BW2_Chemicals

Amidst the Brexit uncertainties, representative of the UK’s tech industry association TechUK Susanne Baker, called for the UK to remain aligned to the EU’s chemical safety rules. Speaking about the UK’s Statutory Instrument on REACH, which will replicate REACH into domestic UK law, she highlighted the uncertainties the tech sector is facing as a downstream user of chemicals. Baker expressed her “concerns about the skills and readiness of the Health and Safety Executive to run the new system”. Though she does not believe that the UK will necessarily lower environmental standards. Downstream users of chemicals often benefit from upstream authorisations, which will no longer be valid in the UK post-Brexit, and therefore will have to submit relevant paperwork to the new UK Chemical Agency, the Health and Safety Executive.

Michael Warhurst, from CHEM Trust, one of the environmental groups which together with chemical industry called for keeping the UK in REACH, said that UK government is likely to lower environmental standards once outside the EU.

Chemical Watch Business Summit 2019

(25 February 2019) A new Statutory Instrument (SI), which attempts to copy across the EU’s chemicals safety regulation REACH into domestic UK law, was approved by a narrow majority after heated debate in the House of Commons. The SI was criticised by opposition MPs for deleting crucial governance structures for independent scientific advice and stakeholder engagement, and risking duplicate animal testing.

A Government Minister confirmed that the critical IT system may not be up and running by Brexit day and that significant costs and new staff capacities are needed to administer a distinct UK chemicals safety system, amounting to an estimated £13 million a year. As Health and Safety Executive (HSE) will take over ECHA’s role, it will have to employ at least 35 to 40 more people and will also need further financial support, as it has previously suffered funding cuts of 40%. Even with these preparations, critics still point out that HSE “lacks the capacity, the resources, the experience and expertise” to take over duties. Indeed, ECHA, the EU’s agency implementing REACH, deploys around 10 times more resources.

The UK Government confirmed growing fears that the ECHA’s chemical safety database will most probably have to be duplicated due to property rights. Chemical companies could in theory ask for amending consortium contracts and make data available both under the EU REACH and UK systems. Nevertheless, 75% of UK companies hold their data in consortiums, to which access is restricted due to their particular configurations. According to the Shadow Environment Secretary Sue Hayman, additional tests on animals will need to be performed in order to duplicate the already existing data that is not obtainable.

Labour politicians opposed the SI and asked the Government to take it back to the drawing board, however the SI was narrowly passed in the vote. In order to be signed into law, the instrument will now go through a vote in the House of Lords.

Debate in the House of Commons 
More on SI procedural activity
CHEM Trust’s article on the debate and vote

(8 February 2019) With Brexit day fast approaching, ECHA published a preparedness note encouraging chemicals companies to take action prior to the UK’s withdrawal. In order to maintain market access, UK-based companies will have to transfer their business or appoint an only representative in an EU27/ EEA country. A “Brexit window” for the REACH IT system will be opened from the 12th to 29th of March to enable UK-based companies to change or transfer their registrations. EU27/ EEA downstream users relying on authorisations granted to UK-based companies will also need to make sure they can use another valid authorisation received by an EU27/ EEA-based company.

ECHA preparedness note

The Draft Statutory Instrument (SI) serves to replicate the EU REACH regulation and was laid before the UK Parliament on 5 February, being scheduled for debate this month.

However, stakeholders have highlighted a number of concerns about the SI. Steve Elliot, the head of UK’s Chemical Industries Association (CIA), noted there are some “unresolved” issues that raise major complications for UK firms representing non-EU companies that import to the EU. There are negative competitive consequences for UK importers as well. Further, there is no provision to allow for information exchange forums, which would have enabled companies to avoid duplicating tests. Finally, Michael Warhurst, representing CHEM Trust, highlighted the lack of commitment to mirror EU decisions on hazardous chemicals and the heavily reduced opportunities for stakeholders’ participation.

Chemical Watch on industry criticism
CHEM Trust on the Draft Statutory Instrument

According to ECHA, there is no clear evidence for any significant increase in only representative appointments in the EU27 by UK-based chemical companies. Nevertheless, Brexit related inquiries are increasing, and ECHA is preparing further instructions for companies. According to ECHA’s registration statistics, the UK’s role in the supply chain of chemicals is significant, involving 5,508 importers and/or manufacturers of chemicals and 4,912 only representatives appointed by non-EEA countries in order to import substances to the single market.

(30/01/2019) With only two months left until Brexit day, the Executive Director of Cefic, René van Sloten, identified a no-deal Brexit as the only relevant planning scenario for chemicals businesses at a Brussels event. What this entails in practice has been outlined by CEFIC and the CIA in a newly published briefing. After 29 March all chemical registrations held by UK entities will be invalid, which means that they will not be able to import into the EU unless they have appointed an EU entity which holds a registration. The UK’s role in the supply chain of chemicals is significant, involving 5,508 importers and/or manufacturers of chemicals and 4,912 only representatives appointed by non-EEA countries in order to import substances, according to ECHA registration statistics. No transition period to allow continuity would take place in this no-deal scenario. EU based companies thus need to identify their UK supply chain exposure and take measures including switching to EU based suppliers.

The head of UK’s Chemical Industries Association (CIA), Ian Cranshaw, warned about of the negative impact on UK jobs in regions with economic decline and the extra costs of registering chemicals twice, both in the EU and the UK.

Campaigner Kate Young, from the environmental NGO CHEM Trust, raised the UK government’s announcement to subject all ex-EU law to its target to cut regulatory costs for business by 9 billion GBP. So far EU law has been exempt from this target. She also voiced concerns of regulatory divergence on chemical protection standards in the UK post-Brexit.

High level debate on Brexit & Chemical sectors, European Economic and Social Committee – Agenda
CEFIC and CIA briefing note

The UK plans to copy across most of the EU’s environmental legislation, including the chemical safety regulation REACH. This means that companies doing business in the UK and in the EU will have to comply with two sets of rules.

In the case of REACH, this means that companies doing business in the UK will have to register chemicals under the UK system. “If we spent €5 billion on establishing the EU’s REACH, what is there to suggest it is going to be much less for UK-REACH?” asks Peter Newport from the UK’s chemical business association. As a third country the UK will no longer have access to the EU’s REACH database and needs to set up its own REACH registration system. It is difficult to see how the UK could cut costs without sacrificing environmental and public health standards.

EU chemical industry association CEFIC voiced its fears about supply chain disruptions in the absence of agreements between the EU and UK. Given the REACH data sharing and only representative requirements, UK registrants will need to acquire access and rights to using safety data, which will require lengthy data sharing negotiations involving multiple owners.

ChemicalWatch on UK chemical safety framework data struggle
Cefic statement on outcome of Brexit vote

(09/01/2019) The UK government published its draft statutory instrument to establish a UK chemical safety law, copying and amending the EU’s REACH regulation. It puts in place arrangements for a two-year transition period, during which UK authorities will have no access to the world’s largest chemicals safety data base hold by the European Chemicals Agency (ECHA).

The instrument provides that an existing registration under EU REACH “has effect on and after exit day as a UK registration” as long as the registration holds a connection with the UK. The companies, which hold this so-called “grandfathered” registrations will then have a period of two years to submit the full data package. According to the Government’s guidance note, the IT system is already being tested as to be ready for use on 29 March 2019. But companies warn about the difficulties and complexity of managing the data sharing given the complex supply chains. The EU needed ten years to master the challenges and to phase in the new system.

Further to this safety data gap, the instrument omits essential governance elements of the REACH regulation, including the independent expert committees, the board of appeal and transparency requirements, which are seen important tools against short-term interests.

The UK could become a dumping ground for products containing harmful chemicals that are banned in the EU, according to Greener UK.

Draft Statutory Instrument on REACH (EU Exit) Regulations 2019
UK Government guidance on REACH in a no-deal scenario
Greener UK, “Environmental concerns around no deal”

From a trade perspective, a no deal Brexit is bad news for the chemicals industry. The UK would fall under the WTO most favored nation tariffs, or the Chemical Tariff Harmonisation Agreement (CTHA), which the UK could join after leaving the EU. The CTHA would allow the UK to benefit from a 6.5% or 5.5% rate for most traded chemical products. But even this cannot match the EU’s lower or even zero tariffs negotiated with third countries (such as with Canada, Korea, Mexico etc.). New similar EU deals could be ratified by the UK, but this would take years. Meanwhile, increased tariffs on chemicals would significantly raise the prices of intermediate and finished goods, costs which according to EU chemical association CEFIC would be most likely borne by industry (estimated to amount almost 40 billion euros annually). This could significantly hit UK industry, with the chemicals sector the third biggest industry in the country.

Cefic and CIA joint statement on Brexit and the future

The EU Market Access Database

Though both the US (TSCA) and EU (REACH) legislation on chemicals share the objective to protect the environment and human health whilst supporting the sector’s competitiveness, they could not be further apart.

REACH has changed risk management governance by requiring companies to demonstrate safety, increase transparency and substitute toxic substances with safer alternatives, whereas TSCA (Toxic Substances Control Act) keeps the burden of proof on public authorities and retains most information as confidential. That is the theory, though in practice the differences are less sharp given that implementation of REACH has been found to be deficient.

Whilst the EU’s regime appears to be less business friendly, with high regulatory costs, litigation expenses are lower and the EU’s chemicals trade surplus has grown by around 5% a year since 2007. The US trade surplus is smaller and declined over the same period.

In this context it is worthwhile looking at China, where chemical production has outpaced both the EU and US. China opted to align with the EU and put in place a China REACH system.

REACH and TSCA description
CEFIC fact & Figures 2018
American Chemistry Council 2018