On 24 December 2020, the EU and the UK reached a deal on the terms of their future free trade and cooperation agreement ("TCA"). Comprising 1,200+ pages, the TCA was a significant achievement in such a short timescale and avoided the UK leaving the EU without a deal at the end of the transition period on 31 December 2020.
Although the TCA changes little of the immediate impact of Brexit for product stakeholders in terms of new obligations (such as using the UKCA mark, updating Declarations of Conformity and traceability information), it does contain important implications for the longer term, including:
- certain commitments from the EU and UK to take a common approach when it comes to the development of future technical requirements for products (for example, standards, conformity assessments and the marking and labelling of products); and
- an agreement to cooperate on the market surveillance and enforcement of products sold in the EU and UK (for example by exchanging information on corrective actions notified in the EU's rapid alert system (RAPEX) and the new UK Product Safety Database).
It remains to be seen how the EU and UK will implement these commitments successfully as the regulatory requirements in the UK begin to diverge from those in the EU. In the meantime, below is our summary of some of the key effects of the TCA for product stakeholders.
Background - independent "right to regulate"
By way of background, from 1 January 2021, the UK has left the EU Single Market and Customs Union. This means that the UK no longer benefits from the free movement of goods between the EU and Great Britain (England, Scotland and Wales). However, the Northern Ireland Protocol, which is designed to avoid a hard border on the island of Ireland, still allows for the free movement of goods between Northern Ireland and the EU (and vice versa).
The EU and UK have the "right to regulate" goods independently within their own territories, subject to certain provisions in the TCA which incorporates provisions from the WTO Technical Barriers to Trade Agreement. These provisions aim to ensure technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade. The TCA does not contain mutual recognition measures (apart from a limited number of provisions for certain products such as medicines and motor vehicles - which are discussed below). However, in reality the UK's freedom to regulate is currently fettered in respect of Northern Ireland as a result of the Northern Ireland Protocol, which requires products placed on the Northern Irish market to continue to comply with the EU regime. As a result, for most products companies will now have to comply with two separate regulatory regimes for the EU (and Northern Ireland), and for Great Britain.
TCA - Common Approach to Technical Requirements
The TCA contains important provisions to try to ensure common approaches to future technical requirements for EU and UK goods and to simplify access to each other's markets. These include:
- Standards: the UK and EU have agreed to use "relevant international standards" as a basis for technical regulations, except where it can be demonstrated that the international standards would be an ineffective or inappropriate means for fulfilling the objectives. A definition of "relevant international standards" identifying the international standards setting bodies is included. A Q&A document issued by the European Commission explains that the aim of this definition is to ensure that EU and UK domestic product standards and technical regulations are based on the same international references and compatible to the extent possible. We are likely to see divergence where the EU or UK consider that international standards are not effective or appropriate for their policy goals.
- Conformity assessments: the EU and UK have agreed to continue to accept self-certification of conformity by a manufacturer as proof of compliance where this was allowed under applicable EU and UK product rules as of 1 January 2021. The Q&A document issued by the European Commission explains that this was agreed to maintain simplified access to each other's markets and covers a "very large share of bilateral trade". However, as there is no mutual recognition of technical regulations, conformity assessment procedures or approval bodies, products will generally have to undergo two separate conformity assessment processes in order that they can be validly placed on both the EU and UK markets - especially where third-party conformity assessments are required. In addition, the EU and UK have the ability to introduce mandatory third party testing of products in certain circumstances - so in the future launching products in both EU and UK markets is likely to be more complex than it has been to date.
- Marking or labelling of products: mandatory requirements for marking or labelling are to be limited to information which is relevant for consumers or users of the product or information that indicates that the product conforms to mandatory technical requirements. The EU and UK have also agreed for simplified measures to allow labelling to take place in customs warehouses or other designated areas in the country of import as an alternative to labelling in the country of origin (unless it is required to be carried out by an approved person for reasons of public health or safety). The EU and UK have agreed to respect each other's regulatory requirements - e.g. by allowing information in other languages in addition to the language required for their own market, and encouraging a flexible approach to the placing of certain labels and marks. These provisions should help businesses selling in the EU and UK navigate the doubling-up of requirements, even where there is limited real estate on products, labels or accompanying documentation.
TCA - Cooperation on Market Surveillance and Enforcement
The TCA contains a framework for cooperation between the EU and UK, and in particular exchanging information on non-food product market surveillance and enforcement activities, risk assessment methods and product testing, and coordinated product recalls or other corrective actions.
An arrangement is to be set-up "preferably within six months" for the regular exchange of information between the EU rapid alert system for unsafe non-food products ("RAPEX") and the new UK Product Safety Database.
TCA - Other Product Safety and Compliance Cooperation
There are some simplified measures to facilitate cooperation and trade for certain products including motor vehicles, medicinal products and chemicals.
- Motor vehicles and parts: the EU and UK will both accept products covered by a valid UN type-approval certificate. There are provisions for regulatory convergence, based on specified international standards. There are also provisions allowing market access for products incorporating a new technology or feature approved by the exporting party, but not yet regulated by the importing party (with exceptions).
- Medicinal products: a provision has been included allowing the mutual recognition of Good Manufacturing Practice inspections of facilities in the EU or UK and for acceptance of official Good Manufacturing Practice documents.
- Chemicals: the EU and UK have agreed to implement any scientific and technical guidelines issued by specified international organisations and bodies such as the OECD. There are provisions to enable some limited cooperation and sharing of certain information on chemicals. The EU and UK have committed to implement the United Nations Globally Harmonized System of Classification and Labelling of Chemicals (UN GHS) with flexibility where there are specific reasons to apply a different labelling system for particular chemical products in their finished state intended for the final user. The UN GHS is already part of EU and UK law under legislation dealing with the classification, labelling and packaging of substances and mixtures (known as CLP legislation). There are no parallel commitments for requirements under REACH, POPs (persistent organic pollutants) or Biocides legislation.
Tariffs and Customs Rules
The TCA includes agreement on tariffs and rules of origin. We will be blogging separately on the details of these provisions, and on practical considerations to help businesses navigate the new product compliance, trade and customs rules.
The TCA was ratified by the UK Parliament on 30 December 2020 and has been provisionally applied since 1 January 2021, pending ratification by the EU Parliament (this needs to be completed by the end of February 2021, unless the parties agree to extend this date). On 10 February, the European Commission adopted a proposal to request an extension of this period until the end of April 2021, to allow time for the legal-linguistic revision of the TCA into 24 languages of the EU Member States for its scrutiny by the European Parliament and the Council.
The commitments by the EU and UK to cooperate and take common approaches to technical requirements for products will be welcome signs for many product stakeholders. However, these provisions may be difficult to implement if the UK starts to diverge significantly from the EU regulatory position. We've already seen some signs that the UK is willing to adopt its own approach outside the EU (for example in the context of construction products and medical devices).
What's more, as the TCA does not include mutual recognition provisions for most products - or strong commitments in relation to future regulation - the real test will be how these provisions play out in practice, and especially the extent to which the UK will follow the EU's lead when it comes to its ambitious program of reforms of the existing EU product regulatory regime (such as the revision to the EU's General Product Safety Directive and new upcoming legislation on AI, among many other initiatives in the pipeline). At this stage, it remains to be seen to what extent the TCA simply pays lip service to the notion of a close relationship between the EU and UK when it comes to product regulation, whether there will be continued future cooperation in these areas, or whether we will see increasing divergence in Europe.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.