporation of retro-reflected material in the design.

The
second regulation (Pedal Cycles (Construction and Use) Regulations (SI
1983/1183))[176] is
concerned with the construction of the bicycle as well as the use of these
vehicles. Examples of regulations include the name of the manufacturer on the
bicycle, braking systems, and the presence of a gearing system between the pedals
and the wheels.

In the Netherlands, bicycles are subject to the
Warenwet in the Netherlands which covers general requirements for the safety of
consumer products[177].
Secondly, bicycles are covered under the Regeling Voertuigen[178]. The
former is based on the European directive for product safety. The latter is
specifically for vehicles and gives specific (technical) rules to which
bicycles should comply. The Netherlands does not have required approving each
type of bicycle. The Regeling Voertuigen does only have several general
requirements which bicycles have to fulfil if they want to enter the Dutch
roads. One of the requirements are reflectors of a certain type on the side of
the tires, pedals should have these as well. Also, the Dutch law knows the requirement
of a bell.

Germany has
a similar set-up to the Netherlands. Rules about the bicycles can be found in
the Straßenverkehrszulassungsordnung (StVZO)[179].
From this legislation requirements are for instance the fact that bicycles
should have two brakes which can be operated independent from each other. Also,
bicycles should have a bell. In contrast to the Netherlands, Germany requires
the bicycle it self to have lights, back and front. These lights should be
operable at all time. The Netherlands only requires it during night and also
allows the cyclist to have the lights on himself instead of the bike. Secondly,
Germany requires a dynamo to operate the lights.

In
the interviews some other requirements were mentioned. For example, in France
bicycles have to be fully assembled and in Denmark a traceability code is
required (in connection with theft) and in Spain bicycles have to be
accompanied by test certificates.

From the countries discussed up to
now, we see that the requirements seem to be quite similar. In general, safety
standards are considered to be important which results in requirements for
lights, reflectors as well as for brakes. In practice the different national
requirements result in specific adjustments of bicycles per country.

In
contrast to regular bicycles, Electrical Power Assisted Cycles (EPACs) are
within the scope of by IM legislation. An overview of relevant directives is
provided in the following table[180]:

Legislation || Obligations

Directive 2006/42/EC (Machinery)[181] || o Complete technical file o EC Declaration of Conformity o CE marking o Marking with § The business name and full address of the manufacturer and, where applicable, his authorised representative § Designation of the pedelec § Designation of series or type, § Serial number, if any, § Year of construction, business name and full address of the manufacturer and, where applicable, his authorised representative,

Directive 2004/108/EC (Electromagnetic Compatibility)[182] || o Complete technical file necessary to produce evidence of compliance. o EC Declaration of Conformity o CE marking o Fulfil requirements for traceability.

Directive 2011/65/EC (RoHS)[183] || o Complete technical file o EC Declaration of Conformity o CE marking

Battery transportation (dangerous good regulations for transport by road (ADR), class 9) || o Includes requirements for all transports of the battery. o Comply to UN3481 requirements o Follow handling procedures

Directive 2006/66/EC (Battery) || o Registration of the producers of batteries o Obligation to take back used batteries o Readily removable (or clear instructions on how to remove the bicycle) o Labelled with the correct symbols o Recycling of collected batteries

Source: BIKE EUROPE series on EU
regulations for E-bikes and pedelecs.[184]

There
is a technical standard for Electrical Power Assisted Cycles, EN15194:2009. In
terms of technical standards a lot of the requirements are covered by technical
standard EN15194:2009[185].
Only the requirements of the Machinery Directive are not fully included.
Therefore following the standard does not mean that you meet all requirements
of the directives. The fact that the standard does not fully cover the
requirements of the directives makes it confusing for enterprises.

Also
from the interviews the main conclusion is that the rules for EPAC are rather
confusing. The main remarks from interviewees are:

· The
EN standard for EPACs is a ‘collage’ of many single requirements from the
applicable directives;

· It
was already mentioned that EN 15194:2009 covers most of the requirements of the
directives, but not all;

· EN
15194:2009 sometimes conflicts with national regulation on vehicles or traffic;

· The
Machine Directive is applicable, but not all requirements of the MD are
possible for EPACs. The interviewee mentioned for example that according to the
Machine Directive rotating parts have to be covered, but if you do that with a
bike, you cannot use the bike anymore. This interviewee also mentioned that
according to the Machine Directive the EPAC should have an emergency button.
Although these are wrong interpretations of the interviewee, it shows that
there is confusion.

· At
the moment a working group is working on the revision of the EN 15194 standard
to include the relevant requirements of the directives in the standard,
including the requirements of the Machinery Directive. In the main time it is
confusing for some enterprises that following the EN standard do not mean that
you meet the requirements of IM legislation and that enterprises have to find
out themselves which elements of the Machinery directive are relevant for
Electrical Power Assisted Cycles.

4.
Analysis of mutual recognition in non-harmonised product groups

Additional
information on the role of mutual recognition in the case of bicycles was
provided in the impact assessment study that took place in 2007[186]. A
sectoral study that took place in 2002 found that 41% was unfamiliar with the
principal of mutual recognition (2002)[187]
while only about 50% of the companies familiar with the principle actually
relied on it to access foreign markets.

The
impact assessment (2007) illustrated three firm cases in the bicycle sector,
with lack of mutual recognition and extra costs caused by national rules. The
first case describes the technical barrier of lightning equipment used in
bicycles. Different Member states have different requirements for these. The
enterprise has to change these to meet the requirements in the different
countries. Associated costs are estimated for the lack of mutual recognition of
98,000 and 148,000 EUR each year, which represents between 0.7% and 1% of the
turnover of this company on the market of this (large) Member State.

The second case[188] of an SME importing indicated
three specific requirements in his country:

· All
bikes must be equipped with bells

· Particular
stickers on the bikes.

· Need
to have bikes type approved

All these requirements were reported to impose an
extra cost to the firm of € 103,400 each year, representing 4.75% of its annual
turnover for the specific company.

Finally, the third case indicated that the most
important hurdle that each type of bicycle has to be previously tested in an
accredited laboratory in the Member State in which the company wants to sell.
If this test is successful, a code is provided which the company has to engrave
in the frame of the bicycle. The specific costs could not be specified.

All
above indicate that national requirements, which are allowed under the Mutual
recognition principle, result in technical barriers and in extra costs for
placing products on the market in other Member States.

From
the interviews carried out there seems to be limited familiarity with the
principle of mutual recognition. Still, the interviewees could not mention
substantial problems with placing products on the market in other Member
States. This is because nearly all manufacturers make use of the EN standards
which facilitate the operation of the EU market. The only problems are the
national requirements on especially lightning and retroflection which results
in extra costs for especially designing of adjustments for specific countries
or extra logistic costs (order and store different parts). These national
requirements are allowed within the Mutual recognition principle and were
already identified in the case studies in the impact assessment study mentioned
before.

The
impact of the national requirements on lights is limited. The European bicycle
industry and market exist for a long time. They are used to the different
requirements on lights. There are no problems with placing products on the
market in another Member State. Furthermore, markets in the different countries
are quite different because of differences in consumer preferences. There are
some typical bicycle countries, like Germany, UK and the Netherlands. Producers
in a country best know the national preferences. Therefore most producers produce
especially for their home market and little for other countries.

At
the same time the view of interviewees on imported bicycles (especially China)
differs. Some suggest that they mostly meet the EN standards, but that they are
generally of low quality. Others suggest that there are imported bicycles on
the market that do no meet the EN standards, but that there is too little
surveillance. Furthermore, there is a feeling that a certain level of dumping
is taking place.

5.
Analysis of management of regulatory compliance and administrative
costs and burdens

Differences
of national requirements mainly have to do with lighting and retroflection, and
sometimes an extra brake. To comply with these national requirements some
manufacturers have to make adjustments in their designs and they have to look
for and buy the needed components. The interviewees have different views. One
interviewee mentioned that there are extra costs to meet the national
requirements of about 2 or 3 days per adjustment and that they have about 30 to
40 adjustments a year. Some interviewees estimated the extra costs on about 1%
of turnover, because of extra inventory of different models or extra inventory
of different kinds of lights. Some others mentioned that it is very easy and
that there are hardly any extra costs. The suppliers of the lights know exactly
the requirements of all countries and the bicycle producer only have to buy the
right lights.

Overall
the extra costs are limited. Furthermore, all interviewees mentioned that it is
difficult to separate these costs for national requirements of light from costs
for adjustments for national preferences. Bicycles are “cultural” products,
meaning that every country has different consumer preferences. So, bicycles
have to be adjusted for these consumer preferences in nearly every country
anyway. Meeting the national requirements is incorporated in the processes.

From
the analyses it can be concluded that while bicycles are
non-harmonised products (except Electrical Power Assisted Cycles), the sector
is to a large extent harmonised through the use of harmonised standards (for
safety requirements under the General Product Safety Directive (GPSD
2001/95/EC)). The Mutual recognition principle does not play an important role
in the bicycle sector.

6.
Overall conclusions

The
case study focused on bicycles covered by the Mutual Recognition Regulation
(Regulation 764/2008/EC). Bicycles are not covered by Union harmonisation
legislation (except Electrical Power Assisted Cycles) and the only relevant
piece of legislation is the General Product Safety Regulation. In the context
of the Regulation, a number of European EN Standards developed by CEN are key
for the sector. They are used by all manufacturers inside
Europe but to a large extent, also by manufacturers outside Europe.

In
2011, the total European market for bicycles was close to €2.8 billion in size
with a total of around 20 million bicycles sold on the European Market (EU-27).
Production inside Europe was close to 11.8 million bicycles in 2011. Italy,
Germany and the Netherlands are the three larger producers in Europe but 60% of
the global production takes place in China.

The
situation is different in the case of Electric Power Assisted Cycles, which are
covered by IM legislation (Machinery, EMC, RoHS, Directive 2006/66/EC on
batteries and accumulators). However, according to the input provided, the
rules applying to Electric Power Assisted Cycles are confusing and the
development of a new comprehensive technical standard is being developed.

Earlier
studies on the costs of the different national pieces of legislation and our
own analysis suggest that the additional costs may be up to 1% of firms’ annual
turnover as a result of different requirements concerning lighting and
retroflection, the requirement to introduce additional breaks or bells, to
apply specific stickers, but also the need to have bikes type approved in some
EU countries.  An important finding was that many firms are unaware about the
concept of mutual recognition and its potential advantages, although since most
firms follow the EN standards, this problem has been partly addressed by
default.

7.
Sources of information

Sources
of information:

· COLIBI
and COLIPED annual report (2011 statistics)

· European
Committee for Standardization

· Eurostat
PRODCOM

· http://www.worldometers.info/bicycles/

· http://www.colibi.com

· http://www.bike-eu.com

· Impact
Assessment COM(2007) 36 FINAL SEC(2007) 113

· http://www.legislation.gov.uk/uksi/2010/198/pdfs/uksi\_20100198\_en.pdf

· http://www.legislation.gov.uk/uksi/1983/1176/pdfs/uksi\_19831176\_en.pdf

· http://wetten.overheid.nl/BWBR0001969/geldigheidsdatum\_23-05-2013

· www.gesetze-im-internet.de/stvzo\_2012/BJNR067910012.html

· www.cen.eu

Interviews:

· 3
interviews with a national industry association

· 6
interviews with producers of bicycles

Case study on
Additive Manufacturing / 3D Printing

Introduction

Through
this study, 10 product cases have been developed (8 harmonised and 2 non-
harmonised). In addition, this case has been produced since the specifications
posed questions as to how ‘fit for purpose’ the body of internal market
legislation for industrial products is to accommodate new technologies and
advanced manufacturing processes.

The
main sources that have been used to carry out the case were: desk research to
identify relevant studies and literature that provide information on the 3D
printing sector and on regulatory issues raised by its rapid development. In
addition, discussions with a small number of industry associations and
manufacturers involved in the manufacture of laptops and printers have been
interviewed. Lastly, the Your Voice consultation on possible reform of the
Internal Market Legislation for Industrial Products included a question
specifically on the issue of 3D printing. There were limited responses specifically
relating to 3D printing, but some inputs were used.

Background
on Additive Manufacturing (commonly known as 3-D printing)

Additive
manufacturing is an advanced technology and an intermediate step in the
production process. It can be used to develop prototype products for R&D
and design purposes across a wide range of sectors. Additive manufacturing
involves a process of making a three-dimensional solid object from a digital
model. The manufacturing process involves making physical objects by depositing
a material using a nozzle, print head, or another printer technology.  A 3D
object is made using an injector which during each pass deposits five or ten
hundredths of a millimetre of an acrylic resin, a metal alloy, a wax or a nylon
powder. This is consolidated with a laser, or left to cool, and then tested.

It is important to note that the
terms '3D printing' and '3D printer' are misleading in that the process of
additive manufacturing is more like a machine tool, except that instead of
removing material, the machine adds materials in successive layers so as to
produce a 3D object. Although 3D printing was initially used for the
development of product prototypes, the different potential uses of 3D printing
have evolved and become multifaceted.

Additive manufacturing is now
used to produce highly customisable short-run manufacturing of industrial
products and also for dental implants and medical devices. The purposes for
which 3D printing are used are therefore becoming more diverse in terms of
their potential applications across different markets. The 3D printing industry
has grown markedly in the past 5 years, driven by growing consumer interest in
3D printers and the reduction in the cost of 3D printers and improvements in
their technological capabilities. There are also an increasing number of
industrial applications. For instance, a recent study in the US by GIS[189]
estimated that the global 3D printing market will reach $2.99bn by 2018.  The
report states that the market for 3D Printing Products is projected to grow
considerably in the near future as 3D printer systems become more affordable
and easy to use.

3D Printing
and Industrial Competitiveness

There is considerable potential
to stimulate growth and competitiveness through this nascent industry.
Customised products can be developed, developmental costs for new
products reduced and this helps to level the playing field for SMEs through
reduced lead times to market and the ability to carry out design and prototype
development in-house rather than having to pay for external product prototype
development.

Further advantages of additive
manufacturing are that it can help to accelerate product development lead
cycles considerably. Taking an example from Italy in the area of the design of
customised parts for Formula 1 vehicles, 3D printing of prototypes dramatically
reduces time to market. “In the 1970s, it used to take six years from the
designer’s first sketches to release to market. Today, we’re looking at
eighteen months, and even that’s shrinking”[190].

Applicable
IM legislation­ for additive manufacturing

·
The
legislation that is applicable to 3D printers includes:

·
IM
legislation applicable to the 3D printer itself e.g. the Machinery Directive

·
IM
regulations applicable depending on the products produced by the machines

·
The
products produced by the machines will also be subject to wider legislation
beyond IM regulations e.g. intellectual property law, legislation to control
dual-use potential and environmental legislation.

Since 3D printers are essentially
machines, and are not like office printers, the current interpretation is that
the Machinery Directive is  always  applicable[191].
Since the scope of the Machinery Directive is based on a broad definition of
machinery and not on a list of product categories and since the essential
health and safety requirements of the Directive cover all the potential risks,
there is no need for new or amended legislation. On the other hand, effective
application of the Machinery would be facilitated by the development of a
specific harmonised standard or set of standards for this type of product.

There may be an outstanding
question as to whether certain compact '3D printers' could not be considered as
ordinary office machinery or IT equipment subject to the Low Voltage Directive.
This issue could become more pertinent as 3D printers become ever-cheaper and
the uses ever wider. There is evidence that the price point has been
significantly reduced and that consumer-oriented 3D printers are becoming more
common.

Since a central feature of Union
harmonisation legislation is that it is technology-neutral, in principle, there
are no specific legal barriers within current IM regulations that would hinder
the development of additive manufacturing or of the products produced by 3D
printers, which would follow existing IM legislation, depending on what type of
product is being produced (and only if these products were placed on the market
(not if they were basic prototypes).   A respondent to the Your Voice
consultation confirmed that “3D printers can be covered through the existing
CE-Marking directives. Similarly, products printed using 3D printers need to be
compliant like any other manufactured good”.

However,
a distinction can evidently be made between the applicable legislation for the
3D printer as a piece of machinery and the products and prototypes it produces
through additive manufacturing processes. No specific problems were identified
in terms of gaps in internal market legislation. If products produced using
such printers were placed on the market, they would be subject to whatever the
applicable legislation is depending on the final product being produced.

There
likewise do not therefore appear to be any problems relating to additive
manufacturing being an intermediate stage in the production process, whereas IM
regulations apply to products placed on the market.  There is no evidence of
specific gaps in IM legislation.

An
interesting issue identified in relation to all types of printers (not only 3D)
is that products can be modified through software updates post-placement on the
market. Moreover, major manufacturers are increasingly designing hardware based
on a single platform with some functions disabled so that different models can
be sold using this platform simply through software updates and/ or the
insertion of a configuration SIM card.

Wider legal
issues raised by 3D printing

Although
a detailed examination of the legal implications of 3D printing is beyond study
scope, having concluded that IM legislation is fit for purpose in accommodating
new technologies and innovations, it is worth providing a short summary of the
legal issues raised by the sector’s development (and the practical challenges
of ensuring that market surveillance is effective for the outputs produced by
3D printers. In summary, these were:

·
The
importance of addressing potential product abuse or misuse by carrying out of a
thorough risk assessment procedure by manufacturers. There are risks that 3D
printers could be used to produce products for nefarious purposes or that could
potentially be misused. 3-D printers use computer-assisted design (CAD)
blueprints as a template to print solid objects out of raw plastic polymers.

·
Since
these are downloadable over the Internet, there are clearly associated risks[192].
It is therefore essential that manufacturers carry out a thorough risk
assessment at product design stage.  However, the applicable conformity
assessment modules under different IM legislation are already based on a
risk-based approach and a manufacturer’s risk assessment is already required
under the MD. But there is as yet no specific mention in the guidance
accompanying the LVD and MD respectively on 3D printers.

·
A
specific reference could be made when the guidance is next updated as to the need
for “a manufacturer’s risk assessments to take into due consideration possible
product misuse, including dual use potential and any risks associated with
changes to the product specifications resulting from software”. In addition,
guidelines could be introduced on a voluntary basis, drawn up between
manufacturers, regulators and market surveillance authorities to ensure that
there is a clearer understanding of the potential risks.

·
3D
printing has implications for the legal framework in respect of intellectual
property rights and these should be reviewed.

Under
Decision 768/2008, manufacturers retain responsibility for updating product
information for 10 years following their placement on the market. However,
there is a question mark as to whether manufacturers should assume ongoing
responsibility for potential product misuse. Technologies such as 3D printing
may in future need to be included within IM product legislation, as such
“disruptive technologies” are transformed towards more mainstream markets for
consumer and industrial use.

There
is also a need to ensure that the potential for misuse by consumers / end-users
is appropriately regulated, for instance, to avoid consumers producing
dangerous objects or weapons. However, there is already a robust regulatory
regime in place to concern any products placed on the market, both for
harmonised and non-harmonised products.  3-D printing does however raise wider
legal issues such as disputes over copies of physical objects covered by patent
law, since this tends to be less strict than copyright. There may also be grey
areas and legal gaps in respect of intellectual property rights, for instance,
patent law generally governs only complete assembled products. There may
therefore be legal uncertainty as to whether creating replacement parts are
legal.

A wider issue raised by 3-D
printers and the use of advanced manufacturing equipment is how this should be
addressed through IM legislation, which under the New Approach has historically
focused on end-use following the placing on the market. An EC official
commented that “there is a need to look at the entire value chain not just end
product”.

There are self-evident practical
difficulties for market surveillance authorities in checking the safety of
products if in future these can be produced directly by industry and consumers
themselves. There is a need to ensure that any products placed on the market
using 3D printers are subject to rigorous market surveillance and that there is
adequate traceability. This is particularly the case given the issues mentioned
above relating to the potential for the increased risk of product misuse or
unintended use and the danger of or dual-use. Indeed, during the course of this
study, there has been a. There is consequently a need to develop mechanisms to
monitor product use following the placement on the market of 3D printers.

Stakeholder
feedback on 3D printing.

A
leading EU industry association representing the interests of manufacturers
stated in response to the Your Voice consultation that “Products and
applications related to 3-D printing do not need to be regulated at EU level. 
However, there are some issues relating to their dual use (civil/military) and
their potential for fraudulent use to counterfeit other goods. These issues
need to be tackled under the existing regulatory framework, thereby avoiding
establishing additional regulatory requirements for additive manufacturing”.

A
major German industry association confirmed through the Your Voice consultation
that although there was no need for 3D printing to be regulated at EU level,
certain legal issues nevertheless arise in the context of 3D printing, such as
possible violations of intellectual property, technology misuse (for military
purposes, the risk of reduced quality of products produced on a decentralised
basis), and the use of new materials through the development of new
applications in the area of medical technology.

A further respondent to the Your
Voice consultation confirmed that there are a wider set of legal issues beyond
IM legislation and CE-Marking requirements. It was suggested that “rules may
need to be introduced or reviewed for products produced using 3D printers
regarding possible copyright or IPR infringements and dual-use products”.

Conclusions

·
IM
legislation is open to innovative products and techniques and existing IM
legislation appears to adequately cover 3D printers. These should be considered
as machines and therefore fall under the Machinery Directive.

·
Since
IM legislation is technology-neutral, there are no specific barriers under the
applicable legislation to the development of new technologies, or to the use of
additive manufacturing in production processes.

·
However,
since additive manufacturing is a relatively new and growing industry, and is
changing rapidly, there is a need for a more thorough discussion with industry
on the applicable EU legislation. Specifically, the Commission should clarify
directly with industry whether all additive manufacturing machines and '3D
printers' are subject to the MD or whether certain types maybe considered as
ordinary office machinery or IT equipment subject to the LVD.

·
Effective
application of the Machinery Directive would be facilitated by the development
of a specific harmonised standard or set of standards for this type of product.

·
Where
necessary, existing IM legislation can also cover the products produced by the
machines when products are subsequently placed on the market.

·
There
may however be concerns with regard to intellectual property rights or certain
abusive applications such as weapons but these do not relate to IM legislation
itself and as such, are outside this study’s scope.

·
Additive
manufacturing has strong potential to serve as an innovation catalyst and to
level the playing field between SMEs and large industry in terms of R&D and
product design costs.

·
There
is a need for vigilance by regulators so as to ensure that manufacturers’
attention is drawn to the need to carry out adequate risk assessment,
especially with regard to potential product misuse and/ or dual use.

·
Likewise,
the implications of micro enterprises and individuals being able to produce or
“print” their own products in future, albeit on a limited production scale
should be debated by Market Surveillance Authorities.

Literature sources:

·
Guidance
on the application of the Machinery Directive and LVD

·
Cross-sectoral
Analysis of the Impact of International Industrial Policy on Key Enabling
Technologies within the Framework Contract Sectoral Competitiveness
ENTR/06/054, Final report - 28th March 2011

·
Application
of 3D Printing in the Manufacturing Process, Shimpei Kurokawa

·
3D
printing and product lead times http://www.corriere.it/english/13\_maggio\_14/formula-one\_70300362-bc81-11e2-996b-28ba8ed4f514.shtml

·
3D
printing and product misuse/ dual use issues - http://www.guardian.co.uk/world/2012/sep/26/3d-printing-guns-legal-issues-us-law

·
http://techcrunch.com/2013/01/18/like-it-or-not-i-think-3d-printing-is-about-to-get-legislated/

This technical note sets out our approach to the
case studies and to the quantification of costs. It sets out the more detailed
methodological approach with regard to (i) the case study work (ii) the
quantification of compliance costs and (iii) the quantification of the benefits
of possible simplification measures. As such, it supports Section 5 of the main
report.

E.1      Introduction
– case study analyses

An
important task in the specifications was to carry out ten case
studies based on different product categories. The objectives
were to:

·
Identify
which Union harmonisation legislation is applicable in eight selected
harmonised product groups and to illustrate the interactions between different
EU legislative texts;

·
Identify
and estimate the costs for firms of complying with Union harmonisation
legislation;

·
Assess
the cumulative effects of IM legislation and the interaction
between different pieces of legislation applicable to
the same product;

·
Assess
the potential scope for any further regulatory and administrative
simplification of IM legislation;

·
Quantify
(to the extent possible) the cost savings that might arise for firms at the
level of the sector, and examine the possible impact on economic growth and
employment creation from such measures.

It
was agreed with the Commission that eight of the ten case studies would focus
on harmonised products and two on non-harmonised products. In addition, a
qualitative case study was carried out on 3D printing, which focuses on issues
relating to fitness for purpose of the IM legal framework for accommodating
innovation. The following table provides an overview of the case studies
carried out, the number of interviews completed, the internal market legislation
applicable to each product (environmental legislation was excluded from scope) and
the selection criteria addressed through each case.

Table E.1:
Product groups selected for case studies

No || Product || Applicable Legislation || Selection criteria covered || Interviews

Harmonised cases

1 || Electric motors || Core Directives - LVD, EMC, ATEX Other applicable IM legislation: REACH, RoHS, Ecodesign || · Professional users · High share of total manufacturing · High share of SMEs || · 2 national industry associations · 9 firms

2 || Laptops || Core Directives - R&TTE, LVD and EMC Other applicable IM legislation: Ecodesign, RoHS, Packaging and Packaging Waste Directive || · Final consumers and professional users · Relative high share of e-commerce · Large firms dominant || · 1 EU industry association · 4 firms

3 || Domestic Refrigerators and freezers || Core Directives - LVD, EMC Other applicable IM legislation:: REACH, Ecodesign, Energy labelling, RoHS, Regulation on materials in contact with foodstuff || · Final consumers · Large firms dominant || · 1 EU association · 4 firms

4 || Lifts for persons || Core Directives - Lifts[193], LVD and EMC   || · Professional users · Large firms dominant || · 3 EU industry associations · 2 national industry association · 8 firms

5 || Garden equipment || MD, EMC, Outdoor noise, Non-road mobile machinery Emissions, RoHS, REACH || · Professional users and final consumers · Large firms dominant || · 1 EU Association · 5 firms

6 || Instruments & appliances for measuring, testing and navigation ||  LVD, EMC || · Professional users/intermediate products · Use of KETs · High share of SMEs || · 2 industry associations · 5 firms

7 || Air conditioners || MD, EMC, LVD, CPR, RoHS, Energy labelling, PED[194], Ecodesign, the GAD, Regulation 2007/1494/EC on labelling requirements || · Final consumers and professional users · SMEs || · 1 EU and 1 national association · 8 firms

8 || Integrated circuits || LVD, EMC, ATEX, RoHS || · Professional users/intermediate products · Use of KETs such as photonics · Large firms dominant || · 1 EU association · 8 firms

Non-harmonised cases

9 || Ski/Snow footwear || Directive 94/11/EC relating to the labelling of materials used in the main components of footwear for sale to the consumer, Directive 94/62/EC on packaging and packaging waste, REACH, Mutual recognition Regulation 764/2008 || · Final consumers · High Share of SMEs || · 1 EU association · 5 firms

10 || Bicycles || Mutual Recognition Regulation 764/2008 || · Non-harmonised · High Share of SMEs || · 3 national industry associations · 6 firms

|| Total || || || 62 firms 19 industry associations

Overall,
the product groups selected for the case study work have achieved broad
coverage across different types of industrial products addressed through Union
harmonisation legislation.

A
number of selection criteria were agreed with the Commission during Phase 1,
such as: a mix of different industrial product sectors in terms of their market
size and importance within the European economy, the need to include innovative
product groups that integrate Key Enabling Technologies (KETs) and the use of
advanced manufacturing in production processes; product groups in which SMEs
have a strong market share, and products aimed at professional / industrial users
and at final consumers. Although most harmonised product legislation relates to
final products, a further criterion was to ensure that intermediate products
were included in the selection of products, such as electric motors and integrated
circuits.

The
target was to carry out between 6-8 firms per case study. This was achieved for
some case studies, but not others. In total, 62 firms and 19
industry associations contributed to the case study work out of a total of more
than 220 firms contacted. There were challenges in getting
cooperation from firms across all product groups. For instance, in the case of
laptops and domestic refrigerators, the relevant industry
associations (CECED and Digital Europe) were contacted and in turn encouraged
their members to participate in our study. However, many were unwilling to be
interviewed due
to commercial sensitivity concerns, difficulties for firms in collecting the
necessary data internally. In parallel with the efforts of industry associations
to encourage participation in the case study research, manufacturers
were contacted directly by our study team.  The main challenges
in data collection and in quantification – and how we have sought to overcome
difficulties in so far as possible – are set out later in this technical note.

E.2      Methodological
approach to case studies
The
methodology for the
case study research

Our
approach to the quantification of administrative and substantive compliance
costs for economic operators (mainly manufacturers) was informed by the
Standard Cost Model (SCM) approach. A simplified version of SCM, which followed
the main principles, was used in the eight harmonised product cases to get
estimates of the costs of complying with Union harmonisation legislation.

The
quantification exercise was initially meant to focus on the compliance costs
associated with gaps, loopholes, inconsistencies and duplication, by measuring
the current costs of compliance with IM legislation so as to establish a
baseline and then assessing the possible benefits of regulatory and
administrative simplification in future. The practical difficulties in applying
SCM to the broader scope of all (relevant) IM legislation – and the need to
adapt the model accordingly - are outlined in the next section.

The
case studies have been prepared using a combination of research tools. These
are:

•
Data
analysis – a review of sectoral data on
market size and structure from Eurostat (SBS and Prodcom data), industry
associations and information from other data sources, such as the Orbis
database[195].
Where available, data from market studies were also analysed.

•
Desk
research –
a review of relevant applicable Union harmonisation legislation, Commission non-binding
guidance documents on specific legislation and a review of forthcoming
simplifications set out through the NLF (764/2008, 765/2008 and 768/2008) and the
Alignment Package.

•
Interviews
- 62
interviews were carried out with firms[196]
and a further 19 with national and EU industry associations. Interviews with
firms provided both quantitative and qualitative information on the costs of
compliance with IM legislation.

•
Verification
of case study findings and quantitative estimates – checking
with industry associations that the findings from the case studies and the quantitative
estimates of compliance costs are realistic and reflect broader feedback on the
experiences of manufacturers in complying with IM legislation.

The
interview programme was carried out using a structured framework, which
followed the SCM approach but which was adapted to reflect the complexity of
applying SCM to multiple pieces of legislation in parallel. Economic operators
interviewed were asked questions with regard to:

·
How
they manage regulatory compliance internally (whether they use third party
Notified Bodies);

·
Views
on the most costly and administratively burdensome pieces of IM legislation;

·
The
costs involved in regulatory compliance (one-off and recurring), both staffing
and cash costs;

·
Views
on possible regulatory and administrative simplification measures; and

·
Opinions
about what the counterfactual - what would have been the situation in the
absence of Union harmonisation legislation

Having
carried out the interviews, the following steps were then undertaken to analyse
the results:

·
Step
1 - Analyse the current costs of compliance with Union harmonisation
legislation based on information provided by firms. Aggregate these costs at a
sectoral level (“baseline scenario”).

·
Step
2 – Identify and analyse possible simplification measures and quantify the
potential benefits of implementing these.

·
Step
3 – Consider the benefits of possible simplifications at macroeconomic
level in terms of GDP and job creation - for the EU economy.

The
first step was to estimate the current costs of compliance with Union
harmonisation legislation based on information provided by firms and
industry representatives. The intention was to aggregate these costs at
sectoral level in order to develop a “baseline scenario” against which to
compare the benefits of simplification.  On the basis of data available on
compliance costs, we then made an assessment of the costs for a “typical firm”
of complying with IM legislation for each harmonised product group. This was
then used to extrapolate and estimate the costs at the sector level, and to
assess their significance in relation to market size and firm turnover.

The
second step was to identify, analyse and estimate the potential cost savings
from simplification options identified.  The typology of simplification
measures was used (see Section 2.3 of the main report) to distinguish between
regulatory and administrative simplification measures. Two different methods were
used to identify simplification measures. Through the eight harmonised product
cases, manufacturers were asked for their views on possible simplifications.
Secondly, the study team sought to identify through the wider research  further
generic simplifications that could be applied across multiple or all industrial
product groups.  A further distinction was made between simplifications already
taking place through the NLF and additional possibilities identified through
this study.

Quantification
was not always possible however. Whilst some simplifications can be quantified
relatively easily (e.g. putting in place a common template for a Declaration of
Conformity to eliminate inconsistencies in the requirements) in other cases,
such as merging different pieces of IM legislation, quantifying the benefits is
difficult until the precise way in which the legislation will be combined can
be set out. For instance, it may not yet be clear which conformity assessment
procedures will apply post-merger if there are currently different requirements
(e.g. combining the Machinery Directive and the Outdoor Noise Directive – would
the SDoC be applicable or would a third party be required to check
environmental noise levels?).

Since
manufacturers themselves were often unable to estimate the savings, the
estimates were often based on assumptions based on qualitative feedback.  Taking
an example, manufacturers were not generally able to quantify how much time
they would save were there to be a common DoC with no divergence in
requirements between IM legislation. But based on information gathered,
assumptions can be made with regard to time savings and the cost-savings that
this would translate into[197].
In some cases, we assessed what part of the compliance process the specific
simplifications would affect, and provided illustrations as to what could be
considered as a realistic cost saving.

The
third and final step was to estimate the potential for cost savings from
possible future simplification measures and to assess the macroeconomic
impacts on growth and job creation (see Section 5.6 of the main report).
Here, PANTEIA’s PRISMA and WIOM models were used to estimate the impacts of
possible future administrative and regulatory simplification measures. Estimates
were made in respect of potential cost savings for all sectors covered by IM legislation. 
A macroeconomic modelling analysis would have given an indication of the total
possible economic impacts in terms of GDP and job creation for the EU economy.
However, given the high level of uncertainty in relation to compliance cost
estimates from some of the product groups selected and even greater uncertainty
as to the savings from simplification measures, such an extrapolation from the
8 cases to the whole of the EU economy was not deemed to be appropriate.

Rather,
the cases provide illustrations as to the potential cost savings from administrative
and regulatory simplifications in specific product areas. It should be stressed
that the data comes with caveats attached in terms of the comparability of
compliance costs. It is therefore difficult to know how representative the
estimated cost savings are in terms of the total picture for all industrial
products covered by IM legislation, since there are different situations
between product groups in terms of the number of different pieces of IM
legislation applicable. We have therefore limited the exercise to providing an
estimate of the macroeconomic effects across the eight sectors under review.

E.3      Challenges
in the quantification of compliance costs

The
challenges encountered in the quantification of the costs for economic
operators of complying with Union harmonisation legislation are now presented.
It is important to spell these out. Although useful data on compliance costs
was collected, data at the level of individual product groups on compliance
costs was sometimes partial with gaps in relation to some variables.
Assumptions sometimes therefore had to be made in order to arrive at estimates
for the sector as a whole.

E.3.1   Establishing
the “baseline”

There
were difficulties in establishing a baseline against which the current
costs of compliance for economic operators could be compared.  It has not been
possible to get data on the costs incurred prior to the introduction of Union
harmonisation legislation so that we could compare actual costs against a
hypothetical case examining how the situation would have developed in the
absence of the internal market and Union harmonisation legislation for
industrial products. Whilst it was broadly accepted by firms and industry
associations that compliance costs were higher prior to the introduction of IM
legislation for industrial products, since there was considerable regulatory
fragmentation and a need to comply with different national technical
regulations and standards. However, in most cases it was not possible to
provide specific cost figures or estimates.

Firms
were only able to provide a qualitative assessment as to how the current costs
of compliance compare with the situation before the internal market came into
effect. Since core “New Approach legislation” has been in place for 25 years,
it is difficult for many interviewees to compare with how the situation was
prior to the internal market’s establishment.  Furthermore, it would have been
difficult to make direct comparisons since there have been many changes
affecting market size and structure during this period – e.g. globalisation,
the expansion of the EU from 12 Member States when the single market came into
effect to 28 Member States today. There is moreover an absence of data on
compliance costs at the national level prior to its establishment. 
Nonetheless, the lack of such data did not however prevent us from considering
the benefits of Union harmonisation legislation qualitatively (see main report,
some case studies).

E.3.2   Data
availability and reliability

Quantifying
the costs of complying with EU legislation in general, and Union harmonisation
legislation in particular, has been challenging for a number of reasons, such
as the availability of data or the capacity to link specific activities with
the applicable pieces of EU legislation and types of obligations. These are
explained in more detailed in the following paragraphs.  Interviewees were
often not able or unwilling to provide with data to allow for a detailed
analysis of compliance costs for a number of reasons:

·
Commercial
sensitivity of data – even having agreed to participate, some
manufacturers were reluctant to provide cost estimates for commercial reasons.
This was especially the case in terms of R&D, product design and testing
costs, but less so in relation to human resources.

·
Furthermore,
ODM and OEM suppliers are reluctant to provide information to manufacturers
on the costs of compliance. Indeed, full testing data itself is often
considered to be confidential. Although ODMs and OEMs are required to
provide their clients with basic test results for the technical file, such
information is often partial. OEM suppliers are reluctant to provide full test
information due to commercial sensitivity reasons. If they are asked for test
data by an MSA, they often provide the requested information directly to the
MSA and do not share this with manufacturers).

·
Data
on some types of compliance costs was more readily available than for others. It
was straight forward to obtain data on the level of human resources working
directly on compliance with IM legislation. However, there were challenges in
respect of other data parameters, such as internal testing costs
and the external costs of compliance. Firms were first more willing to provide
data on human resources and secondly often lacked data on other types of costs.

·
Difficulty
of disaggregating compliance costs when many different pieces of internal
market legislation are applicable to a given product.
Interviewees often could not associate specific type costs with a specific
piece of legislation since very often the activities to meet the relevant
obligation consider the legal framework as a whole. For example, while fees to
notified bodies can be more easily linked to specific piece of legislation, the
same does not apply to familiarisation with legislation, preparation of
technical files or other information collection obligations.

·
Difficulty
of disaggregating data on compliance costs by specific product group. Several
harmonised product sectors covered through the cases are dominated by large
firms. It was difficult for them to break down compliance costs by individual
product group for the following reasons:

-
There
are difficulties in obtaining compliance data when they manufacture across
multiple manufacturing sites.  Cost data is often fragmented
and not collected or shared between business divisions involved in different
aspects of compliance.

-
Furthermore,
manufacturers often outsource some parts or all of the manufacturing process so
lack data. There is a trend towards outsourcing manufacturing
activities to Original Equipment Manufacturers (OEMs) and Original Design
Manufacturers (ODMs). This means that manufacturers often do not have data on
compliance costs themselves. Suppliers often provide a quotation for delivery of
a final product or for parts and components, without any reference to
compliance-related costs, such as testing.

-
Large
manufacturers typically produce multiple product lines and do not collect data
on compliance costs disaggregated by product platform,
especially for early stage testing as part of the R&D and product design
phase. Within a given product group, they typically manufacture a number of
different models/platforms and data on compliance costs is not kept on each of
these even internally[198].

-
It
was difficult for large firms developing products for global markets to
separate the costs of complying with IM legislation in Europe with similar
legislation that is applicable across multiple regulatory jurisdictions -
e.g. the US, Australia, Russia, BRICs. Although technical standards may differ,
some test results and measures that firms take to comply with legislation in
one part of the world can be used across a number of jurisdictions including
the EU (although some adaptations and/ or retesting may be required). Examples
are basic product safety requirements for electrical safety, compliance with
RoHS, etc.[199]

-
The
globalised nature of manufacturing – and the lack of a complete picture on
costs since many manufacturers, ODMs and OEMs are located outside, or carry out
at least some manufacturing activities outside the Union. Regulatory
compliance specialists within the European divisions of international firms
interviewed often found it difficult to obtain data on compliance costs
(especially for testing) from R&D laboratories and testing facilities within
their firm located outside Europe. Where information was available, this
is rarely disaggregated by individual product group.

Difficulties
in associating costs with specific pieces of EU legislation and types of
Information obligations

During
the interviews it was often difficult to provide estimates of the resources and
time allocated in relation to specific types of legislation or specific types
of legal obligations. It was often the case that estimates were provided at
only a rather generic level (e.g. over a period, or for a specific product
group) with limited indication of their break down. More specifically, the main
challenges were :

·
Difficulties
in separating compliance costs resulting from IM legislation from other
environmental legislation. Environmental legislation such as the
WEEE Directive and F-Gas Regulations are also applicable to industrial
products. Although some firms have regulatory compliance specialists that deal
with IM and environmental legislation separately, at the level of product
groups, firms were not able to disaggregate compliance costs between different
types of legislation, since compliance with EU legislation is sometimes dealt
with horizontally.

·
Firms
often could not identify the “substantive compliance costs”. This
was mainly the case for long-established IM legislation where the requirements
are well known and already integrated into their product design processes. Even
when an estimate is available of the R&D costs during the product design
phase specific to a particular product model, IM legislation is only one factor
among others taken into consideration, making it difficult to disaggregate
compliance costs..

·
More
generally, the identification of the Business as Usual scenario (BaU) was often
difficult. Firms may find it difficult to accurately estimate
the proportion of testing costs that they would be doing anyway as part of
their internal quality assurance and quality management systems (which include
product safety testing).

·
Some
aspects of compliance are managed horizontally by firms –
especially preparatory steps such as participating in EU legislation-making and
standardisation processes, and familiarisation with the relevant legislation
and applicable Information Obligations (“IOs”). Whereas testing is
product-specific, those working in regulatory affairs/ dealing with compliance
are commonly employed by larger firms with a large product portfolio, work
horizontally across many different products. Although a “best guesstimate” can
be made as to the proportion of human resources spent working on specific
product areas, given the horizontal role played by many regulatory compliance
specialists working in industry, this is at best an approximation.

In
summary, although for some case studies the target of 6-8 firms interviews was
achieved, the data available from all firms often only covered some variables,
while it was missing altogether for some others.  In general, data estimates
specific to the product group were more easily provided by SMEs but more
difficult for large companies. As a result of the variability in the quality
and quantity of data obtained, comparisons among the cases are problematic.

Overcoming
data gaps

A
number of steps were taken to overcome, to the extent possible, the
difficulties and limitation described above. These were:

·
Ensuring
that the firms that participated were broadly representative - most
firms that participated could be considered are rather typical of the relevant
sectors even for those cases where more limited numbers of interviews were
carried out, such as laptops and refrigerators. With the assistance of the
relevant associations, the firms interviewed are established firms with long
period of experience and, in those sectors where the market dominated by few
large manufacturers (e.g. domestic refrigerators, laptops, air conditioners,
lifts) firms relatively high market shares. In such cases, while not expecting
to provide a picture covering all firms, we provide a rather “typical” case. In
other cases, like the gardening equipment, the firms interviewed cover a range
of sizes which helped identify the different practices between larger and
smaller firms.

·
Developing
assumptions about the costs of compliance – where data was
only partial in respect of particular parameters we used data from several
firms, we were able to make imputations as to the average costs for a typical
firm, which were then scaled up at the level of the product overall.

·
The
aggregation of costs to the sector was either estimated by referring to the
total number of firms in the sector or the total volume of production.
Certain types of costs (e.g. technical file preparation, purchase of data) were
considered to be similar irrespective of the size of the firm. In that case we
relied on the number of firms in the sector to reach an estimate of the total
costs. In other cases (e.g.  ...) the proposed costs appeared to be linked with
the volume of production or the number of models. In that case, the preferred approach
was to use of market size data to estimate the total costs for the sector on an
annual basis.

·
In
the case of data on market size and on the number of firms, we gave priority to
data from industry associations or market reports and, only in their absence,
to data from PRODCOM and Eurostat. Eurostat data on the number of enterprises was
not considered to be an appropriate base for estimated cost data at the
sectoral level. Eurostat data refer to individual legal units, which may be
many more than one within a single enterprise, particularly among large
multinational firms with presence across the EU market. Compliance related
activities are often dealt centrally from a single unit. When possible, the
data from market studies or associations were complemented by data from the the
Orbis database providing information on active enterprises. In this case we
considered the number of firms’ headquarters as the most appropriate number to
use.

·
Developing
assumptions about the cost savings of simplifications – In
relation to the quantification of the of the savings from possible
simplifications, the qualitative feedback about the type of cost savings, the
main type of compliance cost affected and, in some cases, the order of
magnitude allowed us to make some “reasonable” estimates of the possible cost
savings. For example, in the case of savings related to the reduction of the
use of notified bodies from the move to a self-regulatory approach it was
possible to make some assumptions as to the maximum savings that could arise
once the total costs of notified bodies was established. Even at a more
aggregate level, simplifications of information obligations were assessed in
relation to the overall weight of those obligations to the total administrative
costs and what could be considered a reasonable (e.g. 10%, 20%, 50%)
contribution to the costs reduction.

E.4      Methodological
approach to quantifying and assessing the costs of compliance with Union
harmonisation legislation

In
this section, a definition of administrative and substantive compliance costs
is provided, together with an explanation of the difficulties in quantifying
these separately in some instances. An overview of the methodology for
estimating compliance costs is then provided. Reference should also be made to
the full case studies set out in Appendix C since these spell out assumptions.

E.4.1   Definition
of administrative and substantive compliance costs

Methodological
guidance on SCM in the Secretary General’s Impact Assessment guidelines and in
international methodological documentation[200]
makes clear that a distinction should be made between administrative and
substantive compliance costs, which should be clearly distinguishable from one
another.

·
Administrative
costs relate to the costs of preparing documentation and direct fees, while
substantive compliance costs relate to any specific investments firms must make
in order to comply with the law[201].

·
The
IA guidelines provide a definition of these terms and seek to clarify areas of
possible nuance. For instance, the guidelines state in respect of testing costs
that: “when businesses have to submit their products and processes to the test
in order to get an authorisation or a certificate, these testing costs are not
considered as administrative costs.

However,
in the case of testing carried out as part of conformity assessment modules to
comply with Union harmonisation legislation, the aim is neither to obtain an
authorisation or certification. Rather, it is to demonstrate compliance with
the essential requirements. Only the US requires product certification before
products can be sold. Nevertheless, the guidelines suggest that conformity
assessment should still be treated as a substantive compliance cost, even if
the current definition does not exactly fit this area.

Guidance
on the application of the UK SCM model points to the difficulties in
establishing BAU costs “dividing normal costs from burdens is difficult to
achieve in practice as activities are embedded into business processes”[202]. 
There can still be challenges in breaking down the costs of compliance with IM
legislation between administrative and substantive compliance costs.

If
conformity assessment is accepted as being a substantive compliance cost, there
are other aspects associated with conformity assessment procedures that are
administrative, such as producing the technical file and preparing a
Declaration of Conformity. This means that in practice, there may be nuances
and an unclear demarcation between the two types of costs because such costs
are part of a continuum.   Although conformity assessment is a
substantive compliance cost, it is equally an integral part of the process
leading up to the production of administrative documentation.

The
five steps represent how the various compliance steps can be seen conceptually.
In practice some firms do manage compliance broadly according to these five
steps. Other firms commented however that there is a lot of complexity and
there is crossover between the different steps, with some compliance activities
taking place in parallel, whereas others are sequential.

The
way in which we have defined administrative and substantive compliance costs
for the purposes of this study is summarised in the table on the following page:

Table E.2: Administrative and substantive compliance
costs

Type of costs || Costs

Administrative costs || Familiarisation with IM legislation and standards Notified bodies fees for IM legislation and mandatory testing Development and updating of technical files Production of a DoC and CE marking

Substantive compliance costs: || Modifications to product design (during new product development phase/ R&D) Modifications to product design once products have been placed on the market The costs of temporary or permanent withdrawal from the market of products

Administrative and substantive costs || Conformity assessment procedures under the applicable modules Example of substantive cost - testing for conformity with the applicable modules defined in IM legislation[203] is Example of administrative cost – preparation of a technical files in paralell with testing activities

Source:
CSES and Panteia – assessment of different cost types

Testing
carried out as part of conformity assessment procedures is
arguably both
an administrative and a substantive compliance cost since most
firms say they that they carry out testing as part of internal quality
assurance procedures (BAU costs) and for safety as part of the design stage.
Products are designed, tested and then if legislative changes or changes to
standards are introduced during the design phase, may also be redesigned in
order to meets legal requirements (compliance with IM regulations and
environmental legislation) and with the technical specifications set out in
(voluntary) technical standards. In summary, while some compliance costs
can clearly be defined as substantive, such as making modifications to products
already on the market due to the introduction of new (or amendment of existing)
IM legislation, others can be both administrative and substantive compliance
costs, and there are “grey areas”.  A summary of the quantitative findings from
is provided in the case studies. We have sought to quantify compliance costs.

E.4.2   Methodology
for estimating compliance costs
Standard
Cost Model

The
quantitative analysis was carried out using a Standard Cost Model (SCM), the
most widely applied methodology for measuring administrative costs. As noted
earlier, there was a need to adapt SCM and to simplify and to customise the
approach so that it was suitable for Union harmonisation legislation.

SCM
is normally applied to measuring the costs of complying with a single piece of
IM legislation (or at most a small number of different pieces of related
legislation). Since multiple pieces of IM legislation are applicable to a given
product (and in addition, to environmental legislation), there are practical
difficulties for firms in disaggregating the costs of Information Obligations
(IOs) for each piece of legislation separately. Moreover, the fact that multiple
legislation and IOs are applicable makes SCM difficult to apply without
spending a considerable amount of time with each enterprise (which with a few
exceptions they were generally unwilling to do).

Another
difference in the approach to this study is that whereas in a typical SCM
exercise, a bottom-up approach alone is used, this was not feasible for this
study, given the data difficulties encountered. Instead, a pragmatic and
flexible approach was adopted that combined elements of bottom-up and–top-down.
This was necessary given variations in the quality and extent of data
availability between cases.

The
quantification exercise was meant to focus only on the compliance costs
associated with gaps, loopholes, inconsistencies and duplication, by measuring
the current costs of establishing a baseline and assessing the possible
benefits of regulatory simplification from eradicating these. Since less
evidence of gaps, loopholes, inconsistencies and duplication was found than had
been anticipated, during Phase 2, it was suggested that we should try to
quantify the costs of compliance more generally. However, there are limitations
in the extent of data availability and consequently its quality.

Development
of assumptions

It
was necessary to develop assumptions in order to produce the calculations set
out in the case studies. The detailed assumptions that have been made in
carrying out quantifications for each case are specified in the full case
studies (Appendix C).

Assumptions
can be developed under various circumstances so as to improve the quality of
the data, such as when quantitative data is lacking and qualitative feedback is
used to develop quantitative assumptions e.g. firms found it difficult to
quantify internal testing costs themselves so data parameters for other firms
were cited and the firm was asked if these were considered reasonable.

We
have made had to develop various assumptions for different product groups,
which are specified in the case studies. The nature of the assumptions and the
extent to which we had to make assumptions varied between product groups
depending on (i) how many firms were willing to participate (ii) the extent to
which the issues raised earlier regarding data sensitivity were problematic
(ii) the availability of data internally among firms themselves, which varied
considerably between cases, and can depend on firm size (global manufacturers
found it more difficult to quantify costs accurately and these dominate some of
the product groups concerned.

Taking
the counterfactual into account

Another
way of obtaining a baseline would have been to assess how the situation would
have developed in the absence of the internal market and of Union harmonisation
legislation for industrial products (“the counterfactual”).  Two main possibilities
were considered as below:

•
Counterfactual
1 – compliance costs pre-establishment of the internal market. However, here
there was the difficulty that there was the absence of data on such costs and
comparability issues.

•
Counterfactual
2 - current costs of compliance with Union harmonisation legislation compared
with possible future simplifications

We
now explain why the second of these two approaches was adopted. If there were no
regulatory framework and firms instead had to comply with 28 sets of different
national legislation and technical standards, there would still be costs
associated with complying with national regulations, since there would remain a
need for national product safety regulations to protect consumers and users of
industrial products.

Firms
were only able to provide a qualitative assessment as to how the current costs
of compliance compare with the situation before the internal market came into
effect. Since core “New Approach legislation” has now been in place for 25
years, it is difficult for many interviewees to compare the situation prior to
the internal market’s establishment. It would more be difficult to make a
direct comparison anyway for the following reasons:

•
There
have been many changes affecting market size and structure during this period
e.g. globalisation, the expansion of the EU from 12 Member States when the
single market came into effect to 28 Member States today.

•
The
absence of data on compliance costs at the national level prior to its
establishment.

•
The
fact that a simple “before and after analysis” cannot be undertaken since the
body of internal market legislation was introduced over a period of 25 years
rather than three being a “big bang” when the internal market first came into
being in 1993.

It
was instead agreed with the Commission that the baseline would be based on the
current costs of compliance with Union harmonisation legislation. A comparison
was then made with what impact different simplification scenarios that could be
implemented in future would have in terms of reducing current compliance costs.
As noted in Section 5.2.2, there were challenges in obtaining data on the
current costs of compliance, but data was obtained and assumptions developed
across the 8 harmonised cases, presented later in this section.

Taking
Business as usual scenario (“BAU”) into account

As
already indicated, in all sectors, parts of the costs incurred by firms in the
process of ensuring compliance are costs that firms would incur even in the absence
of the EU legislation.  The estimated share of business as usual costs varies
greatly though. In the case of garden equipment, around 10% and 35% of the
total compliance would have been incurred even in the absence of IM
legislation. In comparison, in the case of electric motors, 73% of the human
resource costs and 87% of the testing equipment were considered as part of the
BAU scenario.

Similar
high shares of the BAU scenario apply in the case of lifts while in the other
product categories around 50% of the cost incurred were considered as costs
that would probably have happened even in the absence of IM legislation.  The
review of the data from the cases suggests that a key driver of high or low
share of the business as usual costs is the level of costs for product design
and testing linked to environmental legislation. Familiarisation with the
legislation, fees for third party certification, preparation of technical
files, DoC and CE marking is generally part of the compliance costs.

Where
data on internal and external testing costs was available, establishing the
costs specific to IM legislation as opposed to BAU costs was not always
straight forward.  While in some cases, the proportion of costs that were
considered to be “BAU” was easy to estimate, for instance, a firm stating that
30% of the costs that it incurs as part of conformity assessment procedures
would be incurred anyway (for instance, safety testing being carried out
irrespective of whether there was IM legislation in place so as to ensure high
levels of product safety, internal quality management systems and procedures to
protect corporate reputation).

Average weightings to take into account firm size

The
costs of regulatory compliance have taken firm size into account in different
ways, depending on the mix of firms that have taken part in each case.
Compliance costs were usually estimated as a percentage of the firm’s turnover.
Where not available, an alternative unit of measurement was used, such as the
volume of units sold per year based on parameters for the regulatory costs per
unit from other firms where turnover data was available. Some form of weighting
was therefore included.

There
were limitations as to the extent to which a detailed quantitative analysis
could be undertaken of compliance costs based on firm size. There was a lack of
SMEs participating in the interview programme generally, although some SMEs
took part in some of the cases. This partly depended on the product case, since
some sectors such as laptops are dominated by large global manufacturers. Even
when SMEs were interviewed, however, it was difficult to make a definitive
judgement as regards compliance costs since for each case study, only a small
number of firms were involved in the SCM exercise (e.g. 2 SMEs, 2 medium, 2
large firms). Although SMEs were well represented in sectors such as bicycles,
this is a non-harmonised case.

Nevertheless,
where possible, average costs were calculated so as to take into account any
information obtained about differences in the level of compliance costs between
SMEs and large firms. We asked firms to provide data on the volume of units
sold in Europe annually and for their turnover and number of employees (this
data was not always available). Establishing the regulatory cost per unit was
possible for some cases, which allowed a weighting to be made.

Other
qualitative considerations with regard to how SMEs and large firms manage the
compliance process were also taken into account, since this can influence the
structure of compliance costs. Since SMEs are less likely to have their own
in-house laboratories and expertise and capacity to carry out testing for all
IM directives and regulations under the SDoC procedure, they are therefore more
likely to have conformity assessment carried out in an external laboratory.
Whilst even under the SDoC, large firms also commonly use the services of a
third party at some point during the conformity assessment procedure, they will
typically carry out some testing in-house and use third party observation to
provide external validation and audit of internal testing. They may then also
outsource some testing activities linked to conformity assessment for some
directives, such as the LVD (electrical safety).

Salary costs

With
regard to salary costs, the study team asked for actual cost estimates in the
first instance. However, in some cases these differed markedly between firms.
For instance, a firm in the air conditioning sector pointed out that the salary
costs of those working on compliance within the company across different
divisions in the EU and in Asia can vary by a factor of between 5 and 10. Even
within the EU, the costs of staff involved in compliance can vary considerably
between different countries in many cases. Since only a small number of firms
took part in most case studies, so as to ensure greater consistency and
comparability, standard parameters were applied to participant firms based on
Eurostat average salaries.

E.4.3   Types
of compliance costs for industry

Evaluation
question 15 - What are the compliance costs with Union harmonisation
legislation in eight selected harmonised product groups?

Two
main types of costs were taken into account in our assessment: (i) the costs of
compliance with Union harmonisation legislation and in meeting the essential
requirements either through following voluntary harmonised technical standards[204]
or alternative means and (ii) the administrative costs that economic operators
have to fulfil in order to meet the essential requirements (e.g. development of
a technical file, production of a DoC, CE marking). In so far as possible, we
have distinguished between whether costs are one-off or recurring, but in many
cases, there are elements of both. For instance, the main cost in preparing a
technical file is in the period from the product design stage up to product
launch but the file needs to be maintained and updated (as does the DoC) for up
to 10 years following its placement on the market.

A
distinction was also made in the case study quantification exercise between
substantive and administrative compliance costs but given the continuum between
some types of compliance activities, this was not always possible.  The
following table summarises the main types of compliance costs identified:

Table E.3: Types of costs incurred in complying with
Union harmonisation legislation.

Type of costs || One-off or recurring?

· Human resources – examples of the resources required to manage compliance are: o Regulatory compliance managers - participation in EU legislative-making and standardisation processes (mainly large firms), familiarisation with the applicable legislative and administrative requirements (all firms), keeping track of changes to legal requirements and updates to standards, briefing other business divisions about the legislation and forthcoming developments, ensuring that documentation (e.g. DoCs, technical files are kept up to date and made available online, responding to requests from market surveillance authorities). o Product and testing engineers – staff involved in R&D and new product development (early stage), engineers involved in testing and conformity assessment procedures prior to product launch. || Recurrent - global manufacturers employ small teams of permanent compliance specialists Some one-off costs – e.g. part of salaries of engineers prior to product launch can be attributed to IM legislation (discounting for BAU[205])

· Investment in laboratories and testing equipment - the cash costs of compliance (e.g. purchasing equipment). Although harmonised standards are voluntary, since the vast majority of manufacturers follow these standards, compliance with standards in order to meet the essential requirements has generally been considered as part of overall compliance costs. || One-off and recurrent

· Third party conformity assessment – typically a one-off cost prior to product launch. Although 3rd party CA is mandatory for a small number of IM directives and regulations, typically, the Suppliers’ Declaration can be used and the use of a 3rd party is voluntary. || One-off – costs incurred prior to product launch

Section
5.4 of the main report provides an assessment of the compliance costs
themselves and draws conclusions between product groups.

E.5      Methodological
approach to estimating the broader impacts on growth and jobs from
simplification measures

The analysis
presented in the main report makes use of the estimated compliance costs and
simplification savings potential calculated from the eight product groups
examined in the context of the case studies.

The basic assumptions of the analysis are that any cost
reductions from simplifications will be translated into savings of firms’
operational costs that will, in turn, be translated into improved labour
productivity which is then passed into lower prices of products. This improves
(international) competitiveness, boosting exports and reducing imports relative
to final demand; which, ultimately, should have a positive impact on Gross
Domestic Product which should, in turn lead to increased employment.  At the
same time, increased labour productivity should be expected to reduce
employment in the short term reducing disposable household income and as a
result, private consumption demand. Thus, whereas the GDP in the sector
concerned is increased at the macro-economic level the impact of the reduction
of compliance costs on GDP is uncertain. Employment effects are also not a
priori certain, as the initial shock is a ceteris paribus reduction in
the number of jobs.

The steps that were followed are now outlined:

1. We
developed a medium/long-term baseline scenario of economic development by
defining a set of plausible values of the exogenous variables of the model.[206]
These include the volumes of export, consumption (household and government),
investment (enterprises and government), imports, GDP and depreciation and its
prices as well as labour costs and employment numbers.. This
baseline scenario did not include simplification of IM regulation.[207]

2.
Definition
of the nature and size of the cost savings as a result of possible simplifications
to the IM regulation on the basis of the results of the case studies.

3.
Taking
the original baseline scenario as point of departure, we prepared an
alternative scenario of economic development including the estimated compliance
cost reductions

4.
Comparison
of the alternative scenario to the baseline scenario to estimate the impact of
the compliance cost reduction on economic development

Ideally
the estimation of the possible impact would be based on a model of the EU
economy as a whole or of each individual member state. As these were not
available, the PRISMA model for the Netherlands has been used[208]. Thus, the
relative costs reductions hypothesised for the EU economy were applied to the
Dutch economy to determine the impact on growth and jobs. The results were then
extrapolated at the EU level and the World Input-Output model was applied[209].

Ideally
the estimation of the possible impact would be based on a model of the EU
economy as a whole or of each individual member state. As these were not available,
the PRISMA model for the Netherlands has been used[210]. Thus, the
costs reductions hypothesised for the EU economy were applied to an economic
baseline scenario to determine the impact on growth and jobs. The results were
then extrapolated at the EU level and the World Input-Output model was applied[211].  This approach is sensible under the assumption that the core
elasticities – mainly price elasticities–  do not vary much between EU
countries.

The
model variables that are directly affected are domestic final demand by
category (household and government consumption, investment), demand in the
private sector and the labour productivity. Furthermore, exports should be
expected to increase as a result of a reduction in prices. The impact on EU
imports too has also been taken from the PRISMA model. Together final demand
and imports determine GDP. On the basis of changes in GDP employment effects
can be estimated making use of expected changes in labour productivity. These
are taken from the PRISMA exercise. Further information about Panteia’s
PRISMA-model is provided in the following box:

Box: Panteia’s PRISMA-model PRISMA - an acronym of Policy Research Instrument for Size-aspects in Macro-economic Analysis - is an economic macro-sector model. It has been designed in such a way that it produces results that are consistent with those produced by the current macro model of the Netherlands Bureau for Economic Policy Analysis. PRISMA is used for forecasting, scenario building and what-if analyses with respect to government policies and exogenous shocks. Its time horizon is 3-25 years. PRISMA consists of a kernel and a number of modules. PRISMA’s business sector is disaggregated into nineteen industries. Within each economic sector, a distinction is made between SMEs and large enterprises. Hence, the following two types of model exercises become possible. First, economic effects derived by PRISMA’s kernel - for example when forecasting, building a scenario, or evaluating the consequences of changes in policy or the economic environment - can be ‘translated’ into the prospects for SMEs. Second, when circumstances change differently for SMEs compared to large businesses - for example due to a policy measure that focuses particularly on SMEs – the consequences can be evaluated by using the size-class module. The relevant PRISMA-sector for the current application is business services (NACE Rev. 2 N+M), of which the services sectors under consideration make up 50% in terms of value added (EUROSTAT SBS, 2010) References: · General Introduction (http://www.ondernemerschap.nl/index.cfm/1,95,305,0,html/Prisma) · PRISMA 2001, The Kernel (http://www.ondernemerschap.nl/index.cfm/12,html?nxt=ctm\_publikatieandbestelnummer=H200104) PRISMA, The Size-Class Module (http://www.ondernemerschap.nl/index.cfm/12,html?nxt=ctm\_publikatieandbestelnummer=N200207)

Section
5.6 of the main report provides a quantitative assessment of the simplification
benefits using the PRISMA model.

[1] The study is part of Lot VI of the Framework Contract for the
Procurement of Studies and other Supporting Services on Commission Impact
Assessments and Evaluations (2008/S146-195858).

[2] Report ‘Trends and segments for electric motors’ by the Dutch Center for Encouraging import from Developing Countries (CBI) – 2011. http://www.cbi.eu/system/files/marketintel/Trends\_and\_segments\_for\_electric\_motors.pdf

[3] Definition taken from ‘EUP Lot 11 Motors’ by de Almeida, Ferreira,
Fong and Fonseca (2008). See http://www.eup-network.de/fileadmin/user\_upload/Produktgruppen/Lots/Final\_Documents/Lot11\_Motors\_FinalReport.pdf

[4] Including production and import, excluding export.

[5] Report ‘Trends and segments for electric motors’ by the Dutch Center for Encouraging Import from Developing Countries (CBI) – 2011. http://www.cbi.eu/system/files/marketintel/Trends\_and\_segments\_for\_electric\_motors.pdf

[6] The table in the appendix provides an overview of the data of per PROD-COM
CODE.

[7] Source: EuP lot 30: Electric Motors and Drives (2012), table 2-3
and 2-4 - http://www.eco-motors-drives.eu/Eco/Documents\_files/EuP-Lot30-Task-2-2-Dec-2012.pdf

[8] CSES (2012), Evaluation of the Ecodesign Directive – Final report

[9] See Guidelines on the Application of Directive 2006/95/EC,
paragraph 22 (page 14) for a list of required documents. Link: http://ec.europa.eu/enterprise/sectors/electrical/files/lvdgen\_en.pdf

[10]
See the Guide for the EMC Directive (2004/108/EC), page 23.

[11] http://ec.europa.eu/enterprise/sectors/mechanical/files/atex/guide/atex-guidelines\_en.pdf

[12] Laptops can be defined as a portable
computer to be operated for extended periods of time without a direct
connection to an AC power source.

[13] NACE codes 2620 includes: Laptop PCs and palm-top organisers,
Point-of-sale terminals, ATMs and similar machines capable of being connected
to a data processing machine or network Desk top PCs and Laptop PCs and
palm-top organisers, among other categories of peripherals.

[14] It is not clarified by the definition but it is also possible that
this category covers portable tablets.

[15] Data from the 2011 Euromonitor report for computers.

[16] Examples of technological change are
increased processing power with reduced power consumption through investment in
energy-efficient technologies

[17] A DoC only needs to be
provided with the product by manufacturer responsible for radio part (since
only R&TTE Directive has this requirement).

[18] In the laptops industry, it has been agreed that an abbreviated
version of the DoC is provided together with the product with more detailed
regulatory compliance information provided online.

[19] There were difficulties in persuading more
firms to participate. Some companies approached were concerned about commercial
sensitivities, while others did not believe that they would be able to collect
such complex data at the product level because they produce so many different
product platforms.

[20] COMMISSION REGULATION (EU) No 617/2013

[21] Preparatory studies for Eco-design Requirements of EuPs, Lot 3
Personal Computers (desktops and laptops) and Computer Monitors, IVF Industrial
Research and Development Corporation, 2007 (for the European Commission's DG
TREN)

[22] There is no direct equivalent to the concept of “placing a product
on the EU’s internal market” as set out in Decision 768/2008

[23] The conformity
assessment procedures that are applied by manufacturers under the R&TTE-D
are in summary (II) Internal production control (iii) Internal production
control plus specific apparatus tests (IV) Technical construction file and (V)
Full quality assurance).

[24] TCAM is the Telecommunications Conformity Assessment and Market
Surveillance Committee and was officially established by the R&TTE
directive.

[25] These costs were annualised in order to arrive at comparable annual
costs, using a system similar to firms’ accounting for depreciation. For some
questions, we also asked questions in the SCM questionnaire about how much they
spent on testing equipment over a 5 year period, which had to be annualised.

[26] All unit costs are based on the interviews with at least 3
respondents answering each figure.

[27] Turnover is used to upscale the parameter estimates. The average
respondent has a market share of about 10%. The same approach was adopted for the
DoCs.

[28] Approximately 30-40 standards need to be purchased in order to
develop a compliant laptop product. However, once purchased, these standards
can then be used across multiple product platforms.  We have assumed an average
annualised cost of 5000 EUR since larger firms may purchase a group license
rather than buy standards individually.

[29] Here, substantive compliance costs are concerned with building in
compliance requirements to product design during new product development phase
and where necessary, making modifications to products that have already been
placed on the market.

[30] Based on one respondent and its market share, the total number of
models was estimated at 200. The average respondent runs 20 models, so the
quantity is 10 (200/20).

[31] Number of models (see above footnote). The same is done for 3rd
parties.

[32] No data was available on the costs of purchasing testing equipment
because for commercial sensitivity reasons, the firms concerned were unwilling
to share this data.

[33] Telecommunications Conformity Assessment
and Market Surveillance Committee

[34] Regulatory compliance websites of leading laptop manufacturers –
examples are: the HP Technical Regulations EuroBase - http://www8.hp.com/uk/en/certifications/technical/regulations-certificates.html,
http://www.dell.com/content/topics/global.aspx/about\_dell/values/regulatory\_compliance/dec\_conform?c=us&cs=&l=en&s=corp&~ck=anavml 
and http://www.lenovo.com/social\_responsibility/us/en/ec\_doc\_notebooks.html

[35] There is already a precedent for electronic labelling in order to
provide regulatory compliance information, since this approach has been adopted
through EU Commission Regulation 207/2012 on the electronic labelling of
medical devices. The provision of instructions for use in electronic form for
professional users is designed to help to reduce the environmental burden and to
improve competitiveness by reducing costs whilst at the same time maintaining
safety.

[36] Global firms will tend to centralise their compliance function
through their European HQ.

[37] The exclamation is known as the "alert symbol” is found on any
device that includes a Class 1 or 2 Wifi module and supplements other CE
markings. The reason why the mark has been introduced is because Member States
have restrictions on various frequency bands—for example, a wireless device
operated outdoors in France can only use frequencies between 2.4 GHz and 2.454
GHz. When a device can follow all these restrictions, it is said to work on
"harmonized frequency bands" and is called a “Class I device”. Class
II devices must however carry the extra alert symbol so that users know the
phone might try and operate on frequency bands that are not allowed to be used in
certain countries. However, consumers are not familiar with the alert sign and
this information could be provided online instead on the regulatory compliance
section of websites directly to MSAs.

[38] Such  delays can occur
if customs and/ or MSAs mistakenly believe there to be a requirement for all
electrical products to provide the DoC together with the product.

[39] Less marking requirements on product. Reduced cost of product
marking (less familiarisation costs, printing the mark itself). Assumed: 2%
reduction familiarisation, 2% reduction preparation etc..

[40] Reduced costs of a single common template for a DoC (rather than
multiple templates). Assumed: 20% reduction DoC. Reduced uncertainty for
manufacturers (eliminate risk of delays to product shipments) is not
quantified..

[41] These standards are similar and can be considered broadly
harmonised.

[42] When designing a computer or laptop, EMC technical standards
influence the design phase because they set the parameters as to what is
possible or not.

[43]             The Ecolabel for portable computers can be awarded for
desktops or laptops with a system unit, display and keyboard combined in a
single case which can be used with an internal battery. This product group also
covers devices equipped with touch screen keyboard.

[44] Topten (2012), Cold appliances: recommendations for policy design

May 2012, http://www.topten.eu/uploads/File/Recommendations\_Cold\_May%202012.pdf

[45] RPA (2011), Ex-Post Evaluation of the Gas Appliances Directive-
Final report

[46] ISIS (2007), Preparatory studies for Ecodesign Requirements of EuPs
– Lot 13: Domestic refrigerators and freezers – Final report

[47] Ecorys (2009), Study on the Competitiveness of the EU Gas Appliances
Sector - Within the Framework Contract of Sectoral Competitiveness Studies –
ENTR/06/054 - Final Report,  http://ec.europa.eu/enterprise/sectors/pressure-and-gas/files/study\_competitiveness\_eu\_gas\_appliances\_final\_en.pdf

[48] Besides refrigerators and freezers this category includes a range
of appliances including: dishwashers and washing machines, vacuum cleaners,
hair dryers, radiators and heaters, microwave ovens, electric ovens, grills and
toasters, coffee makers, electric cookers, food grinders and mixers, electric
blankets.

[49] The data from Eurostat refer to individual enterprise units, many
of which are subsidiaries of the few large manufacturers that dominate the
refrigerators market and are present in most EU national markets.

[50] All products for which the first 4
digits of the PRODCOM code is 2751.

[51] Electra report - Twenty solutions for
growth and investment to 2020 and beyond, http://ec.europa.eu/enterprise/sectors/electrical/files/electrareport\_en.pdf

[52] Refrigerating systems and heat pumps - Safety and environmental requirements
- Part 2: Design, construction, testing, marking and documentation

[53] Refrigerating systems and heat pumps - Liquid level indicating
devices - Requirements, testing and marking

[54] Refrigerating systems and heat pumps - Safety switching devices for
limiting the pressure - Requirements and tests

[55] Refrigerating systems and heat pumps - Valves - Requirements,
testing and marking

[56] Pressure equipment for refrigerating systems and heat pumps - Part
1: Vessels - General requirements

[57] Pressure equipment for refrigerating systems and heat pumps - Part
2: Piping - General requirements

[58] It has not been possible to collect data from a manufacturer of gas
refrigerators. However, some data on costs of the gas appliances were available
in the evaluation of the Gas appliance Directive and are included in the
relevant sections of the report.

[59] In 2012, the firm interviewed had a turnover of EUR 150 million and
350 employees. Around 10% of the turnover came for the sales of refrigerators. 
The firm is a subsidiary of a larger enterprise

[60] RPA (2011), Ex-post evaluation of Directive 2009/142/EC on
appliances burning gaseous fuel, http://ec.europa.eu/enterprise/dg/files/evaluation/03\_2011\_finalreport\_gas\_en.pdf

[61] Firms were not able to provide specific data.

[62] On the basis that other firms did not identify this as a problem
this is possibly and overestimate of the possible savings.

[63] Evaluation of the Energy Labelling Directive, http://www.energylabelevaluation.eu/eu/home/welcome

[64] According to article 3 of the RoHS Directive ‘making available on
the market’ means any supply of an electrical and electronic equipment (EEE)
for distribution, consumption or use on the Union market in the course of a commercial
activity, whether in return for payment or free of charge; ‘placing on the
market’ means making available an EEE on the Union market for the first time;

[65] http://www.lift-report.de/index.php/news/361/373/Industry-report---Lifts-and-escalators-an-industry-in-flux

[66] It should be noted that skip hoists are not lifts and are not
subject to the Lifts Directive. However, Eurostat does not provide further
disaggregation of Prodcom data.

[67] Elevators and Escalators - A Global Strategic Business Report 10/12

[68] To a certain extent, the compliance costs incurred by manufacturers
of components might be passed on to the manufacturers and installers of lift
units through higher prices for components. However, it is beyond the scope of
this study to determine the extent to which that happens.

[69] As an indicative example, UK standards under the Lifts Directive
are typically priced between £50 and £300. See: http://shop.bsigroup.com/.

[70]  The definition comes from EN 836

[71] The definition comes from EN ISO 11806

[72] http://www.egmf.org/en/economic-information/

[73]Data from the UK indicate that the consumer market represents around
60% of the total gardening products market with the remaining directed to
professional users.  Lawn mowers represented around 40% of the consumer gardening
equipment market in the UK (based on retail sales) with another 35% going to
various types of power tools such as chain saws, cutters and trimmers.

[73]According to the EGMF, its members sell in Europe more than 6
million lawnmowers, 4.5 million chainsaws, 3 million brush-cutters and 3
million hedge-trimmers on annual basis

[73] http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/iastudy\_noise\_finrep\_en.pdf

[74] ‘Lawn Mover Noise and Vibration Control’ study (Tetteroo &
Bockhoff, 2006) cited in http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/iastudy\_noise\_finrep\_en.pdf

[75] http://www.britishgardenshed.co.uk/uk\_market.htm

[76] NOMEVAL (TNO, 2007)

[77] http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/tno\_nomevalrep12-12-07\_en.pdf

[78] SME Test Study on possible policy options for reviewing the Noise
Directive + Impact Assessment Study on possible policy options  (concerning
conformity assessment procedures) for reviewing the Noise

Directive), http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/smetest\_noise\_finrep\_en.pdf
(p.59)

[79] Data retrieved from Euromonitor international Passport database
(accessed from British library)

[80] The list of standards is not exhaustive. Furthermore, not all
standards identified are applicable to all products.

[81] safety of powered lawnmowers

[82] safety of electrically powered lawn mowers

[83] Machinery for forestry - Portable chain saws - Safety and testing
requirements

[84] Determination of sound power levels and sound energy levels of
noise sources

[85] Test area standard for different categories

[86] noise test for internal combustion lawn mowers, brush cutters,
trimmers

[87] test code of airborne emissions for powered mower

[88] Declaration and verification of noise emission values of machinery
and equipment

[89] Public consultation on the revision of Directive 2000/14/EC on
noise from outdoor

Equipment, http://ec.europa.eu/enterprise/sectors/mechanical/files/noise/public-consultation/report\_en.pdf

[90] One firm indicated 300hrs but this deviated from all others.

[91] We have assumed 20 large size firms (members of the EGMF) and 30-80
small firms

[92] On the basis of an average of 5 product lines on average per
manufacturer

[93] Investment in testing equipment is usually one-off and last for at
least 5 years. The costs provided here have been estimated on an annual basis.

[94]  Number based on an assumption of 15 models/firm once in four years

[95] This appears to be a position taken by Orgalime that
representatives of a much broader range of manufacturing sectors. See http://www.efcem.eu/media/uploads/dopp\_on\_merger\_md-noise\_final.pdf

[96] Figure also obtained after analysing PRODCOM annual production
statistics

[97] PRODCOM data from 2012

[98] CSES (2010), Interim Evaluation of the Measuring Instrument Directive

[99] Ibid;

[100] Ibid;

[101] PRODCOM data, 2010; cf. CSES (2010), Interim Evaluation of the
Measuring Instruments Directive, page iii

[102] EMC Article 2 (a) (b) (c), Annex MI-005

[103] Annex MI-005

[104] There is a period of transition up till 2016, after which all new POS
must be MID compliant

[105] International Organisation of Legal Metrology (OIML) R139: Compressed
gaseous fuel measuring systems for vehicles

[106] FTE: The ratio of the total number of paid hours during a period
(part time, full time, contracted) by the number of working hours in that
period; Third-party compliance costs: external quality control/product safety
auditors

[107] For instance, the F-Gas regulation (Regulation 842/2006 on certain
fluorinated greenhouse gases) relating to greenhouse gases was considered by
some air conditioning stakeholders interviewed to be one of the most burdensome
pieces of legislation affecting the sector.

[108] Preparatory study on the environmental performance of residential
room conditioning appliances (airco and ventilation), Economic and Market
analysis, July 2008

[109] For instance, pursuant to The F-Gas Regulation (EC) No 842/2006,
Commission Regulation (EC) No 303/2008 of 2 April 2008 establishes minimum
requirements and the conditions for mutual recognition for the certification of
companies and personnel as regards stationary refrigeration, air conditioning
and heat pump equipment containing certain fluorinated greenhouse gases

[110] It should be noted that this data is not publicly available, since
it is proprietary.

[111] Idem.

[112] Sustainable Industrial Policy – Building on the Ecodesign Directive
– Energy-Using Product Group Analysis/2 Lot 6: Air-conditioning and ventilation
systems, Part 2 Market Study, July 2012

[113] Preparatory study on the environmental performance of residential
room conditioning appliances (airconditioning and ventilation), ECODESIGN Lot 10, July 2008

[114] Sustainable Industrial Policy – Building on the Ecodesign Directive
– Energy-Using Product Group Analysis/2 Lot 6: Air-conditioning and ventilation
systems, Part 2 Market Study, July 2012

[115] The relevant Prodcom categories are: 28251220: Window or wall air
conditioning systems, self-contained or split-systems. These products are
within the scope of this case when used for comfort cooling and over 12 kW
cooling capacity: smaller units are under Prodcom code 28251250: Air
conditioning machines with refrigeration unit (excluding those used in motor
vehicles, self-contained or split-systems machines). This category includes
comfort-conditioning air conditioning chillers and chillers used for other air
conditioning applications, and other products, 28251270: Air conditioning
machines not containing a refrigeration unit; central station air, handling
units; boxes and terminals, constant volume units and fan coil units (including
air handling units and terminal units – including fan coil units - but also
other component parts of central air conditioning systems).

[116] The data is based on sales to end-users irrespective of whether
they are imported, manufactured within EU27 or assembled from imported
components. Import and export is only reported from a national perspective so
intra-EU and extra-EU figures cannot be determined from this derived data.

[117] A comprehensive
overview of applicable legislation in the area of Ecodesign, the Energy
Performance of Buildings Directive and the Energy Labelling Directive was
produced recently as part of an Ecodesign preparatory study for air
conditioning equipment above 12 kW – see www.ecohvac.eu, task 1, page 128-160.

[118] The LVD applies to small air conditioners for domestic use, whereas
the MD applies to larger air conditioning systems such as big chillers.

[119] There is currently a proposal for a revised regulation on
fluorinated greenhouse gases -  COM(2012) 643

[120] EU industry associations provide an
opportunity for industry to feedback their views on the revision of existing EU
regulations and on the proposed introduction of new legislation, for instance,
through Commission working groups that have been set up on specific directives
and regulations e.g. working
group on Ecodesign.

[121] In comparison, the lifecycle of a laptops platform in which
different model variants are developed is in the region of 2 to 5 years. It is
easier to integrate regulatory requirements into the development of new
platforms rather than to invest in modifying platforms that have already been
developed.

[122] The reason why the LVD can result in high costs is due to the
duration of the testing process which can take up to one month in a third party
laboratory, even after the manufacturer has carried out testing in-house. The
main mechanism chosen by manufacturers to achieve presumption of conformity
with the LVD is through harmonised standards. Two standards are applicable for
air conditioners: (i) EN 60 335-1 (general standard applying to household and
similar electrical appliances) and Part 2 specific additional requirements for
each category of appliances standard for safety requirements in household
appliances and (ii) EN 60 335-2-40: specific requirements for electrical heat pumps,
air-conditioners and dehumidifiers.

[123] This includes (PED) final observation of a pressure tests and (EMC)
check for radiated and conductive emissions.

[124] These costs were annualised in order to arrive at comparable annual
costs, using a system similar to firms’ accounting for depreciation. For some
questions, we also asked questions in the SCM questionnaire about how much they
spent on testing equipment over a 5 year period, which had to be annualised.

[125] Although there is a lack of data on market size and structure at a
sufficiently disaggregated level in Prodcom and SBS data, we estimate that
there are approximately 20 major manufacturers active in Europe, and perhaps
some 80 small and medium sized manufacturers. Even market studies do not
provide reliable estimates in this regard so this is a “best estimate”.

[126] There were considerable differences in the estimates of compliance
costs for large, medium and small air conditioning manufacturers, reflecting
significant differences in the volume of units sold annually in Europe. Standardised
parameters were estimated based on the data obtained, taking into account
differences between firms of different size thresholds.

[127] There are already examples within the IM regulatory framework of
such standards (e.g. under the PED, where is a standard for boilers).

[128] Lower cost of purchasing standards (average 80 EUReach). 5 (=1/3 of
total) fewer standards purchased a year = saving of 400 EUR per firm.

[129]  15% saving in familiarisation costs .

[130] No saving for manufacturers only exporting within EU. Estimated 25%
reduction 3rd party CA per model exported to third countries. Assumed: 20% of
models exported. Adds up to a reduction of 5% on CA. Note: this saving will only
be relevant and measured in instances when CA was originally carried out in the
EU.

[131] Decision 768/2008 states that “The DoC shall be translated into the
language or languages required by the Member State in which market the product
is placed or made available”.

[132] It is of particular interest that the latter standard deals with
the energy efficiency of gas-fired air-conditioning appliances (the energy
efficiency aspect may be subject to one or several of the implementing measures
under the EcoDesign Directive).

[133] A comprehensive overview of applicable legislation in the area of
Ecodesign, the Energy Performance of Buildings Directive and the Energy
Labelling Directive was produced recently as part of an Ecodesign preparatory
study for air conditioning equipment above 12 kW – see www.ecohvac.eu, task 1,
page 128-160.

[134] European Commission. 2013.

[135] Semiconductors: Global Industry Guide. 2012. MarketLine

[136] http://ec.europa.eu/enterprise/newsroom/cf/\_getdocument.cfm?doc\_id=7382

[137] The EU Industrial R&D Investment Scoreboard: http://iri.jrc.ec.europa.eu/scoreboard.html

[138] European Strategy for Micro and Nanoelectronic Components and
System

[139] http://ec.europa.eu/enterprise/sectors/ict/files/kets/hlg\_report\_final\_en.pdf

[140] High-Level Expert Group on Key Enabling Technologies. Final Report.
http://ec.europa.eu/enterprise/sectors/ict/files/kets/hlg\_report\_final\_en.pdf

[141] High-Level Expert Group on Key Enabling Technologies. Final Report.

[142] A search for ‘integrated circuits’ on the British Standards Institute
database resulted in 685 individual standards. http://shop.bsigroup.com/en/SearchResults/?q=integrated%20circuits

[143] An updated version of the “candidate list” can be found in the ECHA
website: http://echa.europa.eu

[144] http://echa.europa.eu/en/web/guest/view-article/-/journal\_content/512b7526-9dd6-4872-934e-8c298c89ad99

[145] The International Electrotechnical Committee is based in
Switzerland and bases its prices on the Swiss Franc (CHF). Conversions use the
following rate: CHF/EUR = 0.8147

[146] See, for example, the chart created by NXP: http://www.nxp.com/about/corporate-social-responsibility/environment/lead-free-halogen-free/matrix.html#complete

[147] ESIA. 2009. Semiconductors: Enabling Sustainable Living in 21st
Century Europe.

[148] Cited in http://www.nema.org/Policy/Environmental-Stewardship/Documents/081203%20RoHS%20impact%20assessment%20summary.pdf

[149] http://www.orgalime.org/sites/default/files/PP\_Complementary\_REACH\_and\_RoHS\_Mar13.pdf

[150] https://www.bomcheck.net/assets/docs/Guide%20to%20REACH%20Requirements%20for%20component%20suppliers%20and%20equipment%20manufacturers.pdf

[151] This European Standard specifies the technical documentation that
the manufacturer needs to compile in order to declare compliance with the
applicable substance restrictions. The documentation of the manufacturer’s management
system is outside the scope of this European Standard.  http://www.cenelec.eu/dyn/www/f?p=104:110:3448161281810912::::FSP\_PROJECT,FSP\_LANG\_ID:23432,25

[152] See the industry-led initiative, BOMCheck, developed by the
European trade association COCIR and coordinated by the environmental
consultancy ENVIRON, which sits on co-chairs the IPC 1752A materials
declaration standard and serves as EMEA regional coordinator for the IEC 62474
materials declaration standard.  https://www.bomcheck.net/

[153] See press release: http://www.prnewswire.com/news-releases/bomcheck-celebrates-more-than-1-million-rohs-and-reach-materials-declarations-from-over-3100-suppliers-211932871.html

[154] There is no limit to the number of part numbers that the supplier
can load into the database or the number of customers that the supplier may
have on BOMcheck.

[155] FESI

[156] We have been in contact with Eurostat to confirm this

[157] Eurostat Structural business statistics (SBS)

[158] PRODCOM

[159] PRODCOM

[160]
http://www.clusterlink.com/acenet/new/pdf\_acenet/Veneto%20Region.pdf

[161] Due to a low number of producing companies data on the remaining
markets production value is not available in the PRODCOM database.

[162] One of the companies interviewed, for example, has outsourced all
production to a Czech manufacturing company while continuing to design, market,
and manage the company in Italy.

[163] This is a close approximation of the industry, as FESI is the
largest industry association and covers 85 percent of the total industry.

[164] Deutsches Institut für Normung (DIN)

[165] UNI Ente Nazionale Italiano di Unificazione (UNI)

[166] The companies represent typical companies within the industry and
it is our impression that the information obtained are to a large degree
typical for the sector. However, results should be interpreted with some care
due to the relatively small number of interviewees.

[167] Italian standardization committee

[168] Impact Assessment of the REGULATION OF THE EUROPEAN PARLIAMENT AND
OF THE COUNCIL laying down procedures relating to the application of certain
national technical rules to products lawfully marketed in another Member State
and repealing Decision

3052/95/EC

[169] EUROPEAN BICYCLE MARKET 2012 edition, Industry & Market Profile
(2011 statistics), COLIBI and COLIPED. http://www.colibi.com/docs/issuu/European%20Bicycle%20Market%20&%20Industry%20Profile%20-%20Edition%202012.pdf

[170] http://www.bike-eu.com/Sales-Trends/Market-Report/2013/3/European-Union-2012-Is-Cycling-Becoming-Hot-Again-in-Europe-1179947W/

[171] Source: Worldometer Stastics, http://www.worldometers.info/bicycles/

[172] Please note that COLIBI and COLIPED do not give a definition in
their report. It is therefore not possible to compare their findings one-on-one
with the Eurostat data.

[173] For examples from the UK for technical rules, please follow this
link: https://www.gov.uk/mutual-recognition-regulation-across-the-eea

[174] See the following link: http://www.cen.eu/cen/Sectors/TechnicalCommitteesWorkshops/CENTechnicalCommittees/Pages/Standards.aspx?param=6314&title=Cycles

[175] For the full text of the regulation: http://www.legislation.gov.uk/uksi/2010/198/pdfs/uksi\_20100198\_en.pdf

[176] For the full text of the regulation: http://www.legislation.gov.uk/uksi/1983/1176/pdfs/uksi\_19831176\_en.pdf

[177] See http://wetten.overheid.nl/BWBR0001969/geldigheidsdatum\_23-05-2013
for the full text of this legislation.

[178] See http://wetten.overheid.nl/BWBR0025798/geldigheidsdatum\_23-05-2013
for the full text of this legislation.

[179] http://www.gesetze-im-internet.de/stvzo\_2012/BJNR067910012.html
for the full text of the legislation.

[180] Source BIKE Europe EU Regulations for E-bikes & Pedelecs
Series. See http://www.bike-eu.com/Laws-Regulations/Safety-standards/2010/8/EU-Regulations-for-e-Bikes-Part-1-Type-approval-legislation-and-CEN-standards--BIK004232W/

[181] http://www.bike-eu.com/Laws-Regulations/Safety-standards/2010/8/EU-Regulations-for-e-Bikes-Part-2-Machinery-Directive-BIK004233W/

[182] http://www.bike-eu.com/Laws-Regulations/Safety-standards/2010/8/EU-Regulations-for-e-Bikes-Part-3-Electromagnetic-Compatibility-BIK004234W/

[183] http://www.bike-eu.com/Laws-Regulations/Safety-standards/2013/3/EU-Regulations-for-E-bikes--Pedelecs-Part-6-RoHS-Directive-1258753W/

[184] Pedelecs stand for Pedal Electic Assisted Cycles or EPACS stand for
Electronic Power Assisted Cycles.

[185] See http://www.vae-enov.com/fiches\_2010/norme\_en\_15194.pdf

[186] See Impact Assessment, page 70.

[187] See Impact Assessment, page 15 and 16.

[188] See impact Assessment, page 71.

[189] "3D Printing: A Global Strategic Business Report"
announced by Global Industry Analysts

[190] http://www.corriere.it/english/13\_maggio\_14/formula-one\_70300362-bc81-11e2-996b-28ba8ed4f514.shtml

[191] The demarcation between the MD and the LVD is based on the category
of product, rather than its size or whether it is used in a consumer, office or
industrial environment. All ordinary office machinery and IT equipment is
excluded from the scope of the MD and is thus subject to the LVD.

[192] For instance, the template for printing a fully functioning 3D gun
in the US in 2013 attracted more than 100000 downloads before the technical
blueprint was withdrawn.

[193] Certain types of lifts are covered under other Directives. The
Machinery Directive applies to lifts for goods and to other types of lifts not
covered by the Lifts Directive, the Cableways Directive applies to lifting
appliances installed in outdoor mountain or urban sites.

[194] The SPVD is also applicable but only to certain types of air
conditioners

[195] In order to obtain better information on the numbers of firms, CSES
made use of the Orbis database which allowed the number of active firms or
groups of firms in Europe for a number of sectors to be identified. This was
considered preferable to the number of enterprises provided by Eurostat this is
based on NACE two digit level classifications. NACE 2 digit product groups were
usually broader in scope than the sectors we were examining and, critically,
the number of enterprises provided refers to separate legal units, irrespective
if these are subsidiaries of larger groups. In relation to compliance with IM
legislation this is particularly important since more firms tend to perform
most, if not all, relevant activities in one central location. Local
subsidiaries usually have very limited, if any, role in the process.

[196] The firms were mainly manufacturers but some importers and
distributors were also interviewed.

[197] For example, less familiarisation time may be needed and there
would be less chance of products being stopped by customs authorities because
they do not have a paper copy of the DoC – which is currently required under
the R&TTE-D and confusion about whether one must be placed together with
the product.

[198] It was noted during the research by global manufacturers that a
distinction can be made between a product model or basic platform for
regulatory compliance purposes and a product model for marketing purposes,
where there may be multiple variants, with only minor technical differences and
upgrades, but based on the same regulatory model.

[200] International Standard Cost Model Manual - Measuring and reducing
administrative burdens for businesses. SCM network, OECD -
http://www.oecd.org/regreform/regulatory-policy/34227698.pdf

[201] See inter alia - International Standard Cost Model Manual,
Measuring and reducing administrative burdens for businesses.

[202] Measuring Administrative Costs: UK Standard Cost Model Manual,
Better Regulation Executive, 2005

[203] A common set of Conformity Assessment Modules is defined in
Decision 768/2008

[204] Although harmonised technical standards
are voluntary, most manufacturers follow these in order to meet the essential
requirements. The costs of meeting standards to support the legislation’s
implementation were also included not only the administrative requirements and
information obligations underlying these.

[205] BAU - Business as usual costs – a term used under the Standard Cost
Model

[206] It should be noted that in general macro-economic models tend to be
log-linear; therefore effects calculated do not depend strongly on the values
of the exogenous variables. The log-linear behaviour has been seen to hold for
the PRISMA and WIOM model used in this study.

[207] It should be noted that in general macro-economic models tend to be
log-linear; therefore effects calculated do not depend strongly on the values
of the exogenous variables. The log-linear behaviour has been seen to hold for
the PRISMA and WIOM model used in this study.

[208] PRISMA is a macro-sectoral model Panteia has developed for
medium/long- term scenario analysis in the Netherlands. See Box: Panteia’s PRISMA-model
for further information.

[209] Panteia’s WIOM (World Input Output Model) is used; see the Box
Panteia’s World Input-Output Model (WIOM).

[210] PRISMA is a macro-sectoral model Panteia has developed for
medium/long- term scenario analysis in the Netherlands. See Box: Panteia’s
PRISMA-model for further information.

[211] Panteia’s WIOM (World Input Output Model) is used; see the Box
Panteia’s World Input-Output Model (WIOM).

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