In a Single Market where goods circulate freely, everyone must play by the rules. The Volkswagen revelations have highlighted that the system which allows cars to be placed on the market needs further improvement. To regain customers’ trust in this important industry, we need to tighten the rules but also ensure they are effectively observed. It is essential to restore a level playing field and fair competition in the market.

—Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness

The Single Market requires rigorous enforcement across sectors, including the car industry. With our proposals today we will raise the quality and independence of vehicle testing and improve the oversight of cars already in circulation. This complements our efforts to introduce the most robust emissions testing procedures in the world, which we will keep refining and reviewing to ensure the strictest emissions limits are really met.

—Commissioner Elżbieta Bieńkowska, responsible for Internal Market, Industry, Entrepreneurship and SMEs

The current type approval system is based on mutual trust: once a car is certified in one Member State, it can circulate freely throughout the EU. While the EU sets the legal framework, national authorities are fully responsible for checking car manufacturers’ compliance. The draft Regulation on the approval and market surveillance of motor vehicles maintains the principle of mutual recognition, which is at the core of the EU Single Market, but seeks to correct the flaws in the system.

The proposal for a Regulation will help to achieve three objectives:

• Reinforce the independence and quality of testing that allows a car to be placed on the market. The majority of Member States designate technical services, which are paid directly by car manufacturers, for the testing and inspection of the vehicle’s compliance with EU type approval requirements. Technical services are dependent on these revenues and compete for this work. Under the new Regulation, technical services may no longer receive direct payments from manufacturers but instead all fees will be collected by the Member States.

  Under the proposa, Member States have to establish a comprehensive national fee structure (pools) to cover the costs for testing and inspections carried out by the technical services they have designated, as well as to cover the costs for the type approval certification, market surveillance activities and conformity of production review assessments. This is to avoid financial links between technical services and manufacturers, which could lead to conflicts of interest and compromise the independence of testing.

  The proposal also foresees more stringent performance criteria for these technical services, which should be regularly and independently audited to obtain and maintain their designation. There will be a centralized auditing system for technical services (e.g. joint audits by the Commission and national experts, peer reviews which include on-site visits to testing facilities) with the right for the Commission to suspend or withdraw designations.

• Introduce an effective market surveillance system to control the conformity of cars already in circulation. While the current rules deal mainly with ex ante controls, in the future Member States and the Commission will carry out spot-checks on vehicles already on the market. This will make it possible to detect non-compliance at an early stage, and ensure that immediate and robust remedial action is taken against vehicles that are found to be non-compliant and/or to present a serious safety risk or harm to the environment. All Member States should be able to take safeguard measures against non-compliant vehicles on their territory without waiting for the authority that issued the type approval to take action. Member States will have to review regularly the functioning of their market surveillance activities and make the results publicly available.

• Reinforce the type approval system with greater European oversight. The Commission will have the power to suspend, restrict or withdraw the designation of technical services that are underperforming and too lax in applying the rules. In the future the Commission will be able to carry out ex-post verification testing (through its Joint Research Centre) and, if needed, initiate recalls. By allowing the Commission to impose financial penalties, the proposal will deter manufacturers and technical services from allowing non-compliant vehicles onto the market. The Commission will also chair an Enforcement Forum which will develop common compliance verification strategies with Member States and organize joint audits of technical services and peer reviews of type-approval authorities.

The Commission’s proposal maintains the current ban on defeat devices, which national authorities have a standing obligation to police and enforce, but goes a step further—under the draft Regulation, the manufacturer will have to provide access to the car’s software protocols. This measure complements the Real Driving Emissions package, which will make it very difficult to circumvent emission requirements and includes an obligation for manufacturers to disclose their emissions reduction strategy, as is the case in the US.

The proposed Regulation increases the deterrents for unscrupulous manufacturers and underperforming technical services that place or admit non-compliant vehicles on the market, by empowering the Commission to levy penalties. Car manufactures who are in breach of type approval legislation (e.g. defeat devices or fake declarations) risk administrative fines of up to €30,000 per vehicle which can be levied by the Commission if no fine is being imposed by the Member State. Fines can also be imposed on technical services if they fail to carry out the tests rigorously. The level of fines will depend on an assessment of the gravity and extent of the non-compliance. The system of administrative fines and their calculation needs to be specified by a Commission delegated act. The Regulation maintains the existing obligation for Member States to lay down rules for effective, proportionate and dissuasive penalties. In the future, Member States have to inform the Commission every year on the penalties they have imposed. The type approval specific legislation complements the general civil and criminal law of Member States that may be applicable if allegations of fraud are confirmed.

In the current system, the responsibility to remedy wrongdoings lies with the Member State in which the type approval has been granted. Neither other Member States nor the Commission can initiate a recall. The Commission can only take action indirectly, as it did recently by referring Germany to the Court of Justice of the EU over its failure to take remedial action to comply with the Directive on Mobile Air Conditioning. Under the proposed Regulation, all national authorities as well as the Commission will carry out compliance verification checks on vehicles already placed on the market to verify that they comply with applicable EU legislation.

Where tests and investigations show non-compliance, the market surveillance authority can decide to demand a recall or, in severe cases, full withdrawal from the market. Other national authorities will then be notified so they can also take similar action. The Commission will also have the right to order recalls or market withdrawals. This will allow the remedial measure to have an EU wide effect, which does not currently exist. The Commission will evaluate and decide on whether the measures taken by a manufacturer to remedy the situation are sufficient.

The draft Regulation will now be sent to the European Parliament and Council for adoption. Once adopted, it will be directly applicable. It will repeal and replace Directive 2007/46/EC (the Framework Directive).