Impact of REACH on US exporters of manufactured goods to the EU

Impact of REACH on US exporters of manufactured goods to the EU –

EU regulations are more stringent and more numerous than US regulations, and US manufacturers who don’t consider themselves chemical companies will find themselves widely affected by REACH. Dr. Louis Wyness of TSG Europe, a UK-based regulatory services consultancy, explains.

With trepidation from industry a new chemical regulation in the European Union (EU) called REACH (Regulation (EC) No 1907/2006) was published late in 2006. The Regulation which comes into force on 01 June 2007 will have a major impact on chemical and associated industries worldwide which manufacture and/or import chemicals, preparations and articles to the EU.

Before REACH the EU legislative framework for chemicals was fragmented with different rules for new and existing chemical substances and the requirements were generally considered by government to be inadequate for protecting human and environmental health. REACH brings together all existing EU legislation and is arguably the most comprehensive and far-reaching system of chemical regulation worldwide.

Basic elements of REACH

In brief, the basic elements of REACH are Registration (by industry), Evaluation (by a new Chemical Agency), Authorisation (and possible restriction) of Chemicals. The extent of the obligations placed on industry varies depending on the chemical tonnage manufactured in, or exported to, Europe and on the hazard properties of the chemical substance. Substances alone, in preparations or in articles are affected.

There are many exemptions from many or all of the provisions of REACH. Some substances being structurally simple and benign are exempted (and listed in the Annexes to the Regulation). Other chemicals or preparations already regulated are exempt from certain provisions such as those in medicinal products or in foods.

For those substances falling within the scope of REACH the first administrative action for industry will be to pre-register their substances. This will takes place in a six month window starting 12 months after entry into force (June to December 2008). The subsequent registration procedure requiring submission of data and dossiers (with risk assessments) are to be carried out over a period of 11 years. The first deadline is for substances imported or manufactured at tonnages above 1000 tonnes per annum or substances already classified as dangerous over 100 tonnes per annum. Subsequent deadlines in 2013 and 2018 are for lower tonnage substances (above 100 and 1 tonne, respectively).

It is important to note that the registration process is based on the principal of one substance one registration (OSOR). Hence all firms which pre-register the same substance will be encouraged to work together to register the substance which includes the sharing of data.

The final and arguably the main driver for REACH is concerned with the authorisation or restriction of substances. Substances of very high concern (SVHC)1 cannot be used or placed on the EU market without a specific authorisation, granted from the Chemicals Agency. In some circumstances restrictions will apply and some substances, based on their risks to humans and the environment, will be banned.

There are other obligations that REACH places on firms such as information in the supply chain and classification and labelling requirements.

One final, important point is that only EU-based firms or organisations can participate as registrants under REACH. Those firms outside of the EU who import to the EU have a choice to nominate their importer to undertake the responsibilities imposed by REACH, or they can appoint a third party (can be any organisation, including a consultancy firm) as their ‘only representative’ for managing their responsibilities. The duties of the ‘only representative’ are outlined in the Regulation which may limit this choice since the responsibilities extend beyond merely acting as a regulatory ‘post-box’.

Articles – definitions and obligations of producers and importers

Less well known, particularly to firms outside of the EU, are the provisions of REACH related to articles that are exported to the EU or manufactured within the EU. The REACH Regulation defines an article as “..an object which during manufacture is given a special shape, surface or design which determines its function to a greater degree than does its chemical composition.” Most of the objects around the home will be considered articles eg. clothes, furniture, vehicles, toys and so on. A draft EU Commission guidance document, in the ironically named R.I.P.s (REACH Implementation Projects), on articles provides examples. However, there will be many, many situations where a given object might or might not be considered an article and the situation is far from clear. The area where confusion is greatest concerns the differentiation of articles and containers with preparations. Under REACH a printer cartridge is considered an article whereas an aerosol spray or a fire extinguisher are not articles but are containers with preparations. Some assistance in the form of guidance documents and a Manual of Decisions will be available but there will always be circumstances which are uncertain.

Most importantly, a producer or importer of an article has to register the substance(s) within an article if the substance is intended to be released during normal and reasonably foreseeable conditions of use and if the total amount of that substance exceeds one tonne per annum per producer or importer. The definition of reasonably or foreseeable is left to the registrant, although some, limited, guidance is available. An example (as given in the EU Commission guidance) of intended release is that of ink from a pen, hence the pen is an article and the composition of the ink needs to be established and quantified. An example where release is not considered intended is the washing of clothes where substances such as dyes are removed from the textile. It is beyond doubt that there will be numerous situations where the definition and assignment of release will be uncertain. Foreseeable conditions of use are outside of the intended conditions eg. children having access to an article and putting it into their mouths.

For substances of very high concern (SVHC)1 present in articles a notification procedure is required if the SVHC in the article is present at greater than 0.1% (w/w) and the total amount exceeds one tonne per annum per producer or importer. It is not obligatory to notify the new Chemical Agency if exposure of SVHCs to humans or the environment can be excluded during normal or reasonably foreseeable use and disposal of the article. However, disposal will increase significantly the risk of exposure to the environment in many circumstances and thus will pull many articles back into the scope of the legislation. The notification deadline does not apply until six months after the substance has been included in the candidate list(s) of SVHC. However, the first deadline for notification will be 3.5 years (minimum) after June 2007. Guidance for the notification submission will be available in 2007.

If the substance in the article has already been registered for that use, then there is no need for the manufacturer or importer to register the substance(s). However, when REACH enters into force there will have been no registrations, therefore, article manufacturers/importers will have to pre-register those substances in scope within their articles. Once the new Chemical Agency has collated the pre-registrations, firms will be informed as to whom has pre-registered that same substance, thus facilitating the data sharing and OSOR procedure. At this point, firms can establish whether others will register their substance(s) following communications with co-registrants.

If a SVHC is present above 0.1% (w/w) in the article, it is obligatory to inform the recipients of the article about the chemical name(s) and how the article can be safely used.

The EU Guidance document (R.I.P. 3.8) contains a list of sources of government and industry information on substances in articles.

Implications for producers or importers

Unlike perhaps producers or importers of chemicals or preparations, the implications of REACH for article producers or importers may not be immediately obvious.

If an article is produced in or imported into the EU, some customers may require that the article is in compliance with REACH. To respond to such a request and hence maintain confidence in the customer base producers or importers will need to know the composition of their articles. This might be a reasonable task under some circumstances or highly challenging under others. Take the example of a US firm manufacturing an electronic toy for import to the EU. The firm may receive components from companies located in many regions such as the Far East. The chemical composition of the component may be unknown or the component supplier may be unwilling to reveal the composition for commercial reasons. This leaves the article producer the choice to cease exports to the EU or alter the sourcing of the component. This easy example becomes complex with multiple and suppliers (eg. automobile industry). The impact on business costs is obvious. Furthermore, commercial information may be compromised and the perception of risk of the article may be compromised.

A second situation, referring upstream is equally of concern. A supplier may question the continued supply of a substance or component if, for example, a SVHC is under threat of Authorisation or Restriction. Thus, our article manufacturer may have to alter their source, hence incur development costs and so on.

Thus, the challenges to firms exporting to, or manufacturing within, the EU apply upstream and downstream and are more fundamental than simply complying with a new Regulation. There is no doubt that REACH will affect the way business to Europe is conducted.

What producers or importers of articles should do now

Given the widespread impact of REACH it is essential to either increase or re-allocate manpower within a company to (a) obtain a clear view of your obligations and (b) establish what is required and when. Firms should consider involving staff who work not only in the environmental, health and safety (or regulatory) functions but also those who deal with the supply chain.

Article manufacturers or importers need to understand the composition of their articles and whether the constituent substances are expected to be released during normal or foreseeable circumstances. The release of SVHC during disposal needs particular attention. Populating an article and substance (cross-referenced) inventory will enable tonnages, properties of those substances in scope, exemptions and so on, to be established. It is interesting to note that there are commercial REACH management products being developed or are already available (eg. web-based management tools) which could be useful if in-house software (supply chain) systems are not adaptable for REACH compliance.

As indicated earlier questionnaires or communication with suppliers is necessary to establish their understanding of REACH and their degree of compliance. Likewise, customers need to be kept informed and reassured of your compliance measures. Other activities will also be required such as preparing to work in consortia, establishing available or generating alternative data on those substances in scope and possible appointing third party or only representatives (or subsidiary or importer within the EU).

In conclusion

The now published REACH Regulation will have a major impact on US firms who manufacture/import chemicals preparations and articles to the EU. This impact is probably less obvious to manufacturers/importers of articles. Firms need to prepare now to manage the communication up and downstream, to address the challenges in supply of materials and customer demands and handle the administrative and technical tasks. The involvement not only of regulatory managers but also those who deal with purchasing and supply should be considered.

Dr Louis Wyness, TSGEurope