Description of sector
“Consumer goods” is a collection of goods categories (drawn from ONS 2-digit Standard Industry Classification codes) that do not neatly fit into other sectors.Defined in this way, consumer goods represent a relatively small contribution to the national economy, both in terms of value added and employment. However, in many local areas, the manufacture of consumer goods is an important industry. The majority of consumer goods are covered by EU product regulation, which sets both requirements for the product itself (e.g. safety, environmental performance, accuracy, etc.) and the administrative requirements for businesses in the supply chain. This regulation varies in its impact (in terms of cost) according to the product in question. In general, those seen as presenting a higher risk are associated with a higher compliance cost.
In terms of markets, the EU is important for exports of most consumer goods, particularly leather goods, and trade with the EU is significant in the context of overall
The current EU regulatory regime
The majority of consumer products are regulated for safety under EU law to ensure common requirements that facilitate the functioning of the Single Market. The extent of – and cost associated with – this regulation varies by product, largely dependent on the level of risk associated with that product. Specifically, as a ‘baseline’, consumer products not covered by sector specific legislation must meet the requirements of the ‘General Product Safety Directive’ (2001/95/EC). These include:
a. an overarching requirement that products must be assessed (and declared) as ‘safe’ by the manufacturer or importer (often with reference to national, EUor international standards where available);
b. a requirement to keep and make available documents demonstrating goods are safe; and
c. a requirement to monitor the safety of the goods in use and respond accordingly.
In addition, some consumer products must comply with sector-specific safety legislation that establish ‘essential safety requirements’. This type of egislation sets out:
a. specific objectives relevant to products within the scope of that Directive, for example fire protection of watercraft or chemical content of toys;12
b. conformity assessment (pre-market testing requirements) – ranges from declaration by the manufacturer or importer supported by documentaryevidence through to mandatory use of test laboratories appointed by a Member State;
c. various obligations, including documentation, labelling and use of the ‘CE mark’ may also be required to demonstrate compliance with the legislation;and
d. in addition to pure ‘safety’ aspects, there is also legislation relating to, for example, environmental credentials of products (energy efficiency, chemical content),consistent labelling (energy performance, textiles), accuracy (in the case of weights and measures) or performance.
In practice, this means that some consumer products (for example a soft toy) will need to comply with multiple pieces of product regulation addressing different aspects of the product.
The technical detail is often (but not always) set out in standards produced by the European Standards bodies the European Committee for Standardization (CEN), the European Committee for Electrotechnical Standardization (CENELEC) and the European Telecommunications Standards Institute (ETSI); use of the standards is not mandatory and other means of compliance are permitted, provided that the manufacturer can demonstrate how the solution meets the essential requirements of the applicable legislation
Where products (or aspects of products) are not covered by legislation harmonised across the EU, Member States may maintain their own domestic technical regulations as the UK does for furniture and furnishings. The Single Market is based on the principle of mutual recognition which states that, subject to various caveats, a product which is legally marketed in one Member State is entitled to free circulation throughout the rest of the EU. This is underpinned by the Mutual Recognition Regulation which sets out the procedures that should be followed by businesses and enforcement authorities when a product is prevented from free circulation.
This framework of regulation is enforced through a system of market surveillance.Provisions on market surveillance – included in harmonisation legislation and the cross-cutting Regulation on Accreditation and Market Surveillance (RAMS) – cover the procedures to be followed by Market Surveillance Authorities (MSAs) to ensure that only compliant products are allowed access to the Single Market (and unsafe or non-compliant products are identified and removed from the market). In the UK, market surveillance policy is the responsibility of the Department for Business,Energy and Industrial strategy (BEIS) and the activities are generally carried out by local authority Trading Standards.
They operate in accordance with the Principles of Good Regulation and the provisions of the Regulator’s Code. This is consistent with the UK’s approach to good regulation which supports businesses to comply with requirements through the provision of guidance and advice, and makes available a range of proportionate sanctions for serious or repeated non-compliance.
As for any other UK business, those in the supply chain must comply with other relevant rules, for example on employment and employee health and safety, subject to any cross-cutting exemptions ( for example for sole traders). In addition, those in the supply chain for consumer goods are particularly affected by consumer law, which governs the transactions between consumers and businesses in relation to these goods. This includes requirements on unfair trading, misleading advertisingand consumer rights. Further details on these rules are included in the Retail report.
International rules and standards
The World Trade Organisation’s Technical Barriers to Trade agreement aims to ensure that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade.
EU regulation of consumer goods is underpinned by voluntary European standards which provide a technical route to compliance. In the majority of cases, these EN Standards are drawn from international standards agreed by international standards bodies (e.g. the International Electrotechnical Commission (IEC) and the International Organization for Standardization (ISO)). The UK is represented through the British Standards Institution (BSI) in the standards making activities at European and international levels.
Rules affecting trade between non-EU countries and the UK and other EU Member States
Consumer goods imported into the UK from third countries are subject to tariffs (either the common external tariff or lower tariffs negotiated as part of the EU’s Free Trade Agreements (FTAs)). Textiles and apparel attract relatively high EU tariffs. For example, the average world tariff on clothing and footwear is around 10 per cent rising to 25 per cent for certain types of clothing.
Moreover, any goods imported under a tariff preferences provided for by an FTA are likely to need to apply preferential Rules of Origin. This might be relatively simple for certain products (for example simple textiles) but much more complicated for a complex product which sources parts from multiple locations.
In terms of regulation, the requirements for third country manufacturers seeking to export to the EU are the same as those within the EU. However, as set out above, harmonisation legislation requires conformity assessment (pre-market testing) to be carried out on products. Generally for consumer goods this can be carried out through a declaration by the manufacturer or importer supported by technical documentation. However, a very small number of consumer goods (such as recreational craft) are considered to present a greater risk and mandatory third party assessment is required.
That assessment must be undertaken by test laboratories within the EU, or within a country with an appropriate (mutual recognition) agreement with the EU.
In addition, the principle of mutual recognition of technical regulation does not apply to third countries (those outside the EEA) in the absence of a specific FTA, meaning that any divergence in technical requirements represents an additional barrier to trade.
Product safety and related technical regulation for consumer goods is a reserved matter, in the interests of providing consistent protections and a level playing field for business.
Existing frameworks for how trade is facilitated between countries in this sector
The arrangements described in this section are examples of existing arrangements between countries. They should not be taken to represent the options being considered by the Government for the future economic relationship between the UK and the EU. The Government has been clear that it is seeking pragmatic and innovative solutions to issues related to the future deep and special partnership that we want with the European Union.
Manufacturers from outside of the EU wishing to export consumer goods to the EU need to meet the requirements set out in any applicable EU legislation. Manyconsumer goods fall under the General Product Safety Directive14, described above.For some products, however, the EU has introduced specific product safetylegislation, which places certain additional requirements on importers, such as the need for conformity assessment of products (from declaration by the importer supported by documentary evidence through to mandatory use of test laboratories appointed by a Member State), where there is a greater perceived safety risk.This includes toys and recreational watercraft.
Importers and distributors of consumer goods from manufacturers based in third countries must satisfy themselves that the products comply with all relevant EU legislation, including conformity assessment by an EU notified body. These manufacturers would also need to comply with legislative requirements in their home country, and any other countries where they intend to market products.
Countries can use bilateral Mutual Recognition Agreements (MRAs) which allow conformity assessment bodies in either market to carry out product testing andcertification to each other’s legislative requirements. The authorities in both parties agree to accept conformity assessment decisions issued by bodies recognised in one another’s markets. Manufacturers still need to ensure that products meet the requirements set out in the legislation where they plan to market the product.
The EU has concluded MRAs with seven countries, covering a variety of sectors.Some of the EU’s bilateral MRAs have been integrated into FTAs, not all of which cover consumer goods. The EU-Canada Comprehensive Economic and Trade Agreement (CETA) is an example of an MRA which does cover some consumer goods, and offers mutual recognition of conformity assessment for eleven sectors including toys and recreational craft. CETA also contains provisions for voluntary cooperation on data exchange to support market surveillance activity and exchange of information about the development of technical regulations.
Other existing agreements, such as the EU-Swiss agreements and the EEA Agreement, provide for further mutual recognition. For example the EU-Swiss MRAs provide mutual recognition across around twenty product types, including those in CETA and are linked to an agreement that recognises Swiss legislation as equivalent. Where legislation is deemed equivalent, certificates of conformity with the product rules in the EU will be recognised as proving conformity with Swiss legislation, and vice versa.They also cover cooperation on market surveillance of products already on sale.
In the EEA agreement, where there is EU legislation for consumer goods,
EEA countries adopt EU product legislation into their domestic legislation, and goods that originate from these countries are treated as products from member states. The agreement also includes a system of surveillance and enforcement.
Trade in manufactured goods can be facilitated through the use of international standards, such as those developed by the International Standards Organisation (ISO) and the International Electrotechnical Commission (IEC). These are describedin more detail above.
Customs
There are many customs facilitation arrangements in international agreements.These include the EU’s agreements with a number of third countries, such as Canada, Korea, and Switzerland. These agreements differ in the depth and scope of customs facilitation offered. Examples of customs facilitations include: simplifying customs procedures, advance electronic submission and processing of information before physical arrival of goods, and mutual recognition of inspections and documents certifying compliance with the other parties’ rules.
Tariffs
In the absence of a preferential trade agreement, goods imported into the EU from non-EU countries must pay a tariff. Tariffs are custom duties levied on imported goods. Under World Trade Organisation (WTO) Most Favoured Nation (MFN), a country’s tariff schedule must be consistent for all countries it trades with, except those where a preferential trade agreement exists. EU MFN tariff ratesvary depending on the good. The EU’s simple average of MFN applied duties is 6.5 per cent for textiles, 11.5 per cent for clothing and 4.1 per cent for Leather, footwear & other.
Rules of Origin
The EU includes rules of origin in all of its FTAs, which are restrictions on the originating content of products that exporters must comply with to gain tariff preferences. These rules typically reflect both the supply chains of both the EU and its FTA partner. Many of the EU’s rules of origin arrangements are based on the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin, which includes provisions that allow producers to treat content from some third countries as if it comes from their own country.
Several arrangements aim to reduce the administrative requirements associated with origin certification, including the EU’s Registered Exporter (REX) system, which lets businesses register for self-certification of origin using an online system, avoiding paper certificates. The approach to RoO administration in many US bilateral agreements involves no obligation to provide origin documentation, unless specifically requested.
