The current political situation in the UK remains clouded in uncertainty. With the European Union (EU) agreeing to a delay, Brexit is now scheduled for 31 January 2020. However, a Brexit deal between the EU and UK has only been agreed in principle, and it does not guarantee it will pass through the newly elected parliament (to be decided further to the general election in December). Therefore, agencies in both Europe and the UK should continue to prepare for a no deal, taking advantage of the ‘Brexit extension window’.
In light of this, the European Chemicals Agency (ECHA); and the UK’s Health and Safety Executive (HSE); Department for Business, Energy & Industrial Strategy (BEIS); and the Department for Environment, Food & Rural Affairs (Defra) have been preparing for a so-called ‘no-deal Brexit’ (British exit from the EU) on 31 January 2020.
If the UK leaves with a no-deal scenario, then EU Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) registrations held by legal entities in the UK will become void and a new UK REACH regulation will come into force overnight. Organisations should be preparing now to ensure they can continue to trade their chemical products in the UK and the EU from 1 February 2020.
On the European side, ECHA has established a ‘Brexit window’ to enable a smoother transfer of registrations from UK-based legal entities to EU27-based legal entities (the remaining Member States after UK has exited the EU) as it will no longer be possible for UK-based legal entities to hold registrations under EU REACH in the event of a no-deal Brexit. It will enable incumbent holders of registrations to schedule a conditional transfer of these registration to an EU27-based successor using the existing ECHA processes and systems. Once this window has passed, the successor (in conjunction with the incumbent) can choose whether to accept the legal entity transfer or whether this should remain with the incumbent.
To enable this, ECHA is advising organisations to set up a contractual agreement to appoint a EU legal entity now and include a suspensive conditional clause stipulating that the appointment takes effect on the date when the UK exits the EU. This allows organisations the flexibility to prepare for the transfer during January, with the ability to easily revert to the current situation if the exit date is extended. The European Chemical Industry Council (CEFIC) has provided an example clause for organisations to adopt.
These provisions will allow companies to put a plan in place that will facilitate the orderly transfer of legal entities in the event of a no-deal Brexit. This will essentially allow them to wait and see what happens, with the comfort of already having plans in place in the event of a no deal Brexit, rather than having to commit to a decision before the nature of Brexit is confirmed. Put another way, companies have the tools they need to set-up agreements with Only Representatives (OR) right now, which will protect their existing registrations in the event of a no-deal Brexit, but will only come into force if the said event occurs.
Of course, there is still a fee to pay to ECHA for the change in legal entity of EUR 1,631 per legal entity, which ECHA has confirmed will need to be paid to complete the transfer. In addition, organisations will require an EU27 legal entity to receive the registrations. Larger organisations with an existing business unit in the EU27 have the option to transfer their current registration to this business unit. However, in this case, they would need to also transfer the operation, be it either manufacture or import, which is likely to lead to disruption and additional cost. The other option for manufacturers and formulators is to appoint that legal entity as an OR, but this means taking on the responsibilities of customers (importers) and other additional responsibilities that the legal entity may not have the desire or capacity to fulfil. Another possibility for companies would be establishing a business unit with a physical presence (a post box or equivalent is not acceptable) however, for most companies that simply might not even be an option.
AA further option that is available to UK-based manufacturers and formulators is to appoint a third party in the EU27 to provide a dedicated OR service and fulfil the legal duties of importers under the REACH regulation. This will enable customers of the supplier to continue to act as downstream users under REACH, rather than having to register the substance as importers, and enable the overall operation of the producer to continue in the UK, rather than having to move it overseas. NCEC is well placed to deliver this service through its legal entity in the Netherlands, which is primed to act as an OR.
There are over 1,100 substances registered only in the UK. If nothing is done, these could be void once the UK leaves the EU. If you are a manufacturer or importer of these substances, it is critical that you put a plan in place to continue to be able to supply them to customers in the EU27. If you are a downstream user of any of these substances within Europe (see a list of substances registered only by the UK companies), then it is very important you understand what your suppliers’ intentions are.
On the UK side, legislation has been drafted and put before Parliament. This will establish a REACH-like regulation (UK REACH) in the event of a no-deal Brexit. However, it has not yet been approved. If it is approved, then it will come into effect on ‘exit day’. As such, there is no alternative or methodology to register for UK REACH, but organisations should be communicating with their suppliers and customers now as preparation for the imminent future.
In essence, the current intention is that all substances will need to be registered in the UK as a new registration, with ‘immediate’ registration required if these substances are imported into the UK at over 1 tonne per year.
To prevent a complete ban on chemical substances being imported into the UK, the day after a no-deal Brexit, the UK is planning to implement a transition period for UK-based companies with REACH registrations valid within the 2 years from the UK leaving the EU – a process referred to as ‘grandfathering’. UK companies will have up to 120 days (recently extended from 60 days) to notify the HSE. After this, they will have 2 years to complete a full registration under the UK REACH requirement. The notification is expected to be a light-touch process, which NCEC specialists expect to be similar to the REACH pre-registration process.
UK companies (currently downstream users) that source products from EU27 suppliers will become importers under UK REACH and will be subject to UK REACH registration obligations. These organisations will have 180 days to notify the materials that they are now effectively importing, with full registration expected within 2 years. It is important to identify all substances manufactured and imported into the UK that may be subject to UK REACH registration and check what information is available for these substances. If your EU27 supplier plans to appoint a UK-based OR, then making an initial notification (effectively on your supplier’s behalf, but in your name) will allow your supplier a much longer timeframe to submit a registration by the appointed OR (as otherwise the supplier will need to do this immediately).
EU27-based suppliers should be communicating with their downstream customers in the UK to understand their intentions with regards to REACH, whether they are aware of the requirements and if they are willing to notify. If they choose not to notify, but still require the materials and the supplier still wishes to service that requirement, then the supplier would need to contract with a UK-based legal entity to act as their OR. If the light-touch notification is not made by the importer within the 180-day period, then a full registration will be required to enable a product to continue to be imported into the UK after this date.
If you are a downstream user in the UK, it is important to engage with your suppliers to understand what their intentions are and to consider whether you are going to notify the substances to enable a continuation of supply in the months following exit day. It is also prudent to engage with the supplier to determine whether it intends to complete a full registration within the 2 years or if it sees the potential costs of registration being too great and is considering exiting the UK market.
NCEC waits with anticipation for details of the release of the UK’s IT tools to enable the notifications and registrations under UK REACH. However, it is not known for certain when these are expected to be available. Nevertheless, it is expected that submission of registrations under UK REACH is likely to follow a similar process with a similar set of requirements to that for EU REACH.
Of course, the situation has the potential to change. However, with plans being made in the event of a no-deal Brexit, it is prudent for organisations to understand what the implications are on them from a REACH perspective and to act now to mitigate any business risk they may be exposed to.
How can NCEC help you?
NCEC is well placed to support organisations manage the impact of the UK’s exit from the EU, on both sides. As part of Ricardo, a multinational company, we have legal entities already in place across Europe (and the world) and are ready to act from a REACH perspective from our Netherlands entity. We also have significant experience of all aspects of REACH, including working through authorisation requirements and dossier reviews.
We can also act as a UK OR on behalf of European organisations wanting to trade in the UK, including first-time UK REACH registrants. There is likely to be uncertainty and teething issues with the implementation of a new piece of legislation, and we are well placed to support organisations complete their notifications, create dossiers for full registrations, and provide ongoing help and support throughout the process. We are a well-established business with significant financial backing and years of experience, providing certainty and continuity into the future. We are also ‘in the room’, with our principal consultants Chris Hughes and Caroline Raine being members of working groups in ECHA, HSE, BEIS and Defra.
We can help you understand what Brexit means for your business, and how to best take steps to improve your preparedness and business resilience. Contact us if you have any concerns regarding the management of REACH regulations in the UK or the EU.
Information is correct as of 13:00, 30 October 2019.