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Businesses Involved in Trade of Consumer Goods with EU Face Important Legal Repercussions Ahead of a No-deal Brexit

In light of the approaching withdrawal of the United Kingdom from the European Union, Hong Kong traders might be concerned by the existing lack of agreement between the EU and the UK over the consequences of Brexit. Absent a breakthrough, the current default position is that the UK will leave the EU on 31 October 2019 without a deal. This development will have important legal repercussions with regard to the placing of industrial goods on the EU market. Industrial goods include most non-food goods, including toys, electrical equipment, medical devices, fireworks, all kinds of personal protective equipment, textile products, footwear and cosmetics.

The European Commission has issued a notice to stakeholders explaining the legal consequences of UK’s withdrawal, which was conveniently put into a Q&A form, dated 1 February 2019 (intending for it to apply to the first withdrawal date, which was 29 March 2019. The same applies today). The scenarios discussed in this and related documents may be highly relevant for Hong Kong traders of industrial products and are, therefore, discussed below.

In the event that the UK indeed leaves the EU without a ratified withdrawal agreement, there will be no transition period that would allow current trading arrangements between the EU and the UK to continue until a new deal on the future relationship is worked out. This means that the provisions in relation to “goods placed on the market” set out in the draft withdrawal agreement, negotiated previously, will not be applicable. Consequently, different legal regimes will apply for specific products depending on whether a product was placed on the Union (EU-27) market before or after 31 October 2019.

According to EU rules, the concept of “placing on the market” relates to the first time the product is made available on the EU market, i.e. the first supply of a good after the manufacturing stage. Products will be considered as placed on the EU market if they are physically in the distribution chain or already in use in the EU market on the withdrawal date. Such goods will not need any re-certification, re-labelling or product modification in order to continue to be made available in the Union. The same shall apply to goods which are sold to the EU customer before 31 October 2019 but are physically delivered to the EU customer after that date. The reason for this is that the date of the transaction between the manufacturer and the customer will be considered as the date of placing on the Union market.

Conversely, goods manufactured in the UK or imported into the UK from third countries before the withdrawal date, but sold to an EU customer as of 31 October 2019, will be deemed to be imported from a third country. They will thus have to fully comply with EU rules applicable at the time of their placing on the market, i.e. the date of the transaction with the EU customer. This also means that the products will need certification by an EU Notified Body in case a qualified third-party intervention in their conformity assessment is required. Product-related legislation also requires that the goods will also have to indicate the details of the EU importer, i.e. the person who first places the goods on the EU-27 market, charged with ensuring continued regulatory compliance and interaction with market surveillance authorities. Importantly, the current UK-based economic operators (importers, manufacturers) will lose their status as economic operators under EU product legislation, as from the withdrawal date.

Notably, in case of checks upon importation into the EU or checks by market surveillance authorities, traders will be able to use any relevant document ordinarily used in business transactions in order to prove the date of placing of products on the EU market (e.g. contract of sale, invoice, documents concerning the shipping of goods to distribution, etc.). It must be visible that the documents provided correspond to the individual goods and the respective quantity, for instance through the reference to the specific identification element of the goods.

Another aspect of the changes that a no-deal Brexit will bring about with regard to product requirements concerns the qualification of importers for the purposes of EU law. Given that a manufacturer or importer established in the UK will no longer be considered as an economic operator established in the EU as from 31 October 2019, a current distributor may have to be considered as the importer for the purposes of EU law. This will be the case where products are imported into the UK market before the withdrawal date and are placed on the EU market by EU-27 distributors after that date. Consequently, unless there is another natural or legal person who takes on the role of importer, the distributor will have to meet the stricter requirements applicable to an importer, as regards verification of product compliance and the indication of their contact details on the product.

Content provided by Picture: HKTDC Research
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