Brexit and Distribution of Goods: Time for Emergency Plans
The withdrawal of the United Kingdom from the European internal market will be one of the most serious economic consequences of Brexit, as it will have a number of consequences for all economic operators involved in the distribution of goods in Europe. Whether European product conformity law will remain applicable as the legal framework for the free movement of goods after 30 March 2019 for at least a transitional period, until 31 December 2020, will depend on whether the UK Parliament ratifies the current draft Withdrawal Agreement. On 25 November 2018, the heads of government of the EU-27 Member States approved the draft. However, the international press considers it unlikely that the British Parliament will approve the draft. Currently, only two scenarios are considered conceivable: Either there is a "hard" Brexit without Withdrawal Agreement with transition periods or the Brexit is still averted overall. The second scenario depends to a large extent on the outcome of a pending ECJ case on the question of whether a unilateral withdrawal from the contract is legally permissible.
Due to these uncertainties about the timely conclusion of a Withdrawal Agreement, companies should urgently draw up and further develop contingency plans for a no-deal scenario. In a communication (Notice to Stakeholders, Withdrawal of the United Kingdom and EU rules in the field of industrial products of 22 January 2018), the European Commission has already made clear what consequences Brexit will have for the distribution of goods in Europe. Against this background, solutions need to be developed for the following points in particular:
1. No import into the internal market via the United Kingdom
Imports of products from third countries into the United Kingdom will no longer be imports into the European Economic Area (EEA). Rather, only the transfer of a product from the United Kingdom to an EEA Member State will mark the entry of the product into the internal market. This has serious consequences for the economic players involved: If you were previously a distributor, you may become an importer with an increased responsibility for product conformity. In addition, the time of import into the internal market plays an important role when legal regulations or harmonized technical standards change.
2. Consequences for the selection of authorized representatives
An economic operator established in the United Kingdom will no longer be recognized as an authorizes representative by the European Commission. According to the European Commission’s notice, an authorized representative must be established in the EEA. In the case of products for which an authorized representative is not mandatory, this only leads to the manufacturer again bearing full responsibility for the conformity of his products. If the manufacturer is located outside the EEA, the importer is primarily held responsible. However, if the relevant product law establishes the obligation of the manufacturer outside the EEA to appoint an authorized representative (e.g. for medical devices), the product can no longer be lawfully placed on the market by an authorized representative established in the United Kingdom. Instead, the manufacturer must designate an authorized representative established in the EEA to ensure compliance with European product regulations and to continue to legally offer products on the internal market.
3. Consequences for the choice of notified bodies
For certain products, European product law requires the involvement of a notified body in the conformity assessment procedure. Notified bodies must be established in an EEA Member State and be designated by a national accreditation body to fulfill the conformity assessment tasks laid down in the relevant EU legislation. Notified bodies established in the UK will therefore lose this status at the time of leaving the EU and will be removed from the Commission's information system (NANDO database). Products whose conformity assessment procedures involved a notified body from the UK will then no longer be allowed to be made available on the European internal market. The European Commission expressly clarifies that the notified body must still be a notified body at the time the product is placed on the market.
4 Summary and perspective
Even if the Withdrawal Agreement would be approved by the UK Parliament, the above-mentioned aspects must be organized - just with a time delay. An agreement on trade relations between the EU-27 and the United Kingdom at the end of the transitional period is not in sight. There are no provisions on product circulation in the draft Withdrawal Agreement. Rather, the transitional period is to be used to find arrangements. Only the Protocol on Ireland/Northern Ireland, which is part of the draft Withdrawal Agreement, contains in its Article 8 provisions on technical regulations, assessments, registrations, certificates, approvals and authorizations. The provision states that goods may be imported into Northern Ireland from the EU in accordance with EU product law. This provision would remain in force until a long-term agreement on relations between Ireland and Northern Ireland is found. It is part of the so-called backstop solution, which has been sharply criticized in the UK.
In addition, there is a draft political communication which is intended as an annex to the Withdrawal Agreement. However, the wording of this paper is so general that it does not indicate whether future trade relations will be closer to the EEA Agreement with Liechtenstein, Norway and Iceland or significantly less close.
In summary, European product law will no longer apply in relation to the United Kingdom for the foreseeable future. Accordingly, manufacturers, importers and distributors should urgently take steps now to prepare for this.
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Any questions? Please contact: Dr. Susanne Wende
Practice Groups: Compliance & Investigations; Litigation, Arbitration & ADR