Agreement between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway amending the Agreement on Mutual Recognition in relation to Conformity Assessment, Certificates and Markings between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway
Introduction
2.1
This chapter examines the Agreement between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway amending the Agreement on Mutual Recognition in relation to Conformity Assessment, Certificates and Markings between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway (the proposed Amending Agreement). The treaty action was signed in Brussels on 21 September 2018 and tabled in the Parliament on 30 November 2020.
2.2
The proposed Amending Agreement has been agreed in line with Article 15(2) of the Agreement on Mutual Recognition in relation to Conformity Assessment, Certificates and Markings between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway [European Free Trade Association – European Economic Area] (the Australia-EFTA EEA MRA), which provides for amendments where there is mutual agreement between the Parties.
2.3
The Department of Industry, Science, Energy and Resources (DISER) explained that under the Australia-EFTA EEA MRA, the Parties recognise and accept the technical competence of each other’s conformity assessment bodies (CABs) to test or certify goods for compliance with each other’s regulatory requirements:
The MRA facilitates trade by recognising the technical competence of each party’s conformity assessment bodies such as laboratories, inspection bodies and certification bodies. Broadly speaking, this means that a test report or certificate issued by an appropriate conformity assessment body in Iceland, Liechtenstein or Norway attesting to, for example, the safety, quality or other required standard of a good is accepted by Australia and vice versa. This removes the need for duplicative retesting or recertification on a product on arrival. It saves businesses time, resources and money.
2.4
The DISER told the Committee that the proposed Amending Agreement is a ‘trade-facilitating agreement’ designed to amend and simplify the existing Australia-EFTA EEA MRA ensuring consistency across markets:
The purpose of amending this MRA is to simplify it, to introduce greater flexibility and to ensure that it remains aligned with our sister MRA with the European Union, which was similarly amended in 2012. This will provide consistency for Australian businesses and conformity assessment bodies trading into the European single market.
2.5
The National Interest Analysis (NIA) states that the proposed Amending Agreement removes the rule of origin restriction, accords less than treaty status to the Sectoral Annexes that form the administrative arrangements for the Australia-EFTA EEA MRA, and extends the role of the Joint Committee to amend these Sectoral Annexes in response to regulatory and industry developments.
Reasons for Australia to take the proposed treaty action
2.6
The NIA identifies two current areas of concern with the Australia-EFTA EEA MRA:
the requirement that changes to the Sectoral Annexes undergo both Parties’ domestic treaty amendment processes, which according to the NIA is ‘unwieldy and inefficient’; and
the rule of origin provision, requiring products covered by the MRA to originate in the Parties to the MRA, which according to the NIA limits the opportunities for Australian manufacturers and testing bodies to utilise the agreement.
2.7
The NIA provides that a failure to amend the Australia-EFTA EEA MRA enabling streamlining of administrative updates to the Sectoral Annexes may exacerbate under-utilisation of the MRA.
Change to Sectoral Annexes
2.8
The proposed Amending Agreement accords less than treaty status to the Sectoral Annexes that form the administrative arrangements for the Australia-EFTA EEA MRA, and extends the role of the Joint Committee to amend these Annexes in response to regulatory and industry developments.
2.9
The NIA notes that, while the Sectoral Annexes would not have treaty status, changes to them would affect the scope of obligations under the Australia-EFTA EEA MRA.
2.10
The Committee asked for further details regarding the composition and process of the Joint Committee. The DISER said the Joint Committee is made up of officials from the Parties:
The joint committee is provided for under article 12 of the treaty, and the members of the committee would be agreed between the parties. For Australia [a representative from the DISER] would be the designated representative on that committee, and then [their] counterpart from the other parties. But on agreement between the parties you could invite others to sit and be consulted if there were going to be any changes. Depending on the nature of the change that was going to be made to those sectoral annexes, you would look to draw on relevant stakeholders.
Changes to the rule of origin
2.11
The proposed Amending Agreement removes the rule of origin restriction, other than for the Sectorial Annexes relating to medical devices and medicinal products. The Australia-EFTA EEA MRA would instead apply to the conformity assessment of products specified in the statement of scope and coverage in each Sectoral Annex.
2.12
The Committee inquired how the proposed changes to the rule of origin provisions would assist Australian businesses to overcome the current difficulties presented by the Australia-EFTA EEA MRA. The DISER explained that provisions specifying that the products covered must originate in the Parties to the MRA had limited the opportunities for utilisation:
The rule-of-origin provision as it applied in the original agreement meant that a manufacturer looking to access the terms of this agreement would have to source its inputs from one of the parties to this particular agreement. Removing that rule-or-origin provision means that a manufacturer can source an input from … a third country. Assuming that that product is then assessed by a recognised conformity assessment body and certified, then that would be recognised by a counterpart under the terms of this agreement. So it gives more flexibility and scope to businesses to be able to source inputs from beyond just the countries that are party to this agreement.
2.13
The DISER provided an example of the benefits for an Australian company producing low-voltage equipment:
… if you were producing a piece of low-voltage equipment that required an input, and you could source that more cheaply from Thailand than from within Australia, then you could source that from Thailand and incorporate it in the manufacture of your product and have that product assessed by a conformity assessment body that would then be recognised and export that to Liechtenstein, Iceland or Norway without that product having to go through a duplicative re-testing process.
2.14
According to the DISER the sectors that would benefit are those that are listed under the Sectoral Annexes: telecommunications terminal equipment, low-voltage equipment, machinery, simple-pressure equipment, automotive products and electromagnetic compatibility of products. The DISER emphasised that it is an opt-in agreement:
… so businesses can use this agreement if it’s seen to be in their particular interest and if it’s going to facilitate trade into those markets for them.
Consultation on the changes
2.15
The DISER assured the Committee that it had consulted broadly regarding the proposed changes to the Australia-EFTA EEA MRA, including relevant Australian government agencies and regulators, Australia’s peak standards and conformance bodies, states and territories, and Australia’s key industry associations. There was broad support for the changes and the DISER is ‘not aware of any objections made during the consultation process’.
Obligations
2.16
The NIA offers assurance that the proposed Amending Agreement ‘does not significantly alter Australia’s core obligations’ under the Australia-EFTA EEA MRA. It would however affect the operation and scope of the obligations as they relate to the Sectoral Annexes.
2.17
The proposed amendments to the Australia-EFTA EEA MRA are set out in Article 1 of the proposed Amending Agreement and are summarised below.
Removal of the rule of origin restriction
2.18
Article 4: the rule of origin restriction is removed and replaced with a more general ‘scope and coverage’ provision as set out in paragraph 2.11.
Simplification of the Australia-EFTA EEA MRA
2.19
Article 3(2)(c): removed so that the Sectoral Annexes no longer require a list of CABs. The Parties will retain and update their own lists of CABs.
2.20
Article 6(1) and 6(2): inconsistencies in the language between the two Articles are removed and amendments made to reflect the inclusion of processes in relation to the suspension of a CAB.
2.21
Article 6(3): removed and instead covered in amendments to Article 12.
2.22
Article 8(6): amended to provide that unless decided otherwise by the Joint Committee, the suspension of a CAB occurs from the time its competence or compliance is challenged by a Party, rather than from the time disagreement has been established in the Joint Committee. The suspension will run from this time until either agreement has been reached in the Joint Committee on the status of the body, or the challenging Party notifies the other Party and the Joint Committee that it is satisfied as to the competency of the CAB in question.
2.23
Article 9(1): expanded to ensure that the Parties maintain an accurate list of CABs designated in accordance with the Australia-EFTA EEA MRA.
2.24
Article 9(2): amended and new Article 9(3) included to clarify that when considering amendments to legislative, regulatory and administrative provisions that relate to the subject matter of the MRA, each Party must notify each other of the new provisions at least 60 days before coming into force. Further, in case of urgent measures, Parties must notify each other of the measures and reasons for their imposition immediately.
2.25
Article 12: the powers of the Joint Committee are expanded, granting it the ability to amend the Sectoral Annexes and to adopt new Sectoral Annexes.
2.26
Article 12(6): amended to provide processes relating to the designation of a CAB by a Party and the procedure for objecting to CAB designation by the other Party.
2.27
Article 12(6)(c): amended to give the Joint Committee power to verify the technical competence of a contested CAB.
2.28
Article 15(1): amended to clarify that the Sectoral Annexes have less than treaty status.
2.29
Article 15(3) and 15(4): amended to empower the Joint Committee to adopt new and amend current Sectoral Annexes, respectively.
Sectoral Annex on Medicinal Products Good Manufacturing Practice (GMP) Inspection and Batch Certification
2.30
The NIA states the amendments to the ‘Scope and Coverage’ section are primarily language-related, ensuring consistency with amendments to the main body of the Australia-EFTA EEA MRA. They do not provide for any new obligations.
2.31
Section II is amended such that the Parties must maintain respective lists of official inspection services. A Party may request that the other Party provide the latest lists of official inspection services and the other Party must comply within 30 days.
2.32
Paragraph 7 of Section III is amended to include the right of a Party to request additional information about the capability of official inspection services or their programs where significant changes to regulatory systems have occurred. The NIA states that this is to ensure that these services are sufficiently competent to carry out conformity assessment in accordance with the other Party’s regulatory requirements.
2.33
Amendments to Section IV provide that the Parties may be required to provide information to verify programs for the mutual recognition of inspections for the entry of a new official inspection service or where there have been significant changes to an official inspection service.
Sectoral Annex on Medical Devices
2.34
Amendments to the ‘Scope and Coverage’ section provide that the Sectoral Annex will apply to medical devices exported to Australia only if they are ‘manufactured in the EEA EFTA States’. The NIA states this is a more restrictive rule given the high risk nature of the products involved and will provide confidence that only bodies with quality assured and monitored manufacturing practices will fall within the scope of the amended Australia-EFTA EEA MRA.
2.35
According to the NIA, amendments to paragraph 1 of Section V update and strengthen confidence-building measures, intended to help ensure that CABs can demonstrate their experience in assessing conformance to Australian requirements. The confidence-building period will be reviewed after two years of the amended Sectoral Annex being in operation.
2.36
Paragraph 5 of Section V is added to provide that the Sectoral Annex shall not constrain a Party from implementing measures necessary to protect public health and safety.
Implementation
2.37
According to the NIA, no changes to Australian legislation would be required to implement the proposed Amending Agreement.
2.38
The NIA notes that the state and territory governments are responsible for regulating the low voltage equipment, machinery and pressure equipment sectors covered by the Australia-EFTA EEA MRA. The NIA also confirms that an Inter-Governmental Cooperation Agreement between the Commonwealth and the states and territories signed in 1998 commits the states and territories to the Australia-EFTA EEA MRA, and is not affected by the proposed Amending Agreement.
2.39
In this regard, the ACT Government in its submission to the inquiry advised that the list of applicable legislative, regulatory and administrative provisions contained in the Appendix to the Sectoral Annex on Medicinal Products GMP Inspection and Batch Certification in the proposed Amending Agreement should include the ACT Medicines, Poisons and Therapeutic Goods Act 2008. This legislation applies to veterinary medical and pharmaceutical products.
Costs
2.40
The NIA states that there would be minimal financial costs associated with bringing the proposed Amending Agreement into force.
2.41
The NIA provides that the removal of the rule of origin restrictions would increase Australian firms’ competitiveness and would result in potential cost-savings for those firms.
2.42
The NIA expects that, in the case of the Sectoral Annexes on Medicinal Products GMP and Medical Devices, there would be a significant reduction in the regulation and regulatory cost burden for Australian importers using overseas manufacturing sites in EFTA EEA countries, largely associated with the cost of on-site Therapeutic Goods Administration (TGA) inspections.
2.43
The NIA notes that the Australian Pesticides and Veterinary Medicines Authority (APVMA) has advised that, from a regulatory perspective, the savings to industry from the proposed Amending Agreement would be partly offset by the cost of confidence-building and confidence-maintaining measures. However, ongoing maintenance activities have increased the effectiveness of the APVMA’s regulatory activities and led to efficiencies and cost savings.
Conclusion
2.44
The Committee welcomes efforts to simplify access to trade agreements that benefit Australia and encourage their utilisation. In particular the changes to the rule of origin provisions in the proposed Amending Agreement should facilitate greater flexibility and opportunities, and ensure market consistency, for Australian businesses in the sectors covered by the Australia-EFTA EEA MRA.
2.45
The Committee suggests that the Australian Government address the issue raised by the ACT Government and investigate the inclusion of the ACT Medicines, Poisons and Therapeutic Goods Act 2008 in the Appendix to the Sectoral Annex on Medicinal Products GMP Inspection and Batch Certification.
2.46
The Committee agrees that the proposed Amending Agreement should be ratified and binding treaty action be taken.
2.47
The Committee supports the Agreement between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway amending the Agreement on Mutual Recognition in relation to Conformity Assessment, Certificates and Markings between Australia and the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway and recommends that binding treaty action be taken.