Why E-Commerce Merchants Must Understand the EU’s New Fifth Class of Economic Operator
The European Consumer Organization (BEUC) has called for online marketplaces selling consumer goods in the European Union (EU) to be held accountable for faulty and unsafe goods.1 This legislative initiative is part of a trend towards greater online accountability. With new EU regulations becoming applicable from July 16, 2021, how do e-commerce sellers remain compliant?
In February 2020, the BEUC published the results of a market surveillance survey conducted by six different consumer groups. Collectively, they bought 250 products from a variety of online marketplaces. When these products were tested, the results showed 166 products, or two-thirds, failed to comply with EU safety laws. The products tested included cosmetics, toys, and electrical goods, with the possibility that these non-compliant products could cause electric shock, fire, or suffocation.2
This survey’s results match the findings of several other studies. In January 2020, French consumer group UFC-Que Choisir looked at twenty cell phone chargers and found 55% were dangerous.3 At the end of 2018, France’s Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) looked at 150 products that can be bought online, including costume jewelry, electric garlands and toys. They found 77% were non-compliant and 43% were dangerous. The survey also noted that 26% of online sales sites had anomalies with regards to transparency and consumer communication.4
Dangerous and non-compliant products can result in fires, electric shocks, and personal injuries. For example, when the UK consumer group Which? looked at non-branded phone chargers, they found over 70% failed standard safety tests. In many cases the components were too close together, resulting in possible electric shocks, and they discovered multiple safety faults that could lead to the charger exploding or catching fire.5
On June 20, 2019, the EU adopted Regulation 2019/1020 on market surveillance and compliance of products.6 This piece of legislation amends:
- Directive 2004/42/EC – volatile organic compound emissions from organic solvents in certain paints, varnishes and vehicle refinishing products
- Regulation (EC) No 765/2008 – accreditation and market surveillance relating to the marketing of products
- Regulation (EU) No 305/2011 – harmonized conditions for the marketing of construction products
Regulation 2019/1020 seeks to harmonize market surveillance for all categories of non-food products, covering 70 regulations and directives – exempted products include food, feed, medicines, live plants and animals, products of human origin. It also reinforces the responsibility of economic operators through customs and documentary controls, and by physical and product controls. This is especially relevant for online sales. Finally, to cover newer forms of economic activity, such as e-commerce, and create a greater level of responsibility, it also creates a fifth category of economic operator.7
For online sellers, a major change being brought in by the new legislation is the requirement for establishing an ‘economic operator’ within the EU. The ‘economic operator’ must belong to one of the following groups:
- Manufacturer (located in the EU)
- Authorized representative with a written mandate from the manufacturer to comply with legislation
- Order fulfilment service provider
‘Order fulfilment service provider’ is a new, fifth class of economic operator. It is defined as any natural or legal person who performs at least two of the following services: storage, packaging, labeling, and shipping, without being the owner of the products.
The requirement for an economic operator inside the EU will impact third-party sellers located outside of the EU. Without a designated economic operator, their operation becomes illegal. The creation of this fifth group allows them to have an economic operator with legal responsibilities in the EU but without having to fundamentally alter their business operation. It should be noted, at no point can the end consumer be classified as the importer.
Economic operators have several obligations, including performing specific tasks to ensure all products comply with legislative requirements. In addition, they must have access to comprehensive quality information on the products and make these available to the authorities and, in the event of non-compliance, they should immediately implement corrective measures.8
Regulation 2019/1020 comes into force on July 16, 2021. After this date, ‘distance selling’, shipping directly to an EU consumer from a non-EU country, will be prohibited without the establishing of an economic operator.
Part of the impetus behind the new regulation is the need for greater equivalence between the enforcement and surveillance of products that are sold online and offline. To back this up, Member States are being asked to reinforce their market surveillance teams scanning of both markets, backed up by more document checks and, if necessary, physical checks and laboratory assessments.
SGS offers a comprehensive range of services to help online retailers, manufacturers and suppliers remain compliant with the new EU regulations. Our solutions include the verification of online information, independent laboratory assessments, document reviews, mystery shopping, vendor qualification verification, label reviews, packaging services, market surveillance, development of a Declaration of Conformity (DoC), technical consultancy, and training, throughout the e-commerce supply chain.
Learn more about our service.
For more information, please contact:
Directrice Commerciale CRS