ioana bere

The UK plans to copy across most of the EU’s environmental legislation, including the chemical safety regulation REACH. This means that companies doing business in the UK and in the EU will have to comply with two sets of rules.

In the case of REACH, this means that companies doing business in the UK will have to register chemicals under the UK system. “If we spent €5 billion on establishing the EU’s REACH, what is there to suggest it is going to be much less for UK-REACH?” asks Peter Newport from the UK’s chemical business association. As a third country the UK will no longer have access to the EU’s REACH database and needs to set up its own REACH registration system. It is difficult to see how the UK could cut costs without sacrificing environmental and public health standards.

EU chemical industry association CEFIC voiced its fears about supply chain disruptions in the absence of agreements between the EU and UK. Given the REACH data sharing and only representative requirements, UK registrants will need to acquire access and rights to using safety data, which will require lengthy data sharing negotiations involving multiple owners.

ChemicalWatch on UK chemical safety framework data struggle
Cefic statement on outcome of Brexit vote

(09/01/2019) The UK government published its draft statutory instrument to establish a UK chemical safety law, copying and amending the EU’s REACH regulation. It puts in place arrangements for a two-year transition period, during which UK authorities will have no access to the world’s largest chemicals safety data base hold by the European Chemicals Agency (ECHA).

The instrument provides that an existing registration under EU REACH “has effect on and after exit day as a UK registration” as long as the registration holds a connection with the UK. The companies, which hold this so-called “grandfathered” registrations will then have a period of two years to submit the full data package. According to the Government’s guidance note, the IT system is already being tested as to be ready for use on 29 March 2019. But companies warn about the difficulties and complexity of managing the data sharing given the complex supply chains. The EU needed ten years to master the challenges and to phase in the new system.

Further to this safety data gap, the instrument omits essential governance elements of the REACH regulation, including the independent expert committees, the board of appeal and transparency requirements, which are seen important tools against short-term interests.

The UK could become a dumping ground for products containing harmful chemicals that are banned in the EU, according to Greener UK.

Draft Statutory Instrument on REACH (EU Exit) Regulations 2019
UK Government guidance on REACH in a no-deal scenario
Greener UK, “Environmental concerns around no deal”

From a trade perspective, a no deal Brexit is bad news for the chemicals industry. The UK would fall under the WTO most favored nation tariffs, or the Chemical Tariff Harmonisation Agreement (CTHA), which the UK could join after leaving the EU. The CTHA would allow the UK to benefit from a 6.5% or 5.5% rate for most traded chemical products. But even this cannot match the EU’s lower or even zero tariffs negotiated with third countries (such as with Canada, Korea, Mexico etc.). New similar EU deals could be ratified by the UK, but this would take years. Meanwhile, increased tariffs on chemicals would significantly raise the prices of intermediate and finished goods, costs which according to EU chemical association CEFIC would be most likely borne by industry (estimated to amount almost 40 billion euros annually). This could significantly hit UK industry, with the chemicals sector the third biggest industry in the country.

Cefic and CIA joint statement on Brexit and the future

The EU Market Access Database

Though both the US (TSCA) and EU (REACH) legislation on chemicals share the objective to protect the environment and human health whilst supporting the sector’s competitiveness, they could not be further apart.

REACH has changed risk management governance by requiring companies to demonstrate safety, increase transparency and substitute toxic substances with safer alternatives, whereas TSCA (Toxic Substances Control Act) keeps the burden of proof on public authorities and retains most information as confidential. That is the theory, though in practice the differences are less sharp given that implementation of REACH has been found to be deficient.

Whilst the EU’s regime appears to be less business friendly, with high regulatory costs, litigation expenses are lower and the EU’s chemicals trade surplus has grown by around 5% a year since 2007. The US trade surplus is smaller and declined over the same period.

In this context it is worthwhile looking at China, where chemical production has outpaced both the EU and US. China opted to align with the EU and put in place a China REACH system.

REACH and TSCA description
CEFIC fact & Figures 2018
American Chemistry Council 2018