The European Union is considering replacing its chemicals classification and labeling rules with an international set of rules called the Globally Harmonised System (GHS). Implementing the new rules in the EU may affect your company’s global trading activities in a number of ways. Costs may increase, but those may be offset by the increased imports and exports that a unified system brings.
Today, worldwide compliance is a burdensome exercise for global traders, navigating labeling rules that vary greatly from one region to another. Some multi-national companies estimate that more than 100 different hazard communication regulations apply to their products globally.
The GHS intends to curtail this proliferation and harmonize the related rules. In July 2003, the United Nations adopted the GHS after a decade of work. In 2005, it adopted the first revised edition. While the GHS is not mandatory, it provides a voluntary international standard. To become mandatory, it must be translated into legislation by individual countries.
What Changes in the EU?
Unlike the current EU system, the GHS is based on a “building block” approach. Legislatures choose hazard classes and categories depending on the target audience of the communication – primarily consumers and workers and, to a lesser extent, emergency responders and transport actors.
The proposed rules:
- Identify the descriptive information suppliers will need to use. In general, new test data should not be necessary, and suppliers will be allowed to use information alreadyavailable.
- Give responsibility for the classification primarily to the suppliers, following guidelines set out by the GHS. The supplier will then have to notify a newly created environmental agency of its classifications in order for them to be included in an inventory. This provision is aimed at ensuring a certain uniformity in the classification of the same substance.
- Include hazard classes and categories of the GHS that are comparable with those of the current EU system. They also include categories not yet part of the GHS but part of the current EU system.
The European Commission estimates that, as a result of the new GHS classification rules, more mixtures will be classified, while the number of classified substances should remain substantially the same.
The new rules contemplate adding new pictograms, signal words, hazard statements, product identifiers and precautionary statements to labels. Rules are also laid out for colors, label size, formats, legibility, label location and packaging standards.
Under the proposed regulation, each Member State should appoint authorities to enforce its rules. This would include a body centralizing all information related to health effects. The proposal also requires Member States to adopt penalties for noncompliance that are “effective, proportionate and dissuasive.” Despite the proposal’s harmonization efforts, it is clear that penalties will be a matter for national law and one in which, together with enforcement practices, divergences are likely to continue to exist.
Legislative Procedure and Entry into Effect
The draft regulation is to be adopted under the so-called “codecision” procedure, which involves primarily the European Commission and the European Parliament and Council. The final decision is generally made after several rounds of amendments and negotiations taking place over the course of months and, often, years.
According to a study carried out by Risk & Policy Analysts Ltd. and London Economics, the administrative costs of reclassifying and relabeling, as well as the increased costs of IT and training, should rank between €280 million and €390 million, depending on the length of the transition period to the new system (the longer that period, the less the financial burden). However, the costs resulting from applying the two systems in parallel have not been quantified and may be significant. On the other hand, the same study estimates the benefits of the GHS, in terms of a present value, from the resulting increase in exports and imports, of between €420 million to €500 million respectively once the GHS implementation in the EU fully coincides with that of the EU trading partners.
The EU chemicals industry generally welcomes the implementation of GHS in the EU and its global harmonization goal. However, concerns remain. Reactions include:
- Concern that the proposal deviates too much from the UN-developed GHS to the detriment of the very aim of that system – to provide a seamless framework worldwide.
- Suggestions that the draft proposal needs to address coordination with other pieces of EU legislation that currently refer to classification and labeling, and that such pieces of legislation should be amended in parallel with the GHS to avoid confusion and legal uncertainty.
- A push for broadening the scope of substances that should be self-classified by suppliers versus being classified through legislation.
- A suggestion that the provisions for the Safety Data Sheets (or Material Safety Data Sheets) be included in the draft regulations. This would allow the GHS system to include all the hazard communication.
- Concern that industry and consumers will need training and education on the new rules.
- Desire for the Commission to increase the legal protection of confidential business information.
Clearly, the harmonization opportunity offered by the GHS could be of significant value for the chemicals industry worldwide. It is hoped that national legislators, including the EU legislator, will resist implementing the system with too many “local” elements added, thus defeating the very goal of simplification behind the GHS system in the first place.