Introduction.
In order to successfully expand overseas and to fully scale the sales of an overseas business unit, there is a limit to relying on mere distributors or small partners.
The key is to acquire local distributors who have a solid structure as a corporate organization with local annual sales of several hundred million yen and a sales team.
Through these distributors, products are distributed to retailers (retailers) and ultimately reach the hands of general consumers, forming a business flow.
In order to ensure this commercial flow, it is an absolute prerequisite to have a correct understanding of the "European Regulations" applicable in the European region and to have them cleared in advance. In fact, when discussing business with local companies, the status of compliance with "European regulations" is invariably questioned. If you are not well prepared, you risk losing credibility at that point and negotiations may collapse.
This article details the types of European regulations that companies seeking to expand overseas face, how to deal with them, and how to plan for long-term success.
Types of European Regulations
There are various types of European regulations, and the applicable rules vary depending on the product genre and industry. Below is a list of typical regulations.
1. CE Marking
CE Marking is a certification mark indicating that a product meets the safety, health, environmental protection, and other requirements of the European Union (EU). It is mandatory for many categories, including toys, medical devices, electrical products, and construction materials.
2. REACH Regulation (Registration, Evaluation, Authorization and Restriction of Chemicals)
REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) is a regulation on all chemical substances manufactured and sold within the EU. It applies to a wide range of products, from daily necessities to industrial products, and exporters are obliged to disclose information on chemical composition and register chemical substances.
3. RoHS Directive
RoHS (Restriction of Hazardous Substances) is a directive that restricts the use of certain hazardous substances in electrical and electronic equipment. It restricts the use of lead, mercury, cadmium, etc., and is considered as important as CE marking.
4. food-related regulations (e.g. EC 178/2002)
Exporting food products and supplements to Europe requires following a number of rules, including food safety regulations, labeling requirements, and traceability. Organic products and health foods are subject to even more detailed standards.
5. GDPR (General Data Protection Regulation)
Compliance with the GDPR, a privacy law, is essential for digital products and services and e-commerce site operations in Europe. It sets strict rules regarding data collection, storage, and provision to third parties.
Application, registration and certification process for European regulations
In order to sell a product on the European market, the following steps are required to prove compliance with the regulations as described above.
Identifying the regulations covered and organizing requirements
Identify the applicable European regulations for each product and clarify the necessary certificates and data.
Obtain testing and certification from a testing laboratory
Obtain product testing and certification as needed at a third-party public testing laboratory (e.g., Notified Body).
Preparation of Technical File (Technical File)
Technical documents summarizing product specifications, inspection results, risk assessments, use manuals, etc. will be prepared and ready to be submitted upon request by EU authorities.
Preparation of labeling and marking
CE mark, country of origin marking, precautions for use, and other necessary statements on packaging and product labels.
Appointment of an Authorized Representative
Non-EU companies are required to have a local European representative. The representative serves as a liaison with the authorities and is also responsible for dealing with problems.
European deregulation and renewal cycle
Once a European regulation is passed, it is not the end of the world. Regulations are regularly revised in response to political developments, environmental policies, and technological innovations. In recent years, the following developments have been particularly active
Strengthening Environmental Measures (Green Deal Policy)
The EU's policy toward carbon neutrality has led to stricter regulations for plastic products and requirements regarding the extension of product life cycles.
Increased scrutiny of digital products
New proposed regulations (such as the AI Bill) are emerging with respect to AI and IoT products, and operators need to be continuously informed.
Compliance with the UK's own rules (UKCA) after BREXIT
If the UK market is to be included, it is required at the same time to comply with its own marks and regulations, which are different from EU regulations.
Against this backdrop, a system is needed to continuously monitor local legal and regulatory trends and re-apply and re-register as necessary.
What happens if we fail to comply with European regulations?
If European regulations are disregarded, companies will be exposed to a variety of risks.
Product import injunctions and customs refusals
There are cases where products are caught in checks at European customs and the import of the goods themselves are refused.
Termination from distributor
Local partners take legal compliance very seriously. Non-compliance with regulations can lead to loss of trust and cause termination of business.
Fines and Litigation Risk
Violations of the GDPR, for example, can result in huge fines and class action lawsuits, which can have a serious impact on the survival of a company.
Damage to brand image
Once a regulatory violation is reported, consumer confidence is severely damaged and it is very difficult to reestablish a local presence.
How to plan to clear European regulations
So how can you properly introduce your products to the European market? The following process will help you prepare step-by-step.
Market research and competitive analysis
Research what European products in the same category meet the regulations and identify the differences with your company.
Develop internal teams and leverage external partners
Strengthen collaboration with legal, quality control, and technical departments familiar with European regulations, and bring in external consultants as needed.
Consider regulations from the product development stage
Incorporating European regulatory requirements early in the product development process can minimize later revision costs.
Develop a certification schedule and apply early
If you can prove that you are already "regulation cleared" before a business meeting or trade show, your business will speed up dramatically.
Conclusion
At first glance, European regulations may seem complicated and hurdles to overcome. However, with the right knowledge and arrangements, it is definitely something that can be cleared. Conversely, only those companies that overcome this hurdle will be able to open the door to the huge, high-value-added market that is the European market.
For successful overseas expansion, it is important to be aware that "compliance with regulations" = "proof of trust" and to work strategically. Take the first step as a global brand through systematic preparation.