EU harmonisation could erode the cost advantage that new member states currently enjoy and leave British importers legally liable if products from these countries do not comply with EU legislation, warned Marsh.
It said recent research from EuroChambers found that only 10% of companies in the new EU states were fully informed about the EU legislation that will affect their business, while only 8% said reforms to ensure their business's compliance with EU legislation would be complete by 1 May 2004.
In addition, research conducted by Marsh itself revealed that as many as 35% of companies in Eastern European member states are not compliant with new rules on consumer protection and product liability.
Marsh warned that any UK companies importing and selling goods from Eastern European suppliers could be liable if the original product manufacturer is not compliant with EU law.
EU product liability legislation aims to make manufacturers responsible for complying with product standards and holds them liable for all damages. If the manufacturer cannot be identified, the vendor becomes responsible, regardless of geographic location, warned Marsh.
“Any company importing or selling goods from countries in Eastern Europe will want some assurance that the goods are compliant with EU Directives and national legislation, and that the original manufacturer can be identified,” said Alan Williamson, chief executive of risk consulting at Marsh.
“If either of those questions is left unanswered, liability could fall to the vendor.
“For all its benefits, EU enlargement will increase the total cost of risk for most companies in Central Europe. In particular, those companies which do not take the necessary steps to manage those new risks arising out of their country's accession to the EU will face a significant increase,” continued Williamson.
“The inevitable increase in frequency and severity of claims made against product manufacturers in the joining states will result in higher insurance premium costs.
“This, combined with additional costs associated with revised processes and product recall requirements, could erode the unit cost advantage that has been so attractive to importers in the EU.”
