Following years of negotiations and missed deadlines, the United Kingdom reached agreement with the European Union on post-Brexit trade on December 24 2020. A sigh of relief for industry as we move into 2021 as there will be no new tariffs with respect to chemicals traded between the European Union and the United Kingdom. Nevertheless, the United Kingdom will carry on with the independent chemicals regulatory regime, doubling compliance efforts and cost for industry. This alert provides a brief overview of the deal’s provisions in relation to chemicals (sold on their own or present in mixtures and articles) and answers some outstanding questions on UK REACH which comes into force on January 1 2021.
Technical Barriers to Trade for Chemicals
The Trade and Cooperation Agreement between the European Union and the United Kingdom (TCA) agreed on Christmas Eve will provisionally apply from January 1 2021. Though now ratified by the UK parliament, the agreement must still be ratified by all EU Member States. The information in this alert is based on the draft TCA published on December 26 2020 (here). Despite its length, in many areas the TCA does not provide full details of the new relationship between the European Union and the United Kingdom, but rather establishes the basis for new rules and regulations.
The level of cooperation between the European Union and the United Kingdom varies between industries. Part 2 of the TCA covers trade in goods and addresses product regulations, standards and conformity assessment procedures, referred to as technical barriers to trade (TBTs), including regulation of chemicals (Annex TBT-3). In relation to chemicals, the TCA falls short of the level of cooperation seen in other areas (for example for medicinal products, where the TCA provides for mutual recognition of Good Manufacturing Practice, inspections and certificates).
From January 1 2021, the United Kingdom and the European Union will operate independent TBTs and will have two separate and independent chemical regulatory systems, which will give rise to additional barriers to trade. The provisions in Chapters 4 contain commitments from each party that aim to minimise disruption caused by TBTs on trade through various measures, for example by providing for TBTs to be based on international standards. In the case of chemicals, both the European Union and the United Kingdom agree to recognise that international organisations and bodies (such as the OECD) are relevant for “developing scientific and technical guidelines with respect to chemicals”.
The Old New UK REACH
As already discussed in detail in our previous alert, the domestic chemicals regime that will operate in the United Kingdom from January 1 2021 will be known as UK REACH (although it only applies in Great Britain as Northern Ireland will remain within the scope of EU REACH. References to UK and UK-based entities should therefore be read as excluding Northern Ireland) and HSE will take over the role of ECHA as the UK chemicals regulator. Companies wishing to supply chemicals to both the European Union and the United Kingdom will need to comply with both sets of regulations.
Guidance on UK REACH from HSE has been lacking in practical details. The IT system replacing REACH-IT in the UK (Comply with UK REACH) has been tested by a limited number of industry members but will go live on January 1 2021, leaving no time for companies to familiarise themselves with the platform before they need to use it. HSE also held a few webinars and prepared a draft Q&A document on UK REACH, however it has only been circulated amongst select industry members, not the wider public.
Fortunately, UK regulators recognise that there is a high level of uncertainty due to information not being made available to industry in advance and intend to take “pragmatic and proportionate enforcement” as the new rules take effect (as noted by HSE in their webinar address to chemicals industry on 16 December).
Below we explore some issues which caused the greatest amount of confusion to industry members and that have been clarified by UK regulatory authorities since our previous alert.
Who can Appoint an Only Representative?
HSE’s draft Q&A states that non-UK “suppliers” of chemicals to UK-based entities can appoint an Only Representative (OR) in the United Kingdom to fulfil their UK REACH importer responsibilities.
Whilst industry members understand the term “suppliers” includes chemicals manufacturers as well as traders and distributors, Article 8 UK REACH specifies that only manufacturers and formulators of substances (on their own or in mixtures) or producers of articles can appoint an OR. We have also received confirmation from HSE that the term “supplier” does not include traders and distributors.
Therefore, OR appointment will not be an option for any non-UK traders and distributors (such as EU REACH registered importers) wishing to supply products to UK-based customers. These suppliers will need to either rely on their customers fulfilling the role of UK REACH importers, or set up a UK subsidiary to act as the UK REACH importer and take “responsibility for import”.
Who can Carry Out Downstream Users Notifications (DUINs)?
UK REACH contains transitional provisions for existing UK-based downstream users of EU REACH registered substances. UK-based downstream users can notify HSE by submitting a downstream user notification (DUIN) through the “Comply with UK REACH” IT system.
A non-UK manufacturer, formulator or article producer can also appoint an OR to submit the DUINs on behalf of the relevant UK downstream users who become importers under UK REACH. This absolves the actual downstream users of the need to notify when an OR has done so on their behalf. However, it is not possible for an EU REACH registered importer (or any other third country exporter of substances to the United Kingdom that is not a manufacturer) to submit a DUIN on behalf of their UK-based customers to HSE directly.
Therefore, non-UK traders and distributors who cannot appoint an OR will need to rely on their UK-based customers notifying HSE or, if they wish to retain control over UK REACH compliance, will need to set up a UK subsidiary to act as the UK REACH importer.
What is the Process for New UK REACH Registrants?
HSE’s publicly available guidance is most lacking in relation to the process for the new UK REACH registrants (i.e. either first time UK REACH importers/manufacturers or UK-based importers established specifically for complying with UK REACH). UK REACH transitional provisions only cover existing supply chains from the European Union into the United Kingdom and there are no transitional provisions available for new UK REACH importers or manufacturers.
If a UK-based company manufactures or imports a substance for the first time after the end of the transition period (i.e. from January 1 2021) and they establish that they have a registration obligation, then a registration under UK REACH will be required prior to manufacture/import reaching 1 tonne per year. There are no staggered registration deadlines similar to those provided by EU REACH when it first came into force.
As explained in our previous alert, in principle the UK REACH registration process will be very similar to the one under EU REACH. The first step in registering a new substance under UK REACH will be submitting an Article 26 inquiry to HSE. This will be done using the ‘Comply with UK REACH’ IT system which will go live on January 1 2021.
Following a successful inquiry, new UK REACH registrants will be put in contact with any other registrants of the substance, including those who have grandfathered their existing EU registration into UK REACH, with a view to sharing data and making a joint submission. However, there is no legal requirement to form a substance information exchange forum (SIEF) under UK REACH.
If the substance has not been grandfathered, then legally the inquirer will need to prepare a dossier of information on the substance depending on the tonnage band before manufacture/import of 1 tonne or more per annum can commence. This is the case even where there is a new registrant of an “existing substance” (i.e. there are grandfathered registrants) but the group has not fully formed with respect to data-sharing/joint submission.
Before the UK Government announced its plans to extend the full registration deadlines to October 27 2023, 2025 and 2027 (depending on tonnage band and hazard properties), we understand HSE’s intention was to use the Technical Completeness Check (TCC) process provided in Articles 20(2) and 21 of UK REACH to formally flag ‘potential’ dossiers as incomplete and set a deadline for completion to coincide with the deadlines for grandfathering registrants and former downstream users. Placing on the market of substances with incomplete UK REACH registrations would have been allowed during this period (unless HSE specified otherwise) and the new UK REACH registrants could have joined any joint submission in a similar way to those that are grandfathering EU REACH registrations or utilising the DUIN process. However, the extension to the transitional deadlines meant that such an option would leave the new registrants being unable to provide their customers with UK REACH registrations for a significant length of time, as no “pre-registration” phase is foreseen under UK REACH.
HSE is currently looking at the policy implications of such an option (i.e. utilising TCC), but this issue is certainly not getting resolved before the end of the transition period, leaving new UK REACH importers or manufacturers in uncertainty with respect to how quickly they will need to UK REACH register.
Whilst the UK-EU Trade and Cooperation Agreement prevents the extreme disruption that could have been caused by a no-deal Brexit, it does not substantially reduce the compliance costs and efforts that will be required from the chemicals industry. Any companies supplying chemicals to the United Kingdom will be required to familiarise themselves and comply with the new UK regulatory regime. HSE is aware of the issues and uncertainty surrounding the practical implementation of UK REACH and it is expected that the UK regulator will be receptive to industry feedback as companies venture into the New REACH Year.