The chemical and manufacturing industries are still waiting for clear post-Brexit plans for UK chemicals regulation, with exit from REACH a particular concern
After years of gradual implementation, 31 May 2018 marks a milestone for the EU REACH regulation. Businesses across Europe are hard at work to meet the final registration deadline for substances, but the chemicals industry and the manufacturing sector as a whole have another deadline looming large on the horizon: the moment when the UK leaves the EU on 29 March 2019.
Much has been written about the complexity and interconnectivity of European supply chains, not just for chemicals themselves but also for the complex products that chemicals go into. The potential for significant business disruption if the UK and the EU fail to reach a pragmatic solution on the future of the UK’s participation in EU REACH also poses issues. Our commentary on the matter, is published in ‘Chemistry Today’.
In this article, I want to add two things:
- A commentary on the emerging idea of ‘associate membership of the European Chemicals Agency (ECHA)’.
- Five top tips for what businesses should be doing now.
Associate membership of ECHA
Since sending the article to the publishers, we have heard Theresa May's Mansion House speech on 2 March proposing ‘associate membership of ECHA’ and ensuring that products ‘need to undergo one series of approvals, in one country’. On the face of it, that sounds a lot like the sort of pragmatic ‘one regime’ compromise that our article advocates, and in many ways, it is. However, before the business community relaxes into an assumption that this will come to pass, we need a reality check on the politics.
Just five days later, the President of the European Council, Donald Tusk, gave a speech where he stated that ‘the EU cannot agree to grant the UK the rights of Norway with the obligations of Canada' and ‘a pick-and-mix approach for a non-member state is out of the question’. Associate membership of ECHA was not mentioned by name, but the implications are clear. As sensible and pragmatic as the solution would be, the politics is stacked against it as the EU-27 seek to preserve what Donald Tusk called ‘the integrity of the Single Market’. That’s not to say such an outcome is impossible, but it does mean industry needs to work hard to make its case for a compromise and make it clear why such a deal matters for the health of the EU's manufacturing sector as a whole.
What should businesses be doing now?
In the meantime, the UK is less than 11 months from exiting the EU, and so those who are still crossing their fingers need to start making plans. Here are our top 5 suggestions for actions that need to be taken now:
1. Use your voice
Ideas such as ‘associate membership of ECHA’ are pragmatic and sensible, but there will be a significant political opposition within the EU-27 to such cherry picking. Industry needs to make it clear to the politicians what the impact on business will be if such solutions are not forthcoming.
2. Do not bank on two more years
The business community needs a 2 year transition period, and a 2 year (or rather, 19 month) transition period has been agreed in principle between the UK and the EU-27. It is important however to remember that this is just an agreement in principle, and ‘nothing is agreed until everything is agreed’. Business planning cannot be based solely on faith and optimism, so contingency planning will be required in case of a ‘no deal’ scenario.
3. Keep the registrations alive
It has been disconcerting for UK businesses to be told that they must register their substances for the 31 May 2018 deadline, at the same time as being told (correctly) by ECHA that in a ‘no deal’ scenario, those registrations ‘will no longer exist’ on 30 March 2019. The same will also be true for authorisations in the names of UK parties. Forward planning is required to ensure that those registrations stay in force.
4. Think about your data rights
Most of the standard data-sharing and other co-operation agreements (in their various forms) have catered for participation in EU REACH. If the UK progresses with its own UK REACH in some form with its own registrations, there is no entitlement for the UK to have access to ECHA's databases and the data contained within them. Agreement to share data for the purposes of EU REACH may not confer rights for use of that data in a UK REACH.
5. Think about your contracts
With less than a year to go until the UK leaves the EU, even relatively short-term contracts may straddle the UK’s exit from the EU. Are the procurement decisions that are being taken now giving sufficient thought to allocating the various risks of Brexit?
As well as regulatory compliance and the legal right to put substances on the EU or UK markets, it is also prudent to consider the costs of tariffs, the risks of delays in crossing borders, obligations to complete customs paperwork and share information in a timely manner, to name just a few items. Of course, none of these issues are insurmountable, but unless consideration is given to them, they may nevertheless give rise to disruption in the supply and disagreements between supply chain participants, that would be best avoided. Avoiding these potential complications might even favour certain procurement decisions over others in the first place.
It is not just manufacturers, importers and downstream users that need a plan B. Professional and technical advisors also need to consider their strategies. A great number of industry experts are based in the UK and many are implementing their own contingency plans. Often the answer for UK experts such as consultants, lawyers and representatives, is to establish a presence in the EU-27 while keeping the UK footprint. This allows the supplier to continue to service the EU market but also to provide valuable support and assistance for whatever emerges as the UK chemicals regime.