Impact of Brexit on REACH Presenters

01.12.2016 | Webinar

Riku Rinta-Jouppi Keven Harlow Partner, Head of Global Compliance Reachlaw Business Partner (UK & Ireland)

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3 REACHLaw in brief

What we do? We provide global regulatory compliance and environmental sustainability services to ensure market access and operational sustainability for global businesses

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AGENDA

1. Brexit- Background and key negotiation points

2. REACH options on the table for the UK

3. REACH status of UK companies after Brexit

4. Implications for Only Representatives

5. Conclusions

6 Understanding Brexit Realities

• Brexit will be an extended transitional process, not a single event

• Certain ‘Hard’ Brexit options involve substantially more costs than others

• No cake, terms upon exit will not be better than as member as no substantial value created for either party from the separation

• There will be a “loss of rights” upon exit for the EU rights that cannot be converted into UK national law

High Court Decision: Parliament to Vote on A50, Judgment Includes Analysis of “Loss of Rights”

03/11/2016 Judgment R Miller v. Secretary of State for Exiting the EU:

Categories of rights arising under the European Communities Act 1972 and EU law (and now to be subject to Brexit negotiations):

Category 1: Rights capable of replication in UK domestic law (eg. Working Time Directive, but without right of reference to EU courts) Category 2: Rights enjoyed in other member states of the EU (eg. free movement of persons, capital, goods and services, right of establishment) Category 3: Rights that could not be replicated in UK domestic law (eg. rights of reference and participation as member of “EU club”)

Long Summer After Referendum: impact limited, but uncertainty & difficult trade-offs anticipated

“a trade-off between securing a deal as quickly as possible to reduce uncertainty in the short term, and securing the best possible deal for the U.K. to minimize the economic costs of exit over the long term.” UK Treasury

”There are actually two negotiations. First you exit and then you negotiate the new relationship, whatever that is.”

C.Malmstrom, EU Trade Commissioner

Exit timetable is still uncertain, FTA negotiations can only start upon agreement on terms of exit

• The clock only starts ticking when Article 50 TEU notice is given • Exit upon entry into force of Withdrawal Agreement or 2 years from notification • Now the High Court judgment not to allow launching Article 50 process without full debate and vote by the parliament will be appealed by the government, further delay before A50 process • On the other hand, the exit process can’t wait forever as further delay creates significant uncertainty • No agreement on Free Trade Agreement (FTA) with the EU legally necessary for exit from the EU, therefore it is possible that a there is a period during which trading takes place under WTO rules

UK Political Process and Positions So Far, 2-5 October, Birmingham Tory Party Conference

“Article Fifty – triggered no later than the end of March [2017].” “A Great Repeal Bill to get rid of the European Communities Act – introduced in the next Parliamentary session.” “Our laws made not in Brussels but in Westminster.” “Our judges sitting not in Luxembourg but in courts across the land.” “The authority of EU law in this country ended forever.” “Let’s state one thing loud and clear: we are not leaving the European Union only to give up control of immigration all over again and we are not leaving only to return to the jurisdiction of the European Court of Justice. That’s not going to happen.” PM Theresa May

UK Unofficial “Red Lines” (No Compromise), 2-5 October, Birmingham Tory Party Conference

“No contribution to the [EU] budget” “No jurisdiction of the European Court of Justice” “The end of Free Movement” “British laws made in our sovereign parliament”

Stewart Jackson, aide to David Davis, Secretary of State for Exiting the European Union

Hardening Rhetoric: Limitations, Costs & Blocks

Next steps: UK’s model for future relationship

• The new prime minister needs to agree and present a model for relationship that the UK is seeking with the EU in the future

HM Government: Alternatives to membership: possible models for the United Kingdom outside the European Union, March 2016 Next steps: Different groupings available

HM Treasury analysis: the long-term economic impact of EU membership and the alternatives, April 2016 Next steps: EU sets the scene for two sets of negotiations

• Full rights and obligations apply to the UK as EU member until exit • Withdrawal to take place in an orderly fashion, Article 50 to be activated as quickly as possible • No negotiations of any kind before Article 50 notification • ”Any agreement, which will be concluded with the UK as a third country, will have to be based on a balance of rights and obligations. Access to the Single Market requires acceptance of all four freedoms”, EU Summit Statement, 27th June 2016 • FTA with the EU comes at the back of the queue: ”Britain will not be able to start talks on a new trade arrangement with the EU until other aspects of its exit have been settled”, Cecilia Malmstrom, trade commissioner, 1st July 2016 • Australia: EU takes priority, formal FTA negotiations with UK can start in about 2,5 years after exit from EU is complete

Negotiators and contact persons are appointed

Jean-Claude Juncker Didier Seeuws Guy Verhofstadt Andreas Herdina President Head Brexit Taskforce Chief negotiator ECHA European Commission European Council EP contact person

Managing the UK-EU relationship via bilateral agreements? Switzerland has more than 120

AGENDA

1. Brexit- Background and key negotiation points

2. REACH options on the table for the UK

3. REACH status of UK companies after Brexit

4. Implications for Only Representatives

5. Conclusions

19 EEA Scenario: Still viable to stay as OR in the UK?

• Still-in-REACH Scenario - EEA – Very few only representative registrations from Norway, Iceland or Liechtenstein compared to 2249 from the UK (relative position 1.)

EEA State No of OR Regs Percentage of Relative position 31.12.2015 total

Norway 10 0.10 25. Liechtenstein 1 0.01 29.

Iceland 0 0 30.

ECHA REACH Registration Statistics by Country, 31.12.2015

AGENDA

1. Brexit- Background and key negotiation points

2. REACH options on the table for the UK

3. REACH status of UK companies after Brexit

4. Implications for Only Representatives

5. Conclusions

21 What will happen with UK companies and subsidiaries in UK and their REACH compliance?

• Two main scenarios

• Hard or Clean Brexit – WTO rules – NO TRADE DEAL IN 2 YRS – If no FTA in place after 2 year deadline after Article 50 notice given – Orderly exit from the EU but nothing to replace it with – Interim arrangements? Only available option would be to join EEA

• Soft Brexit – Negotiated agreement – Continued access to EU Single Market - EU law still applies - Budget Contributions etc. – REACH still in force in some form? Brexit risk analysis for subsidiary acting as OR

EU - customers 7. Independent Your OR / New counterparts EU – supplier importers 4. 1c.subsidiary ECHA, SIEF, Substance A Consortia.... 6. 5. EU

Non-EU Scope: topics to be covered 1b. 1a. Appointing Parties, substances, legal entities Independent 3. Your company 1b. Appointment Process Non - EU Your(Group) company Manufacturer Group 1c. Appointed Party (OR) 1a. 2. Independent non-EU suppliers 3. Indirect export 4. Independent EU importers Non-EU 5. Potential EU suppliers, reimport suppliersNon-EU 6. New ”REACH counterparts/liabilities/risks” 2. suppliers 7. New liabilities against your customers Purpose of Brexit Risk Analysis

• To understand the legal basis for OR operation in different Member States • Identify all relevant relationships, liabilities and risks involved with Brexit • To find ways to manage risks, so that the probability for future losses due to Brexit will be as low as possible • Action plan for management Structure of Brexit Risk Analysis: Gap Year(s) from REACH for the UK?

1. Identification of relationships and liabilities of OR 1. Identification of relationships and liabilities of OR 1. Identification of relationships and liabilities of OR

2. Defining the legal base of OR (EU & local legislation) 2. Defining the legal base of OR (EU & local legislation) 2. Defining the legal base of OR (EU & local legislation)

3. Identifying possible Brexit risks and exposures 3. Identifying possible Brexit risks and exposures 3. Identifying possible Brexit risks and exposures

4. Development of methods to protect against risks 4. Development of methods to protect against risks 4. Development of methods to protect against risks

5. Recommendations: action plan 5. Recommendations: action plan 5. Recommendations: action plan

EXIT NEGOTIATION PHASE POSSIBLE INTERIM PHASE NEW FTA PHASE

AGENDA

1. Brexit- Background and key negotiation points

2. REACH options on the table for the UK

3. REACH status of UK companies after Brexit

4. Implications for Only Representatives

5. Conclusions

26 Change of Only Representative Take home messages

For non-EU manufacturers • Select competent new OR • Consider the event of OR change in contractual provisions • Ask for REACH expert advice if consent is refused by previous OR

• Timing of change of only representative?

27 Change of Only Representative

OLD OR

OLD OR agreement to transfer of Non-EU manufacturer Termination of pre- OR agreement (legal entity according to /registrations with OLD OR 3. REACH-IT non-EU national law) ”hand-shake” procedure

NEW OR appointment letter NEW OR

Consequence: the agreed pre-registrations, registrations, notifications and 4. inform EU importers about inquiries are transferred from OLD OR to NEW OR via a legal entity change OR change

AGENDA

1. Brexit- Background and key negotiation points

2. REACH options on the table for the UK

3. REACH status of UK companies after Brexit

4. Implications for Only Representatives

5. Conclusions

29 General Conclusions • Timeline and model of Brexit are still somewhat open questions • Currently the UK is compliant with REACH so as an individual question it would be in the UK’s long term interest find a way to continue with REACH and with full access to the single market • This may well be in conflict with the UK’s aim to limit immigration and not be subject to EU law so only a bilateral FTA may be available in practise • As a FTA can only be concluded with the UK as a third country there would be likely to a period of time during which the UK is trading with the EU under the WTO rules without any preferential treatment REACH Specific Conclusions • REACH registrations, authorisations and notifications may not be valid after Brexit in the UK so an OR change could be an option • Companies outside the EU reliant on UK REACH importers may also need to seek alternative arrangements to access the EU • UK manufacturers and importers industry organisations should lobby for their members’ REACH rights to be protected in the coming negotiations but continuation of REACH being outside the scope of EU law is hardly possible • Changes to current arrangements should be based on a Brexit risk analysis that takes into accout the possible ”Gap Year(s)”, the interim period after exit when a free trade agreement would not yet be in place between the EU and the UK Presenter: Riku Rinta-Jouppi Partner and Head of Global Compliance [email protected] +358 40 773 8143

REACHLaw Ltd. Vänrikinkuja 3 02600 Espoo Finland www.reachlaw.fi

Anticipate

& plan for

www.reachlaw.fi Only Representative: back to basics:

REACH role(s): • EU substance importer (I) • EU substance manufacturer (M) • EU only representative (OR) of a non-EU substance manufacturer or a combination of these roles…

Article 8: “Only representative of a non-Community manufacturer”

REACH impacts only on legal entities based in the 31 countries of EU+EEA (‘EU’)

www.reachlaw.fi Article 8 applies

Only representative of a non-Community manufacturer

1. A natural or legal person established outside the Community who manufactures a substance <…………….> that is imported into the Community may by mutual agreement appoint a natural or legal person established in the Community to fulfil, as his only representative, the obligations on importers under this Title.

2. The representative shall also comply with all other obligations of importers under this Regulation. To this end, he shall have a sufficient background in the practical handling of substances and the information related to them and, without prejudice to Article 36, shall keep available and up-to-date information on quantities imported and customers sold to, as well as information on the supply of the latest update of the safety data sheet referred to in Article 31.

3. If a representative is appointed in accordance with paragraphs 1 and 2, the non- Community manufacturer shall inform the importer(s) within the same supply chain of the appointment. These importers shall be regarded as downstream users for the purposes of this Regulation.

www.reachlaw.fi Remember…

An OR does not assume the obligations of the non-EU manufacturer; rather, the OR takes over the REACH obligations of the EU importers from that non-EU manufacturer.

Each EU-based importer becomes a downstream user of that OR for the substance they import from that named non-EU manufacturer

www.reachlaw.fi Why appoint an Only Representative (OR)?

Makes good business sense to appoint an OR

Why?

1. more control over the whole REACH process 2. centralised administration function 3. control of confidential and proprietary data/information 4. only one registration cost per substance 5. your importers become ‘downstream users’ of the OR 6. updating of registration info is easier 7. competitive advantage

www.reachlaw.fi REACH registration roles - % of EEA: (ECHA - May 2016)

Country M I M/I OR Germany 26% 27% 38% 16% United Kingdom 7% 13% 7% 23% France 11% 8% 9% 6% Netherlands 4% 13% 7% 12% Italy 11% 8% 8% 1%

M manufacturer I importer M/I manufacturer and importer OR only representative of non-EU manufacturer

www.reachlaw.fi Assume UK full exit from the EU – “hard Brexit”

1. No REACH obligations for UK legal entities

2. UK-based ORs can no longer operate

3. All existing UK registrations become ‘invalid’ (including those submitted in 2018)

4. Dossier updates, evaluation, authorisation, restriction, new substance registrations etc no longer apply to UK actors

www.reachlaw.fi

Hard Brexit (case study 1): Non-EU manufacturer looking to support a 2018 registration

• Strongly advised to consider the EU-based OR route: - releases your importers (customers) of obligations under REACH - maintains your control of CBI - centralised registration administration - cost effective - competitive advantage

• Do not select a UK-based legal entity as your OR • Plan before Brexit is finalised as registration deadline is only 18 months away (31 May 2018)

www.reachlaw.fi Hard Brexit (case study 2): Existing UK-based OR

Can no longer act as an OR following Brexit, meaning that EU-based importers relying on that OR registration are then non-compliant.

Action • Non-EU substance manufacturer must nominate an alternative OR located within the EU • If pre-registration is needed then late pre-registration deadline is 31 May 2017 • OR-to-OR legal entity transfer before Brexit is finalized (or a new registration by the new OR may be needed)

www.reachlaw.fi Hard Brexit (case study 3): UK substance importer

• No EU-REACH obligations

• Can import substance/s from any manufacturer worldwide (subject to UK import requirements)

• If subsequently exported to EU, REACH obligations will fall to those EU importers in the normal way.

www.reachlaw.fi Other considerations:

• If the UK OR is a lead registrant (LR) then the substance co- registrants must agree an alternative LR based in the EU and transfer the role to that new LR before Brexit is effected

• Data ownership disputes / discussions may arise

• Be informed and keep your value chain informed

www.reachlaw.fi Some myths and realities of the OR role

Myth Reality An OR registers on behalf of the non-EU The OR registers in his own right manufacturer

www.reachlaw.fi Some myths and realities of the OR role

Myth Reality An OR registers on behalf of the non-EU The OR registers in his own right manufacturer The OR assumes the obligations of the The OR assumes the obligations of the EU non-EU manufacturer importers The OR must also be my EU sales agent Any EU natural person or legal entity can act as the OR

www.reachlaw.fi Some myths and realities of the OR role

I must provide substance information to Information only provided to the registrant all my importers – the OR

www.reachlaw.fi Some myths and realities of the OR role

I must provide substance information to Information only provided to the registrant all my importers – the OR I can only sell to REACH registered You can sell to whomever you wish importers

www.reachlaw.fi Some myths and realities of the OR role

I must provide substance information to Information only provided to the registrant all my importers – the OR I can only sell to REACH registered You can sell to whomever you wish importers New importers (customers) will need to All future importers will be covered by the register OR arrangement

www.reachlaw.fi Conclusions:

• Based on a hard Brexit, UK-based legal entities shall no longer have EU-REACH obligations • Biggest impact will be on existing, UK-based ORs • A non-EU manufacturer using a UK-based OR needs to make provisions to transfer to an OR based in another EU country • Plan in advance of Brexit to mitigate cost, admin and possible supply chain disruption. • In reality, a hard-, soft- or 3rd-Brexit option may result. Regardless, start planning your Brexit REACH options and strategy now!

www.reachlaw.fi Dr Keven Harlow REACHLaw ( UK & Ireland) Phone: + 44 7800 85 0692 Email: [email protected]

THANK YOU

www.reachlaw.fi REACH and Chemical Regulations Seminar in Baltimore, Maryland (USA) 5th and 6th of April, 2017