The UK government has recently published a technical notice to guide businesses that produce, register, import or export chemicals on what they will need to do if the UK leaves the EU in March 2019 in a 'no deal' scenario i.e. where the UK has failed to secure a negotiated outcome.
What is the current position for chemicals placed on the EU market?
- The EU Regulation on the Registration, Evaluation, Authorisation and Restriction of Chemicals ("REACH") is the main piece of legislation governing chemicals in the EU.
- REACH requires EU-based manufacturers or importers to register chemical substances with the European Chemicals Agency (the "ECHA"). Where a manufacturer is based overseas but wishes to market chemical substances in the EU, they need to either ensure the EU-based importer fulfils REACH requirements, or alternatively procure the services of an EU-based agent (known as an "Only Representative") to comply with REACH.
- Some chemical substances must be specifically authorised by the ECHA in order to be placed on the EU market. Other chemicals are restricted under REACH and cannot be marketed in the EU unless they comply with a specific set of terms and conditions.
How would chemicals be regulated in the UK market post-Brexit?
- The UK would create a parallel chemicals regulatory regime that "preserves REACH as far as possible" under domestic law.
- The Health and Safety Executive (the "HSE") would act as the lead UK regulatory authority in monitoring and evaluating chemicals placed on the UK market.
- New chemicals would need to be registered on a new UK IT system (similar to the existing EU IT system).
- Chemicals already registered with REACH would be automatically "grandfathered" into the UK regime. Companies would then have 2 years from the date of Brexit to:
(i) validate the existing registration with the HSE;
(ii) provide the HSE with the full data package that supported the original REACH registration; and
(iii) open an account on the new UK IT system.
- Existing authorisations and restrictions with REACH would also be "grandfathered" into the UK regime.
- UK companies that imported chemicals from the EU pre-Brexit (but relied on a registration held by an organisation based in the EU) would need to notify the HSE and provide basic data on the chemicals within 180 days from the date of Brexit. However, this would be an interim arrangement only and would ultimately require full registration by the UK company with the HSE.
How would UK companies place chemicals on the EU market post-Brexit?
- Existing REACH registrations and authorisations held by UK-based companies would cease to be valid (this has been confirmed by ECHA).
- UK companies registered with REACH pre-Brexit would need to transfer their registrations to an EU-based organisation to preserve access to the EU market. UK-based manufacturers have the option of appointing an Only Representative within the EU, but the process of transferring registrations in these circumstances has yet to be confirmed by ECHA. UK-based importers will need to consider transferring their import function and registrations to a company established in the EU. All such arrangements and transfers would need to be completed by 29 March 2019.
- UK companies wishing to register new chemicals for the EU market would need to register them with the ECHA but via an EU-based organisation, such as an Only Representative.
- For further guidance, UK companies are advised to refer to the ECHA website found here.
How would non-UK companies be affected?
- Non-EU manufacturers who have appointed Only Representatives based in the UK will have to appoint an alternative Only Representative based in the EU (unless the existing Only Representative is willing to establish itself in the EU).
- EU-based customers that import into the EU chemicals sourced from UK manufacturers and suppliers would become subject to the requirement to register under REACH (unless the UK or other non-EU manufacturer appoints an Only Representative).
- EU-based customers that rely upon an authorisation issued to a UK-based supplier will need to look for alternative suppliers or apply for their own authorisation.
What should business be doing now?
With time running short, and no assurance that a transition period will be agreed, businesses need to prepare for all possible outcomes on chemicals and broader trade regulation.
- UK-based companies that need to import substances into the EU-27 may need to consider transferring their import function and registrations to a company established in the EU. UK-based manufacturers need to consider appointing an Only Representative within the EU.
- EU-based companies should review their supply chains to determine whether they are dependent upon the supply of chemicals sourced from the UK or using a UK-based Only Representative. This will not always be obvious. Companies should liaise with their supplier, and may need to consider alternative sources of supply or registering the substances themselves.
- Suppliers and customers will both need to have regard to their rights and obligations under existing contracts covering the pre and post-Brexit periods.
- Companies should ensure that their concerns and objectives in relation to the post-Brexit regulation of chemicals are made known to relevant national and EU institutions, whether directly or through trade associations.
The UK government is hopeful that a negotiated outcome will be secured and that a 'no deal' Brexit can be avoided. However, in the absence of a withdrawal agreement, a 'no deal' will have far reaching implications on companies that market chemicals in the UK and Europe.
Ideally, there would be mutual recognition by the UK and EU-27 of the parallel REACH systems and existing registrations and authorisations, but it seems doubtful whether the EU would agree to this. In March 2018, the Prime Minister proposed that the UK would become an 'associate member' of ECHA, but this idea seems to have been dismissed by the EU as 'cherry picking' by the UK. Businesses that wish to place new chemicals on both the UK and EU markets post-Brexit will need to bear in mind that they will have to make two separate registrations: one to the ECHA and one to the HSE. Although the overall impact of this is uncertain, it is likely that this will result in additional administrative and cost burdens for businesses and regulators alike.
Despite March 2019 drawing closer, the outcome of UK-EU negotiations is still unclear. In order to ensure they are prepared for all outcomes, companies should be considering the steps they need to be taking now. Some UK suppliers are already known to be transferring their import business function from the UK to the EU in order to ensure that their existing registrations and ability to lawfully import into the EU can be preserved.