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Brexit: cutting through the fog

2017-08-23 06:56:18

I am finding it very hard to get excited by yesterday's excursion into cross-border civil judicial cooperation when the Government's previous position paper on continuity in the availability of goods is a show stopper.

In its "continuity" paper, it has created a misplaced and potentially dangerous fiction to the effect that the EU might continue to recognised as valid "approvals, authorisations, certificates and registrations" issued prior to Brexit in respect of products marketed by UK companies throughout the EU.

These "approvals, authorisations, etc." are essential elements in the functioning of the Single Market, reflecting the prevailing regulatory model in the Union, loosely known by the term "prior approval".

Basically, a huge range of products, before they can be placed on the market, must be approved in a manner specified in the relevant legislation. Conformity then guarantees access to the markets of the EEA members (EU members plus the three Efta/EEA members).

Largely, the legislation works in a permissive manner, illustrated by Directive 95/16/EC the "dangerous machinery" directive, covering things like circular saws, chainsaws and other nasties. In this, under its Article 6 headed "freedom of movement", it states: "Member States shall not prohibit, restrict or impede the placing on the market and/or putting into service in their territory of machinery which complies with this Directive".

Thus, as in this case, the primary purpose of the legislation is not to address the specific issues related to the product that is the secondary purpose the means to an end. The primary purpose (the end) as this website indicates is to remove barriers to trade between EU/EEA members.

To level the playing field, the same criteria in the legislation are then used to set the standard(s) which imported goods must meet, before they can be placed on the market in the EEA states. But, as between intra-Union trade, and importation, there are important differences.

In the first instance intra-Union trade the responsibility for ensuring that products conform with the legislation rests with the manufacturers. And, where the legislation requires it (as it does with a wide range of goods), it must be tested by an independent third party, known as a "notified body". And, with certain exceptions, that notified body must be established in the EU and be recognised by the European Commission.

Currently, of course, the UK is able to benefit from the intra-Union trade rules but, on leaving the EU, it will no longer enjoy what amounts to a simplified procedure. It is then that the UK becomes a "third country" and the legal responsibilities accruing to those placing products on the market move from the manufacturers to the "importer", defined as "any natural or legal person established within the Community who places a product from a third country on the Community market". (For "Community" you can now read "Union".)

When products from third counties arrive at EU Member State ports, it is then for the importer to satisfy the customs and any other authorities that the products comply with EU law, and have the necessary approvals or certification including type-approvals from notified bodies, where necessary.

Currently, there are over 25 categories of goods to which the CE marking system applies, for which a Notified Body certificate may be required. These include: personal protective equipment; active implantable medical devices; hot-water boilers; medical devices; recreational craft; in vitro diagnostic medical devices; cableway installations designed to carry persons; noise emission in the environment by equipment for use outdoors; dangerous machinery; toy safety; and so on.

For the UK on and after Brexit day, this gets quite interesting. Where the product relies on certification from a UK notified body (approved prior to Brexit), that notified body will no longer be approved. Arguably (and it is arguable), the certificates (on which the importer will rely) will no longer be valid.

Some might argue that the certificate is valid for the full period for which it is issued (in the case of machinery, for five years) with the example given that such certificates are still valid if the issuing notifying body goes out of business. But then, under EU law, the files of its customers must be sent to another notified body (which, presumably, must be willing to accept them), or "are made available to the Member State which has notified it".

Since the UK will no longer be a Member State, it is difficult to see how that latter provision can be complied with, so the crucial issue might become whether a notified body in one of the EU-27 can be prevailed upon to hold the relevant files and make them available as required.

Certainly, it is not beyond the realms of imagination that a creative customs officer under "guidance" from his national government or Brussels might find technical reasons why paperwork accompanying a particular consignment might be deficient. Any amount of UK imports might thus be rejected.

It is entirely logical therefore, for the UK to seek as part of the Article 50 settlement, an assurance that all certificates, etc., continue to be recognises as valid. But that, for notified body certification, is not the way things are normally done. What usually happens is that third countries conclude Mutual Recognition Agreements (MRAs) on conformity assessment, whereby the parties recognise the certification produced by their approved testing houses.

There is a possible short-cut in the PECA: Europe Agreements on Conformity Assessment and Acceptance of Industrial Products, which were applied to candidate countries, and could be applied in reverse as a transitional mechanism for a departing country.

Thus, if the UK was playing this conventionally, it would not be messing around asking for continued recognition of certification. It would be declaring its intention to pursue a MRA on conformity assessment.

However, the UK's problem is that the CE marking regime only covers certain sectors, where there is an amount of flexibility. For other sectors, such as medicines, chemicals, pharmaceutical precursors, veterinary products, pesticides and biocides, approvals can only apply to businesses which are established in the EU. There is no possibility, under current EU law, that UK businesses could continue to hold valid approvals.

But "prior approval" also extends to the agri-food business, and also to aircraft parts, where current approvals rest on the UK's status as an EU Member State. It is certainly the case that there is no provision for approvals to be carried over in the agri-food business, and it is not easy to determine whether aviation parts approvals would survive Brexit.

As it stands, therefore, exports to the EU, to the value of anything up to a hundred billion pounds or more, each year, could be at risk. If their approvals are no longer valid after Brexit, then they will be turned away from the EU borders if entry is sought.

If our Government was taking this matter seriously, it would not have relied on a trivial, nine-page document on trade continuity, proposing the continued recognition that had already been rejected by the Commission. As each of the major sectors has its own different approval system, each with their own peculiarities, it should have done a sector-by-sector analysis, appraising the obstacles to continued trade, producing a document of some substance.

In some instances, there may be some flexibility but, in others, there will be no option but to bite the bullet seeking approvals de novo for a wide range of products, at huge expense. There may even be a significant loss of exports over the short-term, as it may not be possible to secure replacement approvals before Brexit.

To ignore these issues, though as the Government seems to be doing is thoroughly irresponsible. It reduces the time our businesses have to prepare for the worst case scenarios, and risks exposing them to having consignments rejected at the borders, with all that implies in cost and chaos.

And there is more than just business to think of. Chaos at the ports could bring the flow of goods to a complete halt import and export. If that resulted in empty supermarket shelves, that could have a profound impact on public order and the governance of this country something we cannot allow to happen.

Mr Davis needs to go back and look again at his trade continuity document, and then tell his civil servants to do the job properly. And, while he is about it, he needs to cut through the fog blinding his department one of those CE-marked chainsaws would be quite handy. He should learn for himself the significance of the term "third country", and what it means to a post-Brexit UK.