Explanatory Memorandum to COM(2017)796 - Mutual recognition of goods lawfully marketed in another Member State - Main contents

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dossier	COM(2017)796 - Mutual recognition of goods lawfully marketed in another Member State.
source	COM(2017)796
date	19-12-2017

1. CONTEXTOFTHEPROPOSAL

• Reasons for and objectives of the proposal

Achieving a deeper and fairer single market is one of the key political priorities of the European Commission.¹ The follow-up and the implementation of the Single Market Strategy, Upgrading the Single Market: more opportunities for people and business, adopted on 28 October 2015² constitute one of the main objectives of the 2017 Commission Work

Programme.³

Within the Single Market, free movement of goods is the most developed of all four fundamental freedoms and generates around 25 % of EU GDP and 75 % of intra-EU trade. The EU accounts for around one sixth of the world’s trade in goods. Trade in goods between EU Member States (intra-EU trade) was valued at EUR 3 110 billion in 2016⁴. However, there is still work to do to ensure a deep and fair European Single Market. Where there are no common rules, the principle of mutual recognition is not always being applied. The Goods Package announced in the 2017 Commission Work Programme, intends to address this fundamental problem, with an initiative on mutual recognition.

Mutual recognition is essential for a proper functioning of the single market for goods. Where no specific EU legislation is in place, Member States are free to set national rules that lay down requirements to be met by products. Such national requirements can co-exist in various Member States, but, if divergent, may create barriers to intra-EU trade. The principle of mutual recognition requires that a good that is lawfully marketed in one Member State should not be prohibited in another Member State, unless the latter has sound reasons for banning or restricting its sale. Mutual recognition applies to products not subject to Union harmonisation legislation or only partly covered by it, such as a wide range of consumer products (textile, footwear, childcare articles, jewellery, tableware or furniture).

The adoption of Regulation (EC) No 764/2008 (‘the Regulation’)⁵ was a partial⁶ response to the weak application of the principle of mutual recognition in the field of goods, triggered by the lack of awareness about the principle, legal uncertainty when applying it and the lack of administrative cooperation among national authorities. The Regulation aimed mainly at establishing a procedural framework to minimise the possibility that national technical rules create unlawful obstacles⁷.

In December 2013, the Conclusions on Single Market Policy, adopted by the Competitiveness Council, noted that to improve framework conditions for businesses and consumers in the Single Market, all relevant instruments should be appropriately employed, including harmonisation and mutual recognition.⁸ The Commission was therefore invited to report to the Council on the sectors and markets where the application of the principle of mutual

Jean-Claude Juncker, ‘A New Start for Europe: My Agenda for Jobs, Growth, Fairness and Democratic Change’, Political

Guidelines for the next European Commission, Opening Statement in the European Parliament Plenary Session, 15 July 2014:

ec.europa.eu/about/juncker-commission/priorities.

2. Communication from Commission to the European Parliament, the Council, the European Economic and Social Committee and the

Committee of the Regions, Upgrading the Single Market: more opportunities for people and business, COM 2015 550/2.

COM(2016) 710 final: ec.europa.eu/atwork/key-documents/index_en.

Source Eurostat.

COM(2014) 910 final: ec.europa.eu/atwork/pdf/cwp_2015_en.pdf.

3. Several other tools allow for the correct application of the mutual recognition principle, such as the mutual recognition clause and

the complaints and infringements related to articles 34-36 TFEU. For more information, see the Evaluation.

See the Evaluation.

Conclusions on Single Market Policy, Competitiveness Council meeting; Brussels 2 and 3 December 2013:

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4. recognition is economically most advantageous, but where its functioning remains insufficient

or problematic. In its Conclusions on Single Market Policy of February 2015, the

Competitiveness Council urged the Commission to ensure that the principle of mutual

recognition would function effectively and to bring forward proposals to that effect, as appropriate⁹.

In response to the indications that the functioning of the principle might not be optimal, and taking into account the request of the Council, the application of the principle of mutual recognition was subject to an external evaluation.¹⁰ Building on it, the Commission Evaluation on the functioning of mutual recognition (REFIT) included an assessment of the functioning of the Regulation as well, in order to have a full picture of the obstacles impeding mutual recognition to function optimally (hereafter, the Evaluation).

The Evaluation concluded that mutual recognition is not functioning as it should and that the principle and the Regulation had limited effects in meeting the foreseen objectives in terms of raising awareness and of increasing legal certainty and administrative cooperation.

This initiative responds to the conclusions of the Evaluation. Its overall objective is to achieve a fairer and deeper single market for goods through more and better mutual recognition.

The specific objective will be to improve the functioning of mutual recognition by proposing several ambitious measures. Such measures aim at ensuring that the existing rights and obligations deriving from the mutual recognition principle are observed. In practice, this means that Member States continue to be able to protect their national legitimate public objectives and restrict the marketing of goods even if lawfully marketed elsewhere, if their decision is justified and proportionate.

First, clarifying the scope of mutual recognition, by clearly defining when it is applicable, will increase legal certainty for businesses and national authorities as to when the mutual recognition principle can be used.

Second, the introduction of a self-declaration to facilitate the demonstration of a product being already lawfully marketed, and of a problem solving system to deal with decisions denying or restricting market access will increase legal certainty about the application of mutual recognition and facilitate its application by businesses; both business and national authorities will know what they can reasonably expect when mutual recognition is, or ought to be, applied.

Last, setting up administrative cooperation, and putting in place an IT tool will enhance communication, cooperation and trust among national authorities, and thus facilitate the functioning of mutual recognition.

• Consistency with existing policy provisions in the policy area

(a) Directive (EU) 2015/1535 laying down a procedure for the provision of information

in the field of technical regulations and of rules on Information Society services¹¹.

The Directive contributes to ensuring more and better mutual recognition by requiring Member States to notify the Commission and each other of any draft ‘technical regulations’ for products before they are adopted in national law. This helps to prevent new trade barriers in the form of ‘technical regulations’ from arising before they are adopted, by enabling the

Conclusions on Single Market Policy, Competitiveness Council meeting; Brussels 2-3 March 2015:

register.consilium.europa.eu/doc/srv?l=EN&f=ST%206197%202015%20INIT.

European Commission, Study commissioned to Technopolis Group (2015): ‘Evaluation of the application of the principle of mutual

recognition in the field of goods,’ ENTR/172/PP/2012/FC – LOT 4 carried out between April 2014 and May 2015:

ec.europa.eu/growth/single-market/goods.

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Commission and Member States to verify that the technical rule is compatible with EU law. This initiative has a different, complementary objective. It puts in place corrective measures, to ensure, once the rule is in force, that the rule is being applied correctly on a case by case basis in a manner that respects the principle of mutual recognition.

(b) Directive 2001/95/EC on General Product Safety¹²

The Directive ensures that products placed on the EU market are safe. It applies to non-harmonised consumer products. This draft Regulation also applies to the non-harmonised area, but addresses the situations where the competent authorities of a Member State intend to deny or prohibit the marketing or use of a non-harmonised consumer product, lawfully marketed in another Member State, for reasons other than solely a risk to the health and safety of consumers. This is the case, for example, when a product is not allowed to be marketed for reasons based on the denomination, size, composition or packaging, or for environmental reasons.

(c) Regulation (EU) No 305/2011 on construction products¹³

This Regulation sets up Products Contact Points for Construction (PCPCs), to provide information on the provisions applicable to construction works and construction products. This initiative complements coherently the PCPCs. Nevertheless, in numerous Member States, the PCPC and the PCP have been merged, to offer a 'one single entry point' for businesses. This initiative does not prevent such mergers in the future.

(d) The SOLVIT network¹⁴

SOLVIT is a service provided by the national administration in each EU Member State, as well as in Iceland, Liechtenstein and Norway. It helps business when their rights are breached by public authorities in another EU Member State, by aiming at finding a solution within 10 weeks. Thus, SOLVIT may be used, as an alternative to court proceedings, by businesses when facing a national decision denying or restricting market access on the basis of the mutual recognition principle. This initiative builds on the SOLVIT network and the recently adopted Action plan on reinforcing SOLVIT¹⁵; it enhances the existing mechanism in the area of goods, in order to facilitate challenging administrative decisions denying or restricting market access based on mutual recognition.

(e) EU harmonisation legislation

EU harmonisation legislation and mutual recognition are fully complementary. Free movement of goods in the internal market is ensured through EU common rules on products (EU harmonisation legislation) and the principle of mutual recognition. EU harmonisation legislation sets out common requirements on how a product has to be manufactured. But EU harmonisation legislation covering every product and aspect of product is neither a feasible nor a desirable objective. It is a costly and time consuming process, where a balance needs to be struck between different approaches and should be reserved for those products and aspects of products where there are significant barriers to the free movement across the Single Market which cannot be addressed otherwise. Where there are no EU common rules, or when products are only partially covered by EU common rules, Member States remain free to adopt national technical rules laying down requirements to be met by those products, in terms of

¹² OJ L 11, 15.1.2002, pp. 47.

¹³ OJ L 88, 4.4.2011, p. 5.

¹⁴ ec.europa.eu/solvit/what-is-solvit/index_en. 15

designation, form, size, labelling or packaging, etc. This initiative ensures that when Member States do so, they comply with Articles 34 and 36 TFEU, and in particular with the mutual recognition principle.

• Consistency with other Union policies

The following ongoing / planned initiatives at EU level are of importance for mutual recognition:

(a) The Single Digital Gateway¹⁶. The Gateway aims to improve the online availability, quality and findability of information and assistance services and procedures which are relevant for businesses and citizens.

(b) Action plan on the reinforcement of SOLVIT¹⁷.

2. LEGALBASIS, SUBSIDIARITYAND PROPORTIONALITY

• Legal basis

This Regulation is based on Article 114 i TFEU, dealing with the establishment and functioning of the internal market and specifying that measures can be adopted for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market. This Regulation aims at setting up rules and procedures for ensuring that free movement of goods lawfully marketed in another Member State is granted in full respect of the mutual recognition principle. It does not prejudice the Member States' regulatory autonomy in the area of non-harmonised goods.

• Subsidiarity (for non-exclusive competence)

Mutual recognition only applies in cross border situations where an economic operator would like to trade in a Member State a product already lawfully marketed in another Member State. Action by Member States alone cannot solve problems associated with the application of the principle of mutual recognition across the single market. To be effective, the application of the principle needs to be based on common solutions to be applied equally by all national authorities. Only such common procedures can guarantee that national authorities will apply the principle in the same manner, thus allowing companies to benefit from an equal treatment regardless of the country where they try to market their product. Leaving the procedural aspects of the application of the mutual recognition principle to each Member State would weaken the principle by dismantling the modus operandi into 28 different and possibly contradictory procedures. Therefore, EU action is both appropriate and justified to ensure the effective application of the principle. The EU has the responsibility to act to ensure the functioning of the single market for goods. Pursuant to Article 26 i TFEU, the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties. The prohibition of measures having equivalent effect to quantitative restrictions on imports of goods is one of the main principles of the TFEU (Articles 34 to 36).

Proposal COM(2017)256 for a Regulation of the European Parliament and of the Council on establishing a single digital gateway to provide information, procedures, assistance and problem solving services and amending Regulation (EU) No 1024/2012.

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• Proportionality

This proposal strikes a careful balance between, on the one hand, the regulatory autonomy Member States have for setting the level of protection they consider necessary for achieving legitimate public interests, and, on the other hand, the need to address the remaining obstacles to the free movement of goods lawfully marketed in other Member States and subject to Articles 34-36 TFEU.

The measures foreseen in this proposal do not extent beyond what is necessary to solve the identified problems and to achieve the objectives set. The foreseen costs on the Commission and Member States are considered as acceptable, and will be compensated by the savings incurred by businesses, and benefits for businesses, consumer and Member States alike.

• Choice of the instrument

This Regulation is based on Article 114 TFEU. It includes provisions aimed at improving the functioning of the Single Market for goods, by establishing rules and procedures for competent authorities of Member States and for businesses to ensure a smooth free movement of goods lawfully marketed in another Member State.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER

Contents

CONSULTATIONS

Communication from Commission to the European Parliament, the Council, the European Economic and Social Committee and the

Several other tools allow for the correct application of the mutual recognition principle, such as the mutual recognition clause and

recognition is economically most advantageous, but where its functioning remains insufficient

Option 2 - Soft law to improve the functioning of mutual recognition (awareness raising, training, exchange of officials, etc.)

1.

CONSULTATIONS

ANDIMPACTASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

The evaluation of the functioning of mutual recognition in the field of goods, i.e. the mutual recognition principle and the Mutual Recognition Regulation looked to what extent mutual recognition has achieved its original objectives in term of effectiveness, efficiency, relevance, coherence, and EU value-added. The findings show that that, in the field of goods, mutual recognition is still relevant and has the potential to bring added value to the EU. It gives the possibility to market in other Member States products already lawfully marketed elsewhere. However, the mutual recognition principle is not functioning well. The majority of businesses wishing to sell products in another Member State check the applicable rules in that Member State, and, if these rules prevent them from selling the product, they don’t rely on the principle of mutual recognition but most of them adapt the product to those rules. Where businesses try to rely on the principle of mutual recognition, national authorities often deny market access to those products. As for the Regulation, which was adopted to facilitate the application of the principle of mutual recognition, generally, the evaluation shows that only few economic operators consider that it is easier to sell products in other Member States since the Regulation entered into force. It had a moderate effect with regards to the objectives set, mainly because the procedural requirements it put in place proved to be insufficient to ensure an easy, reliable and user-friendly application of the mutual recognition principle. It also had limited effects in raising awareness of the mutual recognition principle.

Effectiveness

Despite the existence of the principle and the adoption of the Regulation, free movement of goods in the non-harmonised area remains problematic, mainly due to the lack of awareness and knowledge, the lack of legal certainty and the lack of trust and cooperation among national authorities Businesses are still facing difficulties with regards to market access, even if their products are already lawfully marketed in other Member States. Thus, they often adapt their products or give up entering on a new market. Stakeholders' consultation shows that the level of awareness about mutual recognition increased over the years, but not sufficiently. All

stakeholders alike consider that awareness should be increased, and that this should be one of the Commission's main priorities. Legal certainty when using mutual recognition remains a major obstacle to free movement of non-harmonised products, and one of the main reasons why businesses and national authorities are reluctant towards mutual recognition. As regards administrative cooperation, the evaluation shows that it needs to be further enhanced in order to facilitate the application of the mutual recognition principle.

Efficiency

Relevant stakeholders were consulted in order to asses to what extend the costs generated by using the principle and the Regulation are proportionate to the benefits it achieved. In terms of costs, the Regulation generated few costs for national authorities: the implementation and functioning of the PCPs (EURO 7417-47 450, based on 1 FTE) and the costs related to the assessment of products lawfully marketed in another Member State (EURO 420 000 in one sector such as fertilisers). They consider these costs as average. The main costs incurred by businesses are rather due to the incorrect application of mutual recognition. They have to adapt their products, duplicate tests and procedures (EURO 1000-150 000 per product and market), or lose opportunities (EURO 40 000-500 000 per product and market) because they are obliged to renounce entering on a new market. Most of these costs were considered as important. In terms of costs-benefits, the perception is quite mixed. While national authorities tend to agree that the costs are proportionate to the benefits, businesses mostly disagree. They consider that the costs are significant, while the benefits were not achieved.

Coherence

The evaluation carried out shows that there does not seem to be any contradiction between mutual recognition and other EU policies for achieving the internal market and facilitating the free movement of goods in the EU. Rather, the mutual recognition principle and the Regulation complements and is coherent with a number of initiatives in this area such as the Product General Safety Directive 2001/95/EC¹⁸ 'Single Market Transparency' Directive (EU) 2015/1535, the Construction Products Regulation (EU) No 305/2011, the SOLVIT network¹⁹ and EU harmonisation legislation.

Relevance

Mutual recognition aims at achieving deep market integration while respecting diversity and regulatory autonomy among Member States. It is seen as an alternative to harmonisation, allowing regulatory autonomy, when the latter is not necessary, justified and proportionate. Furthermore, mutual recognition is particularly relevant for supporting innovation. In the area of new innovative products, there are no European harmonised rules, and businesses need to rely on existing rules/standards at national level, or even to deal with the absence of such rules. Mutual recognition is the only alternative for businesses wishing to market their new/innovative products in other Member States.

EU

added value

The evaluation shows a general consensus among stakeholders that mutual recognition brings added value to the EU. It gives the possibility to market in other Member States products already lawfully marketed elsewhere, while maintaining Member States' regulatory autonomy

¹⁸ OJ L 001, 15.01.2002.

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and diversity. It is widely acknowledged that the objectives it sets out can be met only by acting at an EU level. Throughout the consultation process, stakeholders were almost unanimous as regards the necessity of having an EU legal instrument for achieving more and better mutual recognition.

• Stakeholder consultations

The members of the Mutual Recognition Consultative Committee were asked to provide their feedback during their last meetings on 2 December 2015 and 25 October 2016. Some representatives were not convinced that there are benefits in fully revising the Regulation, whilst all of them agreed that some adjustments are necessary and that many of the problems can be solved with soft law measures.

A public consultation in all EU official languages has been published on a consultation website hosted on Europa. The consultation has run from June to September 2016. 153 replies were received during the public consultation. Businesses were strongly represented (91), followed by Member States authorities (45), and citizens (17). The results of the consultation show that, despite the indicated high level of awareness about mutual recognition, the majority of respondents consider that awareness-raising remains necessary. As regards the obstacles to the functioning of mutual recognition, businesses identified the lack of quick remedies for challenging national decisions denying market access as the highest one, followed by insufficient communication among authorities. As regards the Commission's priorities with regard to mutual recognition, businesses rank the need for effective remedies as being the highest priority, while Member States and citizens opt in favour of increasing awareness about mutual recognition.

The public consultation has been supplemented by a stakeholder conference organised by the Commission on 17 June 2016. The aim of the event was to identify the main issues related to the functioning of mutual recognition and to identify possible ways forward. 144 participants attended the event, representing businesses (62), national authorities (60) and others (22), such as consumer organisations, representatives of trade unions. Overall, participants supported the need to improve the functioning of mutual recognition and increase legal certainty as regards the application of the mutual recognition principle.

• Collection and use of expertise

A broad range of surveys, consultations and studies were carried out by the Commission or external contractors between 2014 and 2016, and offer a solid basis of expertise.

The functioning of the mutual recognition principle was subject to an external evaluation, carried out between 2014 and 2015. The magnitude of the problem and the impacts of the various options envisaged by the Commission were subject to a study, performed between 2016 and 2017.

Impact

assessment

An impact assessment was carried out in preparation of this initiative. It shows that less trade take place as regards products subject to mutual recognition. The comparison of the value of the intra EU exports with domestic consumption shows that for harmonised products the value of intra EU exports is 55% of domestic consumption, while for the non-harmonised and partially harmonised goods it represents only 35%. This is due to the obstacles encountered by businesses when trying to market their products under the mutual recognition principle. The financial costs caused by lack of mutual recognition are high for the businesses. For example, the need to adapt the products to the applicable national rules when mutual recognition is either denied or not used for penetrating the market are estimated to be between 1000 and 150

000 Euro per product and per market. Lost opportunities, i.e. businesses renounce entering a market due to different national rules requiring adaptation of the products have been estimated on average between 10 000 and 500 000 Euro per product and per market. A study done for the European Parliament²⁰ tried to estimate the magnitude of the impact that non-tariff barriers to trade have on the internal market. It concluded that a reduction of such barriers could lead to an increase in intra-EU trade of more than 100 billion EUR per year. Furthermore, over the period from 2008 and 2014, around 0.89 million enterprises were operating within non-harmonised sectors, representing more than 50% of the total number of active enterprises in the manufacturing economy. Around 87% of the enterprises are micro enterprises. According to the Commission’s 2014 Competitiveness report, only 14% of SMEs are trading across borders in the EU compared to 85.4 % of large manufacturing firms.

The impact assessment received a positive opinion from the Regulatory Scrutiny Board on 7 April 2017. The Board considered that the report had an overall good presentation and recommended, as further improvement, to better explain the choice of options and how these would work in practice. The report should also draw clearer conclusions on how far the expected outcome of the revision will have an impact on the functioning of the mutual recognition on the ground and contribute to a well-functioning internal market. Finally, it should better assess the potential to simplify administration and reduce burdens. The recommendations contained in the positive opinion were incorporated in the report. In particular, the various options and the way they interact among them were better explained. The report details better how these options work in practice, with an emphasis on the consequences on the market of the preferred option. The report also better explains how the current regulatory burdens are due to the non-functioning of mutual recognition and clearly indicates how the preferred options will reduce those. The summary sheet and the positive opinion of the Regulatory Scrutiny Board are available here: XXXXX.

Besides option 1 (status quo), the envisaged policy options included in the impact assessment were:

5. Option 2 - Soft law to improve the functioning of mutual recognition (awareness raising, training, exchange of officials, etc.)

Option 3 - Minimum legislative changes to Regulation (EC) No 764/2008 (transparency of administrative decisions, use of EU standards, enlarged role for PCPs)

Option 4 - Comprehensive legislative changes to Regulation (EC) No 764/2008 (voluntary mutual recognition declaration, problem solving mechanism, enhanced Product Contact Points and cooperation)

Option 5 - Voluntary prior authorisation to placing on the market

The option related to repealing the Regulation and the option of proposing further harmonisation measures on specific basic requirements covering certain aspects of products have been discarded at an early stage, as well as the introduction of a third party declaration of compliance.

The preferred option is option 4 (comprehensive legislative changes to Regulation (EC) No 764/2008), complemented by option 2 (the soft law measures).

Option 2 (Soft law) was supported by all stakeholders, but considered effective only if complemented by other comprehensive tools.

²⁰ The Cost of Non- Europe in the Single Market, Cecchini Revisited, An overview of the potential economic gains from further

completion of the European Single Market, CoNE 1/2014.

Option 3 (minimum legislative changes to the Regulation) was considered by Member States and economic operators as potentially effective, however to a less extent than other options.

Option 4 was considered as the most effective in achieving the policy objectives and in reducing costs for business.

There was a consensus among stakeholders that option 5 (voluntary prior authorisation) cannot remove the existing obstacles to mutual recognition. It would mainly generate costs. For example, in the sector of biocides, is was assessed that the administrative costs related to this procedure would be between 18 and 20 million Euro per year

Due to the complexity and variety of products falling under the scope of mutual recognition, it is very difficult to provide a quantitative assessment of the benefits. Option 4 combined with option 2 would increase awareness and knowledge about mutual recognition, while bringing legal certainty on the application of the principle and improving administrative cooperation among Member States. Not only more economic operators would become aware about the possibility to enter new markets without additional changes to their products, but those aware about mutual recognition and reluctant to use it will gain trust in the system. In particular it would facilitate the placing on the market of products lawfully marketed in other Member States, by framing and streamlining the discussions on whether or not the product can enter the market on the basis of mutual recognition and by reducing the risk to see market access denied. This would significantly reduce costs for businesses in terms of information, adaptation, delayed entry on the market and lost opportunities. Member States as well would benefit from this combination of options as they would be incentivised towards a more consistent and correct application of the mutual recognition principle. A reduction of trade barriers in general (see above) could lead to an increase in intra-EU trade of more than 100 billion EUR per year.

Similarly, it is very difficult to provide a quantitative assessment of the costs of the preferred options. Costs for economic operators are considered to be minimal, and this applies also to the voluntary mutual recognition declaration, where costs have been estimated as being minimal administrative work (it would take on average 20 minutes to an economic operator to fill in the declaration). Member States and the Commission would bear certain necessary costs, which can be estimated as follows: the soft law option involves costs related to the organisation and coordination of awareness and training events (500 000 Euro), as well as costs related to the exchange of officials' scheme (100 000 Euro). The problem solving mechanism involves an increased workload for the Commission, in terms of staff dealing with the appeals (3-4 additional FTEs). Increasing administrative cooperation among Member States also involves certain costs, estimated at 1 200 000 million Euro per year.

• Regulatory fitness and simplification

The initiative has been linked to the REFIT programme due to the impacts the malfunctioning of mutual recognition have on the functioning of the internal market. The Evaluation looked at how regulatory burdens can be reduced. It was concluded that the fact that mutual recognition does not function well is, de facto, a regulatory burden triggering barriers to trade. Therefore, any efforts to improve the functioning of mutual recognition would result in simplifications for businesses, such as easier access to new markets. The introduction of a voluntary mutual recognition declaration will have a major impact in reducing administrative burdens for economic operators. Streamlining the procedures for accessing the market and communicating with national authorities will facilitate market access and therefore reduce costs for economic operators. Furthermore, better cooperation and communication among authorities will increase trust and therefore reduce delays when assessing the goods on the market.

4. BUDGETARYIMPLICATIONS

The proposal requires human and administrative resources, as well as operational appropriations, as highlighted in the financial statement.

5. OTHERELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

Every five years, the Commission will evaluate the Regulation and will submit a report to the European Parliament and to the Council. The report will assess the functioning of the Regulation and of the mutual recognition principle based, when applicable, on the criteria of effectiveness, efficiency, relevance, coherence and EU added value as well as their impact on the free movement of goods and on the internal market for goods, based on feedback collected from stakeholders, including relevant information from Member States. Specific indicators allowing assessing the impacts of the Regulation such as the number of notifications by competent authorities via the Information and Communication Support System, the speed of the procedures used or the number of information exchanges between competent authorities and Product Contact Points will be considered.

• Detailed explanation of the specific provisions of the proposal

Article 1 sets the subject matter of the Regulation, which is to establish rules and procedures for ensuring the right to free movement of goods lawfully marketed in another Member State.

Article 2 defines the scope of the Regulation.

Article 3 contains the definitions relevant for the Regulation.

Article 4 provides for a mutual recognition declaration, to be used on a voluntary basis by economic operators in order to facilitate the demonstration that a product has been lawfully marketed in another Member State. It sets out the conditions to be met by such declaration, and clarifies that it can be provided online.

Article 5 establishes the procedure to be followed by competent authorities of Member States when assessing if goods lawfully marketed in another Member State can be marketed on their territory on the basis of the mutual recognition principle.

Article 6 contains requirements addressing the temporary suspension of goods lawfully marketed in another Member State, in case such goods pose serious risks on health and safety or run contrary to public morality or public security.

Article 7 avoids duplicating notification to the Commission, when the administrative decision to be notified is also a measure falling under RAPEX.

Article 8 provides for a mutual recognition problem solving mechanism allowing economic operators to challenge an administrative decision denying or restricting market access by referring it first to the SOLVIT network. Such administrative decision shall be subject to an assessment by the Commission at the request of the relevant SOLVIT centre .

Article 9 establishes the tasks of the Product Contact Points.

Article 10 sets the framework for administrative cooperation among competent authorities.

Article 11 provides for an IT tool to be used for the purposes of communication and exchange of information among competent authorities of Member States and between competent authorities of Member States and the Commission.

Article 12 contains financing of activities to be carried out in support of this Regulation.

Article 13 clarifies how the Union's financial interests will be protected.

Article 14 requests the Commission to periodically report to the European Parliament and the Council on the functioning of mutual recognition, including the functioning of this Regulation.

Article 15 establishes a committee and the implementing powers this Regulation confers on the Commission.

Article 16 repeals Regulation (EC) No 764/2008.

Article 17 sets out the entry into force and application of this Regulation.

The Annex provides for a standardised template for the Mutual Recognition Declaration.