20 Oct 2017
Chemicals Agency Launches Webpage Offering Information on the Implications of the UK’s Withdrawal from the EU, On the EU’s Regulatory Regimes and Chemicals Legislation
On 25 September 2017, the European Chemicals Agency (ECHA) published a new section on its website, providing information on the impact of the withdrawal of the UK from the EU, as well as advice to business operators in a questions and answers format.
ECHA is said to be the driving force among regulatory authorities in implementing the EU's chemicals legislation for the benefit of human health and the environment. Hong Kong sellers will be especially familiar with the ubiquitous REACH Regulation, an area of chemicals legislation to which ECHA is closely associated.
The EU’s chemicals legislation currently applies in 31 European countries, namely the 28 EU Member States and the three members of the European Economic Area (EEA), being Iceland, Liechtenstein, and Norway. The REACH Regulation is felt by many to be globally the most advanced – and costly – regime to regulate the safe handling of chemicals. The Regulation itself has also assigned regulatory functions to ECHA as well as to national authorities, including those of the UK.
Similarly, the EU’s lawmakers have entrusted ECHA with managing the implementation of the Biocidal Products Regulation (BPR), the Classification, Labelling and Packaging Regulation (CLP) and the Prior Informed Consent Regulation (PIC).
The UK invoked Article 50 of the Treaty on European Union on 29 March 2017, and is expected to become a non-EU (“third”) country as from 30 March 2019 (unless a transition period is eventually permitted which could lengthen the exiting deadline).
On its website, ECHA emphasises the profound implications of the UK’s withdrawal, as the EU regulatory regimes that have been established for numerous sectors of the internal market economy will no longer directly apply to the UK. Indeed, upon the UK’s withdrawal, cooperation with the UK will no longer be based on these EU regulations, unless the UK continues to implement them. As a result, companies within the UK and from the remaining 27 EU Member States, with rights and duties arising under these regulations, will be tangibly affected.
When examining the REACH Regulation, the practical impact of the UK’s withdrawal will be substantial, taking into account that more than 5,000 REACH registrations have been made by UK companies (said to be second only, in volume, to Germany). In addition, with regard to the Biocidal Products Regulation, businesses have been warned to carefully monitor any substance or product approval, renewal or mutual recognition currently being evaluated by the UK. ECHA points out that after Brexit, the UK will become a “third country” that cannot act as an evaluating or reference Member State under the BPR (unless it implements legislation to that effect). Brexit will also affect companies established in the UK, as – according to the BPR – product authorisation holders must be established in the EU. This means that UK-based businesses will have to transfer their authorisation to a new holder in the EU.
For the UK, a major impact of its withdrawal will be the loss of access to ECHA’s database on the properties of chemical substances worldwide as well as to the topical databases and IT tools that ECHA provides for regulatory purposes. The UK authorities will also no longer be involved in using this data, as only Member States may cooperate with ECHA as partners in applying the regulatory processes. In fact, solely to the same degree as the general public, UK authorities will continue to benefit from the variety of substance-centred information that ECHA makes publicly available on its website.
As for companies (such as Hong Kong’s importers and buyers) that are subject to the burdensome REACH requirements, they may have to review their REACH compliance provisions that will have likely already been written into their chemical supply agreements.
Should the UK decide to remain in the single market (by, for example, becoming a non-EU country that is part of the EEA, like Norway) then it would be “business as usual” for all companies currently subject to REACH. Pursuant to this “still-in-REACH” scenario, the REACH Regulation would still apply in the UK. While the UK would maintain the existing single market for chemicals and preserve the value of the existing REACH registrations, the UK would lose its ability to take part in decisions on the future of the EU chemicals policy.
The situation will become more complicated if the UK leaves the EU without an agreement, or if the UK agrees on a free trade agreement with the EU without the relevant REACH provisions (by, for example, becoming a member of the European Free Trade Association (EFTA), like Switzerland). In both scenarios, the REACH Regulation would no longer apply to the UK, potentially causing a seriously disrupted chemicals trade. The UK would have to remedy such a disruption by developing a national chemicals policy similar to REACH to address the same issues. In order for the UK chemical industry to maintain, as far as possible, its continued access to the EU single market post-Brexit without additional regulatory barriers, the UK regulatory replacement of REACH would require mutual recognition by the EU authorities.
Pursuant to this “out-of-REACH” scenario, and without the mutual recognition of the UK system by the EU authorities, UK substances would have to be registered by either the importers located in the EU, or by appointing an only representative (ORs) in the EU. Moreover, the validity of the already REACH registered manufacturers, importers and ORs located in the UK would be called into question. Deactivating these existing REACH registrations and replacing them by importers or ORs in the EU would potentially double the initial cost burden of compliance. Up to date, more than 40% of the UK registrations has been made by ORs for non-EU manufacturers. In addition, in order not to lose their business as ORs, the UK’s ORs which are providing services to international manufacturers would need to relocate to the EEA.
The negotiations process on the terms of the UK’s withdrawal and the future relations between the EU and the UK will take time, and the outcome of such negotiations remains highly uncertain. As a result, the information provided in the new section on ECHA’s website will incrementally be expanded and updated. In addition, ECHA advises companies from within the EU-27 and UK-based companies to follow the legislative developments as well as the withdrawal negotiations, as these are likely to determine their future obligations.