INCREASED LIABILITY OF BUSINESS ENTITY – Part 1 of 3 The first part of the series of articles “CHANGES TO MARKET SURVEILLANCE RULES AND PRODUCT MARKETING IN THE EUROPEAN UNION”
Author: Joanna Bogdańska – Attorney at law
INTRODUCTION
Protecting consumers, including protecting their health, but also protecting the environment in relation to goods consumed in the European Union are the priorities of the European Parliament. Therefore, on June 20, 2019, the Regulation of the European Parliament and of the Council 2019/1020 on market surveillance and product compliance was issued.
The purpose of the Regulation is to improve the functioning of the internal market and eliminate the placing on the market of products that do not comply with the requirements of the European Union. This will be achieved by increasing market and product oversight, ensuring clear, transparent and comprehensive regulation, and promoting closer cross-border cooperation, including customs cooperation. The Regulation will only apply to products indicated in the Annex to the Regulation. Their list is quite extensive and includes products that, due to their composition, can be potentially hazardous to health or threat to the environment. The list includes, among others: cosmetic products, detergents, aerosol dispensers, fertilizers, packaging, toys, batteries, accumulators, radio equipment, gasoline and diesel fuels.
The regulation regulates such areas as:
- Liability of business entities
- Market Surveillance
- Product control on EU borders
The Regulation will enter into force only on July 16, 2021 (with the exception of some provisions regarding the launch of the electronic system, which will enter into force on January 1, 2021), but it is worth knowing the planned changes in order to be able to prepare for them in advance.
LIABILITY OF BUSINESS ENTITY
Pursuant to the Regulation, as business entity is considered: a manufacturer, authorized representative, importer, distributor, supplier of order processing services or any other natural or legal person subject to obligations related to the production of products, making them available on the market or putting them into service in accordance with relevant Union harmonization legislation (as a reminder: listed in Annex 1 to the Regulation).
Thus, the changes introduced by the Regulation will cover all the main categories of entities involved in the launch of products on the EU market. Furthermore, the Regulation will also cover the activities of entities to which no product liability has been attributed until this date. Due to the fact that in recent years the number of entities offering sales of their products via the Internet has increased significantly, and also due to the increasing complexity of product supply chains, there are entities on the market whose activities go beyond the applicable legal framework of traditional distribution channels.
That is why the definition of business entity has been extended to include “provider of order processing service”. By this is meant an entity that, as part of its activities, provides at least two of the following services: storage, packaging, addressing and shipping of products without being their owner, with the exception of postal or transport services.
Another important issue contained in the Regulation is need for an business entity (manufacturer, importer, distributor, etc.) to have registered office or place of residence in the European Union, when their product is placed on the EU market. In addition, the placement will only be possible if such business entity is liable for:
- Verification, storage and sharing on request to specific authorities of the EU: declaration of conformity, declaration of performance and technical documentation (if such documentation is required);
- Presentation of information and documents to relevant authorities to demonstrate product compliance in a language that the authority understands;
- Notifying the relevant authority, in the event of reasonable doubt, that there is suspected risk causing by the product;
- Take corrective action to remove product non-compliance with EU requirements or reduce the risk posed by such a product.
At the same time, the data of this business entity should be indicated on the product, packaging, package or accompanying document.
Business entities placing products covered by the Regulation on the EU market, which have not yet identified liable for the above business entity established in the EU or when they rely on an business entity based in the United Kingdom, should verify their supply chains and take the necessary steps to implement the new regulations.
On this occasion, it is worth considering how the Regulation will affect e-commerce. Although the Regulation does not introduce specific regulations in this area of activity, it is obvious that it will pose the greatest challenges for this type of service. There is currently no requirement for non-Union traders to designate an entity representing it or responsible for product compliance in the Union.
Until now, the consumer who ordered the product electronically acted as an “importer”. Therefore, 2021 will be a breakthrough for business entity outside the Union, in particular from China who have dominated online sales. Products offered for sale online or by other methods at a distance, are considered to be available on the EU market if the offer is directed to end users in the EU, e.g. if the economic operator directs its activities to the Member State by any means.
In addition, the Regulation also establishes a general obligation for all economic operators to cooperate with market surveillance authorities, including information society service providers, thus providers of services normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.