With the first major deadline in the European Union's new chemicals policy just days away, companies based in the United States will be increasingly confronted by the impacts, direct and/or indirect, of this new legislation. Titled the Regulation on the Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), the first major direct impacts will be felt on December 1, 2008 when REACH requires that all phase-in chemical substances (i.e. substances that are already on the market in the EU) manufactured in or exported to Europe be pre-registered with the European Chemicals Agency ("ECHA").
The consequence of failing to pre-register is the potential loss of access to EU markets. Therefore, concerned U.S. businesses that have not yet acted are being urged to do so quickly in order to avoid losing key European business. Indirectly, REACH promises to influence U.S. companies through the potential to change existing U.S. regulation under the Toxic Substances Control Act ("TSCA"). Revisions to TSCA are a very real possibility with the upcoming change in Administration and control of Congress firmly in Democratic Party hands.
Direct Impacts
The direct impacts stem from REACH's imminent pre-registration deadline. In order to comply with the December 1, 2008 deadline, U.S. companies manufacturing in or exporting to the EU the following substances in amounts of 1 ton or more per year must pre-register (via the REACH -IT portal on the ECHA website):
- chemical substances: e.g. base chemicals, speciality chemicals, metals, natural substances that are chemically modified;
- substances in preparations: e.g. alloys, petrochemicals, coatings (including paints, varnishes or enamels), dyes, inks, cleaning materials, lubricants, sterilizers, perfumes and adhesives; and
- chemical substances that are contained in articles (i.e. "finished products") and which are intentionally released during their use: e.g. fragrance in a scented candle, perfume from an eraser, scented toys etc.
There are clear advantages for U.S. companies that meet the pre-registration deadline, including being able to continue importing into the EU market until the substance has been registered; benefiting from extended registration deadlines; and guaranteeing the supply chain for European downstream users.
If a U.S. manufacturer has a legal entity (e.g., a subsidiary) with a presence in the EU, then this entity is able to pre-register its substances. U.S. manufacturers without such arrangements, however, are not able to pre-register substances directly. Instead, they must either rely on their importer to pre-register their substances or appoint an EU-based representative, a so-called only representative ("OR"), such as a consultancy or law firm with chemicals expertise. While either option is equally acceptable under REACH, appointing an OR versus relying on an importer allows the U.S. company to have more control over the pre-registration process, minimizes risk of having sales interrupted if the importer does not meet the REACH requirements, and avoids the disclosure of potentially sensitive information to the importer.
While pre-registration is free of charge and does not establish any obligation to continue production or import of substances, there are long-term impacts that also must be taken into consideration. For example, for each substance that is pre-registered, the business (or the OR) will be required to join a Substance Information Exchange Forum (SIEF) until 1 June 2018 and may have to participate in SIEF activities -- such as data gathering and testing. Thus, in reality, pre-registering is just one in a long line of steps that will involve spending a significant amount of money, time, and resources in order to ensure REACH compliance. Given the potential consequences of failing to pre-register, however (i.e., complete exclusion from EU markets), business are advised to consider participation by taking a number of preparatory steps, including:
- creating an inventory of all products that exported to the EU;
- identifying whether these products fit the categories of reportable substances noted above;
- determining if the substances or uses in your inventory are exempted from (pre-)registration;
- collecting available information on the name of the substances and analytical data from the laboratory;
- identifying the likely registration deadline corresponding to the volume of the substance in tons per year and its classification and labeling.
By January 1, 2009, ECHA will publish on its website a list of all pre-registered substances. The identity of the pre-registrants will only be visible by those who have pre-registered the same or related substances and provides the basis for the formation of SIEFs to share data amongst manufacturers and importers of the same substances.
Indirect Impacts
U.S. manufacturers should also be aware of the indirect impact REACH will have outside of Europe. Already, the shift of REACH's focus from a regulation that places burdens on governments to prove a chemical is hazardous to one that shifts that burden to manufacturers who must prove a chemical is safe is being felt in the United States. For example, in mid-2005, the U.S. Government Accountability Office ("GAO") published a report detailing how TSCA could be reformed to more closely mirror the approach enacted by REACH. As recently as August 2007, GAO conducted a side-by-side comparison of TSCA and REACH.
Both of these reports generated considerable interest by the Democratic leadership, particularly Senators Barbara Boxer (D-CA), Frank Lautenberg (D-NJ) and Patrick Leahy (D-Vt). With President-elect Barack Obama scheduled to take office in January of 2009, the likelihood of chemical reform, potentially along the lines of REACH, is even greater; especially with President-elect Obama making such reform his second highest environmental priority.
The focus towards a more REACH-like system has been spurred on as well by other factors, creating almost a "perfect storm" for the reform of U.S. chemical regulation. For example, there also has been a sharp increase in the media coverage regarding the hazards of existing chemicals in everyday products. Other factors include efforts by the U.S. Environmental Protection Agency to obtain additional data through voluntary programs such as the expansion of the High Production Volume program through the Chemical Assessment and Management Program (ChAMP), California's recently enacted Green Chemistry requirements and Canada's move towards pro-active chemical regulation.
With all of the foregoing factors coming together and REACH's implementation as a guide, the new leadership in Washington, D.C. is likely to impose similar systems on the federal level. Accordingly, while U.S. companies may avoid REACH directly by not participating in European markets, they are sure to feel its effects as components of that legislation are adopted in the U.S.
James C. Chen is a Partner, and Giles Chappell an Associate in the Product Risk Management Practice of Crowell & Moring LLP. The practice works with consumer and industrial product manufacturers, component suppliers, sellers and distributors in identifying and managing risks and navigating legal and regulatory regimes, both domestically and internationally. Crowell & Moring LLP is an international law firm with more than 450 lawyers practicing in litigation, antitrust, government contracts, health care, corporate, intellectual property and a variety of other practice areas. http://www.crowell.com
