No Data? In 2020, That Means No Market.

The dynamics of global regulatory compliance are shifting rapidly. Companies are watching the EU market particularly closely, asking: Will these upcoming changes threaten my access to this huge market?

For an answer, we direct you to Article 5 of the European Union’s REACH Regulation (EC1907/2006), which is prefaced with the catchy phrase, “No Data, No Market.”

In this regulation, legislators didn’t direct their enforcement approach exclusively toward audits, fines, or any of the other more conventional sanctions. Instead, the indication was that products without proper compliance documentation could simply be denied entry at customs and put back on the boat.

Over the past decade, REACH enforcement has proven to be more nuanced than this uncompromising language had foreshadowed. A disconnect between legislative mandate and subsequent enforcement action is not entirely unusual. Most compliance professionals are aware that there is often a significant gap between the aspirations of legislators and the realities of enforcement.

Regulatory Realities can Change

2020 is not 2010. In 2010, few would have envisioned that the EU’s second largest member state (by market size) would be on the verge of crashing out of the customs union with the possibility of a “no-deal” hard-Brexit. In 2010, rapid globalization seemed like an inevitable and irreversible reality. Trade wars were not something that most companies spent a lot of time planning for. Certainly, it wasn’t considered a significant business risk for trade between political allies with highly complementary markets and mutually beneficial commerce.

In fact, if there seemed to be any apparently stable assumption that global manufacturers could count on, it was the expectation that the market-oriented economies of the West would continue to partner with each other in furthering the secular trend toward ever-increasing globalization. Barriers to trade would continue to collapse and the free movement of goods and services would expand indefinitely — at least between countries that were politically aligned.

In that context, perhaps it was tempting to dismiss the strong enforcement language in REACH and other similar EU regulations. It may have been reasonable to suspect that strict enforcement would be overwhelmed by economic realities. According to the Office of US Trade Representative, total trade between the US and EU topped $1.3 trillion in 2018. The latest data estimate that this trade supports 2.6 million jobs on the US side.  The EU is the US’s largest export market and is the US’s second largest source of imports. Enforcement actions that threaten harm to this trillion-dollar golden goose are not to be taken lightly.

If we arbitrarily choose 2016 (when the UK’s EU Membership Referendum was held) as the year when European political realities started to shift, we could likewise arbitrarily single out 2019 as the year when EU regulatory enforcement began to take its cues from this changing mindset.

In terms of compliance, many regulatory professionals contend that the UK had served as a moderating influence compared to some of the other EU member states (e.g., recall the controversial REACH “Once an Article, always an Article” ruling of 2015, which the UK opposed).

In the current political climate there may be less concern about running afoul of World Trade Organization sanctions against regulatory barriers to trade. In this new context, more politicians are making it a priority to protect domestic jobs from foreign competition. ”Fair trade” proponents now say that there is increasing justification for denying market access to foreign exporters who do not meet the same level of regulatory compliance that domestic manufacturers meet.

New EU Regulations in 2019

From a regulatory standpoint, 2019 has seen the EU’s new Waste Framework Directive (WFD) suddenly take on a life of its own, expanding rapidly beyond its original mandate to regulate waste products and now seemingly encompassing nearly the entire stream of goods imported into the EU. In fulfillment of the “No Data, No Market” promise, WFD now includes plans for an immense central database that all companies who wish to retain their privilege of accessing the EU market would potentially have to use for reporting hazardous chemicals.

On September 9, 2019, the SCIP (Substances of Concern in Products) Database information requirements were published. Despite energetic protest from global exporters, the database will ask companies to identify whether their products are produced within the EU or outside of the EU. All products will also have to be identified by a TARIC (Tariff of the EU Code). In the public comment period, numerous large industry organizations pointed out that this was a giant step toward creating barriers to trade and a possibly useful vehicle for discrimination against non-EU manufacturers trying to maintain access to the EU market.

Likewise, in 2019, while the UK was in the midst of struggling its way toward Brexit, the EU moved ahead with the “Market Surveillance and Product Compliance” regulation.  Amongst this new regulation’s provisions is the expansion of product compliance to include “companies who place a product on the EU market without…being established in the EU” (and, notably, it explicitly mentions the UK as being not part of the EU). The regulation also creates a framework for enhanced cooperation at the EU level for more robust enforcement of regulations against foreign-based importers placing products on the EU market.

Prepare for the Change 

Perhaps these changes are transitory and the political, economic, and regulatory winds will shift once again in the 2030s or earlier. Whatever the case may be, it does not seem prudent to just wait and ride out the current storms.  Starting in 2020, non-compliance should now be considered a legitimate risk to market access. Sudden, unanticipated revocation of market access privileges would translate to sudden, unanticipated drops in top-line revenue – precisely the type of surprise that Wall Street punishes mercilessly.

Does all this mean that your products will soon be making a u-turn at customs and sent back to US ports if they don’t have proper compliance documentation? Not necessarily — but it does appear that the risks of your company losing access to the US’s largest export market are higher than they have ever been.

Contact Tetra Tech for more information on how you can protect your access to the EU and other markets.

LEARN MORE 

 

Your Options for UK REACH Compliance

As a chemical importer into the United Kingdom, Brexit poses many challenges and uncertainties for your REACH obligations.

If a deal is struck between the UK and the European Union, EU REACH should continue in the UK with an implementation period of 6-24 months to UK REACH.

But if the hard-stop Brexit scenario does occur on October 31, 2019, or at a postponed later date, then considerable action must be taken by importers to meet the new UK REACH regulation.

To help prepare for this, let’s look at some items chemical and product manufacturers outside of the UK will need to consider before placing product onto the new UK market.

UK Legal Entities’ Options for Compliance

Once Brexit occurs existing UK registrants for EU REACH with REACH ORs outside of the UK must do the following:

  1. Open a UK REACH IT account.
  2. Enter basic information of your EU substance registration within 180 days of Brexit.
  3. Provide the technical dossier and submit to Health and Safety Executive for registration within two years of Brexit. This process will be deemed a new registration in the UK and subject to fees.

If your substance was originally EU REACH registered with a UK only representative, your registration will be “grandfathered” in. But first, you must transfer the registration into UK REACH by:

  1. Opening a UK REACH IT account.
  2. Entering some basic information of your EU substance registration within 120 days of Brexit.
  3. Providing the technical information of your substance (same as EU REACH for your tonnage band) within two years of Brexit.

For all other non-UK based manufacturers wanting to place chemicals on the UK market, you will have to set up a UK OR specifically. To establish an OR within the UK you can:

  1. Create an OR within your organization by first identifying a stable operational UK business entity.
  2. Next determine if there is enough technical expertise to maintain communications and compliance with the UK REACH legislation and process.
  3. Confirm you have executive backing to support the OR efforts. Make sure you are comfortable with the liability or consider getting legal opinion and approval from a UK attorney to proceed with establishing the office.
  4. If these cannot be guaranteed, then you may want to consider an outside OR provider such as Tetra Tech.

Once you have found the technical talent located within the UK to perform OR duties, you should begin to gather information on the substance that is required for the initial notification to UK REACH, such as:

  1. Manufacturer/importer identity.
  2. Substance identity.
  3. Information on the manufacture and use of the substance data.
  4. Indication as to which of the relevant information on the manufacture and use has been reviewed by an assessor.
  5. Confirm if you are meeting the 1 MT/year threshold, which exists specifically for the UK market. If not, then monitor imports by substance until they exceed 1 MT.

After the proper registration with the HSE is complete, maintenance of the information will be an ongoing requirement. Any changes in the hazard classifications, additional safety or use information will need to be included, just as it is for EU REACH. As of now HSE foresees staying in line with the EU REACH, however, the point of Brexit was so the UK could choose to make its own rules, so the outcome is uncertain.

Establish Your UK OR Today

Tetra Tech has years of experience as only representatives for REACH compliance and authorizations, representing North American-based exporters and operating out of Tetra Tech’s offices in the US and in Germany. We can help by:

  • Providing help in establishing OR (only representative) support to your chemicals business.
  • Auditing your supply chain to hold it accountable to UK REACH compliance.
  • Reviewing your reliance on authorized substances for compliance to allow your business to continue seamlessly.

 

To legally conduct business within the United Kingdom in a post-Brexit market, contact Tetra Tech’s UK REACH subject matter expert at reach@tetratech.com to learn more.

 

Learn More

 

The Implications of EU Phthalate Restrictions

Phthalates are a family of substances commonly used in many plastics today, enhancing everyday products with flexibility and endurance. They were a scientific breakthrough that had been a win-win for everyone.

Yet, now with greater understanding, phthalates have been classified as a Category 1B reprotoxin (endocrine disruptors) and thus have been the subject of many regulations in the European Union that restrict or require notification for specific phthalates.

These restrictions can mean major disruption to your operation, requiring you to change suppliers and/or to modify the entire makeup of your product itself. Yet as these restrictions are gaining more ground and becoming more comprehensive, it is ever-more challenging to determine whether or not you already comply with EU phthalate restrictions or need to take steps to comply.

Here we will be providing some clarity, focusing specifically of these implicated four phthalates:

bis(2-ethylhexyl) phthalate (DEHP) CAS 111-81-7

diisobutyl phthalate (DIBP) CAS 84-69-5

dibutyl phthalate (DBP) CAS 84-74-2

butyl benzyl phthalate (BBP) CAS 85-68-7

Phthalates and RoHS

As of July 22, 2019, the four above phthalates are restricted from inclusion in all homogeneous materials used in the manufacturer of Electrical and Electronic Equipment (EEE) (except for Medical and Measure and Control EEE which have until July 2021) in concentrations >0.1% by mass — as part of the RoHS directive (EU) 2015/863.

RoHS was intended to apply to all EEE and has been expanded by some manufacturers and importers to include a wide variety of products which one may not traditionally believe to be EEE. As a conservative approach you should strive to remove these phthalate substances from your products and supply chain to alleviate any EEE product interpretations and reduce risk of non-compliance.

Phthalates and REACH Candidate List (SVHC)

REACH covers all chemical substances whether used in industrial products, commercial products, retail products or in the manufacture of articles (finished products and their components). The regulation is broadly applicable and is in place to ensure the protection of the environment and human health from harmful chemicals.

These four phthalates fall under provision of REACH called the Candidate List or Substances of Very High Concern (SVHC). The regulation requires that all products that contain > 0.1% by mass of an SVHC must be accompanied by a notification to the user that an SVHC is present in the product and what safety precautions should be in place to prevent exposure.

If you have a product that is placed on the EU market, and that product contains a component (article) or is part of a chemical mixture that has one of the above phthalates within its chemical composition at > 0.1 % by mass, then you are required to notify the users of its presence and proper safe handling.

This may be accomplished with a product declaration and safety documentation. However, one should be sure that the product is not classified as EEE. If it is classified as EEE and you were to provide a declaration to the user that the product contains one of the RoHS phthalates, then you would be in violation of RoHS and be restricted from placing on the market.

Phthalates and REACH Annex XIV (Authorization List)

EU manufacturers, industrial users and consumers may not use a substance on the Authorization List unless approval has been granted by ECHA.

The four phthalates listed above require such Authorization for use as of May 2, 2015.

If you have are importing a product, mixture or substance which contains one of the phthalates above in a concentration >0.1% by mass, then your customer must have an Authorization in order to use it in the manufacturing of another product or to use it in general.

Phthalates and REACH Annex XVII (Restriction List) 

Should you happen to make it this far down the list and your product still is not affected by any of the above regulations, then maybe this one will apply. These phthalates are also on the Restricted for use list. A summary of the restriction states these phthalates:

  1. Shall not be found in plasticized materials in toys and childcare articles at concentrations > 0.1% in total.
  2. Shall not be found in any article at concentrations >0.1% by mass effective July 7, 2020.

There are some exemptions for industrial, agriculture, automotive and aerospace applications, but only if the materials does not come into contact with humans and foods.

Conclusion

The EU is not the only government looking to remove phthalates from the market, however, they are currently the most active. Enforcement activities are initiated and non-compliance to any of these regulations could lead to fines, loss of market and potentially criminal negligence. Each member state has the opportunity to enforce these regulations uniquely. If your product in sold across multiple member states, then you would then be exposed to multiple penalties.

If phthalates are in your product, it is vital you look for alternatives now. The regulations on these phthalate substances are based upon their health hazards. And since all Phthalates share the same basic chemistry, it should be of no surprise that additional phthalates substances are being investigated for regulatory action as they come onto the market. For the long game, manufacturers should be looking to remove all phthalate substances from their product matrix and supply chain.

Contact us today to learn more at andy.gbur@tetratech.com.

 

LEARN MORE