Last reviewed 11 July 2016
Leaving the EU is envisaged as potentially leading to a vibrant economy unconstrained by Brussels red tape. However, it is not clear how far the UK could release itself from Brussels regulations when it leaves the EU. In this article, Gordon Tranter discusses how UK-based companies’ obligations under the provisions of EC Regulation 1907/2006 on Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) will change after leaving Europe.
One of the most important exporting sectors
The chemical industry is one of the most important exporting sectors. Its exports to the rest of the EU total €22.3 billion a year. Not surprisingly, the industry is worried about the consequences of Brexit and in particular the UK’s status as regards EC Regulation 1907/2006 on REACH.
REACH was adopted to improve the protection of human health and the environment from the risks that can be posed by chemicals. It applies to chemical substances used both in industrial processes and also for domestic purposes. Therefore, it has an impact on most companies across the EU. The regulation requires companies to identify and manage the risks linked to the substances they manufacture and market in the EU.
A major part of REACH is the requirement for companies to collect information on the properties and the uses of substances that they manufacture or import at or above one tonne per year and register them with the European Chemicals Agency (ECHA). They also have to make an assessment of the hazards and potential risks presented by the substance. A registration package will be supported by a standard set of data on that substance. The amount of data required is proportionate to the amount of substance manufactured or supplied. Failure to register the substance means that the data required will not be available and as a result, the product cannot be manufactured or supplied legally.
A burdensome piece of legislation
The REACH Regulations are very complex, taking up 526 pages and with 24 amending Regulations. Not surprisingly Hubert Mandery, Director General of the European Chemical Industry Council (Cefic) claims that REACH is considered by companies, particularly small and medium-sized enterprises (SMEs), as one of the most burdensome pieces of legislation in Europe.
Cut EU Red Tape: Report from the Business Taskforce, a report for the Business, Innovation and Skills Department concluded that: “The cost of registering chemicals under REACH is excessive. SMEs across the EU are hit disproportionately hard. REACH is forcing some smaller businesses to consider manufacturing outside Europe or stop manufacturing altogether. Current REACH guidance is unwieldy and complex. It forces small companies to buy in expertise to help them comply.”
In 2018, the threshold for registration will reduce from 100t to 1t per annum. Most SMEs will then be covered by the regime. They will have little option but to pay fees, often prohibitively high, to join “registration” consortia to gain access to information on chemicals and register for REACH. Consequently, the removal of REACH might seem attractive to many SMEs.
REACH after leaving
Once the UK has formally notified the EU of its intention to leave, it is likely to be two years or more before the exit occurs. During this time REACH will continue to apply in the UK and there may also be a transition period after this. The effects Brexit will have on REACH will depend on the outcome of the renegotiation of a new legal basis for Britain’s trade relationship with the EU.
Companies currently importing chemicals and products into the EU have to comply with the provisions of REACH. However, only EU companies can participate in certain aspects of REACH including registration. Consequently, companies outside the EU must use the services of third parties and pay the costs.
The extent to which UK companies will be excluded from participation in REACH will depend on the outcome of the forthcoming negotiations. Currently, the options if the UK leaves the EU include:
making arrangements similar to those of the members of the European Economic Area (EEA), such as Iceland, Liechtenstein and Norway, which would allow the UK to be part of the EU’s single market, or
being outside of the single market, probably with a free trade agreement such as Switzerland.
Joining the single market
Members of the EEA have full access to the single European market. If the UK joins the EEA without any concessions, it would have to pay about 83% as much into the EU budget as it currently does; abide with European freedom of movement; have no say in EU politics and still comply with EU regulations. It would keep access to the existing single market for chemicals and keep the advantage of REACH registrations. However, members of the EEA have to keep current EU regulations without participating in making them. This would mean that the UK would not take part in decisions on the future of REACH and other EU chemicals policy.
Outside the single market
If the UK took the option of being outside the single market, REACH would no longer apply. Not only would the UK have no input into EU chemical policy, but also there would be changes in the process of registering substances which could seriously disrupt chemicals trade.
Chemicals from the UK would be considered as imports into the EU from a non-EU country and UK manufacturers would become non-EU manufacturers. Registrations could no longer be carried out in the UK. Registrations that are now carried in the UK would have to be replaced by registration by importers or only representatives (ORs) in the EEA.
REACH companies based outside the EEA can appoint EEA based ORs to take over the tasks and responsibilities of importers for registering their substances. With the UK outside the single market, the status of ORs would be affected. ORs based in the UK would no longer be able to make registrations for non-EU manufacturers, which are estimated as more than 40% of UK registrations.
Authorisation and restrictions
REACH includes two other processes, authorisation and restriction, aimed to protect human health and the environment from unacceptable risks posed by chemicals. Authorisation applies to Substances of Very High Concern (SVHC), substances with hazards that have serious consequences. Substances identified as SVHCs may be included in the Authorisation List and become subject to authorisation. These substances cannot be placed on the market or used after a given date, unless an authorisation is granted for their specific use, or the use is exempted from authorisation. Restrictions may limit or ban the manufacture, placing on the market or use of a substance.
If REACH ceased to apply in the UK, authorisations and restrictions would no longer be directly applicable and it might allow the reintroduction of certain substances that have been phased out under REACH in the EU. However, reintroduction of any of these substances could meet strong opposition.
It depends on the terms
It has to be emphasised that the options described above are based on the “out means out”, a position currently held by the EU. Much depends on the extent to which the EU sticks to this position.