On 10 September 2015, the Court of Justice of the European Union published its decision on the "article in article" debate that has divided EU Member States, the European Commission and the European Chemicals Agency (ECHA) for a number of years. The Court's decision means that EU importers and suppliers of products are now subject to REACH "articles" obligations in respect of each individual component part of a product, rather than the product as a whole.
Controversially, the Court's ruling follows the position favoured by a small minority of Member States, known as the "once an article always an article" approach, rather than the approach promulgated by the Commission from as early as 2007 and supported by ECHA and the majority of Member States. Crucially, this means that the "whole product" position described in ECHA's "Guidance on requirements for substances in articles" should no longer be considered as correct.
Case C-106/14 was a preliminary reference ruling referred to the Court by the French Conseil d'État in early 2014 for the purpose of considering the interpretation of the "article" concept under the EU REACH Regulation (1907/2006/EC). The Court's decision follows the publication of a non-legally binding Advocate General's opinion on the referred matter in February 2015.
What is the "article in article" debate?
What constitutes an "article" is relevant to two key provisions of REACH:
- Art 7(2), which requires a producer or importer of articles to notify ECHA if a substance of very high concern (SVHC) (i.e. a substance listed on ECHA's "Candidate List", which is added to on a biannual basis and currently totals 163 substances) is present in those articles above a concentration of 0.1% weight by weight (w/w) and in quantities exceeding one tonne per year (unless otherwise exempt); and
- Art 33, which requires a person supplying an article to provide information to supply chain recipients and, upon request, within 45 days to final consumers, on any SVHCs present in articles in excess of the 0.1% w/w threshold.
The "article in article" debate has revolved around what is the actual "article" for the purpose of these provisions in the case of a complex product (e.g. a laptop or plane) made up of multiple component parts. Does the 0.1% w/w threshold apply to each individual component of the product or to the assembled product (made up of individual components) as a whole? EHCA, supported by the European Commission, has followed the "whole product" approach until now. The "individual component" approach is the position set out in a joint guidance document published by the national authorities in Belgium, Germany, Denmark, France, Norway (EEA) and Sweden (the so-called dissenting Member States) in July 2013.
What has the Court decided?
The Court has ruled in favour of the approach adopted by the dissenting Member States. In reaching its decision, the Court found that there was no provision in the REACH Regulation that specifically covered the situation of "complex articles" and, therefore, there was "no need to draw a distinction… between the situation of articles incorporated as a component of a complex product and that of articles present in an isolated manner."
In respect of Art 7(2) the Court took the view that:
- where articles are manufactured in the EU, the producer's duty of notification only concerns those articles that the producer actually makes or assembles itself. In the case of a complex product made up of individual component articles, the notification obligation does not apply in respect of the individual components used as inputs by the complex product producer where they have been made in the EU (or imported into the EU) by a third party. The Court argued that this interpretation "is in keeping with the objective pursued by the duty of notification and, more generally, the overall scheme of the regulation of which it forms a part" on the basis that where a product assembler uses components sourced from within the EU, the original producer or importer will have already made any notifications to the extent required.
- if the complex article is assembled outside of the EU and then imported, the notification applies to each individual component article used to make the complex product. The Court was not persuaded by the Commission's arguments about the difficulties that importers will face in obtaining this information from non-EU supply chains that are not obligated under REACH. In reaching its conclusion, the Court referred to a point made in the Advocate General's opinion, that a different interpretation would mean ECHA obtaining less information about complex products manufactured outside of the EU than those manufactured within the EU.
In respect of Art 33, the Court held that the obligation must be interpreted as meaning that a supplier of a complex product has to provide SVHC information in respect of any constituent article that contains a SVHC in a concentration above 0.1% w/w of the particular constituent article. In making this determination the Court noted that the scope of the obligation under Art 33 is minimal and not an excessive burden, as it only requires suppliers to provide "sufficient information … to allow safe use of the article", which must include as a minimum the name of the SVHC. Industry seems unlikely to agree, however, with the categorisation of this obligation as minimal.
Was this decision expected?
On the one hand, given that the Court has largely followed the approach suggested in the Advocate General's opinion its decision may not be a surprise to many. However, the decision is ground-breaking nonetheless, given both the rarity of the Court's involvement in this particular area of law and that the Court followed an interpretation supported by only a small number of Member States that is directly contrary to the views of the Commission and ECHA.
What are the key implications?
Implementation of the Court's ruling will impose a significantly greater burden on entities importing products for sale on the EU market. While these entities already have the difficult task of obtaining SVHC information for whole products from their non-EU based supply chains (i.e. companies which are not themselves subject to legal obligations under REACH), this task is now made much harder by the requirement to focus on the individual components making up the product. The Court offered no practical guidance as to how it would expect entities to comply with the tougher requirements. These entities may need to consider amending their supply contracts as well as reviewing and updating their REACH compliance procedures.
Entities that purchase components and manufacture complex products within the EU have the advantage of knowing that their suppliers bear the responsibility of determining whether a notification is required in respect of a particular component. Further, by virtue of purchasing in the EU, they should themselves receive the information required by Art 33 that they are then obligated to pass on down the supply chain. However, the number of entities falling within this category is likely to be small. Given the ever increasingly global nature of product supply chains, many EU-based manufacturers will need to purchase components from outside of the EU and will then become responsible for those components as the importer.
Even for suppliers established outside of EU and who are not legally obligated under REACH, they will no doubt see an increase in the number and specificity of SVHC information requests received from their downstream supply chains.
Notwithstanding that the Court's decision appears to bring an end to the "article in article" debate, several outstanding questions still need to be resolved within the coming months, as follows:
- When will ECHA publish revised guidance on the topic and what will it say? ECHA's previous guidance on this topic remains available on its website although a note has been added to clarify that ECHA will initiate an update "in the near future".
- Critically, how soon will Member State competent authorities expect importers and suppliers to discharge their Art 7(2) and Art 33 obligations in line with the new, more restrictive thresholds? While the Court's interpretation is effective immediately it would be unreasonable for enforcing authorities, especially those that did not previously follow the dissenting Member States' approach, to apply the ruling immediately without allowing businesses some kind of grace period. EuroCommerce, a European trade body, has already called for a moratorium pending publication of further guidance from ECHA.
- Will the Commission simply accept the Court's interpretation or will it seek to introduce a more specific provision in the REACH Regulation that supports its former interpretation?
- Is more guidance needed on the meaning of "article" so as to enable obligated entities to identify whether a constituent part of a larger product is actually an "article". The need for an article to be "an object which during production is given a special shape, surface or design which determines its function to a greater degree than its chemical composition" indicates that the level of dissection required falls short of the "homogenous material" concept of the EU RoHS Directive (2011/65/EU), so would not capture, for example, layers of paint or coatings on cables. This would match the position adopted by the dissenting Member State's guidance document published in July 2013.