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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.

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As such, many non-EU manufacturers, in particular U.S. companies, have been seduced by the possibility of appointing an independent professional Only Representative. In contrast, Russian and Chinese companies have generally preferred, in accordance with their business cultures, to use or create their own subsidiaries in Europe.

Impact and Influence

As noted, REACH regulations represent a big challenge for U.S. companies. It is an EC regulation, and directly binds only European companies. Nevertheless, as the burden of compliance is on all those who sell into the EU market, all exporters to this market are indirectly bound by REACH. This factor has turned REACH into a global regulation. It is, of course, not the first global regulation, but it is still a fairly new phenomenon on such a large scale.

The harmonization of any U.S. legislation on chemicals with REACH is, therefore, almost mandatory. Many other non-EU countries, including China and Russia, have already started a pre-legislative process toward the adoption of REACH-like regulations. In addition to making compliance with REACH easier for U.S. companies, such legislation would help the U.S. stay competitive on the worldwide market.

The requirement to share studies about the intrinsic characteristics of chemicals is another very big issue intrinsic in REACH. In relation to the quantity and quality of these studies, the U.S. will be one of the world leaders—even if being outside the EU inherently weakens its position. In this regard, forming a consortium would be a very interesting option. If Substances Information Exchange Forums, in which European companies are going to discuss the sharing and performance of studies, are in the strict frame of REACH and thus not open to U.S. companies, those companies will be looking at becoming members of consortia instead—cooperating to carry out and to share relevant studies and the related costs.

As useful as it can be, a consortium is a tool that must be used carefully so as not to become a vehicle that veers down illegal avenues. Indeed, to set up an agreement with competitors in order to establish a common strategy to implement a regulation is not a common business practice, and the temptation to use this framework to “organize” the European market is real—with enough known illegal agreements and violations of European competition law under the guise of such organizations to raise general suspicions that any and every consortia will engage in such behavior. Therefore, U.S. companies should be well aware that they are no more beyond the scope of European competition law than they are beyond the scope of REACH. Indeed, competition law applies regardless of a company’s country of origin, and instead depends on a restriction of competition on the European market. As such, a U.S. company meeting in the U.S. with its European partners can create a restriction of competition in the EU market, and that U.S. company can be prosecuted and eventually sentenced.

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