If you work for a US company purchasing chemicals from the European Union, does your purchasing department need to worry about whether your EU supplier is complying with the EU’s Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) rules? The answer is probably yes. You will not always have a REACH obligation to ensure your EU supplier’s compliance, but the business risks of not doing so can be high.
Your Legal Obligations
If the EU chemical you incorporate into a product will not find its way back into the EU, strictly speaking, you do not have an obligation to comply with REACH. You may have good business reasons (see below), but no legal obligation requires you to do so.
On the other hand, if you will be exporting your product back into the EU, you may have an independent obligation to register chemicals in your product under REACH. Also, if you use a chemical in the EU, you will need to ensure your EU supplier has complied with REACH. As a general matter, you will need to register a chemical incorporated in a product you export into the EU if that chemical is intended to be released “under normal or reasonably foreseeable conditions of use” and is present in your exports in quantities over 1 ton per year, unless someone else has already registered that chemical for the same use.
With or without a legal obligation, you may have smart business reasons to comply:
- First, EU suppliers that manufacture chemicals in the EU need to comply with REACH, even for chemicals they export outside the EU. If they do not comply, they may not be able to legally supply you anymore. While the enforcement aspects of REACH are still under development, one likely sanction will be a prohibition against manufacturing noncomplying substances.
- Second, particularly if your business relies on a supply of a potentially hazardous chemical, your supplier may find REACH too burdensome and stop production. In that case, you may not have sufficient time to find a second source or an appropriate substitute.
Working With Your Purchasing Department
Your purchasing department, together with your legal group, can aid in the REACH compliance effort in several ways:
1- Address REACH in the contract. The “compliance with law” provision may be expanded to explicitly cover REACH. While this provision probably already covers REACH in a general way, the specific reference may help the parties focus on the importance of the issue.
2-Require documents evidencing compliance. The purchasing department should talk with the supplier to find out whether the supplier is in compliance with REACH. For purchases of key raw materials, your purchasing department should require documentation showing that the supplier has proper registration of the chemical and, where required, has appropriately reflected your use of its substance in certain key documents he will deliver to you (the safety data sheet).
Obviously, REACH isn’t applicable to all purchases, so you should apply any request for compliance documentation selectively. This can become tricky, because someone first has to make the determination that REACH is applicable and, if so, how. One way to address this is to generally identify purchased materials that are likely to be covered by REACH. Your legal counsel can become involved when a supplier claims that REACH is not applicable and advise on difficult technical questions about compliance obligations.
3-Stay close to certain suppliers. Because REACH is still in the early phases, a supplier may not have a clear picture of the compliance costs and burdens. As noted above, some suppliers may elect to stop production when compliance becomes too burdensome. You should be in communication with your suppliers and understand their current thinking. If they assure you that they will continue to manufacture the chemical, you might ask for a long-term agreement that does not provide an out for regulatory issues. This will help if compliance proves burdensome – although it will not be of much use if the chemical is restricted in such a manner that it can no longer be used in your manufacturing process.