24 Sept 2019
Brexit: Regulatory Challenges Faced by UK and EU-27 Companies in the Field of Chemicals Law
Should the UK leave the EU by the currently foreseen deadline of 31 October 2019 without a withdrawal agreement in place, the EU’s laws will stop applying to UK-based establishments. This will be the case for all product-related laws, including the REACH chemicals legislation. As the REACH Regulation is complex and can be burdensome at the best of times, Hong Kong traders concerned by REACH may wish to ensure that they act speedily if they have not already done so, in order to ensure uninterrupted supplies to both the UK and the EU-27 markets.
As is well known by now, the REACH Regulation applies to EU/EEA manufacturers and importers of chemical substances, mixtures, and certain articles which contain substances. The primary activity under REACH is the registration of virtually all chemicals traded in the EU/EEA over 1 tonne per year, per manufacturer or importer. Non-EU manufacturers (such as those located in Hong Kong) cannot register chemicals themselves, but must either depend on their importers’ registrations or else appoint an EU/EEA-based ‘only representative’ to register chemicals on their behalf. Without a valid registration, chemicals cannot be traded or used downstream in the EU. The REACH Regulation also regulates hazardous chemicals, banning those, or in some cases the goods which contain them, which are considered to be particularly harmful to the environment or human health.
The European Chemicals Agency (ECHA), which oversees REACH, has warned that if a non-EU based manufacturer has appointed an only representative to act on its behalf, which is located in the UK, the non-EU based manufacturer must appoint a new only representative which is located within the EU-27/EEA. It is noteworthy that the new appointment must take place ahead of the UK withdrawal and be notified to ECHA (through the ‘Legal entity change’ functionality in REACH-IT) without undue delay. In the event that the non-EU manufacturer decides not to appoint a new only representative, it would have to ensure that its importer(s) in the EU-27/EEA register the substances without delay, so as to ensure uninterrupted trade flows.
If a non-EU manufacturer’s substance being exported to the EU has been registered by a UK-based importer, that registration will simply not exist after the UK’s no-deal withdrawal. This means that to continue having access to the EU-27/EEA market, the imported substance will need to be registered by an EU-27/EEA-based legal entity. To this end, the company outside the EU can appoint an only representative located within the EU-27/EEA to carry out the required registration of the imported substance. Alternatively, customers within the EU-27/EEA will each have to register the substances they import from the non-EU manufacturer. This means that the latter will need to quickly start cooperating with its importers, providing them with the relevant information for the registration.
For entities that are based in one of the remaining EU-27 or EEA countries, EU legislation and obligations will continue to apply to them (“business as usual”). However, their customers or business partners in the UK (be they UK manufacturers or UK importers of substances from non-EU countries such as Hong Kong,) will need to review their operations to follow the new UK chemicals legislation.
Where an EU-27/EEA company purchases chemical substances from a UK-based company (UK manufacturer or importer) that registered a substance under REACH, the EU-27/EEA company will no longer be able to rely on the substance being legally registered after the no-deal withdrawal. For the substance to remain legally registered, the UK-based manufacturer from which its EU-27/EEA customer bought the chemical will need to appoint an only representative established in one of the EU-27 or EEA countries. Alternatively, the customer can choose to register the substance itself as an importer.
Hong Kong exporters should keep in mind that if its UK-based supplier is currently an importer of the chemicals from a third country (e.g., Hong Kong), that importer will either have to move its importing activity to the EU-27/EEA to continue with the import, or else the non-EU manufacturer will have to find a new importer or a new only representative in the EU-27/EEA. Those that are currently UK importers will not have the possibility of appointing an only representative in the EU-27/EEA, unless they are a manufacturer, formulator of mixtures or manufacturer of articles whose substances need to be registered.
As for Hong Kong companies selling only to the UK market, the UK had announced, previous to the initial Brexit deadline of 29 March this year, that the Health and Safety Executive would take on the role of the REACH agency for the UK. An existing UK-based importer will have to hold a UK REACH registration. Fortunately, if that importer already holds a valid EU REACH registration, the latter will be ‘grandfathered’ into the UK REACH system. For this to happen, the existing importer has to open an account in UK REACH IT and enter basic information into the system within 120 days post-exit day. The full registration can then be carried out by that importer within 2 years post-exit day.
This ‘grandfathering’ into the UK REACH system applies to any UK-established entities (importers, manufacturers and only representatives) based in the UK that already have an EU REACH registration. Grandfathering will not apply to registrations that are held by entities that are established outside the UK. Usefully, grandfathering will not incur any fees from the UK agency for registrants.