A Q&A with White & Case's Richard Horsch, Jacquelyn MacLennan and Thomas Tindemans
"REACH" stands for "Registration, Evaluation, Authorization and Restriction of Chemicals." The REACH Regulation is Europe's comprehensive new chemicals legislation, which enters into force throughout the European Union (EU) on June 1, 2007. It will radically modify the way manufacturers, importers and users of chemicals do business in Europe. It will also have an impact on manufacturers and importers of finished products.
The issues raised by REACH involve not only environmental law, but also Intellectual Property Rights (IPR) protection, contracts with suppliers and customers, antitrust, and potential trade and customs problems. Prompt preparation is essential to ensure legal compliance, and also to win early market advantage and safeguard supplier and customer relations. In the following Q&A, Richard Horsch, who heads White & Case's Environment Law practice, discusses the new rules with Jacquelyn MacLennan and Thomas Tindemans, who counsel clients on EU law and policy from the Firm's Brussels office.
Q: Does REACH apply to all types of chemicals?
Richard: REACH applies to all chemical substances that are manufactured in, imported into or used in the EU in volumes of one tonne per year (tpy) or more, on their own, in preparations or in finished products — which, in REACH terminology, are called "articles" — even when the substance or end-product is intended for export from the EU. The regulation contains only a few limited exemptions.
This means REACH applies to all substances manufactured, imported or used in the EU, irrespective of whether or not they are classified as dangerous. And, of course, some chemicals may also be subject to other EU measures besides REACH.
Q: Who will be responsible for complying with REACH?
Jacquelyn: Duties under REACH will depend on the operator's role in the supply chain of each substance. Broadly speaking, REACH applies both to European manufacturers of substances, preparations or, under some conditions, articles, and to European importers of substances, preparations and articles produced in third countries. REACH is not directly applicable to non-EU manufacturers or exporters: all the legal responsibilities for such substances or articles should be borne by their European importers, who must be based in the EU.
Although REACH does not apply directly to US or Asian manufacturers of substances or articles, those manufacturers will still have to provide their importers in Europe with detailed information on the substances they supply or use to make their products, and this may conflict with their need to protect IPR rights and business secrets. If they do not provide the information their European clients require to comply with the REACH requirements, they will risk losing their business outlets in Europe. But REACH offers third-country operators ways of simplifying this process, as non-EU manufacturers may appoint a representative based in the EU to fulfill all the responsibilities.
Thomas: It is crucial that the different operators in the supply chain assess their role for each substance, which may vary according to their activities and the substance concerned. Operators in the supply chain include EU manufacturers and/or importers of substances, but also so-called Downstream Users (DU) based in the EU that use substances in the course of industrial or professional activities. Use is defined very broadly in the regulation, including processing, formulation, consumption, storage, keeping, treatment, filing into containers, transfer from one container to another, mixing, production of an article or any other use. The burden will fall principally on EU manufacturers and importers, but DU also have significant obligations under the new system. Operators must understand the influence of REACH on each supply chain where they are involved. Some supply chains might be at risk, and they should be prepared to deal with this or seek alternatives.
Q: What types of obligations will they get?
Richard: REACH creates a general obligation for EU manufacturers and importers or EU-based representatives of a non-EU manufacturer to register each substance manufactured or imported into the EU in volumes of one tpy or more with a new body, the European Chemicals Agency (ECA), which will be up and running by June 2008, and will be generally responsible for handling and supervising all the formalities arising under REACH. We're talking about nearly 30,000 chemicals — and any substance or use of a substance not registered will be banned throughout the EU — no data, no marketing. In the days before REACH, the authorities were responsible for undertaking risk assessments of chemicals. REACH shifts the burden of providing evidence to show a chemical is safe, and places it firmly on the shoulders of EU manufacturers and importers.
Jacquelyn: The registration procedure means that EU manufacturers and importers will have to prove to the ECA that the chemicals they produce or import are safe for all their "identified uses," that is, the uses intended by any member of the supply chain (including the registrant's own use), or made known to the registrant by an immediate DU. As this requirement includes downstream uses, EU manufacturers and importers will have to obtain information on the use their clients make of a substance, in order to draw up appropriate risk management measures. DUs should normally inform their suppliers of the use they make of a substance, so the use can be identified and covered in the supplier's assessment, and must apply any risk management measures notified to them. A DU that prefers to keep the use of a substance confidential or use a substance outside the conditions described by the manufacturer, must perform its own risk assessment, and notify the use separately to the ECA, but this could prove very costly. Suppliers may not support a specific use if the costs involved are too heavy, and may prefer to withdraw the substance from the market unless their customers are willing to share the costs involved in registering it. DU should seek guarantees and identify safer alternatives as early as possible. This information flow up and down the supply chain may conflict with IPR rights and business secrets. This is one reason why operators will need sound legal advice on how REACH may impact their activities.
Q: What does registration involve? Is collective registration possible?
Thomas: Registration means that EU manufacturers and importers must generate basic toxicity and exposure data for assessing the safety of, and selecting risk management measures for, every substance they manufacture or import in quantities of one tpy or more. The information required varies according to the tonnage in which a substance is manufactured or imported and its hazardous properties. REACH will therefore entail significant costs for operators, owing to the requirement to generate data and tests to assess the safety of substances, and the need to put communication lines in place up and down the supply chain to transfer information on the substances marketed. The estimated registration cost varies widely owing to a number of factors — such as existing data, reliability of the data, possibility of using already available data, request for further testing by ECA. If substantial and reliable data on the safety aspects of a substance are not available, operators may have to "buy" data from other registrants or obtain them by consulting scientific experts.
Richard: REACH encourages registrants of the same substance to share costs by joining consortia for joint registration, under the "One Substance — One Registration" (OSOR) principle. OSOR requires only a single joint submission of the hazard information on a substance by all its EU manufacturers and importers, although each legal entity, which is an EU manufacturer and importer, must still register some information separately, regardless of whether it is part of a group or a head office and its subsidiaries, and must pay a fee. Companies may opt out of the system and register separately for valid reasons, such as confidentiality. Thus for each substance manufactured or imported, operators must either join a consortium and submit the hazard information jointly with other EU manufacturers, importers or EU-based representatives, or opt out and register separately.
Q: What are the registration deadlines?
Jacquelyn: They vary according to the tonnage in which a substance is manufactured or imported into the EU, as well as how dangerous it is. REACH assumes that production volume is easy to measure and legally predictable, so that a company will know when to register a substance. Of course, this may not be true, and expert legal advice may be needed to clarify the situation. The registration process will be spread over an 11-year period after REACH enters into force. The first REACH obligation is the pre-registration between June 1 and December 1, 2008 of all existing substances listed in the European Inventory of Existing Commercial Chemical Substances (EINECS) — also referred to as "phase-in" substances — manufactured or imported in quantities of one tpy and more. Following pre-registration, registration deadlines apply on December 1, 2010, June 1, 2013 and June 1, 2018, depending on the tonnage band and level of concern of the substance. Priority is given to registration of the most dangerous substances, which, regardless of their tonnage, must be registered at the beginning of the process, along with the highest tonnage substances. Thus registration is prioritized according to both risk-based criteria and the substance's tonnage. Non phase-in substances — that is, those not produced or marketed before REACH's entry into force, must be registered before being placed on the market. Registration starts on June 1, 2008. The final deadline for the lower tonnage substances will be June 1, 2018, but in view of the time needed to test and generate data for a single substance under the current legislation, and the number of requests for information all members of the supply chain will receive or send, operators should view prompt preparation as a way to gain an early advantage, secure suppliers and protect client relations.
Q: Is registration the end of the story?
Jacquelyn: It's just the beginning — the ECA will only check that the information required on a chemical substance is available in the registration dossier. The next stage is evaluation, which constitutes a check of quality. The ECA will verify that the contents of the registration dossier comply with the registration requirements, and will check the proposals for testing submitted as part of a registration before tests are performed — this is called the "dossier evaluation." For selected substances suspected of causing a risk to health or the environment, evaluation enables the ECA to require the industry to gather and submit further information — this step is called "substance evaluation." The substance concerned can still be marketed during the evaluation process, but the outcome may be to make a substance subject to authorization, or to EU-wide restrictions if its risks are shown to be inadequately controlled and need addressing at EU level.
Q: When do the chemical substances require authorization?
Thomas: In short, the manufacture and use in the EU of SVHC will require authorization. Authorization is use-specific, so uses of SVHC will eventually be subject to authorization. Although it is estimated that only 25 to 30 substances requiring authorization will be identified every year, up to 1,500 substances will be included in a "candidate list." Because of the authorization requirement for SVHC and their uses, operators must identify as soon as possible whether any of the substances manufactured or imported may qualify as an SVHC, since those substances are particularly likely to be phased out by the authorities and withdrawn by suppliers. There is also likely to be market pressure to replace substances on the candidate list with less dangerous substances before authorization is required. Uses of the substance itself may not be authorized if risks from the use in question cannot be adequately controlled, suitable safer alternatives are available or the socio-economic arguments for the use are insufficient.
Richard: That said, companies should bear in mind that REACH aims to phase out the most dangerous substances, so any authorization should be considered as temporary and the respite used to research a safer alternative. If a suitable substitute is identified for a substance, the Commission may amend or withdraw the authorization
Q: Let's say I'm a US manufacturer of products that I export to the EU, and that contain chemicals. How does REACH affect me?
Richard: REACH requires all substances intended to be released from articles during normal and reasonably foreseeable conditions of the articles' use, and present in the articles above one tpy, to be registered according to the normal REACH rules, including tonnage deadlines and information requirements. If a substance incorporated in articles and intended for release has been registered for the same use by an actor further up the same supply chain, it need not be registered again. In addition, all SVHC present in articles above a concentration limit of 0.1 percent weight by weight (w/w) and above one tpy must be notified to the ECA, unless exposure to humans and environment can be excluded during normal conditions of use, including disposal.
Thomas: For articles manufactured in the EU, when release of substances is foreseen, there would be an incentive to source substances within the EU rather than importing them, so as to avoid any risks of registration. While businesses manufacturing articles within the EU will be exempt from registering substances intended for release which their suppliers have already registered for that specific use, this exemption will only be available to businesses outside the EU in the rare cases when the released substance they use has been registered by their own supplier or its representative for that use in the EU.