DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES - ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMCD) - USAID
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DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES — ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMCD) FINAL REPORT USAID GOVERNING FOR GROWTH (G4G) IN GEORGIA May 19, 2019 This publication was produced for review by the US Agency for International Development. It was prepared by Deloitte Consulting LLP. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES — ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMCD) FINAL REPORT USAID GOVERNING FOR GROWTH (G4G) IN GEORGIAUSAID GOVERNING FOR GROWTH (G4G) IN GEORGIA CONTRACT NUMBER: AID-114-C-14-00007 DELOITTE CONSULTING LLP USAID | GEORGIA USAID CONTRACTING OFFICER’S REPRESENTATIVE: PHILLIP GREENE AUTHOR(S): PMO BUSINESS CONSULTING PRIVATE SECTOR AND CIVIL SOCIETY CAPACITY STRENGTHENING COMPONENT: 5500 LANGUAGE: ENGLISH 19 MAY 2019 DISCLAIMER: This publication was produced for review by the US Agency for International Development. It was prepared by Deloitte Consulting LLP. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 2
DATA Reviewed by: David Gvenetadze, David Lelashvili, Nino Chokheli Project Component: Public-Private Dialogue Practice Area: Overall Institutionalized Framework for Public Consultations Key Words: DCFTA, EU, Directives, RIA USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 3
ACRONYMS
AA Association Agreement
CE Conformité Européenne
CEN European Committee for Standardization
CENELEC European Committee for Electro technical Standardization
CIS Commonwealth of Independent States
DCFTA Deep and Comprehensive Free Trade Area
EEA European Economic Area
EMC Electromagnetic Compatibility
EMCD Electromagnetic Compatibility Directive
EU European Union
G4G Governing for Growth
GAC Georgian Accreditation Center
GDP Gross Domestic Product
GEL Georgian Lari
GEOSTAT National Statistics Office
GEOSTM Georgia Standards and Metrology Agency
GES Georgian National Standard
GNCC Georgian National Communications Commission
GoG Government of Georgia
GRS Georgia Revenue Service
HS Harmonized System
IEC International Electro technical Commission
IMF International Monetary Fund
ISO International Organization for Standardization
LVD Low Voltage Directive
LVTR Low Voltage Technical Regulation
MoESD Ministry of Economy and Sustainable Development
NACE Nomenclature of Economic Activities (statistical classification used in Europe)
NAD New Approach Directive
NLF New legislative framework
NQI National Quality Infrastructure
PV Present Value
RIA Regulatory Impact Assessment
RS Revenue Service of Georgia
TCSA Technical Construction and Supervision Agency
UN United Nations
USAID United States Agency for International Development
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 4CONTENTS
DATA ................................................................................................................................................3
ACRONYMS .....................................................................................................................................4
I. EXECUTIVE SUMMARY ........................................................................................................6
II. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES .................11
A. Data collection and information used ....................................................................................12
B. Constraints and Limitations ..................................................................................................13
III. PROBLEM DEFINITION.......................................................................................................14
A. Policy context ........................................................................................................................14
B. EMCD Objectives and requirements ....................................................................................15
IV. BACKGROUND TO THE BASELINE SCENARIO ..............................................................19
A. Regulatory Framework and Institutional Arrangement .........................................................19
B. Georgian ElectriCAL PRODUCT MARKET ..........................................................................23
V. OBJECTIVES .......................................................................................................................30
VI. POLICY OPTIONS ...............................................................................................................31
VII. METHODOLOGY AND ASSUMPTIONS .............................................................................33
A. Methodology .........................................................................................................................33
B. Assumptions .........................................................................................................................34
VIII. COMPARING THE OPTIONS ..............................................................................................35
A. POLICY OPTION 1: BASELINE SCENARIO — MAKE NO CHANGES TO THE CURRENT TECHNICAL
REGULATORY FRAMEWORK. ...........................................................................................35
B. POLICY OPTION 2: ADOPT A NEW TECHNICAL REGULATION IN CONFORMITY WITH EMC DIRECTIVE
REQUIREMENTS .................................................................................................................37
IX. SUMMARY OF RESULTS ...................................................................................................45
X. RECOMMENDATIONS ........................................................................................................48
ANNEX 1: HS CODES FOR EMCD-RELATED ELECTRICAL PRODUCTS ...............................50
ANNEX 2: ASSUMPTIONS ...........................................................................................................57
ANNEX 3: TABLES OF CALCULATIONS ....................................................................................58
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 5I. EXECUTIVE SUMMARY
1
Policy Context: In June 2014, Georgia signed both an Association Agreement (AA) and an agreement to establish a
2
Deep and Comprehensive Free Trade Area (DCFTA) with the European Union (EU). These are important steps in
Georgia’s EU accession process. As part of the EU accession process, Georgia committed to gradually approximate
its legal framework and institutional arrangement to the EU regulatory practice. The AA came into force in July 2016,
while the DCFTA was fully enacted in 2014.
The DCFTA outlines fundamental principles related to trade with the EU, including the removal of trade tariffs and the
reduction of technical barriers to trade (TBT). The provisions related to TBT are discussed in Chapter 3 of the
3
DCFTA. Additionally, Georgia must gradually approximate the EU’s technical regulations, institutional arrangements,
and conformity assessment procedures to ensure products placed on the market comply with EU safety requirements.
Within eight years of entering the DCFTA into force, Georgia must approximate 21 EU Directives related to the
4
technical standardization and accreditation of industrial products (see Annex III-A of the AA ). Guidelines for
approximating the EU’s technical regulations for standardization and metrology, including essential safety and
regulatory requirements that products must satisfy to meet EU standards, are provided in the EU’s New Approach
Directives (NAD) or, more recently, the EU’s New Legislative Framework (NLF) measures.
5
Among those directives is EU Directive 2014/30/EU “on the harmonization of the laws of the Member States relating
to electromagnetic compatibility,” commonly referred to as the Electromagnetic Compatibility Directive (EMCD), which
ensures the protection of telecommunication systems, electrical networks, and other electrical apparatus against
electromagnetic disturbances caused by the operation of electrical appliances.
The EMCD applies to any electrical or electronic equipment that either emits electromagnetic radiation beyond normal
6
limits or is adversely affected by such radiation from a separate source. Typically, the EMCD applies to equipment
containing electronic components, including remote controls.
The EMCD defines essential requirements and conformity assessment procedures for electrical apparatus and fixed
installations to ensure electromagnetic compatibility and protection from interference caused by the electromagnetic
emissions of electric apparatus and fixed installations. According to the EMCD, electrical equipment placed on the
market should not cause electrical disturbances and should be protected against electromagnetic disturbances
caused by the operation of other electric apparatus.
Georgia must approximate the EMCD by 2022, which includes:
Developing regulations regarding EMCD-related products
Ensuring market surveillance and customs control
Developing the required infrastructure, particularly testing, accreditation, and metrology capabilities
Developing technical facilities with the support of the EU
Building the human resources capability necessary for market surveillance and the standardization process
During the EMCD approximation process, it is important to increase the awareness of local manufacturers and
importer companies to the EMCD’s requirements, as well as engage stakeholders in drafting and adopting technical
regulations and relevant sublegal acts.
7
Alongside the EMCD, Georgia must also approximate EU Directive 2014/30/EU “on the harmonization of the laws of
the Member States relating to the making available on the market of electrical equipment designed for use within
certain voltage limits,” commonly referred to as the Low Voltage Directive (LVD), which applies to electrical products
that operate between certain voltage limits. Domestic electrical appliances make up a large group of LVD products,
but the LVD extends to several other electrical products, including cables, office equipment, and electric power tools.
1
An Association Agreement (AA) is a bilateral agreement between the EU and a third country, which is fundamental to the EU accession process.
2
http://www.dcfta.gov.ge/en/agreement
3
Ibid
4
Source: https://eur-lex.europa.eu/legal-content/en/TXT/PDF/?uri=CELEX:22014A0830(02)
5
EU Directive 2014/30/EU, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0030.
6
The equipment functioning of which in its intended environment might cause electromagnetic interference and disturbance in functioning of other
electrical equipment and/or fixed installations operating in the same environment
7
EU Directive 2014/35/EU, https://eur-lex.europa.eu/eli/dir/2014/35/oj.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 6Some electrical products are covered by both the EMCD and the LVD.
Regulatory Objectives: Georgia’s primary aims in seeking to fully align its regulatory system for electrical products
with that the relevant EU directives are as follows:
• Regulating the electromagnetic compatibility of equipment
• Requiring equipment sold on the local market to be electromagnetically compatible
• Providing protection against electromagnetic disturbances
• Creating an acceptable electromagnetic environment in which equipment can function as intended
Stakeholders: The stakeholders who will be affected by the new regulations are divided into four groups:
Consumers: EMCD-compliant electrical products are protected from electromagnetic risks, but may not be
protected from other safety risks. Consumers can assume EMCD-compliant electrical products will not be
affected by electromagnetic emissions from other electrical goods, but the adoption of EMCD-compatible
technical requirements will not necessarily increase the safety of electrical products. Benefits of the EMCD
are difficult to quantify, but should be mentioned in the analysis. A price increase on electrical products is an
expected impact of the regulation. After the EMCD technical requirements are imposed, electrical products
that fail to meet the essential requirements defined under the EMCD (the “EMCD requirements”) will be
eliminated from the market and replaced by EMCD-compliant products. As a result, the market price of
electrical products is expected to increase, and this increase will be borne by consumers.
National Manufacturers: Manufacturers of electrical products in Georgia will be required to demonstrate
compliance with EMCD requirements by directly applying EU harmonized standards to the production of
electrical products or by other means chosen by the manufacturers. To comply with EMCD requirements,
manufacturers will be required to test their electrical products against EMCD-related risks, draft technical
documentation, and introduce internal production controls. Manufacturers that already produce EMCD-
compliant electrical products may still need to make minor changes to their production processes. Most
manufacturers will need to upgrade their production technology to comply with the EMCD standards.
Import Companies: Import companies must demonstrate that electrical products they import into Georgia
are EMCD compliant, but the importers will not be required to conduct EMCD testing. To demonstrate
EMCD compliance, importers only need to ensure manufacturers provide product technical documentation.
If a manufacturer is unable to demonstrate its products comply with EMCD requirements, the importer will
not be allowed to import that manufacturer’s products into Georgia. In such cases, the importer will need to
switch to another manufacturer, which may cause an increase in the price of imported electrical products.
Government: The State of Georgia should prepare draft legislation, develop national quality infrastructure
(NQI), and strengthen the capacity of market surveillance bodies to ensure EMCD enforcement.
From October 2018 to December 2018, consultations were held with all stakeholder groups. The following influence-
interest matrix categorizes stakeholders based on their impact on, and interest in, the EMCD approximation process:
Table 1: Influence-Interest Matrix
LOW INFLUENCE HIGH INFLUENCE
LOW INTEREST Consumers of electrical products Not indicated
HIGH INTEREST National manufacturers of electrical products Ministry of Economy and Sustainable
Development (MoESD)
Importers of electrical products
Market surveillance body (Undefined)
Georgian Accreditation Center (GAC)
Georgia Standards and Metrology Agency
(GEOSTM)
Challenges: EMCD approximation will be challenging in Georgia as no equivalent technical regulations currently exist
within the country, which means no information exists about the incidence of electromagnetic disturbances related to
the operation of electrical products. Due to absence of such data, it will not be possible to get precise estimates on the
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 7market share of electrical products that do not comply with EMCD requirements, nor will it be possible to define the
impact non-EMCD-compliant electrical products have on the current electromagnetic environment of the country.
Developing EMCD-compliant technical regulations and a national quality infrastructure (NQI) will be challenging for the
State of Georgia. On the one hand, the state must be careful to avoid complications related to trade with electrical
8
products. On the other hand, the NQI must ensure proper market surveillance and law enforcement.
The technical regulations Georgia develops should not create artificial trade barriers or alter the free movement of
goods with the country’s main trading partners. Georgia imports more than half of its electrical products from China
and Turkey, where it can reasonably be assumed that most, if not all, imported products that do not have Conformité
Européenne (CE) markings (or an equivalent conformity marking) could be replaced by CE or other conformity-
marked products from the same countries. However, the same cannot be said of the roughly 34% of electrical product
imported into Georgia from other countries (e.g., Ukraine and Russia) where CE or other conformity-marked products
are significantly less available; thus, the tight EMCD requirements may inadvertently restrict imports.
Georgia’s development of an NQI is crucial to support law enforcement processes. Some progress was made in
developing NQI within the last year, and this progress is ongoing. The GAC and GEOSTM are gradually developing
their capacity. GAC already developed and implemented accreditation schemes in accordance with the International
Organization for Standardization (ISO). Since 2017, GAC has been a signatory to the European Cooperation for
Accreditation’s bilateral recognition agreement related to testing and calibration laboratories, certification and
inspection bodies. Additionally, GEOSTM actively cooperates with international standardization bodies, and three
GEOSTM laboratories have maintained international recognition since 2014.
However, Georgia faces several challenges to the development of NQIs. Currently, no market surveillance body is
9
assigned to conduct supervision of electrical products that fall under the EMCD’s scope . Moreover, existing
accredited laboratories do not have the required capacity to conduct EMCD testing on electrical products. Only the
laboratory for the Georgian TV-Radio Center tests electrical equipment against the electromagnetic emissions from
other electrical products, and this laboratory only measures the impact of electromagnetic emissions on people. The
effects of electromagnetic interference on the performance of electrical products is not tested in Georgia. Investment
to develop local testing laboratories will be required to ensure compliance with EMCD technical requirements.
The EMCD will be a burden for local manufacturers who will be required to demonstrate their electrical products
comply with the EMCD’s electromagnetic compatibility requirements before placing them on the market. It must be
noted that the EMCD, in general, provide two methods by which manufacturers can demonstrate compliance with
EMCD requirements:
By applying EU harmonized standards to the production of electrical products
By using other means chosen by the manufacturer to demonstrate that its electrical products conform to the
EMCD requirements (i.e., legislation also provides some choice on the conformity assessment system)
Regardless of the option manufacturers choose, most will incur large expenses to comply with the new EMCD
technical requirements. Many small and medium-sized enterprises (SME) do not have the technical and financial
capacity to upgrade their electrical products or production technology to comply with the EMCD requirements.
It is important to note that EMCD approximation will not necessarily require Georgia to create a technical regulation
model that is identical to the EU model. Some legislative flexibility is allowed, and Georgia is free to select the best
policy approach to satisfy EMCD requirements.
Also, it should be taken into account that EMCD approximation will not be sufficient to create an internal market
between the EU and Georgia. The EU has other regulatory requirements for electrical products that are covered by
other technical directives. However, EMCD approximation will be step forward in developing EU-compliant technical
regulations and reducing technical barriers to trade.
Policy Options: The two policy options considered in this regulatory impact assessment (RIA) are:
Option 1: Baseline scenario — Make no changes to the current technical regulatory framework:
Leave electrical products under-regulated. The baseline will be used as a benchmark to assess the impact
of EMCD approximation.
8
Market surveillance body, testing laboratories, conformity assessment bodies and other institutions engaged in the process
9
Source: Communication with Ministry of Economy and Sustainable Development
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 8 Option 2: Adopt a new regulatory system for electrical products that fully conforms with EU
requirements defined under EMCD, includes enhance enforcement mechanisms and provides
assistance to manufacturers and stakeholders: This option considers that by 2022, all electrical products
that fall under EMCD scope and are manufactured domestically or imported into Georgia must comply with
EMCD requirements.
Expected Impact: The introduction of new technical regulations will affect four stakeholder groups:
manufacturers, importers, consumers, and the state. The estimated total present value of the costs
associated with the introduction of new technical regulations ranges from USD 58 million to
USD 297 million. The size of the impact is condition dependent, with the primary variable being the
efficiency of the law enforcement process. The largest portion of costs will result from a decline in the
consumer surplus due to the expected price increases on electrical products. The estimated cost of
consumer surplus decline ranges from USD 52 million to USD 276 million. The decline in consumer surplus
will depend on the size of the market price increase on electrical products. If the market price of electrical
products increases by 5% or less, the associated costs related to the introduction of technical regulations
will be lower than USD 52 million.
However, consumers will benefit from the reduced electromagnetic interference and improved performance of
electrical products. These positive effects of introducing new technical regulations cannot be estimated in quantitative
terms due to the lack of data. The size of these benefits will be dependent on efficient market surveillance that
prevents the placement of nonconforming electrical products into the Georgian market.
Local manufacturers producing electric products that conform to EMCD requirements will benefit from fair competition.
Currently, due to the absence of technical regulations, cheap, nonconforming imported electrical products are placed
on the market. Therefore, with the introduction of new technical regulations, local manufacturers whose products
conform to EMCD requirements will no longer have to compete with cheap nonconforming imports.
Import substitution capacity cannot be quantified because there is no precise data on the market share of
nonconforming electrical products. However, it should be mentioned that imported products from countries at a high
risk of nonconformity comprise around 34% of total electrical product imports into Georgia. After the new technical
regulations are introduced, nonconforming electrical products will be eliminated from the market, and local
manufacturers will have opportunity to increase their market share by replacing those nonconforming electrical
products with the EMCD-compliant products they manufacture. The benefits manufacturers will gain from import
substitution will depend on their production capacity and the competitiveness of the local market.
Small manufacturers that do not produce EMCD-compliant products will be forced out of the market if they do not
have enough technical and financial capacity to upgrade their production technology to comply with the new technical
regulations. However, such manufacturers only comprise a small percentage of the market, and their nonconforming
electrical products will be easily replaced by EMCD-compliant products from other manufacturers or import
companies. The losses of small firms that will leave the market will be offset by benefits of those firms which will take
their share in the market; overall, the net impact of closing down small enterprises will be zero.
The impact of the new technical regulations on import companies will vary. Importers will be required to provide
technical documentation for the electrical products they import that demonstrates the products conform to EMCD
requirements. Importers who already deliver EMCD-compliant products to Georgia will likely not be significantly
affected by the new technical regulations, but importers who deliver nonconforming electrical products will be greatly
affected as they will be forced to switch to different manufacturers that produce EMCD-compliant products.
Furthermore, importers who must drop manufacturers that produce nonconforming electrical products will need to
increase the prices of their imported goods to offset the cost of the manufacturer change and may lose market share
to competitors who locked in EMCD-compliant manufacturers before the new technical regulations went into effect.
Ultimately, the extent of benefits that result from the new technical regulations will largely depend on the effectiveness
of market surveillance and law enforcement. Georgia must strengthen its NQI to ensure efficient coordination between
government institutions and market participants, which will reduce the administrative burden caused by market
monitoring, as well as prevent nonconforming electrical products from entering the Georgian market.
Mitigation Measures to Increase Benefits and Reduce the Cost of Regulation: As previously mentioned, small
manufacturers will be forced out of the market if they do not have the capacity to upgrade their production systems to
conform to the new technical regulations. Even though such manufacturers do not make up a large portion of local
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 9production, it is important to provide SMEs with technical assistance and other support to help them survive the
transition to the new technical regulations. Moreover, strengthening the capacity of SMEs will increase the
development of local production. SMEs that currently cannot provide high-quality imported electrical products will have
an opportunity to become more competitive and produce better quality EMCD-compliant electrical products
manufactured in Georgia. Need-based support schemes can be developed with the help of donors and allocations in
the state budget. As a reasonable estimate, two days of training with a suitably qualified expert would be required to
educate manufacturers on how to judge whether their nonconforming electrical products can be improved and develop
a reasonable cost estimate for the improvements, along with 10 to 15 days of individual technical assistance.
Stakeholders should be informed about upcoming changes so they can start preparations well in advance.
Additionally, it is crucial to engage stakeholders in the regulatory development process since they can help identify
risks, as well as develop and apply mitigation measures before the enactment of the new technical regulation.
Most large manufacturers only need to make minor changes to their technology or administrative processes to adjust
to the new technical requirements. Nonetheless, reasonable time should be provided to large manufacturers before
the regulations come into force so they can get detailed information about the new technical requirements, make
required changes to their production processes, and sell any nonconforming electrical products left in stock.
EMCD testing is another critical area for development. Currently, there are no laboratories in Georgia with the capacity
to conduct EMCD testing; thus, in the short term, local manufacturers will need to have EMCD testing completed
abroad, which will be costly and time consuming. As the production of electrical products is not big in Georgia, in the
short term, local laboratories will refrain from investing in EMCD-related laboratory equipment. In the long term, it is
important to develop local laboratories that can provide EMCD testing services at the local level.
As previously mentioned, the scale of benefits will be dependent on effectively implementing the new technical
regulations and preventing the placement of nonconforming electrical products on the market. Since the market size is
large, it will be impossible to inspect all electrical products; thus, there will always be some risk that nonconforming
electrical products will be sold. Consumer engagement in the market surveillance process will help prevent
nonconforming electrical products from reaching the market. Consumers should be informed about how to recognize
nonconforming electrical products and encouraged to report any incidence of electromagnetic interference caused by
nonconforming electrical products to market surveillance bodies.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 10II. PROCEDURAL ISSUES AND CONSULTATION OF
INTERESTED PARTIES
The RIA on the EMCD was implemented from October 2018 to May 2019. Stakeholders and industry experts were
actively engaged in the preparation of the RIA. Additionally, consultations were held with representatives of Governing
for Growth (G4G), MoESD, and its agencies GEOSTM and GAC. Furthermore, local manufacturers and import
companies were interviewed to help the RIA developers gain an understanding of the current situation, identify
challenges, and select policy options for evaluation.
Development of the RIA was divided into five key stages:
Drafting the assessment methodology and determining the availability of data
Data collection
Data analysis
Stakeholder discussion
Report finalization
Initial work on the RIA was conducted from October 2018 to November 2018. Meetings were held with the G4G
project team and representatives of MoESD to gain an understanding of the current state and identify policy
objectives. In parallel, desk research was conducted to evaluate the accessibility of existing data for analysis.
Based on the information obtained from invited experts at these consultation meetings, the study methodology was
developed and data collection strategy defined. The G4G project team agreed upon the proposed methodology.
The next phase of the project was devoted to the collection of data. Secondary data was requested from the National
Bureau of Statistics (GEOSTAT) and the Georgia Revenue Service (GRS). Also, meetings were held with GEOSTM
and GAC to acquire necessary data for RIA analysis. The most important aspect of the data collection process were
interviews with national manufacturers and import companies that will be affected by the new technical regulations.
The contact details of local manufacturers and importers of electrical products were obtained from GEOSTAT. The
selected companies were interviewed through structured questionnaires to assess their readiness to adapt to the
upcoming regulatory changes and measure the potential costs associated with such an adjustment.
Collected information was analyzed and the possible impacts of Policy Option 1 were assessed against the baseline
scenario. The results of the analysis were shared with the G4G team, and necessary amendments were made to RIA
based on their feedback. The consultations with G4G and state representatives, including MoESD and its related
agencies were held from February 2019 to March 2019.
In March 2019, a stakeholder meeting was held with local manufacturers and import companies, along with
representatives from the Georgian National Communications Commission (GNCC), GEOSTM, GAC, MoESD, and the
G4G project team. The objective of the meeting was to introduce the EMCD requirements to local manufacturers and
importers of electrical products, as well as present the preliminary RIA results. During the meeting, participants
expressed their opinions on proposed mitigation measures to reduce the potential negative impact of the regulation.
Feedback from stakeholders was taken into account when developing recommendations to mitigate the negative
impact of adopting the EMCD requirements. These recommendations were developed with the active engagement of
standardization and RIA experts. Furthermore, consultations with G4G and MoESD agencies were conducted during
April 2019 to design a realistic approach for mitigating the negative impacts and risks of regulatory changes.
In addition, consultations with accredited laboratories were conducted to assess their capacity for testing of product
samples in accordance with the EMCD requirements.
May 2019 was devoted to the finalization of the RIA report and development of the recommendations.
The final results were shared with the G4G project team and MoESD representatives for feedback. Necessary
amendments were made based on the comments received from these stakeholders.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 11A. DATA COLLECTION AND INFORMATION USED
The data for the analysis was collected from different sources. The official databases of GEOSTAT and UN Comtrade
were used to obtain data about local electrical product production trends and international trade statistics. Additional
trade statistics on EMCD-related products were also requested from GRS.
A desk review of existing documents, including similar RIA documents for other countries, was conducted.
Additionally, information published on the official websites of MoESD, GNCC, GEOSTM, and GAC was used to map
current institutional and legal arrangements related to technical regulations for electrical products.
Consultations with MoESD, GEOSTM, and GAC were conducted to understand their potential roles and functions
after EMCD approximation, evaluate their current capacity, and understand what resources they need to update their
production systems after EMCD approximation. Furthermore, interviews with local manufacturers and import
companies were held to assess their readiness to meet the new technical requirements.
It should be noted that the EMCD only regulates risks related to electromagnetic disturbances caused by
nonconforming electrical products. The safety risks of such products are covered in the LVD. In other words, the
EMCD concentrates on risks related to the functioning of electrical products and aims to ensure the proper
performance of electrical equipment. The expected benefits of EMCD approximation include a reduction in the number
of nonconforming electrical products on the market that cause electromagnetic disturbances and improvements in the
performance of other electrical equipment. However, as there were no EMCD-related regulations in Georgia prior to
the new technical regulations, no information is available to measure the share of nonconforming electrical products
on the market and their negative impact on the performance of other electrical equipment. Consequently, it is
impossible to estimate the benefits brought by EMCD approximation in quantitative terms.
Table 2: Data and Information Sources
DATA AND INFORMATION METHODS USED AND SOURCES
LOCAL PRODUCTION OF ELECTRICAL PRODUCTS GEOSTAT
LOCAL MANUFACTURERS AND IMPORT GEOSTAT
COMPANIES
EXPORT AND IMPORT OF ELECTRICAL PRODUCTS GEOSTAT, UN Comtrade, GRS
INSTITUTIONAL ARRANGEMENT AND EXISTING Reviews of official websites of MoESD, GNCC, GAC,
TECHNICAL REGULATION GEOSTM, as well as consultations with their official
representatives
STANDARDS RECOGNIZED BY GEORGIA GEOSTM
ACCREDITED TESTING LABORATORIES Consultation with GAC and a review of the official GAC
website
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 12B. CONSTRAINTS AND LIMITATIONS
Performing a full RIA is notoriously difficult, and to do so in Georgia where data and other sources of information are
limited makes the challenge even more difficult. The approach taken seeks to quantify the overall costs and benefits of
new regulatory provisions, as well as provide qualitative benefits. However, given the uncertainty and variability of the
data over time, even the quantified benefits should be considered as order-of-magnitude estimates only.
Previously, Georgia had no technical regulations or market surveillance to control EMCD-related risks of electrical
products. Consequently, no statistics exist about the share of nonconforming electrical products on the market, the
incidence of electromagnetic interference causing disturbances in product functionality, and the negative impact of
such disturbances on electrical equipment performance. This lack of data limits RIA’s ability to estimate the benefits of
EMCD approximation, although the benefits were assessed in qualitative terms and considered to be positive.
A national-level analysis of the costs and benefits of the new technical regulations is a reasonable starting point for
RIA, but it is necessary to go further than this and attempt to look at the costs that will be incurred by individual
manufacturers in Georgia and the State of Georgia (i.e., the ministry, state organizations, and agencies). National
manufacturers will bear the greatest cost burden as a result of the new technical regulations, and they may not always
directly benefit from these changes. At the national level, benefits will likely outweigh costs, but it is important for RIA
to assess whether individual Georgian manufacturers will be able to absorb the costs associated with implementing
the new technical regulations, as well as the consequences if manufacturers are unable to bear these costs.
Currently, national manufacturers are unaware of the EMCD requirements they will need to fulfill after EMCD
approximation. Consequently, these manufacturers will find it difficult to estimate the potential costs to upgrade their
electrical products or production technology to satisfy the new technical regulation. To assess the potential costs for
manufacturers, the share of initial investments in annual turnover was used as a proxy. However, the amount of costs
will vary based on the size of each manufacturer and the type of technology used in the production process. Due to
data limitations, this difference was not captured in the analysis.
The financial burden on the State of Georgia will be relatively lower than the costs imposed on manufacturers and
importers, but the financial burden on the state is a lot more important. Experience with the rollout of such regulations
in many other countries indicates two things. First, importers and national manufacturers will not voluntarily implement
a new regulatory system, thus implementation will require the state to raise public awareness, provide manufacturers
and importers with technical assistance, and develop effective enforcement mechanisms such as market surveillance
and customs controls. Second, without these state-sponsored activities the new regulatory system will see very low
levels of adoption and, as a consequence, most assumed benefits will not be achieved.
Currently, Georgia has no market surveillance body to monitor the compliance of manufacturers and importers with
EMCD requirements. This limits the state’s ability to identify capacity development needs for effective market
surveillance and enforcement of the new technical regulations. The state will need to strengthen the technical and
human resources capacity of market surveillance bodies, regardless of whichever state agency is selected for market
surveillance of EMCD-related products.
This RIA does not, in itself, justify or reject the introduction of new regulations. Instead, it attempts to quantify and,
where quantification is not possible, qualify the likely costs and benefits of adoption under different scenarios. If these
assumptions prove to be misplaced (i.e., if the state does not invest in public awareness, technical assistance for
manufacturers and importers, and develop effective enforcement), then the estimated benefits will not be achieved.
Several important factors that may affect the assumptions include:
1. Most developed countries have technical regulations to ensure the electromagnetic compatibility of their
products. Moreover, EMCD approximation is an obligation taken under the DCFTA agreement, and the
introduction of the new technical regulation will be a step forward in the EU accession process.
2. Potential long-term benefits of EMCD approximation include reduced technical barriers to trade with the EU,
improved electrical product performance due to reduced electromagnetic interference, and an increase in
fair competition after the elimination of nonconforming electrical products. These benefits are difficult to
quantify, but they support the assumption that long-term benefits will outweigh the costs of the regulation.
3. These benefits will only occur if the state takes the steps necessary to ensure the effective implementation
of the new technical regulation and strengthen local NQI. Otherwise, the positive benefits will be moderate.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 13III. PROBLEM DEFINITION
A. POLICY CONTEXT
Under the DCFTA agreement signed in 2014 between the EU and Georgia, the Government of Georgia (GoG) took an
obligation to approximate the EU’s new and global approach to EMCD by 2022. Georgia’s commitment includes
approximating the technical regulation, institutional arrangement, and conformity assessment procedures of electrical
products in order to reduce technical barriers to trade. The EMCD includes requirements that market operators and
the state must comply with to protect electrical equipment and fixed installations from electromagnetic disturbances
caused by the operation of nonconforming electrical products.
The new technical regulation will impose obligations on manufacturers, importers, and distribution companies to apply
measures that ensure electromagnetic emissions produced from their electrical products will not affect the functionality
of other electrical appliances. In addition, the EMCD requires electrical equipment and fixed installations to be immune
from electromagnetic disturbances. Fulfillment of these requirements will ensure the security of electrical equipment.
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Georgia’s Ministry of Economy and Sustainable Development (MoESD) will be responsible for the approximation of
the EU’s New Approach Directives (NADs). However, no state agency is currently in charge of market surveillance.
MoESD is tasked with developing technical regulations and procedural documents to ensure both imported and locally
manufactured electrical products have access to the domestic market, conform to the new technical regulation, and
conform to the legal packages within the European Economic Area (EEA).
Georgia did not adopt technical regulations for electrical products prior to this year. Consequently, there is no market
surveillance, and manufacturers and importers are free to choose the standards they will apply in production. No
requirements are imposed on manufacturers or importers to demonstrate their electrical products conform to EMCD
requirements or protect against electromagnetic disturbances caused by the operation of other electrical equipment.
The introduction of a new regulatory framework to demonstrate conformity with EMCD requirements will obviously
cause market difficulties, especially for Georgian manufacturers that currently do not produce EMCD-compliant
products. Those manufacturers will need to adjust their production technology in order to demonstrate compliance
with the new technical regulation. The associated costs required to upgrade this technology will be large. Most small
manufacturers will not be able to bear these costs and will most likely will be forced out of the market.
The development of an EMCD-compatible regulatory framework and its efficient implementation will be challenging.
New rules should be drafted, but those rules should not impose additional restrictions on imported EMCD-compliant
products, particularly with Georgia’s main trading partners — China, Turkey, the United States, and Germany. Actions
should be taken to ensure manufacturers and importers comply with the new technical requirements; otherwise, the
potential benefits of EMCD approximation may be reduced or eliminated. It is important to assign a single state
agency the responsibility of market surveillance of electrical products covered by the EMCD. In addition, the state will
need to strengthen the capacity of government law enforcement agencies to ensure compliance with the law.
In order to capture challenges related to the EMCD approximation process and develop effective solutions, the GoG,
with the support of USAID’s G4G program, conducted a RIA to evaluate the influence of EMCD approximation on the
Georgian market and identify mitigation measures to avoid negative impacts on local market players, including
manufacturers and import companies.
10
The Georgian government’s strategy and program for standardization, accreditation, conformity assessment, technical barriers and
metrology. See the link http://www.dcfta.gov.ge/en/implementation last accessed on February 26, 2019.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 14B. EMCD OBJECTIVES AND REQUIREMENTS
The general objective of the EMCD is to create compatible electromagnetic environments that ensure the proper
performance of electrical equipment. It should be noted that the EMCD concentrates on the capacity of electrical
products to function free of electromagnetic disturbances. The EMCD does not cover the safety aspects of electrical
products with respect to people, domestic animals, and property. The electrical and mechanical safety aspects of
electrical products are covered by the LVD.
EMCD SCOPE
The scope of the EMCD covers electrical products that generate electromagnetic emissions that may cause
electromagnetic disturbances that interfere with the performance of other electrical equipment.
11
There are four types of electrical products covered under the EMCD :
Electric Apparatus: Finished appliances and/or appliance combinations intended for end users that are
capable of generating electromagnetic disturbances or capable of being affected by electromagnetic
disturbances generated by other electric equipment.
Mobile Installations: A combination of electrical apparatus intended to move and operate in different
locations (e.g., LED videowalls).
Fixed Installations: A combination of electrical apparatus and other electrical devices that are installed and
intended to operate permanently at predefined locations (e.g., industrial plants, power plants, small residential
electrical installations, telecommunication networks).
Inherently Benign Products in Terms of Electromagnetic Compatibility: Electrical products unable to
generate electromagnetic emissions at a high enough level to cause significant degradation in the existing
electromagnetic environment or interfere with the normal operations of radio and telecommunication devices.
Electric apparatus and fixed installations that after EMCD assessment are considered to be inherently benign are
excluded from the requirements imposed by the EMCD. In addition, electrical equipment that generates
electromagnetic emissions but is otherwise covered by other EU directives is also excluded from the EMCD scope.
11
EU directive 2014/108/EU (EMCD), “Guide for the EMCD,” December 2018.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 15Product groups excluded from the EMCD scope are as follows:
12
Table 3: Products Excluded from the EMCD Scope
Products Considered Inherently Benign and Excluded from the EMCD
Cables, cabling, and cable accessories Passive antennas
Equipment containing only resistive loads without any Electromagnetic relays without active electronic
automatic switching devices (e.g., domestic heaters, components
thermostat, and fans with no remote control) Electromagnetic locks without active electronic
Batteries and accumulators without active electronic circuits components
Corded headphones, loudspeakers without amplification, Cathode ray tubes
and guitar inductive sensors without active electronic parts High-voltage equipment that may cause possible
Pocket lamps, including those containing LEDs, without disturbances due to localized insulation stresses that
active electronic circuits result from the aging process; are under the control
Induction motors without electronic circuits of other technical measures included in non-EMCD-
Quartz watches without additional functions (e.g., radio related product standards; and do not include active
receivers) electronic components such as high-voltage
Protection equipment that only emits transitory disturbances inductors or transformers
(i.e., short duration disturbances during the clearing of a Other products not listed above but considered
short-circuit fault or an abnormal situation in a circuit) and inherently benign after an EMCD assessment
does not include active electronic components (i.e., fuses) Custom-built evaluation kits
or circuit breakers without active electronic components Equipment designed by request for specific
Home and building switches that do not contain any active consumers and solely used for research and
electronic components development projects
Products Regulated by Other EU Directives
TYPE OF PRODUCT REGULATION THAT COVERS THE PRODUCT
Radio equipment and telecommunications terminal equipment EU Directive 2014/53/EU, known as the Radio
Equipment Directive (RED)
13
Aeronautical products EU Regulation N2018/1139
Motor vehicle equipment EU Regulation EC 661/2009
Medical devices, including active implantable medical devices EU Regulation 2017/745 on medical devices
and in vitro diagnostic medical devices
EU Regulation 2017/746 on in vitro diagnostic medical
devices
14
Marine equipment EU Directive 96/98/EC
15
Agricultural and forestry tractors EU Regulation 2019/519
16
Two or three-wheeled motor vehicles EU regulation 2019/129
Products Only Excluded from the EMCD for Immunity Purposes
TYPE OF PRODUCT REGULATION THAT COVERS THE PRODUCT
Measuring instruments EU Directive 2014/32/EU
Manual weighing instruments EU Directive 2014/31/EU
12
Guide for the EMCD, December 2018, official website of EU Commission, https://ec.europa.eu/commission/index_en.
13
Replaces EU Regulation EC N216/2008.
14
Replaces EU Directive 2014/90/EU on marine equipment.
15
Replaces EU Regulation N167/2013.
16
Replaces EU Regulation N168/2013.
USAID | GOVERNING FOR GROWTH (G4G) IN GEORGIA
DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 16ESSENTIAL EMCD REQUIREMENTS
The EMCD defines essential requirements to ensure electrical products are electromagnetically compatible and
protected from electromagnetic disturbances (the “EMCD requirements”). The EMCD does not define technical
solutions to meet EMCD requirements. It is up to manufacturers to find solutions that meet EMCD requirements.
The EMCD allows manufacturers to freely select technical solutions that address the risks revealed by the EMCD
assessment of their electrical products. Three ways a manufacturer can ensure conformity with EMCD requirements:
Apply the EU Harmonized Standards: A manufacturer can apply EU harmonized standards for all EMCD-
related risks, then conduct sample testing and provide the test reports to demonstrate conformity. The
manufacturer must compose technical documentation and a declaration of conformity and place a CE mark on
the product. If it is not possible to affix a CE mark on the product, place the CE mark on the product package.
Use Its Own Technical Solutions: If a manufacturer does not apply EU harmonized standards, it must
provide documentation on the technical solutions used to mitigate EMCD-related risks.
Apply a Combination of the Above-Listed Methods: A manufacturer may apply a combination of its own
technical solutions (with documentation) and EU harmonized standards to mitigate the EMCD-related risks.
It should be noted that when EU harmonized standards are applied to address the EMCD-related risks, the
manufacturer benefits from the presumption of conformity; however, when EU harmonized standards are not applied,
the manufacturer must provide detailed justification that technical solutions were applied to meet EMCD requirements.
The EMCD conformity assessment is the sole obligation of manufacturers. The EMCD does not require third-party
certification to demonstrate the EMCD compliance of products. However, manufacturers are allowed to assign
authorized representative to conduct conformity assessments on their behalf.
Manufacturers in EU member states are obligated to put CE marks on their products to signal they are compliant with
EU essential requirements. But Georgia is not an EU member state; thus, its obligation is to approximate but not
harmonize its regulatory framework with the EU. It is not mandatory for manufacturers in Georgia to affix CE marks on
their products. However, manufacturers in Georgia should include labeling and technical documentation with their
products so consumers can easily observe that their products conform to EMCD requirements.
Affixing CE marks and drafting conformity declarations are not required for fixed installations. According to the EMCD,
fixed installations should be built in accordance with good engineering practice and justified by relevant technical
documentation. Good engineering practice involves building and operating fixed installations in a manner that ensures
electromagnetic emissions and radiation will not cause disturbances in the performance of other electrical equipment.
On the other hand, the EMCD requires a certain level of immunity for fixed installations, which means their operation
should not be disturbed by electromagnetic emissions generated by other electrical equipment. However, the electrical
components of fixed installations should conform to EMCD requirements.
Market surveillance should be carried out by predefined state authorities to ensure manufacturers and importers
comply with EMCD requirements. Market players must communicate with the market surveillance body and provide all
necessary information upon request. Manufacturers and importers must ensure their products are traceable over the
entire value chain. Information about manufacturers and importers must be placed on product packaging to enable the
market surveillance body to trace products and, in case of nonconformity, identify responsible parties.
The market surveillance body is in charge of ensuring manufacturers and importers fulfill obligations imposed under
the new technical regulation and that electrical products placed on the market conform to EMCD requirements. No
market surveillance is required for fixed installations due to their technical nature. If necessary, the market surveillance
body can review technical documentation or require product testing to ensure conformity with EMCD requirements.
In case the technical documentation or technical characteristics of products do not comply with EMCD requirements,
the market surveillance body can require manufacturers or importers to apply corrective actions, including making
necessary changes to technical documentation or withdrawing products from the market entirely.
Prior to the EMCD, Georgia had no technical regulations or market surveillance for electrical products. Introduction of
the EMCD will place new obligations on local manufacturers and importers. Strong coordination among stakeholders
is needed to strengthen the technical capacity of the market surveillance body and other relevant institutions. The
EMCD includes a transition period before it goes into force to provide manufacturers and importers with time to adjust
to the new requirements and market surveillance bodies time to strengthen their capacity to regulate the market.
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DCFTA POLICY PAPERS ON NEW APPROACH DIRECTIVES-ELECTROMAGNETIC COMPATIBILITY DIRECTIVE (EMC) 17You can also read
