28 January 2019
Ready for Brexit: Your Supply Chain - Briefing 4
How to evaluate the risks around regulatory exposures due to the alignment (or not) of UK and EU product standards
Continuing our Commercial team’s series of briefings to help your business’s Brexit steering group work through the direct risks associated with different possible outcomes and their impact on your supply chain management, we look at the risks arising from changes in the alignment of product standards between the UK and the EU.
Taking our inspiration from the approach taken by Next plc in last year’s report on its internal preparedness for Brexit, assessing this particular potential risk of regulatory exposures from product standards issues is another very practical aspect to the potential issues facing businesses which trade globally.
Without getting into any product or sector specifics, the difficulty over product standards in general is one which means that UK businesses selling products that currently meet EU standards could find themselves unable to continue selling their products to their EU customers if the two regimes start to diverge. Those currently compliant UK products could only continue to be sold to EU customers if they continue to meet not only any UK products standards, but also keep in line with any differing EU product standards.
Much has been made of the UK Government’s desire in several areas to ‘grandfather’ or essentially replicate EU standards at a UK level for products to meet regulatory requirements. However, this tends to run into a fundamental snag when matched with the Government’s stated red line of removing itself from the jurisdiction of the European Court of Justice (ECJ). As the final arbiter of the majority of disputes relating to product regulation, the ECJ is a key principle to the compliance arrangements under the different EU product standards regimes and therefore the free movement of goods principle.
There are three European standards organisations: CEN (the European Committee for Standardization), CENELEC (the European Committee for Electrotechnical Standardization) and ETSI (the European Telecommunications Standards Institute) and only standards developed by these organisations are officially recognised by the European Commission. These bodies are independent entities which are not part of the EU’s institutional set up and, in fact they each have a country membership which is much wider than just the EU member states. They mirror at a regional European level the international standardisation bodies for each of the three respective areas covered, these international bodies being the ISO, IEC and ITU-T.
The UK’s membership of the international bodies will remain unaffected by the UK’s exit from the EU. Likewise, UK’s membership of ETSI is not affected by Brexit as the rules of membership are different to those of CEN and CENELEC.
The British Standards Institution or BSI is the UK’s national standards body. Through ongoing negotiations, the BSI has secured its continued full membership of both CEN and CENELEC, which is an important confirmation of continuing UK input to European and international standard setting post-Brexit. It also suggests that, in most sectors, a commercial desire to continue to ensure UK standards align broadly with applicable European as well as international standards is being pursued.
An aspect of this which may require more consideration as part of your business’s risk assessment process is on the certification side of things. EU law requires that, as part of the procedure for confirming a product is compliant with the applicable EU standards, an independent organisation or ‘Notified Body’ confirms or certifies that compliance. One issue likely to impact UK businesses is if they rely on a UK-based Notified Body which might be no longer recognised by the EU post-Brexit. The most practical solution would seem to be engaging with an EU-based Notified Body in order to ensure the business’s product compliance process remains recognised and therefore that products can continue passage through to an EU customer base after Brexit takes effect. The European Commission’s New Approach Notified and Designated Organisations Information System (Nando) website allows businesses to search for country specific Notified Bodies.
If you would like any assistance in evaluating the risk of product standard alignment in your particular sector or industry in your business’s preparation for Brexit, please do get in touch with any member of our Commercial team whose contact details can be found here.