REACH Cross Sector Group – Written Evidence (UER0015)

About the REACH Cross Sector Group:

The REACH Cross Sector Group is an informal group of trade associations, professional institutes and businesses that represents downstream users of chemicals. Comprising of over 50 members, the Group is formed of material manufacturers; paint, coating and surface treatments companies; and complex article manufacturers and retailers.

The group’s main challenge has been to shift focus of the impact of REACH from the manufacturers of chemicals to that of the downstream user. Since its formation, the REACH Cross Sector Group has been able to raise awareness of the various challenges and restrictions placed on the many businesses represented by the group, and others within the sector.

Background to our response

Manufacturers are major consumers of chemicals, both directly in their own businesses and indirectly through often long and very complex supply chains. Our focus in this response is on the risks that Brexit poses to our businesses through its impact on chemicals legislation, and the way that impacts these supply chains.

Our biggest concern is the risk of immediate supply chain disruption in the event of no deal being reached with the EU on chemicals policy. This scenario would, for example, invalidate all UK-held REACH registrations and authorisations meaning that any firms holding those that have not made alternative arrangements would be unable to sell them in the EU, affecting the manufacture of parts in the EU-27 which are necessary for our products and also impacting aftermarket services for those products.

Careful consideration also needs to be given to the long-term arrangements to regulate chemicals. Here too, the majority of manufacturers are concerned about the complication and additional costs involved in dual regulatory approaches developing in the UK and EU-27. If the impact of these becomes too onerous, this could result in some companies ceasing to do business in the UK or certain supply chains avoiding the UK altogether. For more detail, please see the section on disagreements.

What areas should be covered in the framework for future relations, to be agreed in October 2018?

The areas that should be covered in the framework for future relations as a minimum are:

• REACH (Registration, Evaluation, Authorisation and restriction of Chemicals)
• CLP (Classification Labelling and Packaging)
• BPR (Biocidal Product Regulation)

These areas should be addressed as a matter of urgency. We welcome the Prime Minister’s announcement that the UK will seek associate membership of the European Chemicals Agency (ECHA). This proposal is without precedent and is undefined, but could ensure certainty and reassure industry of the continuation of barrier-free trade of chemical substances and mixtures necessary for manufacturing – both for business in the UK and those in the rest of the European Economic Area.

How much detail will it be possible to include in this framework?

In the October 2018 timescale it should be agreed as a minimum that the existing EU chemical regulation acquis will continue to apply in the United Kingdom as transposed through the Withdrawal Bill.

Given the lack of a precedent model, it should include as much detail as possible to explain operating principles of associate membership of ECHA, as well as the future of chemicals already registered or authorised under the REACH regulations. At the very least, there needs to be a period of grace of a number of years beyond the proposed implementation period, in which UK-based businesses can transition in a managed fashion to a separate UK legislative system.

One of the options for associate membership which could be included in this framework could include the UK having full voting privileges (equating to MS) and associate membership without voting privileges (equating to EEA member).

To be effective from a manufacturing perspective, the key principles of the UK Prime Minister’s proposed associate membership of ECHA would need to include:

1)   Continued use by downstream users of chemicals in either jurisdiction based on upstream Registrations and Authorisations held in either jurisdiction – i.e. continued operation of UK companies under the EU regulatory umbrella and avoidance of new obligations for importers at the border between the two jurisdictions.

2)   Future decisions made within the existing regulations being applied and enforced in both jurisdictions (for example on harmonised classification, authorisations, restrictions or biocide approvals and authorisations).

3)   The UK retaining involvement in technical committees, and if possible a decision-making role within ECHA.

4)   Regular review of the relationship on both sides and a mechanism to address unintended regulatory divergence.

How compatible are the visions for a future relationship set out by the UK Government, European Council and European Parliament?

1)   There are a number of in-principle areas of agreement between the UK Prime Minister’s Mansion House speech and the positions of European Council and European Parliament. Whilst the specific words are different, in principle all parties support future cooperation and alignment of environmental law (which could support the proposed continuing participation as an associate member of ECHA)

2)   To avoid supply chain disruption & regulatory checks at borders as far as possible recognising geographic proximity, close links, economic interdependence and integrated supply chains.

3)   To ensure a level playing field in regard to environmental protection, regulatory measures and practices, together with clear enforcement mechanisms to ensure compliance avoiding unfair competitive advantage and a “race to the bottom”.

4)   Recognition of the remit of the CJEU in regards any continued membership of EU agencies.

5)   That the UK may provide technical expertise to the work of EU agencies

Whilst the European Council is of the view that there can be no “cherry picking” through participation in the Single Market based on a sector-by-sector approach, general principles relating to the future relationship appear to be aligned. It is worth noting that the chemicals industry is a fundamental upstream enabler to all industrial sectors, so this issue cannot simply be referred to as a “sector-by-sector” cherry-picking issue.

What are the main areas of disagreement, and how can these be resolved?

The European Council in its guidelines of 7th March 2018 recalls that the four freedoms are indivisible and that there can be no cherry picking through participation in the Single Market based on a sector-by-sector approach. Again we question whether chemicals should be seen as a sector at all given its fundamental role in all industries in both UK and the EU-27.

The European Council does not include the proposed participation of the UK as an associate member of various agencies including ECHA, though this is not specifically excluded.

For the majority of our groups’ members, a fully integrated membership of the EU chemical regulation system, including REACH, appears the most effective way to assure regulatory alignment, support integrated supply chains and avoid a “race to the bottom”.

Should it not be possible resolve a workable model for associate membership of ECHA as described, then the following consequences should be expected:

• Supply disruption – caused by importer obligations at the newly created border, exacerbated by the closely integrated supply chains referred to by the Prime Minister.
• Divergence of regulation – as government, Parliament, agencies, and UK enforcement authorities adopt different decisions. This could be limited by simple word for word duplication of EU decisions, which might also help reduce the chance of ‘unintended’ divergence through UK court rulings.
• Costs to industry as a result of:
• Disruption to supply chains (in the UK, EU and beyond) until either supply chains are restructured, or until importer obligations can be satisfied for every chemical substance on its own and in a mixture that crosses the new UK/EEA border (i.e. until new authorisations are approved to permit the continuation of certain manufacturing activities as well as new registrations).
• Duplication of compliance activities to maintain trade of existing chemicals. These include additional registrations in a UK system, despite having already been registered in EU REACH; new registrations and authorisations required for chemicals exported from the UK to the EU; and transfer in some cases of some Authorisations and Registrations to EU Only Representatives, necessitating new commercial agreements.
• Management of divergence of different authorisation decisions between EU and UK, in both scope of use and review period. This applies even for chemicals traded between the 2 jurisdictions.
• Fees levied on industry to a fund new UK agency, such fees are likely to be higher than the EU equivalent due to the latter’s greater economy of scale.

Whilst operating a separate system to the EU could result in some simplifications to the benefit of particular parts of UK industry, these are outweighed across the sector as a whole by the above issues. It would also run counter to the Prime Minister’s commitments for chemicals to only undergo one set of approvals, to a single set of regulatory standards, and to avoid a “race to the bottom” in the environmental standards and protections we set.

Are elements missing from any or all of these documents?

Whilst the REACH Cross Sector Group welcomes the Prime Minister’s reference to maintaining a form of associated membership of ECHA, we would like further clarification of the government’s intentions in this respect. As it stands we simply do not know what Associate Membership would mean in practice as it is not an existing model of cooperation. In particular this should include:

• Whether the existing relationships between upstream chemical supplier and downstream user across the UK and EU27 currently in existence (especially for REACH Registrations and Authorisations) will continue under an associate membership model. This relationship is critical to support integrated supply chains and avoid business disruption.
• Whether UK companies could continue to have rights and obligations under EU chemical regulation such as REACH, including the ability to operate as Lead Registrant or operate as Only Representative.
• Whether there would be the intention for the UK to have voting rights in ECHA committees. The provision of technical expertise and experience is considered to be important and we would hope and expect these to be valued by the EU going forward.
• More detail on the potential role of ECJ in this context and whether ‘unintended’ regulatory divergence through Parliamentary scrutiny and court rulings can be avoided.
• What checks and balances would be put in place around associate membership to review its benefits for all parties over time.

30 April 2018