Technical Barriers to Trade without an MRA: Chemicals

In my last post I began to examine the extent to which, in the event of Britain leaving the EU, and in the absence of an agreement on the mutual recognition of conformity assessment procedures, there would be technical barriers to trade in industrial goods. I outlined the Old and the New Approach to EU Product Safety legislation, and showed that under the New Approach with CE Marking, British manufacturers could continue much as before. In the worst case, it is possible that they might have to change the Notified testing laboratory they employed to one belonging to a company established in the European Union, but I argued that even this could well be made unnecessary in most cases by means of subsidiaries of British testing and certification companies, or through subcontracting.

In this post I want to begin to examine the situation that would pertain in the Old Approach sectors, which include foodstuffs, biocides, motor vehicles, chemicals, cosmetics, detergents and pharmaceutical products. Whereas, in the New Approach, a whole sector may be covered by a single Directive or Regulation setting out the broad safety objectives, and a multiplicity of harmonised standards set by the European Standard organisations (CEN, CENELEC and ETSI), in the Old Approach the detailed requirements are contained in the EU legislation itself. Today I look at chemicals, of which UK exports amounted to £24.7bn in the 12 months to November 2014, and of which exports to EU countries increased by £0.7bn in 3 months between January and April 2016.

Chemicals

Chemicals in the EU are regulated by two main instruments:

  1. CLP (Classification, Labelling and Packaging) Regulation EC 1272/2008
  2. REACH (Registration, Evaluation, Authorisation and Restriction) Regulation EC 1907/2006

Manufacturers established outside the EU are of course not subject to these Regulations, but importers are. Thus for example, in the CLP, the general obligation to classify chemicals in accordance with the classification scheme laid out in Title II (‘Hazard Classification’) of the Regulation, is incumbent upon ‘Manufacturers, importers and downstream users’:

CLP Article 4

Similarly, in REACH, the general obligation to register chemicals which enter the EU market in quantities of one tonne a year or more is incumbent upon manufacturers and importers:

REACH article 6

It will be noticed that downstream users are not under the obligation to register chemicals under REACH, no doubt because they have already been registered the once. Unless further provision were made in the Regulation, the consequence could be that if, say, a factory in the EU were to buy a quantity of a chemical from an EU manufacturer, he would not have to register it, whereas if he were to import it from outside the EU, he would have to do so, resulting in a competitive advantage for the EU manufacturer.

REACH Only Representative

This potential difficulty for exporters of chemicals to the EU has been effectively averted however by the provision made in Article 8 for the non-EU manufacturer to appoint an ‘Only Representative’ (OR), established in the EU, to fulfil ‘the obligations of importers’ under the Title covering Registration of Substances:

only rep REACH

It will be seen (Article 8(3)) that if such a representative is appointed and fulfils all the obligations of importers under the Regulation, then importers will ‘be regarded as downstream users’ for the purposes of the Regulation, and will therefore be exempt from the obligations they would otherwise have.

The European Chemical Agency (ECHA) advises that:

A non-EU manufacturer may find it more convenient/efficient to get its substances pre-registered and registered in the EU through an only representative, in accordance with Article 8 of the REACH Regulation.

Doing so:

alleviates the regulatory obligations resting on importers

and it can also protect confidential information:

Non-EU manufacturers may also want to choose this possibility if they consider that communication of information needed by the importers would require the disclosure of confidential business information.

The Government of Canada offers a list of firms capable of providing REACH Only Representative services to Canadian companies, as does the US Government. REACH Only Representatives have their own small trade association.

The ‘Only’ signifies that a non-EU manufacturer will have only one REACH Representative in the EU, not that the Representative may only represent one non-EU company. To take one example from the Canadian list of a company offering an OR service:

Curl

the company describes itself as an ‘independent European regulatory consulting company providing scientific and registration services to the chemical industries’. It is already established in several continental EU countries, including Germany, for example, and would therefore no doubt be able to provide an OR service to British manufacturers in the event of Brexit. Larger firms might well prefer their OR to be, or be part of, an EU-established subsidiary.

As was seen above with reference to Article 6, REACH, the obligations of importers, which the OR takes over, are the same as those for manufacturers. Therefore, in the event of Brexit, the work would simply move from British manufacturers to their OR, with only a modest increase in cost and only a measure of inconvenience.

The CLP Regulation

CLP Regulation EC 1272/2008 replaced Council Directive 67/548/EEC on:

the approximation of laws, regulations and administrative provisions relating to the classification, packaging and labelling of dangerous substances

Article 1 stated its purpose simply:

CLP 1

Chemical classification and labelling is hazard-based, its worthwhile aim being to:

identify the hazardous properties of a substance … and then to provide any appropriate hazard labelling and information on safety measures. 1

The 2008 Regulation, which repealed the 1967 Directive from 1 June 2015, adopted the United Nations’ Globally Harmonised System on the classification and labelling of chemicals (GHS). In 2002, the Commission and Member States had endorsed the UN recommendation to implement the GHS into domestic law by 2008. According to the ECHA (p. 2), the EU’s purpose was to lower ‘the non-tariff barriers to trade which were due to re-classification and re-labelling for the purpose of export to non-EU countries.’ The ECHA goes on to explain that:

An exporter will be able to use the same description of the hazards on the label in his home country and in the country he exports to. This means that, when exporting his product, he can save the costs of re-classification for reasons of compliance with different C&L requirements of the country he is exporting to. Conversely, a non-EU supplier who wants to import his substances and mixtures into the EU will experience the same benefits.

Clearly, in the event of Brexit, it will be in the interests of the UK to continue use the GHS, which is gradually being adopted globally (ECHA, p. 2), reducing technical barriers to trade in chemicals not only with the EU, but also with the rest of the world.

Good laboratory practice

Under Article 10(a) REACH, the manufacturer (or his OR) or importer must submit a technical dossier for the substance supplied, and Article 12(1) specifies that:

The technical dossier referred to in Article 10(a) shall include … all physicochemical, toxicological and ecotoxicological information that is relevant…

Where tests and analyses are needed to generate toxicological and ecotoxicological information, Article 13(4) stipulates that they must be conducted according to Good Laboratory Practice (GLP), as provided for in Directive 2004/10/EC and elsewhere:

toxicological

Directive 2004/10/EC requires:

EU countries to take all measures necessary to ensure that laboratories carrying out safety studies on chemical products comply with the OECD Principles of Good Laboratory Practice.

Thus, Article 1(1) reads:

GLP 1

Annex I consists simply of the OECD GLP Principles:

annex I

which are thus incorporated into EU law.

In 1981, the OECD Council adopted a Council Decision, binding on all member countries, on the mutual recognition of test data in accordance with OECD Test Guidelines and with OECD GLP Principles:

OECD

We have already seen that the EU has adopted the OECD GLP Principles as their own. As for the detailed test methods, the EU has in Commission Regulation EC 440/2008 specified the test methods to be used in connection with REACH. The Articles of the Regulation simply say that the test methods are to be found in the Annex, and do not refer to the OECD. But the very first category of tests does refer to the relevant OECD Test Guideline (no. 102):

freeze

and others are equivalent:

equivalent

or even replicates:

replicate

Having said that, only 9 of the first 20 tests have any reference to an OECD Guideline. The current EU test methods are unchanged, according to the British Health and Safety Executive, from those of Annex V of the CLP Directive 67/548/EEC, as may be confirmed by examining them. For example, A.19 of Annex V, 67/548/EEC seems to be the same as A.19, 440/2008, with both stating that the Gel Permeation Chromatographic method is a replicate of OECD TG 119 (1996). Clearly, Annex V had been revised over the years, and presumably the EU test methods as they stand now are the result of an incremental development since 1967, with old methods being revised and replaced by new ones.

In any case, Article 13(3) REACH allows for ‘tests … conducted in accordance with … other international test methods recognised by the Commission or Agency [ECHA] as being appropriate.’ If Britain, in the event of Brexit, were to continue to hold to the OECD GLP Principles, and to adopt the OECD Test Guidelines as the basis for testing methods, I think it must be considered virtually certain that test data and analyses generated by British companies, and submitted via their Only Representatives or importer, would be accepted under REACH. And even if they were not, for sake of argument, all but seven of the EU member states are also members of the OECD, and so would be obliged to accept such data because of the 1981 Mutual Acceptance of Data agreement, and it can hardly be doubted that the others would follow suit.

Conclusion

So far as I have been able to ascertain so far, there would not be any significant technical barriers to British manufacturers continuing to export to the EU in the event of Brexit. The only practical inconvenience and cost would be in finding and paying for an Only Representative to fulfil the company’s requirements under REACH, the financial cost being partly offset by the release of in-house staff from the necessary labour. The EU’s classification and labelling system is already aligned with the UN’s Globally Harmonised System, which we would no doubt continue to use. As for test data and analysis, I think there is no doubt that submissions under REACH would be accepted if we continue to use the OECD GLP Principles and adopt their Test Guidelines.

Andrew

Notes:

  1. Guidance on the Application of the CLP Criteria, Version 4.1 (ECHA, June 2015) p. 44

4 thoughts on “Technical Barriers to Trade without an MRA: Chemicals

  1. Hi Andrew,

    Thanks for you discussion of MRAs. Very interesting that you disagree with Richard North in ‘Flexcit’, who thought that this would make trading under WTO rules impossible.

    Do you believe that trade with the EU could continue at existing levels under WTO rules? Would we revert to a WTO framework if the 2-year period elapsed with no agreement? And how would the financial services we export be affected?

  2. Hi Zaki,

    Yes, I am certainly not convinced at all by Richard North’s warnings of 6 million plus unemployed under Brexit, and I have been surprised so far in the sectors that I have looked at, by how relatively minor the problems would appear to be – see my previous article about the New Approach sectors. I would expect that these fairly minor issues would affect trade aversely to a degree, but I think it remains to be proved that it would be very serious.

    Clearly, if there is no free trade deal, then there would be tariffs, but I think these average at around 3 point something per cent (from memory – I am out of the country right now), and are likely to be balanced out by a fall in the value of the pound – so that exporters should not be too badly affected – or even benefit if the fall in the pound is more than that.

    Yes, my understanding is that it would be WTO rules if no agreement. Perhaps we shouldn’t say ‘revert’ since they didn’t exist when we went in.

    I think a basic free trade deal is almost certainly achievable. The FTAs with the EFTA states c. 1972 took 7 months to negotiate, so 2 years is plenty of time; and I have the impression that the German industrialists would be in favour of keeping zero tariffs on industrial goods. Mutual recognition of conformity assessment is very likely too, I would have thought.

    My impression is that the financial services sector is the most likely to be affected, but as is well known, the City of London is a global financial centre, and some say that there would be benefits from being free from EU rules – and there would dangers too in staying in the EEA and being subject to new rules that could damage the City.

    Thanks a lot for dropping by and commenting,

    Andrew

  3. Hi Andrew,

    Thanks for your reply. I agree that WTO tariffs only seem to be a problem in certain sectors and their impact might be nullified by the depreciation of sterling. But if the WTO regime is really so benign, why would Norway be prepared to contribute to the EU budget for single market access? I believe Switzerland is also prepared to pay the EU as a condition of its free trade deals.

  4. Hi Zaki, good question. I think, though I am not sure, that at least part of the answer is that Norway never intended to be in this situation. See my article ‘Accident or Design?’. And neither did Switzerland. Their governing classes wanted to be in the EU, but the people as a whole did not – so I think they are trying to get as close to being EU members as they can, and are willing to pay for it.

    Andrew

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