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Brussels, 5 June 2008
Was this evaluation undertaken by the European Commission?
No. The evaluation project was undertaken under the direction of an independent expert group with the support and technical assistance of the European Commission. The ad hoc expert group included representatives of main stakeholders such as manufacturers, retailers, test laboratories, consumers and Member States' authorities.
The group included following experts:
They participated in the project as independent experts and not as formal representatives from their respective organisations. The group met five times over the course of the five-month project.
Which activities were undertaken?
The expert group undertook a number of activities including desk research, interviews and fact-finding visits both in Europe and in China, encompassing over thirty organisations. Visits and interviews were carried out with:
Why focus on Chinese toys?
Toys are manufactured all around the world but the People's Republic of China is by far the biggest exporter, with some 85% of all toys on the European market originating there. Moreover, the Chinese government operates a system of toy export controls, which in its scope and depth is by far the most elaborate in the world. Therefore, the research regarding toy production has focused exclusively on China, both in terms of toy manufacturers as well as for export controls.
Who are the different players in the toy supply chain?
The toy supply chain consists of different types of players such as Original Equipment Manufacturers (OEMs), retailers and traders. While the biggest OEMs have almost full control over product design, manufacturing and distribution, many retailers tend to have control only over manufacturing and distribution, with traders only having control over distribution but not in any significant way over design and manufacturing. Moreover, as a general rule the smaller the player, the weaker its influence on the supply chain and consequently on product safety.
What is the role of manufacturers?
In practice, for OEMs product safety starts with the design process and safety aspects are addressed from concept design onwards. Given that many OEMs no longer manufacture toys themselves but have out-sourced production, they typically exert a large amount of control over the manufacturing chain, including supplier auditing (covering engineering capacity, quality management systems, supplier management, control of incoming materials, manufacturing equipment and process controls, personnel training, in-house testing expertise and equipment, etc.), raw material supplier controls, production monitoring, product testing, etc.
What is the role of retailers?
Compared to the 'OEM' supply chain, the retailers' route to market is characterised by the limited influence they have over product design, since, except for companies that develop their own-brand toys, most retailers are not involved in toy development and buy what is available on the market, i.e. 'off the shelf'. Nevertheless, retailers (especially the biggest) often make significant efforts to control the safety of the products they buy, including supplier auditing, prototype testing and finished product testing. However, retailers typically employ a lower number of safety personnel and safety-related contacts with vendors tend to be less frequent.
What is the role of traders?
The 'trader' route to market is characterised by an almost total lack of control over both design and manufacturing, which, combined with the often small size of these companies and the fact that they might import many other types of products besides toys, means that they are often not aware of all relevant requirements and do not have the capacity to control product safety. As a result, they have to rely almost entirely on the manufacturer (with whom they might not be in direct contact) and test reports to ensure that the supplied products are safe.
What is the situation in the toy sector in the People's Republic of China?
In the Chinese toy manufacturing sector, which consists of around 2700 export-licensed companies, a hierarchy can be identified, with the big companies working for the big OEMs, medium-sized manufacturers supplying to retailers and bigger traders, and small suppliers selling to smaller traders. In general, the smaller the manufacturer, the less ability it has to control product safety. Although the bigger players tend to have significant in-house capacity to deal with safety issues, medium-sized companies typically have a less well-developed system to control product safety, while the smaller companies often struggle to guarantee consistent product quality and safety and rely mainly, if not only, on the local authority's export licensing and product testing for ensuring and showing compliance.
The Chinese government operates an extensive inspection and export control regime for toys, including export licensing, manufacturer auditing and classification, first item registration, video surveillance, batch testing and training. In response to the toy recalls, towards the end of 2007 it strengthened the controls for toys, with the auditing of a large number of the export licensed manufacturers and revoking the export license of 701 companies.
What is the role of test laboratories (both in Europe and in China)?
Testing organisations are used extensively by different actors to assure toy safety, not only through product testing but also for doing risk assessments, giving advice on quality management procedures, undertaking factory audits and inspecting products before shipment. Some of these laboratories have notified body status under the Toy Safety Directive, which gives them a special role in ensuring the safety of toys under the so-called EC type examination procedure. The main concerns with their functioning relate to different interpretation of the standards and test methods between different laboratories, communication difficulties between different branches of the same laboratory and the perceived lack of competence of a number of notified bodies.
What is the situation in Europe?
As far as European enforcement practice is concerned, the expert group found that some Member State surveillance authorities find it difficult to ensure effective toy safety controls, due to both a lack of resources and a lack of expertise regarding the applicable safety requirements. Moreover, with respect to the notified bodies mentioned above, Member States are also responsible for establishing and carrying out the necessary procedures for the assessment, notification and monitoring of such bodies. The perceived lack of quality at a number of these bodies also reflects negatively on the rigour of the system operated by certain authorities.
Consumers also play an important role in the toy supply chain, since they can inform toy companies and retailers about quality problems or even accidents with the toys they bought, thus providing an important feedback mechanism for improving toy safety. Moreover, safety-educated consumers could contribute to a stronger demand for safe products.
Finally, there are a number of cross-cutting concerns regarding toy safety, including poor quality or absence of technical files, problems with age grading of toys, weak recall management practices and interpretation issues with toy standards.
What are the key conclusions?
Product safety cannot be guaranteed by final product testing alone, but has to be embedded in the entire product development and production process. Adopting and maintaining a strong quality and safety culture is a critical element in ensuring continuous attention to product safety issues.
The project confirmed that the larger, reputable toy companies, through their leverage over the supply chain, are in the best position to guarantee such a comprehensive approach to product safety. At the same time it has become clear that many of the smaller economic players (whether on the European or on the Chinese side) are far less well-equipped to deal with safety issues.
As a result, for many of the smaller operators the Chinese government's export controls, when undertaken, are the only real independent test of the product's safety before being placed on the EU market. In fact, with the strengthening of the controls in China and the importance of the importer in determining safety requirements, the difficulties, especially for smaller actors, in properly addressing product safety seems to have become one of the main gaps in the toy supply chain.
Do European standards need to be changed?
As far as existing standards for toys are concerned, a major issue is the perceived complexity of the European toy standard (in good part due to the variety and complexity of toys themselves) which, combined with the proliferation of international standards that cover toy safety, result in interpretation and compliance problems. Moreover, since most Chinese exports go to the US there may be a bias towards compliance with the US standards. Although there may be options for further harmonisation of toy standards at international level, care has to be taken that the underlying legislative framework in the EU remains intact.
Can enforcement be improved?
In Europe, a serious concern seems to be the perceived lack of expertise of some enforcement authorities in relation to toy safety and the resulting lack of a level playing field in enforcement practice across Europe. Some authorities make up for this lack of in-house knowledge by commissioning test reports from notified bodies even though this is not a formal legal requirement. In this context it is worrying that notified bodies seem in several cases to be struggling to properly fulfil their role, which also reflects on the process of assigning notified bodies which appears, at least in some Member States, to have serious shortcomings.
Are there any other problems?
There are a number of general issues that need to be addressed including the quality of technical files, product traceability and recall management.
How about counterfeit products?
Although typically seen as having mainly an economic impact, counterfeit products can also pose safety problems. Often being cheap copies of well-known brands, fake toys tend to incorporate inferior materials and are manufactured with limited, if any, regard for safety aspects. The toy industry suffers from a significant amount of counterfeiting (estimates suggest up to 10% in volume) and the successful fight against this phenomenon will also have a positive impact on product safety. Nevertheless, the project has not specifically addressed counterfeit products and the recommendations do not cover possible ways to address this problem.
Are these problems specific to the toy sector?
Although the project focused on the toy sector, some of the findings will be pertinent to other product sectors as well. Most importantly, the conclusion that safety has to be embedded in the entire product development and production process is valid for all other product sectors. Secondly, the fact that the smaller economic operators struggle most to ensure product safety is almost surely applicable to other consumer goods sectors such as electrical appliances, lighting equipment, clothing, child care articles and cosmetics. Moreover, the lack of resources and a pro-active, risk-based approach to market surveillance will also be felt in these areas. Finally, the gaps in the notified body system may also be found in other product sectors where EC type approval is used.
What are the key recommendations?
For Original Equipment Manufacturers
OEMs should engage in education and training of all relevant stakeholders such as market surveillance and customs authorities, Chinese government and industry representatives, and other, especially smaller, economic operators, to share their expertise and best practices for example regarding applicable safety requirements, interpretation issues, technical files including risk assessment and test reports, quality management systems, supplier control, etc.
Retailers should engage in education and training of internal buyers and external suppliers of toys regarding the applicable rules in the EU (i.e. legislation, standards and guidance) and adopt measures to require suppliers to have adequate safety systems in place as a condition of business.
Traders should ensure knowledge of the applicable rules (i.e. legislation, standards and guidance) in the EU and guarantee that the products they place on the market respect the applicable safety requirements.
Manufacturers should ensure the existence of a strong quality attitude and management system, including knowledge of the applicable rules in the EU, and guarantee adherence to relevant procedures.
For Chinese enforcement authorities
Chinese enforcement authorities should continue to strengthen the supervision efforts vis-à-vis the Chinese toy industry, especially focusing on the weaker manufacturers, and engage actively in the exchange of information about the applicable EU product safety framework and the specific toy legislation, standards and guidelines.
For testing laboratories and notified bodies
Testing organisations should improve their coordination (both internal and external) regarding standardisation developments and interpretation issues and engage in training activities towards relevant stakeholders. Notified bodies should ensure they are qualified to undertake the specific tasks for which they are assigned.
For EU enforcement authorities
EU enforcement authorities should undertake regular, risk-based surveillance projects focused on toys and target the surveillance activities more effectively towards the identified problem areas in the supply chain (i.e. smaller traders). Moreover, they should improve and harmonise the assignment and monitoring processes of notified bodies among the Member States and undertake regular audits of such organisations (including of their overseas branches) to ensure necessary expertise and quality is maintained.
For European policy-makers
European policy-makers should investigate the options for further harmonisation of toy standards at international level, taking into account the different underlying legislative frameworks.
Regarding horizontal issues
All economic operators should ensure the traceability of products and components in the supply chain, for example through better inventory and supplier management, and improved product identification. Moreover, all stakeholders should ensure correct and easily-accessible safety information is available to consumers.
What are next steps?
The next step will be to discuss the results of the project with all relevant stakeholders and, subsequently, for them to engage in a combined effort to strengthen the system and to help prevent unsafe toys being placed on the European market in the future.