Who is accountable for the safety of consumer products?

The EU introduced Regulation (EU) 1020/2019 on market surveillance and compliance of products (“the EU Market Surveillance Regulation”). The majority of its provisions apply as of 16 July 2021. This Regulation has important implications for the logistics sector and manufacturers outside the EU who want to place their products on the EU market.

Aim and Scope

The EU felt that non-compliant products (i.e. products that violate European product regulations) were sold in various constellations in Europe for example via online platforms. At the same time market surveillance authorities lacked the tools to get access to certain companies responsible for product safety or these companies evaded controls.

The EU Market Surveillance Regulation aims to meet these perceived shortcomings by providing:

• clear and uniform rules applying to non-food products and economic operators
• requirements to ensure that market surveillance can enforce relevant rules
• streamlined market surveillance procedures for controlling products within the EU and at its borders (import controls)
• tools to coordinate activities carried out by national surveillance bodies across the EU

in order to secure that products put on the EU market do not endanger European consumers and workers as well as to ensure a level playing field.

Which products are concerned?

The EU Market Surveillance Regulation applies to all non-food products placed on the EU market, unless there are more specific provisions pursuing the same objectives. Besides products which are subject to harmonized rules in the EU, the EU Market Surveillance Regulation covers all other products which are imported into the EU from a third country to be freely disposed of in the EU.

Examples include chemicals, cosmetics, packaging, footwear, textile products, toys, electrical and electronic equipment, batteries, machinery.

Broader application for e-commerce

With regard to distant sales or e-commerce, the EU Market Surveillance Regulation broadens the legal concept of "placing on the market" and thereby the scope of EU market surveillance rules.

A product shall now be deemed to be made available on the EU market if the offer is targeted at end users in the EU. This can be online or through other means of distance selling. The "targeting" of an offer can occur by any means and this will be assessed by taking into account the circumstances of each case. Relevant criteria could be: supply regions, available languages, payment methods or the like.

Obligations for Economic Operators (art. 4 of the Regulation)

For certain products defined such as construction products, machinery, toys, radio equipment, pressure equipment, electrical and electronic equipment amongst others, the Regulation requires the presence of an ‘Economic Operator’ in the EU. The name and address of this Economic Operator must be indicated on or with the product.

The Economic Operator can be the manufacturer, the importer (if the manufacturer is not located in the EU), an authorized representative appointed in writing or a fulfilment service provider – parties that offer warehousing, packaging, addressing and/or dispatching services – where there is no other mentioned party in the EU. If none of these parties are based in the EU, the product cannot be placed on the EU market.

The obligations for the Economic Operator include in particular:

• checking whether an EU declaration of conformity/performance and the prescribed technical documentation have been drawn up for the respective product and retaining a copy in case of a requirement by market surveillance authorities.
• notifying market surveillance authorities if the product presents a risk and cooperating to remedy or mitigate that risk including taking corrective actions like product recalls.
• The European Commission published practical guidelines that help implementing these new obligations (C(2021)1461).

Improved Enforcement of Market Surveillance

The improvement of market surveillance is a key element of the Regulation resulting in controls at the EU border and a focus on products or sectors during controls.

The powers of the market surveillance authorities and customs under the Regulation include:

• access to software and documents;
• unannounced on-site inspections, mystery shopping and reverse engineering;
• ordering the removal of online content regarding non-compliant products or the incorporation of appropriate warnings;
• suspending the release of the product for free circulation in the EU.

Economic Operators could face sanctions, liability and cost orders if they don't comply with their obligations under the Regulation. The powers and sanctions could differ between local surveillance authorities.

Key implications for manufacturers outside the EU and the logistics sector

The introduction of the Regulation may have a significant impact on your business and will trigger several legal questions, such as:

• Is the Regulation applicable to the products that you handle?
• Are you an 'Economic Operator' under the Regulation?
• How can you authorize a representative to act as the Economic Operator?
• How do you ensure that you are sufficiently equipped to perform the new tasks? For example: contractual provisions on information sharing under strict deadlines and subject to penalties.
• Which measures can you take to minimise your liability? For example: contractual provisions on guaranties, indemnifications and exonerations.
• How can you address the new risks and obligations in your contracts? For example: agree on compensation for being the Economic Operator or require that an authorised representative will be appointed.
• Is the expansion of your risks adequately insured and do you have a reporting obligation to your insurer? For example: product recall/contamination cover, risk aggravation or change of capacity or business operations.
• Are you prepared for surveillance interventions? For example: keeping proper records, having a recall plan ready and appointing a responsible person.

We can offer a further understanding of the concrete impact of this new Regulation on your business and provide you with tailor made advice in respect of these type of questions.