Brexit: Product Compliance and Liability implications

By Ewan Grist, Pieter Erasmus

01-2020

The UK exited the EU on 31st January 2020.  By virtue of the transition period in the Withdrawal Agreement, EU law will continue to apply in and in relation to the UK only until the 31st December 2020.  The EU Treaties, EU free movement rights and the general principles of EU law will then cease to apply in relation to the UK, and prior EU regulations will only continue to apply in domestic law (by virtue of the European Union (Withdrawal) Act 2018 (the "Withdrawal Act")) insofar as they are not modified or revoked by regulations under that 2018 Act.

This briefing note advises readers on the immediate considerations and anticipates how Brexit might impact on the laws and regulations governing product compliance and liability in the UK, which are currently heavily derived from EU legislation.  This legislation harmonises across the EU the product safety, environmental and other regulatory requirements applicable to a wide array of specific product types (including electrical equipment, medical devices, machinery, toys, cosmetics, etc.) as well as setting out general minimum safety requirements for all consumer products.  This legislation therefore underpins the free movement of goods within the EU.  Additionally, EU law sets out a strict liability regime for defects in consumer products which cause injury or damage to property.

The impact of Brexit on this regulatory regime, and the possibility for divergence, is of considerable concern for both UK manufacturers and EU manufacturers alike.  This is particularly so given that, in many areas, product development and manufacturing lead are long, and manufacturers are naturally keen to avoid costly redesigns or re-labelling.

Anatomy of UK law post-Brexit

The UK-specific aspects of the Withdrawal Agreement agreed between the UK Government and EU have been implemented by amendment into the Withdrawal Act by the European Union (Withdrawal Agreement) Act 2020.

The Withdrawal Act provides for appropriate changes to UK law for Brexit to take effect on 31 January 2020 ("Exit Day"). The fundamental changes are:

  1. the European Communities Act 1972 (the act implementing the UK's membership of the EU and providing for EU law to have effect in the UK) is repealed on Exit Day;
  2. EU law nevertheless continues to have effect in the UK during the "Implementation Period" (i.e. the transition period) running from Exit Day until 11pm on 31 December 2020 ("IP Completion Day"); and
  3. after IP Completion Day, all EU law having effect in the UK immediately prior to IP Completion Day will (subject to the exceptions set out in, and the amendments made pursuant to, the Withdrawal Act) be 'retained' in UK law.

Further to these changes, powers were given under the Withdrawal Act for UK government ministers to legislate to amend those UK laws implementing EU directives, as well as retained EU regulations, to make the necessary changes (e.g. removing any reference to EU institutions, etc.) to ensure these UK laws are coherent and effective after Brexit.  These include the UK regulations implementing the EU 'New Legislative Framework' directives (which set out the regulatory requirements for products to be placed on the EU market, such as CE marking), the EU Cosmetic Regulation (as retained into UK law) and the Product Liability Directive 85/374/EEC, which together form the basis of the EU product regulatory regime.

Key changes to the UK product regulatory regime after IP Completion Day

The overarching, high-level approach of the parties (at present) is set out in Part 3 of the UK-EU Withdrawal Agreement, which deals with 'Goods Placed on the Market'.  In particular, the following core themes are touched upon:

  • CE marking and free movement of goods - during the Implementation Period, CE marking and free movement of goods remain in place in the UK; and
  • providing for on-going information-sharing between the relevant UK and EU authorities for market surveillance purposes.

After IP Completion Day, the UK will be a non-EU country (a 'third country') and will no longer fall within the EU product compliance regime.  The Brexit-related changes to the 29 UK product safety (CE marking) regulations and the EU Cosmetic Regulation, intended to implement the Withdrawal Agreement objectives, are set out in the Product Safety and Metrology etc. (Amendment etc.) (EU Exit) Regulations 2019 ("PSM Regulations 2019"), which, under current arrangements, will now come into force with effect from IP Completion Day.

The major changes currently planned to the UK product compliance regime as from IP Completion Day are as follows:

  • The current EU CE marking system will no longer apply in the UK.  The UKCA ('UK Conformity Assessed') marking system will be the new UK product marking used for those goods being placed on the UK market which previously required a CE mark.  This will follow essentially the same principles as the current CE marking regime, but with the safety and compliance standards, authorised representative/responsible person and notified body requirements all now being valid for the UK only.  There are currently no immediate changes planned in respect of the required safety and compliance standards themselves, but this may change if the negotiations towards a trade agreement with the EU lead to regulatory divergence (i.e. the UK requiring different standards for certain goods to be placed on its market, than those required by EU law).
  • For products placed on the UK market, the current EU declaration of conformity with the relevant and applicable product standards will be replaced with a UK-only declaration of conformity with the relevant UK laws, and the application of a UKCA mark (if applicable).
  • For the many products that only require 'self-certification' of compliance with UKCA/CE laws, such products may, for a limited (but not yet specified) period of time after IP Completion Day, be sold in the UK where they comply with the EU CE marking regulations (and are, if required, CE-marked).  The UK Office for Product Safety and Standards ("OPSS") states in its guidance that there will be consultation with business, and a suitable notice period, prior to the ending of this arrangement.
  • For those products (such as medical devices) to be placed on the UK market (whether before or after IP Completion Day) which require, under the CE/UKCA regulations, mandatory third-party conformity assessments to be carried out by notified bodies, if the conformity assessment has been carried out by a UK notified body, then the product must be UKCA marked immediately from IP Completion Day.  If the conformity assessment has been carried out by an EU notified body, then the conformity assessment and CE marking will remain valid for use in the UK for so long as the CE mark is accepted, post-IP Completion Day.
  • The UKCA mark will not be recognised in the EU – therefore, any products which require CE marking and which are exported from the UK to the EU, whether or not they meet UK standards and have a UKCA mark, will also need to be meet the extant EU product standards and, if required, also bear the CE mark.  There is no restriction on marking products with both a CE mark and a UKCA mark, provided that the respective requirements to properly place such marks on the product are met under both regimes.
  • UK-based notified bodies, which are currently designated to independently assess the conformity of certain products requiring CE marking before being placed in the EU market, will, after IP Completion Day, no longer be established in the EU, and the conformity assessments carried out by them, including those assessments carried out prior to IP Completion Day, will no longer be valid for the EU compliance regime.  Businesses whose products currently rely on third-party conformity assessments carried out by UK notified bodies to sell products to other EU countries will need to have new conformity assessments carried out by EU-based notified bodies in order to ensure continuing compliance.
  • It should also be kept in mind that, when the UK leave the EU and becomes a 'third country', this is likely to have an impact on the status of the economic operators (i.e. which entity is deemed the "manufacturer", "importer" or "distributor") in a supply chain which involves the UK.  This is important because under both the EU regulatory regime and the new UK regulatory regime, each economic operator will have different regulatory obligations placed upon them depending on whether they are deemed to be the "manufacturer", "importer" or "distributor".  For instance, if before Brexit, a UK manufacturer were sending products from the UK to a French distributor for onward delivery to the customer, the French distributor will only have relatively light regulatory obligations (the more onerous obligations being carried by the "manufacturer" and/or "importer" instead).  However, under that same supply chain after Brexit (i.e. when the UK is a third country), the UK manufacturer is then exporting products from the UK into the EU, and the French company becomes the deemed "importer" into the EU.  The obligations of an importer are more onerous than those of a mere distributor and include the need to ensure that the manufacturer has taken the necessary steps to allow the product to be placed on the market, that the requisite documentation is available upon request, and that the importer’s name and contact details should also be displayed on the product or packaging.  Similarly, products imported from the EU (or from anywhere outside the UK) and placed on the UK market will require the UK "importer" and/or "distributor" to comply with any UK regulatory requirements.  The various actors in the supply chain must therefore be aware of their regulatory obligations post-Brexit, which may have changed.

A basic summary of the required actions for those business currently placing products on the UK and/or EU market to remain compliant after IP Completion Day is set out below.  However, businesses are urged to seek legal advice if they are in any doubt as to their obligations:

Intended business model after IP Completion Day

Required Actions

 

For products which can be self-certified for compliance by manufacturer:

 

Businesses placing products on UK market

  • Use UKCA mark, or for a time-limited period only, CE-marked products can continue to be placed on the UK market as well. However, when this period comes to an end, such products will also/instead need to be marked with the UKCA mark (UKCA mark can only be applied if the product complies with UK regulatory requirements then in force)
  • EU-based authorised representatives (if appointed before IP Completion Day) can still be used for UKCA-marked products. A UK-based authorised representative must be appointed for new products placed on the UK market after IP Completion Day.
  • For cosmetic products, a UK-based responsible person must be appointed after IP Completion Day.

 

Businesses placing products on EU market only

  • Products can continue to be placed on the EU market by virtue of CE mark (CE mark can only be applied if the product complies with EU regulatory requirements then in force)
  • If using a UK-based authorised representative or responsible person, an EU-based authorised representative or responsible person must be appointed.

 

For products which require conformity assessment by third-party notified body:

 

Business placing products on UK market only, using UK-based notified bodies and/or UK-based authorised representatives/responsible persons (as applicable)

  • Review amended UK regulations
  • Routinely monitor OPSS website here for further updates
  • Prepare for switchover to UKCA mark:
    • oon IP Completion Day if products require third-party conformance assessment; or
    • in accordance with OPSS guidance

Business placing products on UK and EU markets, using UK-based notified bodies and/or UK authorised representatives/responsible persons (as applicable)

  • Review amended UK regulations

    For UK sales:

  • Prepare for switchover to UKCA mark:
    • oon IP Completion Day; or
    • in accordance with OPSS guidance
  • Routinely monitor OPSS website here for further updates

For EU sales:

  • Arrange for third-party conformity assessments to be carried out/transferred to EU notified body (see EU NANDO database here), because UK-notified body no longer recognised by EU
  • Appoint EU-based authorised representatives/responsible persons, if required, to meet EU requirements for CE marking

Business placing products on UK market, using EU notified bodies and/or EU authorised representative/responsible persons (as applicable)

  • Review amended UK regulations
  • Subject to any further OPSS guidance, CE-marked products can continue to be placed on the UK market for a (still unknown) limited time period, and EU authorised representative can continue to be used after IP Completion Day – so maintain validity of CE mark and prepare for future changeover to UKCA mark
  • If selling cosmetic products, a UK-based responsible person must be appointed after IP Completion Day

Routinely monitor OPSS website here for further updates

Business placing products on EU market, using EU notified bodies and/or EU authorised representative/responsible persons

No action required

The extent to which these changes result in anything more than a mere administrative burden (i.e. identical standards but two registration and marking systems) with the EU and UK moving towards divergent regimes of differing safety and compliance standards, as well as separate administrative systems, will be settled to a certain extent by the trade negotiations which will take place between the UK and EU through the Implementation Period, and beyond.  Clearly, for those business wishing to place products on both markets, it must be hoped that the systems remain as closely aligned as possible.

In terms of product liability, save for potential governing law or jurisdiction issues (see our page herethere is unlikely to be much significant change in relation to claims brought in contract, tort or strict liability (at least in the short to medium term).  Although the strict liability regime arose out of EU law, it has been implemented in the Consumer Protection Act 1987, and is widely regarded as a success.  As an accepted part of the UK consumer landscape, it is difficult to envisage this disappearing or being materially altered any time soon.

Conclusion

Businesses placing their products on the market in the UK or the EU need to consider the steps they will need to take to ensure they are compliant after the end of the Implementation Period (i.e. after 31 December 2020).  This is particularly relevant for those businesses selling products which require third-party conformity assessments by notified bodies, many of which are likely to require re-assessment by (or transfer to) either a UK-based or an EU-based notified body depending on the market in which the products are to be sold.  Notified bodies are likely to be very busy, and so planning ahead is vital.  Most other changes are, for the moment, a matter of updating administrative procedures and planning ahead for the application of the UKCA mark to products/packaging etc.

A careful watch should be kept by business on any potential sector-specific, or more general, changes which may be made to the respective product compliance regimes in the EU and UK, to anticipate potential divergence in safety or environmental standards, particularly where businesses sell the same goods into both the UK and EU.  Whilst we would expect any such changes to be well advertised, and phased in gradually, failing to plan ahead may end up being costly and time-consuming.

This article is part of our Brexit series

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