Market Access Pitfalls 8: Regulation

Market Access Pitfalls 8: Regulation

Disclaimer: This article does not constitute legal advice. Speak to a lawyer or specialist consultant based in the EU or your target market to ensure you are aware of all the regulatory requirements you have to meet.

Regulation is probably the most important and the most-hated topic when bringing a product into a new market. Yes, it might take up a lot of your time. Yes, it might be costly. Yes, it might require you to alter aspects of your product. But it can also help you build a better product.

Products that are to be sold in any EU member state must meet a variety of requirements. The good news is that most of the requirements are the same across the EU (member states can impose stricter requirements in certain circumstances). Once you have done the work to meet regulatory requirements for one member state, you are (mostly) good to go in all other member states as well. For all European issues and questions, the websites of the European Commission are a good starting point.

I will list some examples of regulation below that may or may not apply to you, depending on your product. Again, my strong recommendation is that you discuss your situation and obligations with a lawyer, specialist consultant or other qualified service provider. This article does not constitute legal advice. I am not a lawyer or regulatory specialist.

If you are unaware of relevant requirements, or if you’re thinking, „Oh, I’ll just fly under the radar, it will be alright!“ – well, you would have to be extremely lucky for this to work. More likely, you will be caught. This will cost you even more time and money, not to mention inventory and reputation. I had a client who was unable to import several thousand items of clothing (which had already been sold on a shopping channel) into Italy because the company had been unaware of labeling requirements.

If you don’t have the time and money to deal with regulatory requirements, maybe this is not the right time for you to go international. In this case, grow in your domestic market first and build up in-house resources and knowledge.

Pre-Existing Certification

Quite a few of my Canadian clients told me they did not have to worry about European/ German regulation because „we are Health Canada certified“ or „we have FDA approval“. Unfortunately, Health Canada certification is only valid for Canada and FDA approval only for the US. You will still have to meet the European requirements if you want to sell in Europe. Also note that these may be quite different than what you are used to from other markets. In many cases they may well be stricter.

VAT & Other Taxes

Under certain circumstances, you will have to deal with value-added tax (VAT) – i.e., collect it from your customers and pay it to the relevant tax authorities. Examples are if you are selling D2C or if you are importing product into the EU. VAT is a devilishly complicated subject, even for tax professionals. Do speak to a professional.

Information on VAT in e-commerce can be found on the websites of service providers such as Avalara or SimplyVAT.

Depending on how you do business in the EU, you may become liable for other taxes as well. Again, discuss this with a specialist.

Customs Duties & Import VAT

Any goods produced outside of the EU have to go through customs when entering the Union. At this stage customs duties might be applied.

The good news: once inside the EU, goods may be moved to another country without incurring further duties. This is thanks to the EU Customs Union. Note that the UK is no longer part of the EU Customs Union.

All imports of goods are subject to import VAT. This also applies if your home country has a free-trade agreement (FTA) with the EU. The import VAT is typically payable by the importer. In certain cases, this may be you.

It is important to differentiate between customs duties and import VAT. The former may be lowered or waived under a FTA, the latter will always apply. EU companies importing goods have to pay import VAT, as do private citizens.

I had quite a few clients who complained that they had been charged customs duties despite the Canada-EU FTA. No. They were charged import VAT.

CE Certification

CE certification is mandatory for a clearly-defined range of products. If your product is on that list, you cannot place it on the market anywhere in the EU without CE certification.

On the other hand, if CE certification is not required for your product, you are not allowed to use the CE mark.

„It takes too long, we want to start selling right away“ or „We have another certification that is just the same“ were some of the things I heard from my clients. Sorry, no. This is not open to discussion.

For more information, refer to the website of the European Commission on CE marking.

Data Protection/ GDPR

GDPR is the acronym for the General Data Protection Regulation. The German law implementing the Regulation is called DSGVO – Datenschutzgrundverordnung. We love long words.

European data protection rules seem to be poorly understood by many non-Europeans. Let’s start by saying that they are much stricter than, for example, privacy rules in North America.

One client rolled his eyes and said, „We’re ok, we’re not selling any data.“ It’s not just about selling data. Your data protection obligations start as soon as you collect the data of any EU citizen. That is why one of the first things I did when I started this blog was to set up a data-protection statement.

It is recommended that you have your data-protection statement drawn up by a qualified lawyer. Don’t rely on a third-party template. My own statement, for instance, looks quite different from the template WordPress suggested to me.

Clients told me more than once that they were „fully GDPR-compliant“ only to then send me a newsletter for which I had not signed up. That is not ok. Per GDPR you must be able to prove that your newsletter recipients have agreed to the processing of their data. To be on the safe side, experts typically recommend the „double opt-in“ process: a person signs up for your newsletter on your website and immediately receives an email requesting them to confirm their email address and subscription by clicking a button or link in the email. Only once they have done that is their address added to your distribution list.

You should take data protection seriously for two reasons:

  1. Money. You can be hit with significant fines if found in breach of data-protection regulations.
  2. Customers. EU citizens are highly protective of their data. They will take their business elsewhere if they think their data is not safe with you.

Consumer Protection

There are many consumer-protection rules that may be very different from what you are used to.

Depending on where you are based and how you operate, it is possible that not all rules will apply to you – although my understanding is that once you target EU consumers, you are subject to the EU rules. A lawyer will be able to give you more specific advice.

Just note that EU consumers are aware of their rights and expect to have them, so – unless your product is unique and highly desirable – you may lose business by offering less advantageous conditions. To give you just one example, EU shoppers have the right to cancel and return an order within 14 days, and to a 2-year product guarantee.

Websites and E-commerce

A German lawyer specializing in IT law once told me with a sigh, „E-commerce? I always tell my clients not to do it. Too risky.“

There are many successful e-commerce operations in Germany and the EU, so don’t let that statement put you off entirely. Just know that new rules may apply. To point out a few things that you may not be aware of:

Every website targeting German consumers that is even mildly commercial needs to have an „Impressum“ that provides information about the website owner. This Impressum must list the name and physical address of a natural person (in the case of a company, the Managing Director/ CEO) and, depending on the nature of the business, quite a lot of additional information.

I have already mentioned the requirement of a GDPR-compliant data-protection statement on websites.

You will also need a cookie banner.

If you are running an online store, make sure your store templates meet European requirements. Simply taking a North American template and running a German store with it is not going to work. For instance, under German rules, the product information page (where I look up the details of an individual item I might want to purchase) must indicate the full price including VAT and must include information about shipping costs. It is not sufficient to have a banner at the top (e.g., „Free Shipping for all Orders over 50€!“) or an announcement on your homepage. „Shipping charges calculated at check-out“ is not acceptable, either.

I am not sure whether this rule also applies in other EU countries – local lawyers will be able to advise you in more detail.

The List Goes On…

Depending on your product, you should be aware of the following:

I will keep adding items. In the meantime, do not consider this list exhaustive!

Once again, this article does not constitute legal advice. Discuss your business and requirements with a lawyer or specialist consultant.

Ein Kommentar

Schreibe einen Kommentar

Deine E-Mail-Adresse wird nicht veröffentlicht. Erforderliche Felder sind mit * markiert