REACH and Brexit – Some clarity gained but more certainty required

Seventeen months after the UK Referendum on whether to remain in or leave the EU a number of areas remain uncertain for business. For the chemicals industry[i] whose products form an integral part of our daily lives, the status of the cornerstone of the chemicals regime, the application of the REACH Regulation is uncertain. As the position is scrutinised in the UK, see further below, recently guidance has been issued by the European Chemicals Agency, (“ECHA”) which should be considered carefully and monitored. Guidance was also issued by ECHA in respect of other chemicals related EU legislation.

The potential consequences for UK entities, Continental European entities and non-European entities are outlined below for consideration.

Consequences for UK entities

According to the REACH Regulation, substances that are manufactured within or imported to the European Economic Area ("EEA") must be registered with ECHA. A registration is possible only through manufacturers or importers established in the EU/EEA.

Unless laws in both the UK and the EEA are established to respect the reciprocity of parallel systems or validate existing registrations, the position post the UK exit (outside of the EEA) would be:

• The UK would be outside the scope of application of the REACH Regulation. Manufacturers of substances in the UK and importers that import substances from non-EU countries to the UK would no longer be subject to the registration obligation.
• Already existing registrations of manufacturers, importers and only representatives in the UK would become invalid
• Unless only representatives were appointed, UK manufacturers and suppliers would be dependent on their customers established in the EU to act as deemed importers under the REACH Regulation making their own registrations.
• Already existing authorisations of UK entities would become invalid.
• In view of the deadline for registration on 31 May 2018, organisations should consider how best to register to gain longstanding use of the registration (i.e. consider venue of registration as appropriate). This is also true for applications for authorisation. For any substance listed as a substance of very high concern (SVHC) in Annex XIV to the REACH Regulation, an authorisation must be obtained before the sunset date. There are many sunset dates before the anticipated Brexit date.

Consequences for Continental European entities

In the absence of any alternative legal arrangement, EU customers of UK manufacturers and suppliers will, upon the exit of the UK from the EU, become importers in terms of the REACH Regulation if they order substances from the UK. These companies must – if the UK manufacturer does not appoint an only representative – decide in due time whether they want to apply for their own registrations or order the substances from EU suppliers.

If they lose their status as registrants, UK companies will no longer be obligated to meet the information requirements within the framework of the dossier or substance evaluation. This can lead to substantial extra costs for the remaining registrants. The anticipated consequences in terms of costs should be examined soon in order to be able to react to them in due time.

In view of the existing authorisation duties, EU customers of UK suppliers should check at an early date as of when the authorisation duties apply and whether and until when these duties will be met by their suppliers, because authorisations of UK suppliers will become invalid after the UK’s exit from the EU. Other supply options might have to be examined, or EU customers may have to apply for their own authorisations.

The duties to communicate information within the supply chain pursuant to Article 31f of the REACH Regulation would also no longer apply to UK suppliers. Customers of UK suppliers should examine whether a sufficient contractual obligation already exists or attempt to agree on an appropriate amendment to contracts. The same applies to the duties to communicate information concerning substances of very high concern (SVHC) in products pursuant to Article 33 of the REACH Regulation.

Consequences for non-European entities

Non-European manufacturers of substances have the option to appoint an only representative established in in the EU that assumes registration obligations. Where companies established in the UK were appointed only representatives, non-European substance manufacturers will – unless an alternative agreement will be concluded – have to appoint new only representatives – unless their only representatives are willing to relocate.

Other consequences

An exit from the EU by the UK without an agreement can also lead to the invalidity or need for amendment of substance information exchange forums (SIEF) and data sharing agreements, consortia agreements, contracts with only representatives and supply contracts. To avoid disputes, it is advisable to make contractual arrangements in preparation or to amend existing contracts.

UK Developments

In September 2017 Prime Minister Theresa May proposed a time limited “implementation period” for the UK post Brexit. This suggestion is yet to be agreed at EU level. Absence any transitional period, the above issues come into sharp focus.

In April 2017 the House of Commons’ Environmental Audit Committee (EAC) published a report on the future of chemicals legislation and stated that “The most important component of the REACH system in ensuring access to the market is the registration process… We believe that, as a minimum, the UK should negotiate to remain a participant in this system, including paying for access if necessary. This would allow UK companies to place products onto both the UK and the EU markets without the need to generate additional testing data or incurring additional costs. Continuing to share data with the EU would allow the UK to decide whether to follow the regulatory decisions made through REACH, or whether it wishes to take a different approach. Any alternative approach which involved lower environmental or health standards than the EU would not only expose UK consumers to greater risks, but would subject industry to the additional burdens of complying with two different sets of regulation.”

On 18 July 2017 the UK Government responded to the EAC’s report noting the importance of co-operation on chemicals legislation and the intention to achieve a satisfactory outcome for the UK and EU chemicals sector on registration, regulation and trade. The Government stated it recognises the costs already invested in compliance and the status of existing or future REACH registrations made by UK based companies as a key consideration. Limited information was offered but the principle of recognising registrations issued prior to exit was noted in the position paper on continuity in the availability of goods in August. The EAC has called for further written submissions on the Government’s response and their further report is awaited with interest.

In contrast to limited responses elsewhere ECHA Guidance has confirmed that in the absence of an agreement, the REACH Regulation will no longer directly apply to UK suppliers but clearly any goods placed on the EEA market will need to comply. This month the European chemical industry signed a joint statement with the Chemicals Industry Association setting out the importance of a future EU/UK trading relationship.

Further Reading

ECHA Guidance: https://echa.europa.eu/uk-withdrawal-from-the-eu

UK EAC Report: The Future of Chemicals Regulation after the EU Referendum

UK Government Response to the EAC Report: http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/inquiries/parliament-2017/brexit-and-chemical-regulation-17-19/

http://www.cefic.org/Documents/RESOURCES/PositionPapers/Cefic-CIA-joint-statement-on-Brexit-and-the-future-November2017.pdf

[i] Accounting for a Gross Value Added contribution to the UK economy of £12,064m and 88,000 employees according to UK Government impact assessments https://secondreading.uk/economy/brexit-impact-58-sectors-assessed/