How E-labels Can Support Trade and Innovation in ICT, Medical, and Other Products

Nigel Cory October 27, 2021
October 27, 2021
Displaying regulatory and other product information electronically is more practical than using small, confusing physical labels. But countries need to align their approaches to “e-labels” in order to maximize their benefits and avoid creating a new barrier to trade and innovation.
How E-labels Can Support Trade and Innovation in ICT, Medical, and Other Products

Introduction

Advantages of Using E-Labels

E-Labeling’s Use Around the World

Recommendations for E-labeling Best Practices

Conclusion

Appendix: Country Case Studies

Endnotes

Introduction

In today’s world of Internet-connected products, more countries allow the display of regulatory and other product information via electronic means—an “e-label”—as it is a practical way for consumers and regulators to access information. E-labels have many benefits, but a key one is they ensure labeling requirements don’t inhibit product innovation. As products get smaller, it becomes increasingly difficult for manufacturers to find physical space for labels big enough to address users in multiple markets intelligibly. The widespread use of Quick Response (QR) codes during COVID-19 demonstrates how easily consumers and governments could use e-labels, given how many people own smartphones. However, as more countries allow or consider allowing e-labels for regulatory purposes, there is the risk that divergent and complicated approaches will undermine their benefits and create a technical barrier to global trade in information and communication technologies (ICT) and other products. To avoid this, countries should use emerging best practices and international standards and take a coordinated approach
to e-labeling.

Twenty-one countries—from China and the United States to Samoa and India—allow firms to use e-labels to show radio and telecommunication compliance marks for telecommunication products (e.g., smart phones). Several other countries allow them for medical devices to convey information and directions for product use. Countries may allow e-labels as part of emerging cybersecurity labeling schemes. The ease in which users can access product information means that e-labels can be used in many ways.

As more countries allow or consider allowing e-labels for regulatory purposes, there is the risk that divergent and complicated approaches will undermine their benefits and create a technical barrier to global trade in ICT and other products.

There are three main types of e-labels: a digital display on a device’s screen, a link to a website via a text URL, or a machine-readable code (e.g., a QR code). E-labels can contain a broad range of information beyond conformity-compliance labels. They can include a technical description of the equipment, such as instructions for proper use and service, warranty, equipment selection, and installation information.

E-labeling is not a way to avoid regulation. It is simply a way to convey information to regulators and consumers in a format that is much clearer and more easily understood (as compared to a confusing array of physical labels jammed onto a piece of a product). Governments, firms, and consumers all benefit from e-labeling. For example, regulatory and customs agencies can easily see conformity markings online, which firms can easily update in order to reflect regulatory changes. Consumers benefit, as they can easily see that the equipment is certified and suits their needs, and access other information about service requirements, upgrades, product warranty, and recycling. Equipment installers benefit, as they can access the most accurate and up-to-date technical data about the product and how to install it. Empowered by ubiquitous connectivity, all consumers and users expect to use technology to choose when, where, and how they engage with products they are investigating, buying, renting, using, and servicing.

The number of firms using e-labeling instead of physical labels for regulatory purposes is low, but growing. E-labeling is still relatively new, so its limited use is understandable. For example, the United States only started allowing it for telecommunication products in 2017. And several firms use both electronic and physical labeling as they transition to e-labels. However, more firms will inevitably use e-labels now that more countries allow them. Despite their low adoption, most if not all the major ICT producers use e-labels, which, in turn, covers most consumer electronics markets in Australia, China, Japan, Singapore, and the United States, among other countries. The use of e-labeling in the three main categories of consumer electronic goods (telephones, computers, and TV/radio/multimedia products) means it covers 60 percent of the consumer electronic market.[1] Indicative of this, one study estimates that in 2015–2017, e-labels were used in an estimated 78–90 percent of smartphones sold in Australia, Singapore, and the United States and 82–86 percent of computers sold in Australia and the United States.[2]

However, the growing use of e-labels also raises the prospect of countries enacting restrictive and conflicting requirements. If countries make e-labeling requirements overly complicated and prescriptive, and substantially different from other countries, they will undermine their primary benefit of greater simplicity and efficiency. There is a growing urgency for policymakers to ensure that their respective approaches align. Otherwise, firms face the daunting process of trying to abide by a proliferating range of e-labeling schemes, which may create a similar burden to the one they’re trying to avoid in the case of physical labels. It’d be a disappointing outcome if technological innovation were inhibited as firms had to alter product designs to make space for physical and e-labels.

The use of e-labeling has evolved since the Information Technology and Innovation Foundation’s (ITIF’s) last report, “How E-Labels Can Support Trade and Innovation in ICTs,” in 2017.[3] This report provides an updated analysis of how e-labeling can benefit regulators, consumers, and manufacturers alike. It examines the growing use of e-labels worldwide in more sectors, and the benefits of e-labels. Finally, the report presents a range of recommendations and best practices for how to enact an e-labeling system. Appendix A includes a comprehensive list of countries and a description of e-labeling policies, which includes an analysis of good and bad practices.

A summary of the recommendations for policymakers who are considering e-labeling:

  • Governments should allow firms to voluntarily use e-labels to demonstrate regulatory compliance, such as via digital displays and QR codes.
  • Governments should allow firms to use e-labels in as many products as possible. Smartphones and other devices with a screen are a logical place to start. However, with a growing number of digitally savvy consumers and regulators, countries should consider e-labels for a broader range of regulatory issues.
  • Governments should develop a coordinated approach to e-labeling by ensuring all the various agencies (e.g., telecommunication regulators and customs authorities) are involved and working together.
  • Countries should use an open and transparent rule-making process when developing their e-labeling frameworks to ensure their approach aligns with industry and global best practices.
  • E-labeling is about streamlining and simplifying the delivery of information about regulatory compliance. Governments should set minimum requirements and be flexible in terms of how firms decide to display their e-labels.
  • Countries should ensure that firms provide regulators, installers, and consumers with clear instructions about using e-labels.
  • Countries should allow firms to host, control, and maintain the website with the regulatory and other information that e-labeling requires as they are best placed to manage this information (as opposed to a government-run database). Ideally, countries would work together to designate a single third-party to manage and audit the information.
  • Countries should use international standards for e-labeling and associated technologies (e.g., QR codes), as they provide a common technical approach for firms to meet across multiple markets, and build interoperability between different regulatory frameworks. This supports innovation as firms only have to build to one—and not several—technical standard when designing products.
  • Countries should use regional economic organizations to share best practices about e-labeling to support interoperable or harmonized approaches to e-labeling. For example, Southeast Asian nations should use Association of Southeast Asian Nations’ (ASEAN’s) Consultative Committee for Standards and Quality to develop a regional approach to e-labeling.

The Growing Benefits of E-Labels and Challenges to Further Adoption

E-labeling represents an alternative method for equipment manufacturers to electronically communicate compliance and other equipment information typically displayed with a physical label attached, stamped, etched, or otherwise displayed on equipment, paper inserts, or associated packaging. For telecommunication products, the labeling allows for the easy identification of equipment approved for use in a particular country. Regulatory and other equipment information can be displayed electronically on the screen of a smartphone or similar device.

E-labeling’s main use has been for compliance markings for a country’s telecommunications requirements, serving essentially two audiences: regulators and consumers. But it remains an open question as to how much attention consumers give to physical labels. As some electronic products get smaller, it is becoming a massive challenge for firms to include the current range of physical labels required across key markets, never mind adding new labels for environmental, cybersecurity, and other telecommunication reasons. For example, some countries (e.g., Chile and Colombia) are making firms add labels for smartphones to disclose information about the types of networks in which these devices operate (i.e., 2G, 3G, and 4G), their functionalities, and their compatibility with emergency alert systems.[4] Some countries also require these new, country-specific labels to be in the local language (which is problematic when a product is designed for many markets).

QR Codes: The Rise of a Ubiquitous Technology That Could Greatly Expand the Use of E-labels

People around the world have gained familiarity with machine-readable codes, especially QR codes, during COVID-19, which have become common due to the need for contactless interaction and contact tracing. For example, it became standard practice for restaurants to leave a QR code on tables so that customers could easily pull the menu up on their phones. The rise in consumer, business, and government awareness could be a powerful catalyst for e-labeling in more countries and sectors.

Policymakers previously cited a perceived lack of consumer and regulatory awareness of QR codes as a reason to avoid e-labeling, but widespread smartphone ownership and the massive growth in the use of QR codes during COVID-19 has clearly removed this as an issue in many countries.

A QR code is a type of matrix barcode (or two-dimensional barcode). In practice, QR codes often contain data for a locator, identifier, or tracker that points to a website or application. A QR code allows a scanning device or smartphone to direct the user to a website to view the labels, statements, and other relevant equipment information. Codes are printed on the equipment, viewable on the equipment’s screen, or affixed to its packaging.

Photo 1: Examples of hybrid traditional and e-labels with a QR code that links to a website with clear, detailed, and legible regulatory and other information[5]

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Governments previously cited a perceived lack of consumer and regulatory awareness of QR codes as a reason to avoid e-labeling. This, in part, was due to the fact that QR codes previously required users to download an app to scan them, which put people off from using them. This is no longer the case. In 2017, Apple updated its products to embed a QR code scanner into its iPhone’s camera app, and other smartphone manufacturers soon followed suit. With this change, QR codes became more accessible to many people around the world.[6] Measures related to COVID-19 also contributed to QR usage and familiarity skyrocketing to a 96 percent increase in reach and 94 percent increase in interactions from 2018 to 2020.[7] This trend is global: People in Australia, Canada, France, Hong Kong, India, Indonesia, Malaysia, Singapore, Switzerland, Thailand, and the United States widely use QR codes.[8] QR codes have become a recognizable, widely used, and accepted means of sharing information. According to a 2020 MobileIron poll of people in the United States, United Kingdom, and elsewhere in Europe, 83 percent of respondents had scanned a QR code at least once, and 72 percent scanned a QR code within the previous month.[9]

Firms are using QR codes in a variety of ways. Popular apps such as Snapchat, Spotify, and Venmo began implementing QR codes so people could quickly connect with other users, thereby furthering their general presence and proving their wide-ranging usefulness. The use of QR codes is vast, and already they are being utilized for electronic payments, coupons, marketing, education, and security, among many other applications. The widespread use of QR codes by consumers, businesses, and governments should address concerns about whether users would know how to access and use them.

Sectors Using E-labels

E-labels are being considered and used to address regulatory considerations in several industries.

Telecommunications Compliance

Government regulatory agencies most commonly use e-labels as a way for firms to show mandatory conformity marks for radiocommunications, telecommunications, electromagnetic compatibility, and electromagnetic radiation equipment standards. Hence, e-labels are most commonly used for smartphones, tablets, laptops, and other ICT devices. These labels convey information to consumers and keep companies honest about their products’ regulatory compliance.

Photo 2: Examples of physical and e-labels: (left) how an e-label appears on an iPhone, (top right) the labels on the back of a power adaptor for a laptop, and (bottom right) an example of physical labels for ICT products

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Description automatically generatedMedical Products

Canada, the European Union (EU), the United States, and others allow firms to use e-labels for medical devices, mainly to provide users with a more convenient and helpful way to access Instructions/Directions for Use (IFU/DFU). For example, the EU allows e-labeling for implantable medical devices and their accessories, medical devices and their accessories with built-in screens, and stand-alone software (that is considered a medical device).[10]

For medical devices, IFU/DFU is an integral part of the products and services. Given there are devices that require a prescription (e.g., in-vitro medical devices such as blood glucose monitors), firms must provide different instructions and access for professional users (doctors, etc.) and patients so that the latter don’t alter the product and its prescribed use. Given this, firms carefully manage access, such as via passwords. Instructional material for medical devices plays a more significant role compared with other types of equipment. Patients require simple, clear, and easy-to-understand language, while medical professionals and hospital staff may need very technical descriptions. It’s common for firms to provide a product manual for each machine in each room in a hospital, so it quickly adds up to a massive amount of material, given a single hospital can order dozens or hundreds of one product. Digital product information is far easier to access and use via an e-label for the many medical professionals that use tablets as part of their daily work.

Cybersecurity

Governments worldwide are considering adopting cybersecurity labeling as a way to communicate security features in ICT products and services to users in order to build understanding, confidence, and trust.

Using e-labeling to convey cybersecurity information is relatively new. Few countries have enacted cybersecurity labeling frameworks, and those few don’t allow e-labeling. For example, Singapore has a voluntary cybersecurity certification scheme and labeling proposal for Internet of Things (IoT) products. In 2021, Singapore made it mandatory to have certification/labeling for residential gateway devices, but firms could only use physical labels.

Governments are starting to consider cybersecurity labeling to convey security features in ICT products and services. While labels may help inform consumers about security features, they should not be perceived as a substitute for underlying processes that build security and trust.

But e-labeling may be allowed elsewhere as other countries consider cybersecurity labeling. The United Kingdom’s consumer IoT code of conduct has a certification proposal, with the top three security requirements being mandatory. The United Kingdom is considering labeling requirements but has not yet announced details. The EU’s cyber-certification scheme for cloud (EUCS) includes a labeling requirement for firms to display for cloud services (photo 3). The draft label uses a QR code to access the European Union Agency for Cybersecurity (ENISA), which hosts certification information.[11] The Biden administration’s executive order on improving cybersecurity tasks the U.S. National Institute of Standards and Technology (NIST) and the Federal Trade Commission (FTC) to develop labels for consumers for IoT devices and software, which could potentially include e-labels.[12]

Photo 3: Demo label for the EU’s Cybersecurity Certification Framework[13]

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It would be great if consumers considered device security as a part of their purchasing decision. Before making a purchase, consumers often have limited insight into the security features of a finished product, device, or service. Providing users with clear information about firms’ adherence to cybersecurity standards and specific topics (e.g., the security features and functionality in devices or services) can foster market competition (based on security), build trust, and help them follow good cybersecurity practices. Putting more information about product security in e-labels will make it easier for online retailers to provide this information to consumers when they shop online and compare products.

Policymakers need to be careful in using labels for cybersecurity as it is far more dynamic than other regulatory requirements. While a cybersecurity-specific label encourages firms to adopt the underlying security features, practices, or certifications, policymakers should not see the label as a substitute for the time and effort firms dedicate to building security and trust into a product.[14] Furthermore, as with Singapore’s “four-star” ranking system, countries should be careful not to mislead consumers with systems that consumers (may) think mean a product with the highest ranking is perfectly secure.[15] The dynamic nature of cyberthreats and cybersecurity means that a static ranking on a physical label may soon be out of date, whereas an e-label that seeks to inform users about a firm’s ongoing efforts to secure products provides a more realistic understanding of a product’s cybersecurity status. In this way, the dynamic nature of e-labels becomes apparent, as firms can quickly and constantly update them.

Advantages of Using E-Labels

The benefits of using e-labeling have become more apparent since ITIF’s last report in 2017, especially given how consumers and regulators have become more digitally savvy. When designing e-labeling policies, policymakers should keep these benefits in mind, as they apply the principles and best practices discussed in the final section of this report.

Greater Information and Utility

Products overcrowded with physical labels confuse end users (see photo 1). Manufacturers, regulators, customs officials, and consumers are left to make sense of myriad conformity assessment and certification marks and other labels crammed onto a product.

E-labeling enables users (government regulators, consumers, and commercial users) to get the information they need in a way they want it (rather than after purchase and unpacking). This comes as firms need to provide more and more information to end users as equipment becomes more complex. Accessibility via electronic labeling removes the physical space constraint of products that get smaller and smaller, which makes it difficult to decipher what the labels are and what they mean (see photo 2). It is also in a more readily understandable format—with clear and detailed text, graphics, and videos on a phone, tablet, or computer screen.

E-labeling makes it much easier for firms to provide more information, versus the limited amount of information conveyed by physical labels on products, associated packaging, and document inserts. For example, it allows firms to provide detailed installation information. It also makes it much easier for firms to provide this information in more languages. Similarly, the end user can assess whether the equipment meets their performance, contract, and installation requirements.

A significant advantage of e-labeling is that it enables users—whether government regulators or consumers—to get more of the information they may need and provide it when they want it and on the device of their choice.

Consumer and User Friendly

E-labels empower consumers with more readily understandable information. Finding the right instructions in lengthy multilingual booklets can be challenging given the small fonts used in user manuals. E-labels also make it easier for users to learn what after-sales service and maintenance the product may need and programs/services that may assist in providing them. E-labels also allow firms to provide a detailed explanation of warranty terms that otherwise may be incompletely summarized on physical product labels or discarded as part of user manuals provided (and soon lost) after purchase. E-labeling also allows firms to quickly respond to increasingly rapid changes of technical data that determine equipment suitability and selection, avoiding the scenario wherein printed labels can soon go out of date. In other words, e-labels can help ensure that the relevant information provided to consumers is the most accurate and up to date possible (and can handle versioning history in case of any changes). For example, the dynamism of e-labels is particularly well suited to the constantly changing nature of cyberthreats and security, thus allowing consumers to see how firms are continually working to ensure their products are safe and secure.

While a product may be small, it may require complex and extensive instructions. Requiring these in paper booklets for small products is becoming a growing cost. E-labels allow firms to direct users to websites to access these instructions, demonstration videos, and interactive FAQs. Electronic instructions also lend themselves to better instructions, given they allow firms to use animations and videos.

Smoother and Quicker Product Delivery

Using physical labels slows down and complicates product deliveries whenever firms need to affix country-specific physical labels, especially if there are sudden changes in supply and demand. For example, no one in Brazil wants a phone with Chile’s labels pasted on it. Firms are likely to be more cautious in supplying markets that require unique physical labels and not over-commit products for those markets, given the cost and complications of affixing physical labels. This means consumers in markets with burdensome labeling requirements are likely to face delays in getting the latest products given the extra work firms need to do to get their products ready for that market. Ultimately, consumers may go elsewhere to buy products, such as through black/gray markets or other countries.

E-labels Allow for Easier Enforcement

Regulators and customs officials can easily access compliance information via e-labels, which has the benefit of helping firms avoid customs-related shipment and delivery delays due to issues with certification compliance. A master list of labels and compliance information on the Internet or the device, kept up to date by manufacturers, offers real-time compliance information far beyond a simple mark on a tiny label.

Reduced Environmental Impact

E-labels provide several environmental benefits. E-labelling supports broader work around the “circular economy” and other environmental initiatives (e.g., more efficient industrialization processes).[16]

E-labels allow manufacturers to reduce the material they use in labels, especially with conformity certification changes and product recalls when firms need to replace and update them. If a firm conveys inaccurate information, or if the technical data for equipment or a given system change, firms can quickly correct and update relevant e-label information, rather than recalling products and removing and replacing physical labels. Firms can also provide customers with detailed information about how they can physically dispose or ensure proper recycling of their products.

E-labels support good environmental outcomes. Replacing physical labels for millions of devices is a huge waste; e-labels can provide advice about how to properly dispose of or recycle equipment; and replacing paper instructions with virtual ones saves a lot of paper.

E-labels also save firms considerable costs, as they make it possible to provide virtual instructions sheets. Paper-based product labels and manuals are resource-intensive—both from a manufacturing and an environmental perspective. Having to print materials in multiple languages compounds the problem. For example, the EU’s Medical Device Regulation requires user manuals to be printed in all 24 European languages—which takes time and thus has a detrimental impact on speed to market. 

Reduced Impact on Product Innovation and Product Costs

Technological innovation means ICT, medical, and other products are shrinking in size and becoming more complex and capable, such that physical labeling requirements become a constraint on product design. Manufacturers may need to alter the optimal product design just to satisfy labeling requirements.

E-labeling supports trade and innovation of ICT and other products as it’s easier and cheaper for firms to use. Manufacturers spend significant amounts of time and money on creating, controlling, maintaining, and producing product markings, packaging, and instruction sheets used to convey certification marks and other product information. These costs increase when manufacturers modify labels, rework products, and perform in-country retrofits due to changing labeling requirements.

Firms want to build only one (or as few as possible) version to satisfy as many different conformity requirements as possible. E-labels help firms save money in the event of changes in conformity assessment requirements or product recalls, given the cost of replacing physical labels and redesigning products. E-labeling also reduces time to market for new products, as engineers don’t need to speed time figuring out the increasingly complicated task of physically showing a range of different compliance marks. Firms also save considerable money as e-labels can lead to fewer calls to technical and customer service departments by allowing users to access and understand a wide range of product information.

The cost savings from moving from physical to e-labels are significant. For instance, according to one estimate, the introduction of e-labeling for radiofrequency devices (i.e. smart phones) in the United States allows manufacturers to save over $80 million a year.[17] Similarly, a study by VVA (an economic consultancy firm) estimates that the cost of indicating compliance for the consumer electronics industry in Europe are around $929 million per year, and allowing e-labeling would reduce these costs by approximately 15 percent ($139 million).[18]

Common Concerns Policymakers Cite in Considering E-labeling

Policymakers cite two common concerns in considering allowing e-labeling: regulatory reluctance to change and getting government agencies to cooperate in allowing e-labeling. As already discussed (and rebutted), a previous concern voiced by governments about e-labeling was that consumers might not understand and thus won’t use e-labels. But consumers around the world have shown they are tech-savvy.

Regulatory Reluctance to Change

In many countries, telecommunication regulators and customs agencies are reluctant to abandon their traditional reliance on inspecting physical labels for import inspections and post-market surveillance. It represents a clear and tangible way to know that the products meet local requirements. This is understandable. In the 20th century, applying a physical label to products was an obvious solution to ensure they met local requirements. However, the growth in global production networks, the shrinking size of ICT products, and the option of using digital technologies mean physical labels are no longer the best approach. Burueactic reluctance stems from the fact that e-labeling disrupts the status quo and forces agencies to change regulations, inspection procedures, and other processes.

Regulatory reluctance to change from physical to electronic labels is the main barrier to adoption. Regulators (misguidedly) think e-labels undermine their authority, yet the fact that this hasn’t happened in the dozens of countries that use e-labels shows that this is not true.

Regulators are often reluctant to change, as they think it will undermine their supervisory authority. However, the growing use of e-labels in countries and sectors worldwide shows that this is not true. For example, according to the Australian telecommunications regulator, e-labels have not affected their market surveillance. The presence of a label on a device does not mean that device is compliant; it is the compliance documentation (test reports, Declarations of Conformity, certification body statements, etc.) that demonstrates compliance.[19] And e-labels make it easy for regulators to verify these marks and documents.

Similarly, e-labeling does not necessarily mean governments need to spend more on compliance. For example, the U.S. Congressional Budget Office estimated that implementing the E-LABEL Act would have a negligible effect on net discretionary costs at the Federal Communications Commission (FCC).[20]

The challenge for firms and policymakers that support e-labeling is working with reluctant regulators to facilitate policy reforms. Hence, it’s helpful to layout a detailed and suitably long-term plan of action that brings regulators and industry together on the design, testing (e.g., through pilot programs), implementation, and review of changes. Such a step-by-step approach will help overcome regulators’ reluctance to change.

Getting Government Regulators and Agencies to Cooperate

Countries may be reluctant to enact an e-labeling framework, as it involves cooperation and buy-in from multiple government ministries and agencies. For example, a telecommunication regulatory agency or a medical/health regulator may need to work with its respective ministry and the customs agency to get their approval and cooperation to allow e-labeling. Navigating multiple bureaucracies means there are numerous opportunities for officials who may not support e-labeling to obstruct reforms.

E-Labeling’s Use Around the World

Most of the world’s major economies allow firms to use e-labels for regulatory purposes (see figure 1 and the appendix for a detailed list). As of 2021, 21 countries allow firms to use e-labels to show radio and telecommunication compliance marks, while several other countries allow medical device manufacturers to use e-labels to convey information about how to properly use devices.

Figure 1: Map of countries that allow, or are considering, e-labels to display telecommunication/radio compliance marks