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Legal Update

European Parliament Adopts Product Safety and Market Surveillance Proposals—Mandatory Origin Labeling Still A Long Way Off

18 April 2014
Mayer Brown Legal Update

The European Parliament (EP) adopted proposals for a Regulation on Consumer Product Safety (CPSR) and for a Regulation on the Market Surveillance of Products (MSR) during the plenary session of 15 April 2014. The press releases are available as follows:

The adopted texts are based on the EU Commission proposals dated 13 February 2013, as amended for the CPSR by the report by the EP’s Committee on the Internal Market and Consumer Protection dated 25 October 2013 (the IMCO report).1

The proposed CPSR provides for mandatory origin labeling for all products except “manufactured non-food products,” whether imported or produced in the European Union. More precisely, the proposed regulation specifies that it will not apply to a number of products, including medicinal products for human or veterinary use; food; materials and articles intended to come into contact with food; feed; living plants and animals, genetically modified organisms and genetically modified microorganisms in contained use, as well as products of plants and animals relating directly to their future reproduction; animal by-products and derived products; and plant protection products. Thus, the origin labeling requirement would apply to most of the products imported into the European Union.

The mandatory origin labeling requirement is contained in Article 7 of the proposed CPSR, as adopted by the EP on April 15, and states the following:

1. Manufacturers and importers shall ensure that products bear an indication of the country of origin of the product or, where the size or nature of the product does not allow it, that indication is to be provided on the packaging or in a document accompanying the product.

2. For the purpose of determination of the country of origin within the meaning of paragraph 1 of this Article, non-preferential origin rules set out in Articles 59 to 62 of Regulation (EU) No 952/2013 of the European Parliament and of the Council, including delegated acts to be adopted pursuant to Article 62 of that Regulation, shall apply

3. Where the country of origin determined in accordance with paragraph 2 is a Member State of the Union, manufacturers and importers may refer to the Union or to a particular Member State.

3a. Manufacturers shall be authorised to indicate the country of origin in English alone (‘Made in [country]’), since this is readily comprehensible for consumers.

The vote by the EP does not mean that the proposed regulation will enter into force. It still needs the approval of the Council, which has not yet taken a position on the proposals—in particular due to differences over this one origin labeling issue. Thereafter, there will be further negotiations between the EU Commission, the EP and the Council.

Further uncertainty exists because of the pending May 2014 elections of a new EP. In fact, the EP voted the two texts at first reading in order to establish a firm position for the next EP to use as the basis for further negotiations with EU Member States.

Notwithstanding the EP’s endorsement for mandatory origin labeling, it is by no means certain that mandatory origin labeling will actually be introduced in the European Union, or that the stated date of 1 January 2015 for the two Regulations to enter into force can actually be met.

Indeed, mandatory origin labeling has been a controversial issue for EU Member States. Another proposal on origin labeling was discussed in 2005 that was fervently supported by the EP, but could not find agreement by the EU Member States acting in the Council. Finally, after seven years, this proposal was withdrawn, reportedly due to a lack of agreement in the Council and also in anticipation of the WTO Dispute Settlement Body’s position on labeling rules in a country of origin labeling (COOL) proceeding concerning US meat labeling rules.

Under the US COOL rules, only meat from animals exclusively born, raised and slaughtered in the United States could be labeled as of US origin. Different labels were foreseen for meat where some of the production steps (birth, raising and slaughter) took place outside the United States. In practice, the labeling rules required producers to use various methods to segregate animals falling into different labeling categories (and comply with extensive record keeping and tracking requirements) or simply to refuse imported cattle. Thus, the COOL rules proved disruptive and WTO dispute settlement proceedings were initiated.

The Appellate Body ruled that the COOL requirements violated Article 2.1 TBT (national treatment) because they imposed unjustified and arbitrary requirements that resulted in less-favorable treatment for imported cattle. In fact, the Appellate Body held that COOL was “designed and applied” in a manner that constitutes arbitrary or unjustifiable discrimination against imported beef and pork products.

EU Commissioner for Trade, Karel De Gucht, even stated that “after seven years of work this [origin labeling] legislation is set for failure,” and that it was very clear that it is not going to find a majority in the Council.” As to the Council, we understand that the Member States were basically split along south/north lines, with southern countries—which often still have a manufacturing base—in favor of origin labeling, but the northern Member States against it because of the burdens it would place on imported goods. We understand that a similar split is still present today, which will continue to complicate the EP’s adoption of the mandatory labeling rules. This remains true despite the fact that having the labeling rules as part of a full package of provisions on consumer protection might render it more difficult for EU Member States to reject the entire package over mandatory origin labeling.

Accordingly, there is still significant work to do before the proposed Regulations can be adopted, and it is likely that, if adopted, they will undergo amendments.

Even if the proposed origin labeling provision is adopted, and origin is determined in accordance with the non-preferential rules of origin of the EU’s Unified Customs Code (UCC), as is proposed, this may still cause controversies to arise in practice. Indeed, legally binding implementing rules for the UCC origin rules exist for very few products. Moreover, while guidance exists for other products in the form of the EU’s proposals for harmonized WTO rules, these proposals are not legally binding and cannot be invoked as mandatory until they are converted into an EU legislation. Product-specific non-preferential rules of origin may be adopted in the framework of the current discussions on implementing provisions for the UCC, which should enter into force by May 2016. But, until such is the case, the basic provision is the following:

Goods the production of which involves more than one country or territory shall be deemed to originate in the country or territory where they underwent their last, substantial, economically-justified processing or working, in an undertaking equipped for that purpose, resulting in the manufacture of a new product or representing an important stage of manufacture.

As it is currently written, the provision is vague and prone to multiple interpretations. Hence, until more detailed implementing rules are adopted, there will likely be contradictory determinations on the appropriate label to affix.

Influential industry associations have expressed regrets about the adoption by the EP. Thus, Eurocommerce has stated that mandatory origin labeling creates additional costs and burdens for businesses without clear benefits for product safety. DigitalEurope highlights the difficulties to identify the country of origin of a complex digital product and also considers that the indication of origin does not provide meaningful information for consumers.

The road to adoption of the proposals is paved with difficulties, so developments will have to be monitored in the months ahead.

For more information about the topics raised in this Legal Update, please contact , , or .

1 A separate IMCO report dated 22 October 2013 proposed amendments to the EU Commission’s MSR proposal.

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