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Rules & Regulations: A Long Way to REACH

By: Nicolas Gardères
Posted: February 27, 2009, from the March 2009 issue of GCI Magazine.

When the far-reaching and ambitious Registration, Evaluation, Authorization and Restriction of Chemical substances (REACH) legislation was proposed, many people believed that implementation was unlikely due to the relative complexity and stringent terms. When the pre-registration stage of REACH implementation began June 1, 2008, these same people hoped that their businesses would be able to adapt to whatever challenges arose—whether rules were enforced as written or evolved as practical issues—but it was clear when pre-registration ended on Dec.1, 2008, that companies’ own implementations would not be easy.

Globally, large chemical companies have been making investments in REACH compliance, and, for the most part, have satisfactorily complied with pre-registration of their chemicals. However, the situation is much more problematic for small and mid-size companies, especially those from non-European Union (EU) countries, not as adept at dealing with the chemical regulatory issues directly. And despite the warning bell that has been ringing for the past few years, many of the latter companies only realized that REACH exists relatively late in the day—and, in fact, they may have been doing business illegally. These companies risk prosecution and a large fine, and must still register or risk being excluded from the EU market.

When such concerns relate to only a few dozens companies, it is easy to penalize those companies. However, the situation is a bit different when it concerns thousands of companies globally. This creates another tangle in an already difficult web. With REACH, Europe has created a legal, bureaucratic monster, and will likely have difficulty keeping it under control. The way the European Commission (EC) and the European Chemicals Agency (ECHA) will manage to give a second chance to companies, without discrediting the whole REACH system that’s been put in place, will be a very interesting issue to follow.

The U.S. is clearly one of the countries most interested in the possible softening of REACH deadlines. Indeed, the EU is a very important market for the American chemical industry, and there is no doubt that a significant percentage of U.S. companies did not pre-register. The U.S. was quite active in lobbying to reduce the scope of REACH as much as possible. But, after 2006 and the enactment of the regulation, the industry was very reluctant to involve itself in REACH, and all decisions concerning pre-registration have been made very late or even not at all. A lot of companies were thus still wondering, in the middle of November, what might be the best way to pre-register their chemicals.

Basically, like all non-EU manufacturers of chemicals, U.S. companies had a few choices relating to pre-registration—ask their importing agents to deal with pre-registration, appoint a subsidiary in Europe or create a dedicated subsidiary to be its “Only Representative,” or appoint an independent European professional Only Representative—an intermediate that will be in charge of complying with the administrative procedures of REACH on behalf of a non-EU company. The relative advantage of appointing an Only Representative instead of relying on importers is fundamentally a question of intellectual property law and protection of trade secrets. Indeed, disclosing some sensitive data to importers in order to comply with REACH may be quite dangerous, as the future of that commercial relationship may be uncertain.