Explanatory Memorandum to COM(2003)195-2 - Conclusion of an Agreement with the USA on the Mutual Recognition of Certificates of Conformity for Marine Equipment

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dossier COM(2003)195-2 - Conclusion of an Agreement with the USA on the Mutual Recognition of Certificates of Conformity for Marine Equipment.
source COM(2003)195 EN
date 22-04-2003
I. Summary

The European Community (EC) and the United States of America (US) have negotiated and initialled an agreement on mutual recognition of certificates of conformity for marine equipment, which should now be approved. The negotiations have been done according to the negotiation mandate given by the Council under the Action Plan for the Transatlantic Economic Partnership (TEP). The legal basis for the Agreement is Article 133 and 300 of the Treaty.

This Agreement has as its main objective the facilitation of EU-US trade in marine equipment. This is achieved by ensuring the recognition of certificates of conformity based on the equivalence between the Parties' respective regulations and conformity assessment requirements for a specific product. A Party will thus recognise certificates of conformity issued by the Conformity Assessment Bodies of the other Party on the basis of the technical regulations of that Party. This means a manufacturer can reach multiple markets on the basis of compliance with one set of regulatory requirements instead of multiple ones as would be the case without an Agreement. This can directly lead to a reduction of costs for manufacturers in terms of testing and certification. Indirectly it will also reduce costs that are related to the uncertainty and burden of contacting a conformity assessment body in the importing country, as well as the time delays this leads to in terms of getting a product on the market.

Basing the Agreement on equivalence of EU and US technical regulations is possible since both Parties have based their respective legislation (in the EU it is Directive 96/98/EC on marine equipment) on the Conventions of the International Maritime Organisation (IMO) and the relevant international standards. The Agreement also aims at promoting regulatory co-operation and efficiency.

The Commission and the US have carried out several detailed analyses of their respective technical regulations in view of determining equivalence where possible. The determination of equivalence has been done on the basis the EU and US implementation of the relevant International Instruments of the International Maritime Organisation (IMO). The products included in Annex II of the Agreement contain the initial results of the analysis and will be expanded as equivalence is determined for further products. The Agreement provides for mechanisms related to both maintaining and suspending equivalence while respecting the regulatory autonomy of the Parties.

In its assessment of the Agreement, the Commission draws the overall conclusion that the Agreement can offer substantial benefits to economic operators in terms of facilitating trade by reducing costs and burdens related to conformity assessment, can increase transparency and predictability in relation to regulations, will promote regulatory co-operation and will not compromise the regulatory objectives of the marine equipment directive, i.e. to enhance safety at sea and improve the prevention of marine pollution.

Contents

1.

II. The Agreement


II.1 Basis for the Agreement

The Council endorsed the Action Plan for the TEP on 9 November 1998 and authorised the Commission to enter into negotiations with the US in view of concluding bilateral agreements in the field of, inter alia, technical barriers to trade. After consultation of the 133 Committee, and in accordance with the negotiation authorisation, the Commission commenced negotiations with the US on a mutual recognition agreement for marine equipment in September 1999. The Agreement was initialled on 21 March 2003.

The Community legal basis for concluding the Agreement is Article 133 and 300 of the Treaty.

2.

II.2 Objective of the Agreement


The objective of the Agreement is the facilitation of EU-US trade in marine equipment. This is done by giving EU manufacturers the possibility of approving their products for the US market with a Conformity Assessment Body (CAB) located in the EU and according to the technical regulations of Directive 96/98/EC on marine equipment i. US manufacturers will, conversely, be able to approve their products for the EU market in the US on the basis of compliance to applicable US laws and regulations. This would reduce the costs related to testing and certification, which only has to be done once for several markets, and to the uncertainty, time and administrative burden of contacting approval bodies in the importing country.

The Agreement has also the aim of promoting regulatory co-operation and efficiency, but at the same time respecting the regulatory autonomy of the Parties. This is necessary in order to ensure the functioning of the Agreement and in particular that equivalence can be maintained while ensuring a high level of health, safety and environmental protection.

3.

II.3 Text of the Agreement


The Agreement is composed of a main text, consisting of twenty-one articles in seven chapters, and three annexes. An article-by-article explanation and evaluation of the Agreement text follows hereunder. A more in-depth discussion on equivalence and the scope of the Agreement follows in the next chapter.

Preamble: This sets out the basic objectives and principles of the Agreement which is the facilitation of trade in marine equipment between the Parties.

4.

Chapter 1 Definitions and Purpose


Article 1 Definitions: Sets out the definition of key terms that are necessary to ensure a clear understanding of the Agreement and also refers to ISO/IEC Guide 2 for definitions of general terms related to standards and conformity assessment.

Article 2 Purpose of the Agreement: This Article sets out the general objective of the Agreement - facilitating trade in marine equipment through the mutual recognition of certificates of conformity and putting into place the necessary regulatory co-operation to ensure the well functioning of the Agreement.

5.

Chapter 2 Mutual Recognition


Article 3 Basic Obligations: This Article, together with Articles 4, 6 and 10, is a key provision of the Agreement since it sets out the mutual recognition obligations and to which products it applies to. Each Party is obliged to accept the certificates of conformity that have been issued by a Conformity Assessment Body of the other Party in accordance with the legal requirements of that Party. This obligation applies only to the products that are listed in Annex II of the Agreement.

Article 4 Equivalence of Technical Regulations: This lays down the basis for the mutual recognition obligation, specified in Article 3, i.e. that equivalence between the respective EC and US technical requirements (e.g. performance requirements, testing standards, conformity assessment requirements) has been determined for a specific product. The basis for determining equivalence are the rules of the IMO related to marine equipment and the transposition of these rules into the respective technical regulations of the Parties.

Article 5 Marking: Lays down that the Parties maintain their respective requirements for marking, numbering and identification of products. In general, it could have been conceived that, since equivalence exists between the technical requirements for a product, the respective marking required in EU and US regulations would also be mutually recognised. However, it was considered better to maintain the respective marking requirements since there was a risk of causing confusion in particular for enforcement authorities as to what requirements a product complied to as denoted by its marking. The Article allows for the attribution of each other's marks and identification numbers.

Article 6 Conformity Assessment Bodies: This Article provides that the EU and US recognise, as Conformity Assessment Bodies (CAB), each other's bodies that have been recognised under their respective regulations. In this respect, the US Coast Guard (USCG) will be the only US Conformity Assessment Body since it is only the USCG that can issue certificates of conformity according to US law. The USCG will be carrying out this function together with the independent laboratories it has recognised under its regulations. From the EU perspective, all notified bodies that operate under the marine equipment directive are both eligible and recognised under the Agreement.

6.

Chapter 3 Joint Committee


Article 7 Joint Committee: This establishes the Joint Committee that will administer the Agreement. The Joint Committee can take decisions to amend the Annexes of the Agreement, but will also serve as a forum for discussing technical issues and providing clarifications and guidance needed to ensure a proper functioning of the Agreement. The Article also allows for the establishment of Joint Working Groups which could provide, as necessary, expert advice to the Joint Committee on specific issues.

7.

Chapter 4 Regulatory Co-operation


Article 8: Preservation of Regulatory Authority: Here it is made clear that the Parties do not relinquish their regulatory authority or autonomy with regard to the safety at sea or the prevention of marine pollution.

Article 9 Exchange of Information and Contact Points: This provides for the Parties to establish the necessary contact points and means for exchange of information. It also provides that the Parties are to publish on the World Wide Web the products that have been approved under their respective regulations.

Article 10: Regulatory Changes: This is an essential Article of the Agreement. Since equivalence is determined on the basis of EU and US regulations that are in effect at a certain point in time, equivalence needs to be re-examined when these regulations are amended or new ones are introduced that could affect equivalence. In this respect the Article states that the Parties shall base their regulations on the international instruments of the IMO. The Article sets out an obligation for the Parties to notify each other when regulatory changes take place and calls on them to consult each other. This article lays down that the Joint Committee is to consider whether equivalence is maintained when regulatory changes do take place and, in this respect, spells out what the outcome of the considerations will lead to: 1) that equivalence is maintained and the product is retained in Annex II of the Agreement; or 2) if equivalence is not maintained, the product is removes from Annex II of the Agreement; or 3) if agreement cannot be reached on whether equivalence is maintained or not, the possibility to suspend mutual recognition for that product.

Article 11 Regulatory Co-operation: This Article sets out that the Parties are to co-operate in the relevant international organisations with a view to establishing international rules for marine equipment. It also allows for bilateral EU-US regulatory co-operation, including, when necessary, examining their respective technical regulations in view of establishing equivalence for products that were not included within the scope of the Agreement upon its entry into force or for which equivalence has been discontinued or suspended. The Article also allows the Joint Committee to take decision to include products in Annex II once equivalence of the relevant technical regulations has been determined.

Article 12 Co-operation on Conformity Assessment: In view of maintaining confidence in the Conformity Assessment Bodies and the conformity assessment procedures of the Parties, this Article calls on the relevant authorities of the Parties to consult with each other and undertake other actions as necessary. The Article also calls on the Parties to encourage their Conformity Assessment Bodies to take part in co-operation and co-ordination activities.

8.

Chapter 5 Surveillance and Safeguard Measures


Article 13 Surveillance of Conformity Assessment Bodies: This Article sets out that the Parties shall continuously monitor, through inspections and audits, the competence of their Conformity Assessment Bodies. The Article allows a Party to contest, based on objective reasons, the technical competence of a Conformity Assessment Body of the other Party.

Article 14 Market Surveillance: This Article spells out that the Agreement in no way limits the Regulatory Authorities of the Parties to take enforcement actions (e.g. prohibiting placement on the market or product recalls) against products that pose a danger to health, safety or the environment or otherwise do not comply with applicable regulations. The Parties will inform each other of such measures.

Article 15 Suspending Mutual Recognition: Lays down the procedures to be followed if one or both Parties considers that equivalence of the technical regulations for the products listed in Annex II has not or cannot be maintained. If equivalence is not maintained then the product is removed from Annex II and the mutual recognition obligations for that product are suspended. The Parties undertake to co-operate in view of establishing equivalence again to the extent possible.

Article 16 Alert System: The Parties will set up a two-way alert system to inform each other of products that have been found not to comply with applicable to technical regulations or can pose an imminent danger to health, safety or the environment.

9.

Chapter 6 Additional Provisions


Article 17 Confidentiality: This contains standard clauses and relates to protecting the confidentiality of information exchanged between the Parties or their Conformity Assessment Bodies.

Article 18 Fees: This Article ensures that fees are non-discriminatory and are not imposed for conformity assessment services already rendered by the other Party.

Article 19 Territorial Application: This is a standard Article. However, it should be noted that the special nature of the maritime sector has been taken into account with a reference to that the Agreement is applicable to ships in international voyage that are entitled to fly the flag of one the Parties or one of the Parties' Member States.

Article 20 Agreements with other Countries: The first paragraph of this Article provides that mutual recognition agreements between Parties to this Agreement and other countries shall have no force in regard to the other Party to the Agreement. According to the second paragraph the EC and the US undertake to examine the possibility of establishing a mutual recognition agreement on a multilateral basis.

10.

Chapter 7 Final Provisions


Article 21 Entry into force, amendments and termination: These are standard provisions.

Article 22 Final Provisions: These are standard institutional and legal provisions. It can be noted that paragraph 2 calls on the Parties to assess the functioning of the Agreement on a regular basis and the first time no later than 2 years after its entry into force.

11.

Annexes


Annex I Legislation, Regulations and Administrative Provisions: Refers to the basic legislative, regulatory and administrative provisions of the Parties related to marine equipment.

Annex II Product Coverage for Mutual Recognition: This Annex indicates specifically which products are within the scope of the Agreement. Only those products listed in Annex II are subject to the mutual recognition obligations described in Article 3. This Annex will develop as the programs and regulations of the Parties evolve. The products that are listed in this proposal represent an initial list of products for which equivalence could be determined at this point in time.

Annex III Regulatory Authorities: Lists the Regulatory Authorities of the Parties.

12.

III Determination of Equivalence and Product Coverage


III.1 Basis for determining equivalence

As has been pointed out above, a key feature of the Agreement is that the mutual recognition obligation is based on that the respective EU and US technical regulations related to a specific product being equivalent. It is only once equivalence has been determined and is maintained that a product can be listed in Annex II of the Agreement and kept there. The reason this can be done is that both the EU and the US have to a very large degree based their respective technical regulations related to marine equipment on the international conventions on maritime safety and marine pollution prevention established within the IMO, in particular the SOLAS (Safety of Life at Sea) and MARPOL (Prevention of Pollution from Ships) Conventions, together with the relevant test methods (e.g. those of the International Telecommunications Union (ITU), the International Organisation for Standardisation (ISO) and the International Electrotechnical Commission (IEC)) referred to in IMO Resolutions, Circulars, Codes etc.

In the EU marine equipment is regulated by Council directive 96/98/EC on marine equipment as amended, hereafter called the Marine Equipment Directive (MED). From the EU perspective, the potential product coverage of the Agreement is determined by Annex A.1 of the MED. In the US the majority of marine equipment is regulated by the US Coast Guard (USCG) in the US Code of Federal Register (CFR) 46 CFR Parts 159 to 165, while radio communication equipment and navigation equipment using radio is within the regulatory remit of the US Federal Communications Commission (FCC) in 47 CFR Parts 2 and 80.

13.

Article 4, paragraph 2, of the Agreement states that


"Determination of equivalence of technical regulations of the Parties shall be based on their implementation of the relevant International Instruments in their respective legislation, regulations and administrative provisions, except where a Party regards the Instrument would be an ineffective or inappropriate means of fulfilment of its regulatory objectives. In the latter case, equivalency shall be determined on a mutually acceptable bases."

In other words, the criteria for determining equivalence is the 'degree' of implementation by the EU and US of the IMO requirements into their respective technical regulations for a specific product. The general rule is thus that the EU and US will base their technical regulations on the instruments of the IMO (also articulated in Article 10 i of the Agreement). On an exceptional basis, and as allowed by the WTO Agreement on Technical Barriers to Trade, the Parties may choose not to use the IMO rules when these are deemed inappropriate or ineffective in terms of the regulatory objectives pursued. In such cases the criteria for determining equivalence must be agreed between the Parties. It should also be underlined that in determining equivalence all regulatory requirements related to a specific product must be examined and found equivalent - product requirements, testing and performance standards and conformity assessment procedures.

According to the definition of equivalence of technical regulations in Article 1(1)(e) of the Agreement, EU and US technical regulations do not have to be identical, but must be sufficiently comparable to ensure that the objectives of their respective regulations are fulfilled. In other words, if the EU prescribes a standard in order to achieve a given level of safety or environmental protection, the US standard must be capable of ensuring the same level of safety and protection.

14.

III.2 Determining product coverage


On the basis of the above, a number of detailed studies and analysis have been carried out to examine equivalence between EU and US technical regulations for marine equipment. The USCG carried out an analysis with regard to the products it regulates. This analysis was verified by the Commission who contracted, after an open public tendering procedure, an expert consultant to carry out the work. The Commission also contracted (as well after an open call for tenders) an analysis related to marine radio communication and navigation equipment. All these studies have been made publicly available.

The analysis and examinations made by the Commission and the US have led to the conclusion that the products listed in Annex II of the present proposal is an initial list of products for which there is equivalence. This list constitutes 43 product items, of which 11 are life saving appliances, 12 fire protection equipment and 20 navigation equipment. It should be pointed out that the final analysis has been made on the basis of the third amendment to the MED. Although the amending directive has not yet been formally adopted, its technical contents is known. In this respect, the MRA would have to enter into force in conjunction with the entry into force of the amending directive.

For the remaining products covered by the MED, it is considered that either equivalence can be determined after further technical examinations and this can be done with a relatively short timeframe after the entry into force of the Agreement (1-2 years), or equivalence cannot be determined within a foreseeable timeframe. There are approximately 50 equipment items that are candidates for future inclusion in Annex II of the Agreement, of which 24 are life saving appliances, 5 pollution prevention equipment, 10 fire protection equipment, 9 navigation equipment and 1 radio communication equipment. It is in particular within the area of radio communication equipment equivalence cannot be established. This is mainly due to that the US conformity assessment procedures for these products are at the moment not deemed to be equivalent to those prescribed by the MED and that the relevant US technical regulations are not always in line with the applicable ITU recommendations.

15.

III.3 Maintaining equivalence and change in product coverage


The technical regulations of the Parties will evolve over time, in particular in response to new or amended IMO rules. When a technical regulation of a Party changes and this could affect equivalence, one needs to examine whether equivalence is maintained in terms of the new or amended regulations of one or both Parties. As described above, Article 10 of the Agreement sets out a mechanism of how changes to the technical regulations of the Parties is to be dealt with in terms of the Agreement. It should be underlined that nothing in the Agreement prejudices or limits the regulatory authority of the EU or the US in terms of pursuing their respective regulatory objectives and setting the level of protection they consider appropriate (see Article 8 of the Agreement).

Key elements in maintaining equivalence are, notification and exchange of information on regulatory development and offering the opportunity to consult on such developments, within the limits set by each Party's legislative procedures, and, of particular importance, regulatory co-operation and a shared commitment to the work of the IMO. As the general rule, co-operation on setting rules for marine equipment is to be done in IMO as well as in ITU, ISO and IEC. However, the Agreement also offers the possibility of bilateral EU-US regulatory co-operation and this will be necessary in view of not only maintaining equivalence, but can also contribute to improving the quality of regulations through the exchange of experiences and best practices.

One important element in the bilateral co-operation, which will heavily rely on the work at the international level, is setting out and carrying out a work plan for determining equivalence for those products that have not been listed in Annex II of the Agreement. Once such work has been finalised and both Parties are satisfied that equivalence of their respective technical regulations for a specific product has been determined, that product can be listed in Annex II by a decision of the Joint Committee (Article 11 i of the Agreement).

It goes without saying that if equivalence cannot be maintained or found due to objective reasons, the product will be removed from or not listed in Annex II. For products that are removed from Annex II, the mutual recognition obligations of Article 3 of the Agreement will cease to apply, but the Parties shall continue to recognise previously issued certificates, unless reasons due to the protection of health, safety or the environment warrants otherwise. This may cause difficulties for economic operators, which may have to revert to seeking approvals with the importing Party. However, it should be made clear that the Agreement cannot prejudice or put into question the integrity of the regulatory objectives of the Parties.

16.

IV. Assessment of the Agreement


IV.1 General observations

In general, mutual recognition agreements have two objectives: facilitating trade by reducing costs related to conformity assessment and promoting regulatory co-operation and efficiency. The Commission considers that the Agreement presented for approval can fulfil those objectives for the reasons outlined below.

The Agreement is in a sense innovative since it is the first international agreement related to goods the Community would enter into that is based on equivalence with the regulatory requirements of another country.

In general terms the Agreement has the potential to offer substantial benefits to EU manufacturers and importers. An EU manufacturer, for a product covered by the Agreement, will be able to have direct access to the US market, in terms of regulatory requirements, on the basis of its compliance to EU requirements in the form of the MED. This means the manufacturer can reach multiple markets on the basis of compliance with one set of regulatory requirements and one approval instead of multiple ones as would be the case without an Agreement. This can directly lead to a reduction of costs for manufacturers in terms of testing and certification. Indirectly it will also reduce costs that are related to the uncertainty and burden of contacting a conformity assessment body in the importing country, as well as the time delays this leads to in terms of getting a product on the market.

As has been mentioned above and will be further expanded upon below, the Agreement will not affect the level of health, safety and environmental protection set respectively by the Parties. Although the Parties have a shared commitment to the work of the IMO and to base their respective regulations for marine equipment on the relevant International Instruments, the Agreement does not prejudice or compromise the regulatory autonomy or enforcement rights of the Parties.

17.

IV.2 EC-US trade in marine equipment


The volume and value of trade in marine equipment between the EC and US has been difficult to assess due to the lack of official statistics. Table 1 below gives an indication of the trade in certain products..


18.

Table 1: EC-US trade in certain marine equipment year 2000 (thousands of EUR)


>TABLE POSITION>

19.

Source: Eurostat, COMEXT database


In assessing the potential impact of the MRA, an alternative approach to examining trade figures could be to look at the size of the respective markets for marine equipment. An indication of the size of the respective EU and US markets for marine equipment can be found by looking at the number of ships registered in the EU Member States and the US. This is illustrated in Table 3 below, which gives both the number of ships and the total gross tonnage (GT) of the EC and US registered fleets. In this respect, it should be kept in mind that the Agreement only applies to ships of the Parties that are to carry equipment that must be approved according to the IMO Conventions and that is in international voyage. Data on the number of ships that carry safety certificates according to the IMO Conventions has not been readily available. However, it is estimated that the very large majority (over 90%) of merchant ships carry a safety certificate. It should also be kept in mind that the figures below can include ships, for example those used for fishing or on inland waterways, which are covered by other Community directives.

It is primarily the number of ships that are of interest in assessing the market size for marine equipment since, for cargo ships in particular, the cost of equipping a ship with the IMO Convention required equipment does not vary much with the size of the ship. The greatest variation is between cargo and passenger ships, where passenger ships will necessarily bear a higher cost in relation to e.g. life saving appliances and fire protection equipment. Table 2 shows that the EC fleet is, in terms of numbers, double the size of the US and in particular the EC registered passenger ship fleet is considerably larger than that of the US.


20.

Table 2: EC and US merchant fleets


>TABLE POSITION>

21.

Source: Lloyd's Register of Shipping, World Fleet Statistics 2000


The figures in Table 2 give the number of existing ships which have already been fitted with the required marine equipment. It would therefore be useful to also look at the evolution of the number of ships under completion as this would give an indication of the potential market for marine equipment. These figures are given in Table 3 and illustrated in Figure 1. These figures clearly show that EU ship building, in terms of number of ships, is at least twice the size of the US.

22.

Table 3: EU and US ships under completion 1996-2000 (number and gross tonnage)


>TABLE POSITION>

23.

Source: Lloyd's Register of Shipping, World Fleet Statistics 2000


>REFERENCE TO A GRAPHIC>

24.

Source: Lloyd's Register of Shipping, World Fleet Statistics 2000


IV.3 Conformity assessment costs related to marine equipment

It has been difficult to quantify the costs related to the type approval of marine equipment. The main reason for this is that the different marine equipment items within the scope of the MED cover a wide range of very differing technologies (cf. lifejackets and radar equipment), which will necessarily lead to varying approval costs. There are also a number of other costs, e.g. time to market, administrative burdens, uncertainty, which the MRA would have an impact on, but are very difficult to quantify. Industry sources have however given certain indications of the costs involved. These are given below for purely illustrative purposes and must be considered as 'anecdotal' figures since they are not supported by verifiable quantitative data.

- In general terms it is estimated that the cost of equipping a ship with the IMO convention required marine equipment varies, depending on its type and size, between 10-25 % of its building cost.

- For a large passenger ship (cruise ship) that costs EUR 350 million to build, it is estimated that EUR 115 million (30%) relates to materials, equipment and approvals from classification societies required by IMO rules. Of the EUR 115 million, approximately EUR 90 million relate to different materials (related mainly to fire protection) and EUR 17 million to life saving, navigation and radio equipment. An interesting aspect that has been indicated was that a saving, in terms of costs related to the approval by the classification society, of up to EUR 25 million could be achieved by using materials and equipment that had already been approved. For cargo ships (container vessels), irrespective of size, it is estimated that it costs EUR 1 million to equip it with equipment required by IMO rules.

- Costs related to obtaining USCG approval for components for life-saving appliances are estimated to a minimum of EUR 50 000 and can take up to 2 years. Certain life saving appliances, such as marine evacuation systems and davit launched high speed craft, must be tested under realistic circumstances, which can entail approval related costs of over EUR 1 million.

- With regard to marine radio and navigation equipment the general situation is that approval related costs are high, while the size of the market is limited. For example, for Inmarsat B SES, the approval cost are estimated to EUR 150 000 for a yearly world-wide market of 500 items representing a value of approximately EUR 13,5 million. A complete radar series carries approval costs of an estimated EUR 150 000 for a yearly world-wide market of EUR 175 million.

25.

IV.4 Overall assessment


In making an overall assessment of the MRA the following main factors need to be considered:

- The cost/benefit of the MRA, for example in terms of its impact on trade, market access, reduction of costs etc. for EU manufacturers.

- The possible impact on EU regulatory objectives.

- The impact on other interested parties.

With regard to the cost/benefit, the information above, does not offer, in economic terms supported by quantitative data, a clear cut picture of the impact of the MRA on, for example, trade and cost reduction for manufacturers. However, the available information does give an indication that the costs related to equipping a ship with the IMO Convention required marine equipment are not negligible and the direct costs related to conformity assessment are considerable for many types of marine equipment. To this must be added indirect costs related to, for example, time to market, uncertainty and administrative burdens, which the MRA should also reduce but are difficult to quantify. The data in Tables 2 and 3 above show that the EU merchant fleet is much larger than that of the US, both in terms of existing ships and those under completion. This could be seen as an imbalance to the disadvantage of EU manufacturers of marine equipment. However, this needs to be seen in the overall market access situation. Furthermore, the Agreement can offer both EU and US manufacturers the possibility of being more competitive on each other markets. This should not only be to the advantage of EU marine equipment manufacturers, but also EU shipbuilders who should be able to reduce their costs (see above) and thus become more competitive on the world market.

In this context, it must be underlined that the MRA in itself will not guarantee benefits to economic operators. It offers possibilities for facilitating market access and reduction of costs, but it is up to the economic operators and in particular manufacturers to exploit the possibilities offered. It should also be pointed out that the use of the Agreement by business is voluntary. The relevant European industry federation have all given their support for the MRA. The Commission therefore assesses that the Agreement, can offer substantial benefits to manufacturers, in particular since it is based on equivalence between EU and US regulatory requirements - a manufacturer can reach several markets on the basis of one approval and one technical regulation.

With regard to the possible impact on EU regulatory objectives, the Agreement, in its Article 8, makes it very clear that the regulatory autonomy or authority of the Parties is not limited in any way. The Parties are free to pursue their respective regulatory objectives and set the level of protection they consider appropriate. The Agreement is based on equivalence between EU and US technical regulations and it is from this the benefits to economic operators can accrue. If equivalence is not maintained, e.g. due to regulatory changes, these benefits could be lost. This could be perceived as acting as a deterrent for a Party to set a level of protection that is higher then the other Party, thus not allowing for equivalence to be maintained. The Commission assesses that this is very unlikely to happen for the following reasons: 1) as stated above, the Parties maintain their regulatory autonomy; 2) both the EU and US are strongly committed to basing their technical regulations on the rules of the IMO; 3) equivalence will be maintained on the basis of the amended regulations of one or both Parties, thus the Agreement is affected, or not, on the basis these amendments and not the other way around; 4) the MRA rests on a solid basis of regulatory co-operation.

As has been the experience with other MRAs concluded by the Community, co-operation has not only led to greater transparency in applicable regulations, but also an exchange of knowledge and experience between regulators which hopefully can lead to better use of regulatory resources and improved quality of regulations.

Furthermore, the Agreement does not prejudice or compromise the enforcement of the Parties' respective technical regulations on their territories. The two-way alert system foreseen by Article 16 of the Agreement could even help in increasing the efficiency of, for example, market surveillance activities, since more information on defective products would be made available to enforcement authorities.

It should be noted that the Transatlantic Consumer Dialogue (TACD) i has been quite critical of MRAs in general and the concept of equivalence of technical regulations. The main objections raised by the TACD relates to that MRAs, as well as equivalence, could lead to: 1) transfer of regulatory authority to foreign entities who may operate under different conflict of interest, transparency and liability rules; 2) privatisation of public functions; 3) loss of domestic regulatory control; 4) reduced levels of public participation in the regulatory decision making process; 5) increased opportunities for regulatory evasion by industry; and 6) reduction in levels of health, safety and environmental protection. For the reasons already mentioned above, the Commission cannot share the conclusions drawn by the TACD.

Concerning the possible impact on EU regulatory objective, the Commission therefore assess that the Agreement will not compromise the regulatory objectives of the MED, i.e. to enhance safety at sea and improve the prevention of marine pollution. The Agreement will not have a negative impact on the health and safety of crew, passengers or other persons or the marine environment.

In relation to the possible impact on other interested parties, it is mainly conformity assessment bodies and ship builders that could be affected. According to the Impact Assessment Form attached to this proposal, the MRA would offer EU conformity assessment bodies (the notified bodies under the marine equipment directive) the possibility of offering additional services to existing and new clients. However, the MRA could also mean that they could loose some business since US exporters no longer have to use their services in order to demonstrate compliance with directive 96/98/EC. As mentioned above, EU ship builders should face reduced cost for marine equipment due to, inter alia, reduced conformity assessment costs and an increased competition between EU manufacturers and US exporters.

The Commission draws the overall conclusion that the Agreement can offer substantial benefits to economic operators in terms of facilitating trade by reducing costs and burdens related to conformity assessment, can increase transparency and predictability in relation to regulations, will promote regulatory co-operation and will not compromise the regulatory objectives of the MED, i.e. to enhance safety at sea and improve the prevention of marine pollution.

26.

V. Relations to the EFTA States, members of the European Economic Area


In accordance with the general information and consultation procedures set out in the EEA Agreement and its Protocol 12, the Commission has kept the EFTA/EEA States regularly informed about developments in the negotiations and has informed them of the final results of the negotiations.

27.

VI. The Draft Council Decisions


A proposal for two Council Decisions on the signature and the conclusion of the Agreement is attached.

The legal basis for both decisions is Articles 133 and 300 of the Treaty.

The Decision concerning the conclusion of the Agreement must also establish the appropriate Community procedure to enable the Commission, assisted by the special Committee to be designated by the Council, to represent the Community in the Joint Committee and in any Joint Working Groups that might be established.

28.

VII. Conclusions


For the reasons outlined in this explanatory memorandum, the Commission proposes to the Council to adopt the two attached decisions.