10 April 2019
EU Urges Companies to Take Precautionary Steps for REACH Compliance Before Brexit
On 3 April 2019, the European Chemicals Agency (ECHA) recommended that companies subject to the REACH framework prepare for UK’s withdrawal from the European Union without a transition period, no matter how the future plays out. In its technical notice, ECHA reminded companies to initiate the transfer of REACH registrations and other assets before Brexit takes effect, as, in the event of a hard Brexit (also known as a no-deal Brexit), all registrations will cease to be valid as of 13 April 2019.
Should, despite all signs to the contrary, UK Prime Minister Theresa May’s Withdrawal Agreement be approved by the House of Commons and enter into effect, a soft Brexit would not have any impact, during the transition period for which that agreement provides, on the EU’s REACH Regulation (Regulation 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals). However, in a “no-deal” Brexit scenario, wherein the UK leaves the EU without any agreement, the UK would no longer form part of the EU customs union, nor be a part of the EU’s common commercial (i.e., international trade) or regulatory policies. Therefore, the current application of the EU’s regulatory rules – e.g., for chemical substances – will not continue.
The REACH rules provide that a substance must be registered in accordance with the REACH Regulation, and by the deadlines provided, in order to be placed on the market. Hong Kong traders may recall that REACH registrations are made per substance through the ECHA IT tools system. Under REACH, companies are required to register chemical substances they use or trade in with ECHA, before placing them on European (EU/EEA) markets (the EEA countries are, in addition to the EU-27, Norway, Iceland and Liechtenstein). Furthermore, they must obtain additional authorisation in order to trade in and/or use chemicals that are banned for sale or for use in the EU/EEA.
It follows that companies have to either register their substances by submitting a dossier jointly with other registrants to ECHA, or submit a subsidiary dossier if the substance has already been registered, so as to receive a Letter of Access from the Lead Registrant. Companies established outside the EU and wishing to sell on the internal market, such as Hong Kong-based manufacturers exporting to the EU, cannot directly register their substances under REACH. According to the ECHA guidance for non-EU companies, the responsibility for fulfilling REACH requirements lies with the importers established in the EU, or with an Only Representative of a non-EU manufacturer established in the EU/EEA and appointed for that purpose.
Once the UK leaves the EU, the UK will be considered a third country and companies will not be able to freely sell their products in the EU/EEA. In this scenario, Hong Kong companies selling into European markets will be subject to different sets of rules for the UK and for the remaining EU/EEA countries, and all REACH registrations and authorisations from the UK will cease to be valid as of 13 April 2019.
To remain compliant with REACH, UK-based companies will have to transfer their registrations to an entity based in the EU/EEA, by either relocating their activities to the EU/EEA, or else appoint an Only Representative based in one of the EU/EEA Member States. This also means that non-EU companies with an only representative that is currently located in the UK will also need to get a new only representative within the EU.
As regards REACH authorisations, which serve the purpose of allowing companies to use banned substances for a determined period of time until an alternative is found, the same cancellation will apply to the ones granted to British companies. Therefore, in a no-deal scenario, the companies that held REACH authorisations before Brexit and the ones holding a pending authorisation request will no longer be able to sell their substances in the EU. This also means that EU-based companies within the same supply chain, relying on such authorisations, will need to find suppliers with valid authorisations in the EU/EEA, or apply for new authorisations themselves.
In the event of a “no-deal” Brexit, Hong Kong businesses exporting to the EU through a UK importer or UK Only Representative, should be aware of the above-mentioned practical implications foreseen by ECHA. According to its statistics, the number of registrations for which a transfer was initiated from a UK-based registrant to an EU-27 based company is increasing, with the cumulative figure exceeding 4,800 by the end of March, out of approximately 12,000 UK registrations in total. Therefore, ECHA urges companies to take the necessary steps for REACH compliance as soon as possible, and not to leave these transactions to the last moment.
Please click on the following to find further information on Registration and Authorisation Transfers published by ECHA.