29th December 2009 Ms Neelie Kroes Commissioner for Competition European Commission Rue de la Loi 200 B 1049 Brussels

Belgium
FROM THE AMERICAN IMPORT AGENTS ASSOCIATION 57-63 Coburg Road, Wood Green, London N22 6UB, United Kingdom Re- Draft Proposal for Harmonised Individual Vehicle Approval

“I feel that as policy-makers we should be able to get our relationship right and together tear down remaining barriers, so that businesses on both sides of the Atlantic can continue to flourish”.
Speech by Catherine Ashton at the U.S. Chamber of Commerce Washington D.C., 26 October 2009

Dear Commissioner Kroes, On behalf of the American Import Agents Association (AIAA), who are involved in the importation of new American vehicles into the UK, we are writing to ask for your urgent support to prevent the adoption of a new draft Harmonised Individual Vehicle Approval (IVA) proposal that will undermine consumer choice and decimate a longstanding micro industry across Europe. By failing to recognise or respect the legitimacy of the small independent vehicle import market for North American vehicles in Europe, the Commission may have been negligent in its duties. In developing these draft regulations we believe that the Commission, under intense pressure from the FIA, has been over zealous in its attempt to protect human health and life and in so doing may have been guilty of maladministration. When the AIAA first contacted the Commission about the proposal for Harmonised IVA, we were only seeking an amendment to permit left hand drive very low volume North American imports to stay within the UK’s National IVA scheme. However, as the scheme has evolved and its potential impact has been revealed, we have been forced to question the entire scheme and make the following claims. The AIAA is a group of long-standing family run micro-businesses, typically employing 2-6

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people that offer assistance to consumers in the UK, who wish to import an American vehicle not offered for sale by the manufacturers in Europe. We are typical of similar businesses all over Europe. Our members also provide or arrange servicing, parts supply, warranties and other facilities offered by a car dealer to ensure compliance with the legal obligations relating to consumer protection. As the vehicles are not imported by the manufacturers, we display an extra duty of care to look after the consumer, and often receive referrals from the manufacturers customer service help-lines in the UK to deal with customer queries. The AIAA is recognised by the UK Government as a legitimate stakeholder in the Motor Trade and is an active member of DfT’s Light Vehicle Trade User Group Most of the cars imported are new vehicles ordered in advance by a consumer who wants to drive an unusual vehicle. The vehicles do not undermine the Type Approval system, as the volumes imported are extremely low, and they are mainly bought by enthusiasts. New American vehicles have been independently imported into Europe for over 50 years. These vehicles are not built to European standards, but are built to broadly equivalent Federal or Canadian safety and environmental standards. To register a vehicle in a Member State, each vehicle has to be submitted to a National homologation process called Individual vehicle Approval (IVA). As it says in the Commission’s Interpretative communication on procedures for the registration of motor vehicles originating in another Member State SEC/2007/0169, “National type-approval and individual approval procedures for motor vehicles to be used or registered for the first time in the EU normally fall outside the scope of EC law.” This micro-industry supports a whole infrastructure of specialist businesses and dozens of specialist car clubs. (See attachment 1-Paper on American Vehicles in the UK) Unless the draft proposal is withdrawn, there are literally hundreds of thousands of European citizens whose lives will be adversely affected without a compelling justification. The draft regulations are only aimed at new vehicles (defined as mass produced vehicles under 6 months old), indicating the discriminatory and anti-competitive nature of the draft proposal. In the UK, there are currently less than 500 new American vehicles imported each year, comprising dozens of different models. This compares to circa 2.25 million new passenger cars(M1) and light commercial vehicles (N1) that the SMMT’s members will register in the UK in 2009. In the 27 Member States during 2009, we estimate that for M1 and N1 vehicles, 38,000 new vehicles will have used National IVA schemes out of a total new vehicle registration figure of 16.1 million vehicles-i.e. 0.24 percent. (Source ACEA website) In other words, the ACEA’s members will have accounted for 99.76% of all new Passenger Car and Light Commercial vehicles sold in Europe in 2009. In 2010, can the European consumer not enjoy any choice beyond what the manufacturers have planned for him/her to purchase? With these draft Harmonised regulations, the Commission seems to have grossly overreacted to a case from a few years ago where 300 allegedly unsafe identical Chinese Landwind vehicles were unwisely approved by a rubber-stamp method in Germany. This has led to an intensive lobbying campaign from the FIA to restrict any vehicles that did not have European type approval, a process only available to manufacturers. (See attachment 2 -Statement from the FIA-Loophole in the European Type Approval?). This inappropriate method of rubber-stamping approval is not in the spirit of single vehicle approval and is not

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condoned by the AIAA. This “customer orientated” approach has certainly never occurred in the UK where every single vehicle is independently and objectively inspected by the UK authorities. It is worth noting that contrary to what was said by the FIA in their media statement, the reason the former German Single Vehicle Approval process was used as a popular method to gain approval for American vehicles, is not because it was normally lax or the lowest common denominator. After the Second World War, Germany had many American forces stationed on its territory, and as a result, it had to find a way to legally accept the American vehicles, even though they were not built to German standards. The German system of single vehicle approval (Einzelbetriebserlaubnis) was therefore developed under the scope of the StVZO, in order to legally exempt a non-compliant, yet safe vehicle, so that it could be registered and driven on the road. The German system naturally became favoured by citizens in other Member States as it provided the applicant with a legal document, the Fahrzeugbrief, which contained many of the vehicles’ technical characteristics and standards it had been assessed against. This German system, in many parts of Europe, became the benchmark for single vehicle approval and could often be relied upon in gaining mutual recognition. It is only seen as a loophole by the FIA who are taking a disproportionate and protectionist line. Far from it, this German system helped to ensure that the single market rules actually worked, in the absence of harmonisation. The system of Mutual Recognition is explained fully for vehicles approved on an individual basis in the Commission’s Interpretative communication on procedures for the registration of motor vehicles originating in another Member State (SEC/2007/0169). Consequently, the FIA media statement was not just attacking the right to import an individual vehicle through a well-established and legitimate National approval process. It was also attacking the whole concept of Mutual Recognition one of the most fundamental legal concepts of the Single Market in the absence of harmonised standards. To respond to the Chinese Landwind problem, the Commission made it mandatory for each Member State to operate a National Individual Vehicle Approval scheme. The regulations on this new scheme are found in Article 24 of the Framework Directive 2007/46/EC. This article relies on Member States to provide administrative provisions and technical requirements which, aim to ensure a level of road safety and environmental protection, which is equivalent to the greatest extent practicable to the level provided for by the provisions of the European Type Approval standards. Under the scope of these regulations, the principles of subsidiarity and proportionality apply, and the rights of businesses and consumers are protected. For reasons of proportionality, the UK has a right hand drive - high volume IVA test and a left hand drive - low volume IVA test. (See attachment 3 - Regulatory Impact Assessment from the UK Better Regulation Executive) The left hand drive low volume approval process is one that the Commission insisted that the UK authorities adopt in 2000 and was also endorsed by the SMMT. Even though American vehicles are built to slightly different standards to those in Europe, there has never been a fundamental safety problem with American vehicles on European roads. Unsurprisingly, neither the FIA nor the European Commission has documented

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one single issue with an American vehicle. Indeed the FIA, in another press release recently admitted that Europe is falling behind the USA in the use of life saving ‘esafety’ technology. The new National IVA regulations only became mandatory in April 2009, having been notified and accepted under the 98/34 Directive. Why has the European Commission decided to regulate further, when there is no new vital safety or environmental problem? (See attachment 4 -Statement from the FIA-“Sub-standard cars loophole in EU legislation still wide open 31st March 2008.) If the Commission is only interested in safety, why is it discriminating against brand new mass-produced cars built to the latest Federal or Canadian standards when it could ban amateur built cars or older imports? The Commission officials, however, seem to have lost touch with their sense of proportionality and reasonableness by allowing the FIA leadership through their membership of the Cars 21 High level group, to appear to dictate European competition policy in respect of single imports. The draft scheme is riddled with technical racism and protectionism, and represents the Commission’s implementation of the FIA’s pressure. (See attachment 5 -Letter from the Commission.) Why is there no independent SME representation in the Cars 21 group so that there is a fair balance of opinion? This is a case of where the imposition of administrative procedures and technical regulations designed for major vehicle manufacturers, are being applied inappropriately to individual citizens and SME’s, in the full knowledge by the Commission that they are impossible to comply with. Furthermore, to apply more stringent technical standards to newer products, constitutes an arbitrary discrimination not justified under either International or European law. The Commission is effectively telling consumers that they have no right to drive a new car in Europe, unless it has been bought from a European car manufacturer. In other words, one cannot import a new car that is not marketed officially in Europe ! To protect the rights of SME’s and the consumer, any possible desire to harmonise regulations, should not take precedence over the fundamental legal principles of proportionality and subsidiarity enshrined in European Law. The Commission states that the “Directive that has been repealed by Directive 2007/46/EC has proven to create distortion of the functioning of the internal market.” However, this comment is a protectionist smokescreen as the Commission has failed to fulfil its obligation to provide quantitative or qualitative evidence or justifications of why the fundamental principle of subsidiarity has been withdrawn for vehicles constructed to the latest Federal and Canadian safety and environmental technologies. The Commission has acted inappropriately and has appeared to succumb to unyielding pressure that discriminates against small business and is inherently anti-consumer, eliminating any competition with European Car manufacturers, however small. Furthermore, in the development of the Draft Proposal for Harmonised IVA, no account has been taken of the Better Regulation Guidelines and there has been no Stakeholder Involvement, Consultation or Regulatory Impact Assessment. For passenger cars (M1), the National IVA regulations in force , only came into affect on April 29th 2009. The existing regulations already ensure that fundamental safety and environmental issues are complied with to the “greatest

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extent practicable” with the European Type Approval Directives. For light goods vehicles (N1), the new regulations have not yet even come into effect. The Draft Harmonised IVA proposals are impossible for private individuals and small businesses to comply with, as the proposals contain technical standards and administrative procedures designed for manufacturers that are well in excess of the “greatest extent practicable” benchmark in Article 24 of the Directive. (See attachment 6 from the UK Department for Transport to the Commission) The concept of ”greatest extent practicable” represents for all intents and purposes, the limit of what is reasonable or necessary, from a proportionality perspective. However, for the UK market and for very low volume imports elsewhere in Europe, the Commission’s statements in the preamble to the Draft Harmonised Regulations have no validity and have ignored many different legal principles and policies that they are obliged to comply with. To make reference to Working Party 29 and UNECE regulations, for individual vehicles imported by citizens, their agents or SME’s, this language is an attempt to appear reasonable, under what is in reality a regulatory smokescreen. The Commission knows that these technical committees are only for International experts to work towards a more globalised approach to developing vehicle standards for the benefit of vehicle manufacturers. There are dozens of type approval standards and whilst a number of international standards have been incorporated into the Draft proposal as a ploy to appear reasonable, the Commission knows that the administrative requirements and technical standards that remain, make the import procedure totally uneconomic for SME’s and private European citizens to undertake. Furthermore, the AIAA has evidence from the UK that the number of IVA applications is well below estimate, countering the justification from the Commission that the new regulations are fostering bigger volumes. To protect the rights of the consumer and individual importer, individual vehicles can only gain an approval by complying with reasonable standards that are equivalent to the “greatest extent practicable to European Type Approval Standards.” Otherwise, by definition, the vehicles are banned. What evidence is there under the scope of Article 24 of the Framework Directive 2007/46/EC that each of the Member States are incapable of setting and monitoring safety and environmental standards? Incidentally, is the Commission aware that even though the FIA’s leadership wants to ban the imports, the FIA’s European member clubs sell aftermarket warranties for these new cars? The Commission has therefore chosen to ignore the principles of subsidiarity and proportionality; both crucial and over-riding tenets of European Law, and is trying to enforce constraints that are illogical, superfluous and excessive through the use of harmonised standards. There is no huge trade issue here, as most new American vehicles are generally imported by private individuals and independent SME’s all over Europe, predominantly in response to an order for an end-user.

Unless the Draft Harmonised IVA regulations are withdrawn, the Commission officials may be guilty of Maladministration, in breach of several articles in The European Code of Good Administrative
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Behaviour, by failing to act correctly in the following areas.
1) The Commission has failed to follow the principle of proportionality as clearly laid down in primary law under Article 5 of the Treaty establishing the European Community and subsequently endorsed in the Lisbon Treaty. There have never been any safety or environmental problems with American vehicles built to Federal or Canadian standards to warrant a change in the way these cars are homologated in Europe. 2) The Commission has failed to provide quantitative or qualitative evidence why the fundamental principle of subsidiarity has been withdrawn from Member States only for newer and safer vehicles. On what legal basis have Member States given up their shared competence to regulate individual approvals under Article 24 of 2007/46/EC as confirmed by SEC/2007/0169, and as supported by Article 3b of the Treaty of Lisbon 3) The Commission has ignored the warnings from the AIAA that there could be a serious risk to road safety and the environment when American car drivers are unable to have access to specialist American vehicle maintenance facilities and parts supply after the businesses in this sector fail, due to the impact of these new Draft proposals. The AIAA estimates that there are in excess of 250,000 vehicles built to FMVSS and CMVSS standards on European roads. 4) The Commission has discriminated against private citizens and SME’s, by introducing excessive standards and administrative arrangements for new vehicles that it knows can only be conformed to by vehicle manufacturers. This is anti-competitive behavior, not sufficiently justified. The American car scene is a tiny fraction of one percent of new vehicle registrations in Europe. In the UK it is even smaller as the vehicles imported are left hand drive, entering a right hand drive market. 5) The Commission may have failed to act objectively and impartially by allowing itself to be unduly influenced by the FIA, even after the Commission acted correctly, proportionately and legally with the introduction of the new National IVA regulations in Article 24 of the Framework Directive 2007/46/EC 6) The Commission has failed to undertake any Consultation with European consumers or SME stakeholders. Even though the AIAA has been the lead stakeholder in respect of American cars with the UK Government for the last 13 years and has been in contact with the Commission several times since 1996, the Commission has not made any attempt to contact the established stakeholders in the industry. When the AIAA approached the Commission last year, its recommendations about applying the principles of Better Regulation to the proposal were not adopted. Furthermore, the minutes of many of the meetings held by the Technical Committee for Motor Vehicles (TCMV) have never been made public, as they are password protected on the Commission’s website. 7) The Commission has failed to undertake any Regulatory Impact Assessment and has not followed the guidelines on Regulatory Impact Assessments in the Cars 21 report. By failing to recognise or respect the legitimacy of the independent vehicle import market in

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Europe, the Commission may have been grossly negligent in its obligations. 8) The Commission has failed to apply any Better Regulation Guidelines or the specific Better Regulation Guidelines as outlined in the Cars 21 Final Report for the Automotive Industry. The AIAA worked as an active Stakeholder with the UK Authorities for 3 years in the run up to the new National IVA. The UK government does respect the legitimacy of the small independent vehicle import market for North American vehicles not sold in Europe by the manufacturers and did follow the Better Regulation Guidelines in arriving at the new National IVA regulations. (see attachment-7-The Department for Transport’s Simplification Plan-Update 2009 - page 6.--- and attachment 4) 9) The Commission has ignored the core principles of recognising the central role of SME’s in the EU economy, as outlined in its own Small Business Act for Europe entitled “Think Small First”. The current economic recession further substantiates this criticism. If these regulations come into effect, the reality is that dozens of small businesses may fail and hundreds of jobs may be lost in the UK and thousands more across Europe. 10) The Commission has ignored its own obligations of Transatlantic Economic Integration. The Commission should be aware that American cars are of one of the best icons and symbols of North American culture and technology in Europe today. What possible reason or benefit is there for Europe in 2010 to suddenly erect such a trade barrier with our transatlantic partners to undermine this relationship when so many jobs are at stake? All over Europe these vehicles are only mostly sold to enthusiasts many of whom belong to American car clubs. The AIAA estimates that more than 50,000 Europeans belong to American car clubs. 11) The Commission has created a discriminatory technical barrier to trade, which prevents the importation of new vehicles built to the latest safety and environmental standards. This protectionist activity can only be seen as an arbitrary discrimination, not justified by the protection of human health and life, contravening the principles of the GATT treaty and the Single Market rules. The banning of new vehicles will distort import markets to foster the importation of vehicles with older safety and environmental technologies. Commissioner Kroes, we are appealing to you for help. As we are only a tiny trade body we do not have the same influence and resources as the FIA with the Commission. However, we represent the individual consumer and many hundreds of automotive jobs in the UK and thousands more across Europe. Most of the businesses concerned are small family businesses. Our voice must be listened to. Unless these Draft Harmonised IVA regulations are withdrawn, the Commission will have acted in a disproportionate way that is anti-consumer, anti small business, and failing to comply with so many of the legal principles and regulatory good practices that it is obliged to follow. Indeed the Commission officials may be guilty of Maladministration, in breach of several articles in The European Code of Good Administrative Behaviour. What makes matters even worse is that the senior officials responsible for drafting these regulations deny

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they are trying to stop imported vehicles. “Imported vehicles built in compliance with the US legislation will therefore continue to be accepted as is the case today in the United Kingdom” (See attachment- 8 - Letter from the Commission) These disingenuous statements are very troubling. Why are we being treated as 2nd class Europeans and not afforded full rights under the Treaty? The policies of the Commission should not undermine transatlantic cooperation or bring Europe into disrepute with its citizens. There is no need for new regulations at all. The new existing National IVA schemes which require equivalence to the “greatest extent practicable” with the many European Type Approval directives, are a thoroughly proportionate way for Member States to administer a tiny fraction of a percent of vehicles that European consumers want to buy, and the manufacturers do not sell. In the name of Competition, we urge you to intervene, so that the Commission prevents the creation of a huge injustice for its citizens, not sufficiently mandated by the protection of human health and life. Yours sincerely

Anthony Cohen Chairman American Import Agents Association Tel: +44 20 8889-4545 sales@americancarimports.com

Attachments 1) - Paper on the American Car scene in the UK 2) - Statement from the FIA-Loophole in the European Type Approval? 3) - Letter from the Commission 23-9-2008 4) - Regulatory Impact Assessment from the UK Better Regulation Executive 5) - FIA Statement-“Sub-standard cars loophole in EU legislation still wide open 6) - Letter from the UK Department for Transport to the Commission 7) - Department for Transport’s - Simplification Plan –Update 2009-Page 6 8) - Letter from the Commission saying the American vehicles will be accepted

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Cc -Philippe Jean -Head of Unit-Automotive-Enterprise and Industry-Commission -Members of the Technical Committee of Motor Vehicles -Ami Levin-Chairman–Committee on Technical Barriers to Trade, World Trade Organisation -Ron Kirk-US Trade Representative, United States Trade Compliance Center -Ross Hornby-Ambassador-Mission of Canada to the EU -Catherine Dickson-Head of Trade-Mission of Canada to the EU -Malcolm Harbour-MEP -Juergen R. Thumann-Co Chairman-Transatlantic Business Dialogue -Sylvia Mohr-Automotive Commercial Attaché-US Mission to the European Union -Sara Jones, Commercial Assistant, U.S. Commercial Service U.S. Embassy, London -Dieter Zetsche- President ACEA -Paul Everitt-Chief Executive SMMT -Edmund King-President AA -Tina Sommer, President –European Small Business Alliance -Mark Spelman-Chairman American Chamber of Commerce to the European Union -Ian Yarnold-Deputy Head of Vehicle Technology and Standards Dft –UK -Mike Lowe-Senior Policy Advisor, Transport Technology and Standards DfT-UK -John Maddox-Associate Administrator for Vehicle Safety Research-NHTSA -Christian Lavoie-Director, Motor Vehicle Standards-Transport Canada -Harry Sanne-President European Association of Independent Vehicle Traders -Brian Osler-President North American Automobile Trade Association

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