The year 2020 has brought a host of unique challenges for EU product importers and manufacturers, including those in the chemical sector. Just as most businesses got to grips with their preparation for the disruption caused by Brexit and upcoming regulatory initiatives—such as forthcoming REACH Implementing Regulation on Dossier Updates, consultations on the revision of the Restriction of Hazardous Substances Directive (RoHS), and new Waste Framework Directive reporting requirements—the Coronavirus (COVID-19) pandemic brought a new wave of uncertainty and challenges. This alert provides a concise overview of some of the obstacles and opportunities currently at stake.
COVID-19 Invokes Regulatory Exceptions to Deadlines and Enforcement
European regulators are working remotely to ensure services keep running as usual as much as possible. There has been no formal change in the level of compliance expected from businesses sourcing raw materials or manufacturing/importing products into the European Union. Where strict deadlines are imposed by the EU legislation to comply with applicable product compliance obligations, regulators may have no power to extend them. However, various European and national authorities, including the European Chemicals Agency (ECHA), are aware of the challenges caused by the COVID-19 pandemic and have taken measures to ease pressure on businesses where they face imminent regulatory action:
- ECHA. ECHA confirmed that deadlines for certain processes, including providing complete registration dossiers, will be extended up to two months. The requirement for manual completeness checks of chemical safety reports has been postponed until October 2020. Companies that initially failed to provide a complete registration and had a final deadline to submit information to ECHA between March and May 2020 will have an additional two months to finalise their submissions. Deadlines for payment of some ECHA invoices have been delayed, as have deadlines for completing requests for further information related to confidentiality claims. An extension of 30 days will also apply for companies to comment on ECHA’s draft decisions issued under the Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation (REACH): testing proposal examination (Article 40), compliance check (Article 41), follow-up to dossier evaluation (Article 42(1)) and substance evaluation. This extension only applies to commenting under Article 50(1) of REACH. Companies notifying their national authorities about 2019 exports and imports of chemicals falling under the Prior Informed Consent Regulation (EU) 649/2012 will have until the end of May 2020 to submit their notification. A full list of deadline extensions is now available on ECHA’s website.
- UK HSE. UK Health and Safety Executive (HSE) continues to provide services for regulating chemicals during the COVID-19 outbreak by working remotely. As a result, HSE is not carrying out “official recognition” inspections of efficacy testing organisations during the COVID-19 outbreak. HSE is also no longer accepting any applications nor issuing authorisations, including for commercial pesticides and trials permits, via post.
Businesses that are struggling to meet deadlines are urged to contact HSE directly to inform it of any potential delays. However, flexibility in relation to deadlines does not necessarily translate to a reduced risk of regulatory action. HSE warns that businesses which continue to operate under current circumstances must ensure they comply with public guidance on social distancing measures. If they fail to do so, they open themselves to risk of actions, including enforcement notices and prohibition notices.
- EMA and national authorities. The European Medicines Agency (EMA) and the national competent authorities have agreed a series of measures to mitigate the disruption caused by the COVID-19 pandemic on manufacturers of medicinal products. The full guidance can be accessed here. National authorities also shifted their attention to easing measures to facilitate the manufacturing and entry into the market of personal protective equipment (PPE), as detailed in our previous update on the implications of COVID-19.
Although some specific extensions to the regulatory deadlines have been made available, most are assessed on a case-by-case basis. Various actors, including the Federation for German Industries, have asked for a blanket delay of regulatory deadlines both in relation to the implementation of new regulatory obligations (such as the SCIP database discussed below) and for regulatory processes, including consultations on substance authorisations and restrictions. At the time of writing, no blanket delays have been announced. Product manufacturers/importers should proactively reach out to the regulators and notify of any issues, particularly where COVID-19 poses a disproportionate burden on industry to adequately respond or collate required evidence. Where a relevant authority argues that there is no legal basis to request an extension, it may be appropriate to consider whether the regulator’s actions may lead to breaches of the general principles of EU law, such as good administration, timeliness and fairness.
Brexit Drifts into the Shadow
Because of the ongoing COVID-19 pandemic, the UK government’s and the European Commission’s focus shifted away from Brexit.
The prospect of a deal being reached by the end of the year is increasingly unlikely, as so far there have only been two rounds of negotiations on the future trade deal, with the second round of negotiations being conducted via videoconference and resulting in “disappointing” progress in key areas. An extension to the Brexit deadline was thought to be virtually inevitable until recently, but the UK government has reiterated that it will stick to the original timetable, with the transition period ending on 31 December 2020 whether there is a trade deal or not. To date, the United Kingdom has failed to put forward a legal text setting out its negotiating position.
UK HSE and the Department for Environment, Food & Rural Affairs (DEFRA) have in the meantime removed their previous guidance on how to prepare for a hard-Brexit scenario. The only current message is that all EU laws are expected to apply until the EU-UK trade deal is agreed. In contrast, ECHA updated its existing guidance on Brexit in late April 2020, urging companies to prepare for the inevitable changes arising from the end of the transition period and the UK becoming a “third country”. This update includes detailed guidance on how to transfer REACH registrations from a UK to an EU entity, as well as publication of a list of substances registered by legal entities solely established in the United Kingdom. The European Commission also updated its readiness notices for various sectors highly affected by Brexit, including chemicals, cosmetics, industrial products and medicinal products (the full list can be found here).
The UK companies subject to EU regulatory regimes (such as chemicals, biocides, pesticides, construction products, medicines and medical devices) are therefore urged to seek solutions to retain various licenses, registrations and authorisations for their products granted by the EU regulatory authorities or the UK regulators currently subject to EU rules, so that access to the EU market remains uninterrupted.
Lastly, as the uncertainty over the length of the transition period continues, it remains unclear to what extent (if at all) the EU legislation currently adopted or amended by the European Commission will apply in the United Kingdom. Therefore, UK businesses should not lose sight of the forthcoming EU regulations and new obligations imposed on various actors across the supplies chains.
Ongoing EU Regulatory Initiatives on Product Compliance
COVID-19 may inevitably delay key EU regulatory initiatives on product compliance, such as review of the Market Surveillance Regulation (Regulation (EU) 2019/1020) and the General Product Safety Directive, or implementation of the Revised Waste Framework Directive (Directive (EU) 2018/851).
The Market Surveillance Regulation introduces several measures aimed at strengthening product compliance with EU laws. The new measures include the requirement to identify an “economic operator” established in the European Union as responsible for compliance and cooperation with market surveillance authorities before products subject to EU harmonising legislation (i.e., toys, construction products, chemicals) can be placed onto the single market. The key provisions of the Market Surveillance Regulation come into force on 16 July 2021, including the requirement for non-EU manufacturers to identify an economic operator (an importer, fulfilment service provider or appointed representative) in the EU and the obligation to verify that a declaration of conformity for products placed on the EU market has been drawn up. These provisions will have a significant impact on non-EU-based companies looking to sell products online as well as information society service providers (i.e., online marketplaces).
The revised Waste Framework Directive imposes new obligations on a wide range of industries. Any company dealing with products containing REACH Candidate List substances of very high concern (SVHC) will be required to submit information on those products to ECHA’s new database SCIP by 5 January 2021. Member States are required to transpose the revised Waste Framework Directive into national law by 5 July 2020, a deadline which may prove particularly difficult to meet for the Member States that have been worst affected by the COVID-19 outbreak. Regardless, the process for information submission is set to start at the end of October 2020, and a prototype SCIP database is already available on ECHA’s website for companies wishing to familiarise themselves with preparing notifications.
The European Commission’s schedule for 2020 also includes plans to review the General Product Safety Directive (2001/95/EC) and the Directives on Low Voltage (2014/35/EU), Machinery (2006/42/EC), Batteries (2006/66/EC) and RoHS 2 (2011/65/EU). The final interim report on the Low Voltage Directive was published on 11 February 2020 and will form the basis on which the Commission will determine the next steps necessary to improve the performance of the Directive. A webinar on the results of the study (launched in 2018) took place on 27 April 2020 to support the review of the list of restricted substances and to assess a new exemption request under RoHS 2. It remains to be seen how COVID-19 may affect the review of the other directives, scheduled for later in 2020.
The European Parliament also adopted a proposal to delay the application of the European Medical Devices Regulation (2017/745) for a year (to May 2021) to avoid shortages or delays in obtaining necessary medical devices during the COVID-19 pandemic.
In England, DEFRA announced that it has stopped working on its Chemicals Strategy to tackle chemicals of national concern (which also intended to set out the United Kingdom’s approach in relation to Brexit) and has re-directed resources to deal with the COVID-19 emergency. The call for evidence to inform the Chemicals Strategy and define substances of concern, which was planned to go out in April 2020, has now been delayed indefinitely. Depending on the duration of the current pandemic, the publication of the Chemical Strategy, originally due in 2022, could also be delayed.
Our team at McDermott will continue to monitor developments in this area.
Does This Storm Offer Any Opportunities?
While the challenges caused by the current pandemic are undeniable, there are also some opportunities.
Businesses, particularly in industrial products and the chemicals sector, should consider whether they can re-direct some or all of their manufacturing activities to produce essential and highly demanded products, such as PPE. The European Commission simplified, to a considerable extent, the market entry for PPE and medical devices with its Recommendation (EU) 2020/403 of 13 March 2020. The UK government also announced a procedure for the authorisation of the import of non-CE-marked PPE.
The COVID-19 outbreak could also force the UK government to seek an extension to the Brexit transition period of either one or two years (although, as noted, the UK government has stated that it will not request or agree to an extension beyond 31 December 2020). Should an extension to Brexit be agreed, businesses will have more time to complete their Brexit preparations, including determining where to set up a new EU-based entity and transferring their REACH registrations or other licenses/authorisations held.
For more information on the implications of Brexit and how to prepare for it, please view our Brexit update.