Ray Rex, CRC-US
Brexit is coming! While the timing for its implementation is still uncertain, Brexit will impact many coating manufacturers importing product into both the EU and the UK. Recently, the EU granted a “flexible” Brexit extension until October 31st of this year. This extension, if it stands, will allow companies impacted by the withdrawal of the UK from the EU to better prepare for what appears to be the inevitable. In order to review the possible impacts of Brexit on companies importing chemicals into the EU and the UK, some key acronyms need to be set in place.
Table 1: Terms and Definitions
- REACH: Registration, Evaluation, Authorization, and Restriction of Chemicals within the EU (2006)
- ECHA: European Chemical Agency- Agency in Helsinki, Finland with which importers must register chemicals
- HSE: Health and Safety Executive is the UK agency that will be involved in registering chemicals imported into the UK
- OR: Only Representative-Companies that do not have a physical presence in the EU are permitted to appoint an OR who must be located in the EU
- EU 27: European Union as it would be following the exit of the United Kingdom
- Brexit: Creates (when it occurs) what will essentially be a separate but similar set of agencies and processes for importing chemicals into the UK as currently exist for the EU
Businesses importing chemicals into the EU are aware of the requirements and costs associated with the European Union’s REACH regulatory compliance. Importing one metric ton or more into the EU of any chemical substance requires the importer to register the substance with the European Chemicals Agency (ECHA), located in Helsinki, Finland. This requirement also applies to substances imported as part of a mixture and sometimes even as part of an article.
Companies that do not have a physical presence in an EU country, are able to appoint an Only Representative (OR) as permitted by Article 8 of the REACH regulations. The OR must be located in the EU to conduct annual reporting of chemical imports and to be in a position to notify customers and distributors of the registration status for their products.
So how might Brexit impact your business? The current understanding is that the UK will introduce its own REACH-like legislation on “Brexit day”. In fact, a draft text, which is in principle a copy of the EU REACH text, is already floating through the internet.
The EU has granted a “flexible” Brexit extension to October 31 of this year – although an earlier Brexit date is still possible in 2019. Some have referred to this extension as the Halloween Brexit. Companies impacted by Brexit and the government authorities within the UK, however, can possibly take advantage of this extension to better prepare for what appears to be an inevitable exit.
Your Supply Chain Determines the Path Forward
How should your company address this situation? It all comes down to assessing your current supply chain into the EU countries. If you are importing into the soon to be EU 27 and also into the UK, it will be like having REACH times two. You will need an OR located in an EU 27 country and an OR located in the UK, and you will need to register your chemicals with ECHA in the EU 27 and HSE in the UK, respectively. Bottom line business impact – more time and effort and more cost to continue to import chemicals into the old EU – now the EU 27 and the UK.
Brexit just is – so build a bridge and get over it. What you should do next starts with a definition of and a focus on your supply chain for each of your products? If you do not plan on importing into the UK to serve your customers, then keep your EU registrations and OR in the EU 27 and continue with business as usual. That was an easy one, but likely not representative of most companies.
Let’s look at a more typical supply chain for a US manufacturer of additives used in the paint & coatings market. There are a large number of potential and existing customers throughout the EU, with significantly different channels-to-market. The REACH regulation does not permit the US manufacturer (a non-EU entity) to register substances in the EU on his own. A US manufacturer must appoint an OR to take care of the necessary REACH registration activities because the registrant must be an EU entity.
The “Only Representative” (or OR) is a Service Provide
The OR is a service provider that allows US manufacturers to maintain control of their registrations. It provides the non-EU company with the freedom to control their destiny – to sell to anybody in the EU without being dependent on a specific importer. The registration by an OR can cover as many importers as the non-EU company wants to deal with and only the OR needs to know who is covered by the registration.
The next steps for the US manufacturer to maintain the current supply chain, post-Brexit, is dependent on the location of the manufacturer’s current OR. The two scenarios regarding the OR location are: (1.) The OR is located in the UK; (2.) The OR is located in the EU 27.
Table 2: Scenario 1. The OR is located in the UK
- The US manufacturer’s OR is only able to cover direct imports into the UK post-Brexit
- Any supply chain with active EU 27 clients or those which move chemical products through the EU 27 prior to entering into the UK will necessarily require an EU 27 based OR
- The UK based OR has a legal entity in the EU 27 who can take over the obligation, if not, a dedicated EU 27 OR needs to be contracted
- In any case, the US manufacturers existing REACH registrations will need to shift to the new EU 27 OR. It should be kept in mind that, regardless of the actual situation, registrations may need to be duplicated to stay compliant under both the EU 27 and the UK REACH scheme
Table 3: Scenario 2. The OR is located in the EU 27
- Further action is only necessary, if a supply chain either enters the EU 27 through the UK or enters the UK at some later point
- If the supply chain enters the EU 27 through the UK then changing the supply chain to enter the EU 27 directly, where possible, can save a lot of REACH related costs and work
- When changing the existing supply chain is not possible or practical a UK based OR will be required to cover those chemicals being imported into the UK unless this obligation is assigned or pushed onto the UK importer(s)
- In this case, duplication of the existing registration will likely be required to stay compliant under both REACH schemes.
What can you do?
Every situation is different, and you must remember to examine your supply chain first. Determine your path to compliance within the new EU 27 and separately within the UK. Remember that the actions you will take for chemical regulatory compliance are business decisions. You must assess the economic benefits and strategic implications regarding the marketplace and your products when making compliance decisions.
A Brexit check list:
- Define your chemical supply chain from the source through manufacturing to the customers
- Assess your EU business goals
- Determine the required compliance activities to meet your business goals
- Seek expert advice for compliance activities
- Plan and execute
Good luck and remember to follow your North Star – the supply chain
Chemical Regulatory Compliance Company (d/b/a CRC-US @ www.crc-us.com) is a sister company of CSB GmbH, a 28-year old company started by Heinz Dobbertin and now managed by Lars Dobbertin. CSB GmbH is focused specifically on serving all phases of the global chemical industry with regulatory and compliance services. CSB GmbH has full coverage and expertise for all REACH related activities and OR services located in the UK and the EU 27. Ray Rex, President of the CRC-US, has over 30-years of experience in the specialty chemicals market including the paint and coatings market as the former Commercial Director of HALOX. (email@example.com)
CRC-US is a business partner of the CHEMARK Consulting Group, Inc.