Summary of the Comments Received on the Consultation Paper

D/30126

WORKING PAPER

DRAFT

Preliminary summary of the comments received on the consultation paper onthe advisability and feasibility of presenting a legislative proposal

enabling EFSA to receive fees for processing authorisation files

Introduction

In November 2006, SANCO published a consultation paper[1] on the advisability and feasibility of presenting a legislative proposal enabling EFSA to receive fees for processing authorisation files.51 contributions[2] were received, including 7 from the Member States.

One of the major aims of the consultation was to challenge stakeholders to reflect on two strategic issues – the identification of those liable to pay fees (all applicants[3], or only those with profits vested in the authorisation[4]) and theadvantages and disadvantages of charging fees.

The analysis of the contributions shows that thevast majority of the respondents do not support the establishment of fees and that a system for the collection of fees would be complex and difficult to put in place.Only three industry representativesand one retailer representative responded in favour of a fee-system. A few gave an indecisive reply, showing the complexity of the problem. On the other hand, 6 out of the 7 Member States that have responded are in favour of fees.

Two of the major difficulties foreseenby the respondents are based on the fundamentals of EU food legislation, namely: i)the authorisation procedures for certain foods or substances are mainly aimed at giving general approvals to the benefit of all operators and provide little proprietary data protection and, as a consequence,ii)the complexity of establishing a fee-system given the difficulty to identify those liable to pay fees. The contributions show a common line amongst the different sectors of the food and feed industries.

This document aims at providing an overview of the issues raised in the contributions received. The position of the 7 Member States who respondedare dealt with separately in the first paragraph below. The other parts of the documentdeal with the main issues raised by the otherrespondents, namely: specificity of EU food legislation concerning the marketing authorisations and the correlativedifficulty to compare EFSA to EMEA, high concerns about EFSA's independence, distortion of competition and risk for innovation, cost burden on SMEs, better regulation, duplication of fees when existing at the national level,EFSA's budget instability,timing and administrative burden of establishing fees.

Contributions from Member States

Only seven Member States commented on the consultation paper: Austria, Cyprus, France, Germany, Poland, SlovakRepublic, and UK.

The majority of these Member States are in favour of establishing fees. Only Poland is against, arguing that such a system would penalise the Polish companies compared to the multinationals.

The main arguments put forward by the Member States in favour of fees are the following:

- A more professional service;

- Prevention of ill-prepared applications;

- Enhancement of cooperation and synergy between EFSA and the national agencies;

- Harmonisation of the various Community procedures (EFSA/EMEA);

- Better security of adequate funding;

- Existing rules ensure EFSA's independence.

Despite their support for the establishment of fees, some Member States recognise the complexity of such an option by identifyingkey issues to be addressed.These are the following:

- An analysis sector-by-sector is necessary to determine in consultation with stakeholders if the establishment and amount of a specific fee does not prejudice the competitiveness of operators, is accepted by the sector concernedand takes into account the benefit for the applicants. In the same vein, it is argued that because of the additional costs and more administrative burdens for industry, an impact assessment is necessary;

- Any charging arrangements for and by EFSA should take into account other charging mechanisms (in particular payments to the Joint Research Centre in the field of GMOs and feed additives; fees already paid at national level in the field of plant protection products);

- The impact of fees on innovation and the competitiveness of individual businesses, especially SMEs, must be taken into consideration;

- The amount of fees should not exceed the cost of the risk assessment, but should also take into account the complexity of assessment, the benefits for the applicants and the public financing.

In relation to those liable to pay fees, twoMember States indicated that fees should apply only where the applicant becomes a particular beneficiary by virtue of protection of its data and intellectual property rights as specified in EU legislation.One of these Member States stressed that all generic approvals (positive lists) should be excluded from the payment of fees because it would be iniquitous to charge an applicant when a whole sector could benefit. A sector-by-sector approach is recommended.

Some Member States are in favour of all applicants paying a fee since it appears to be a fairer and simpler option. However, in this case, fees should be modest, remain affordable for SMEs and not act as a disincentive for innovation.

Finally, there are some mixed positions. Some comments made clear that more sectorial analysis is needed not all operators agree with fees; some agree with fees only when the applicant becomes a particular beneficiary). One MemberState(France) suggested the possibility of establishing an annual fee which all food chain operators would pay.

Comments from EFSA

EFSA's Management Board stressed that in its view, it is the decision making bodies (Commission, European Parliament and MemberStates) which will ultimately construct the financial system allowing EFSA to function. The source of the funding may not be an issue provided that a certain number of conditions, particularly in relation to the independence and accountability of EFSA are covered by the legislators.

Main arguments from stakeholders against the establishment of fees

It is important to note that there is a common line, with very few exceptions, against fees amongst the various sectors of the feed, food, biotech, plant protection products, animal healthand meatindustries. Farmer and consumer organisations are also opposed, as well as some retailers and representatives of small and medium-size enterprises.Despite their opposition, they also make concrete recommendations as to how the system could be established shoulda system of fees be put in place. Below is a summary of the main concerns and recommendations raised bythe various sectors:

Fundamentals of EU food legislation (generic authorisations)

Apart from three contributions, all the respondents from the industry are concerned by a possible proposal to allow EFSA to charge fees for processing authorisation files. Their main argument is based on the fundamentals of EU food legislation, i.e. that the legal framework imposing authorisation procedures for certain foods or substances used in the food chain is mainly aimed at giving general approvals to the benefit of all operators. It contains little protection of proprietary data and seldom offers exclusivity to the applicant. Below are some extracts from the position papers:

- Feed sector:Most of the feed additives presently listed in the EU register are generic substances. Substances protected either by a patent or a brand-specific approval are exceptional. Non-holder- specific authorisations would cost a fee for the applicant, whereas all other operators would benefit from the authorisation without having invested. Fees for holder-specific authorisations might be considered justified only if the holder has exclusive rights to exploit the authorisation.

- Food additives/enzymes: Food additives are subject to generic authorisations which may benefit all interested producers and protection by patents is in practice limited for food additives; a fee system could introduce a biased competition between generic products and holders specific products.

- Authorisation of nutritional substances: Substances are included in a positive list and can be used by all food business operators. There is no protection of proprietary data, nor exclusivity for the party that prepared the scientific work and submitted the dossier.

- Authorisation of claims:Most claims are included on a list and can be used by all food business operators. There is only limited protection of proprietary data.

- Novel foods: Although the marketing authorisation is granted to the applicant, the substantial equivalence provision enables competitors to enter the market with a similar product without having invested in the research,unlike the initial applicant. Moreover, there is no protection of data in this area. It appears from the recent consultation on the revision of the novel food legislation that the decision of a general nature could become the rule, rather than the exception.

- Food contact additives/food contact substances:The"positive listing" for food contact substances is generic, not proprietary to the company that filed the submission. The company filing the submission would support the cost of the application (including toxicity and migration data) and the EFSA fees without getting the full benefit of the investment because of the generic nature of the authorisation.

In relation to who should be liable to pay fees, most contributions conclude that if fees were to be established, they should only be envisaged when the applicant benefits from a legal protection (period of exclusivity). Even in the case of applicants benefiting from a legal protection, several respondents stress that the fees should be modest and specific measures should be in place for SMEs.

Several contributions stressed that applicants submitting dossiers in the framework of positive lists should not pay fees for the reasons mentioned above.

Doubts were expressed on the possibility to clearly identify beneficiaries with a determined period of exclusive use. Some respondents signalled that even if the applicant is well identified, the authorisation might be of benefit in the short term (generic authorisation), or in the medium term (specific authorisation) to all interested manufacturers. Several contributions point out that the establishment of fees, if envisaged, should be accompanied by legislative changes granting a determined period of exclusivity to the applicant.

Finally, only three respondents are in favour of option 4.1 of the consultation paper according to which all applicants should pay fees. They consider that it would be fairer and simpler.

In relation to the comments on the system of generic authorisations, several respondents consider that it is inappropriate to compare EFSA with EMEA:

Several respondents from the industry indicate that it would not be appropriate to look at EMEA's example when reflecting on the advisability and feasibility of presenting a legislative proposal enabling EFSA to receive fees for the following reasons:

- EMEA is very different from EFSA in terms of competence;

- As opposed to food law authorisations, medical product legislation includes clauses related to the protection of clinical pharmaceutical data;

- The high cost of fees in the field of medicinal products is compensated by the exclusivity granted which eliminates competition and offers pay-back of investments for the applicant.

Concerns about EFSA's independence

It is interesting to note that this argument is raised by almost all organisations (consumer organisations, retailers, farmers and the industry). They are concerned that if a system of fees is to be put in place the public perception of EFSA's independence might be challenged. Even if effective independence could be guaranteed, there would still be a perception issue for the public.The credibility of EFSA is considered as essential. In an EU centralised authorisation system, it is paramount that EFSA's scientific opinions are completely trusted by national bodies.

The financing of EFSA is a public responsibility

Some comments pointed out thatit is not the private sector's role to compensate the lack of public funding of an Authority that was established in order to protect public health. In their view, it is not for industry to plug a funding gap which has come about because of the development of pre-authorisation requirements.EFSA has a special role as scientific and independent adviser to the Commission. It is noted that in the current system, it is the Commission or MemberStates that require an EFSA assessment and not operators.

Distortion of competition and potential risk for innovation

Several contributions argued that operators might have more difficulty to accede to the markets if fees were established. Additional costs could disrupt the cost/benefit ratio and discourage operators from submitting authorisations files. This would be detrimental to innovation.

Some comments pointed out that the establishment of fees might distort competition since operators in third countries were not paying fees, but still could produce or use the authorised substances because of the generic EU authorisation system.

It was mentioned that in the case of exemption or reduction for SMEs, distortion would be created in the case of a large firm asking for an authorisation for a low volume or low margin product. In this case, it could also discourage firms from requesting authorisation and be detrimental to innovation.

Cost burden on small and medium-size enterprises

Concerns have been raised about the cost burden of fees on small and medium-size enterprises. A call for special attention to be paid to size and financial capacities of businesses was mentioned very often, several contributions support the setting up of exemption or derogation for small and medium-size enterprises. Several contributions pointed out that even if the authorisations in the food sector were granted for the whole of the EU market, very few SMEs benefited from such a centralised system of authorisation because most of them operate only in some Member States.

Not compatible with the better regulation approach

Some industry representatives consider that charging fees would be contrary to the current better regulation policy of the Commission. The addition of further financial burden is contrary to the Lisbon agenda, in particular considering that the cost of compliance with food law is already high. The Regulations recently adopted (claims and fortification) should have taken into account the increase of workload for EFSA in the impact assessments preceding them. Fees should not be established when the current public funding is supposed to be sufficient to cover the increase in EFSA's tasks.

The feed industry also points out that if fees were established in this sector, the rationale should be to provide for a single system of fees covering both the remuneration of JRC and EFSA since the same authorisations dossiers are concerned.

EFSA's budget instability

EFSA's budget should not be dependent on fees as the number of dossiers is unpredictable, may vary from year to year and may be an additional reason to decrease the EFSA budget.

Duplication process – Specific situation of the plant protection industry

The plant protection industry has concerns about the collection of fees by EFSA. In its opinion, it is a duplicative process given that it already pays substantial fees at the national level to the rapporteur MemberState carrying out the detailed evaluation work.

Timing and potential inefficiency of a fee-system

Some respondents stressed that consumers' trust in EFSA's opinions needs to be consolidated. In their view, three years of functioning is quite short in the life of an authority such as EFSA. If a system were to be put in place it could generate a disproportionate amount of administrative burden and all the benefit could go to "self-financing the system and no more".

Others indicated that the quality of the service would not be improved by the establishment of a fee system given that it is mainly an organisational matter.Some mentioned that EFSA's resources should now focus on ensuring a seamless dossier review and that the establishment of fees could be an unnecessary and hazardous diversion. A simplified or streamlined system of authorisations and/or a more efficient management of authorisation dossiers could advantageously replace a fee system.

Main arguments from stakeholders in favour of fees

Only three respondents from the industry and one retailer representative took a position in favour of the establishment of a fee-system.

The two main arguments are the following:

- No risk of reduction of EFSA's independence;

- No great additional burden, provided that it is modest and performance-linked.

Preliminary conclusions

Member States

It is early at that stage to draw conclusions on the position of the Member States given that only seven of them have responded. The issue of establishing fees for EFSA will therefore be re-opened for discussion at the meeting of the Standing Committee on 25 June 2007.

EFSA

EFSA's Management Board stressed that, as long as EFSA's independence and accountability to the community system are well considered, it is the decision making bodies (Commission, European Parliament and MemberStates) which will ultimately construct the financial systems with the budgetary authorities for EFSA to function.

Stakeholders

It appears from the analysis of the contributions received that the various sectors of the feed and food industry do not support the establishment of fees (option 5.1 of the consultation paper). Their main argument is based on the fundamentals of EU food legislation, which provides little protection of proprietary data and seldom offers commercial exclusivity to the applicants. On the contrary, the legal frameworkimposes authorisation procedures for foods and substances aimed at giving general approvals to the benefit of all operators.

For these reasons, the majority of the respondents insisted on the fact that, if fees were to be established, theyshould be limited tothe few cases where the marketing authorisation is granted to one specific authorisation holder (for example, EFSA's work on pesticide authorisations under Directive 91/414/EEC, GMOs, some feed additives, some claims and currently novel food). The products that are approved as generic, for use by more than one person or business, should not be subject to payment of a fee. This approach is very close to the one defended by two Member States.

Several organisations pointed out that if fees were to be envisaged in all sectors, they should be accompanied by major legislative changes granting a determined period of exclusivity to the applicant.

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[1]Available in DE, EN and FR at

[2] To be published soon at

[3] Option 4.1 described in the consultation paper.

[4] Option 4.2 described in the consultation paper.