The Far-Reaching Reach of REACH; Global Supply Chain Impacts
Last week, we reported on the Restriction of Hazardous Substances Directive (RoHS) in the EU, which took effect in 2006 and restricts the use of toxic chemicals in electronics products. Although RoHS is an EU directive, we discussed that it has extraterritorial impacts on global supply chains in that the legislation requires electronics manufacturers to compile comprehensive technical files on their products, and to share this information with importers and distributors – in effect, requiring effective cooperation both up and down the supply chain.
RoHS is complicated, but it is nothing compared to REACH. The EU Registration, Evaluation, and Authentication of Chemicals regulation (2006/121/EC and Regulation (EC) No. 1907/2006) took effect June 1, 2007, with phase-in implementation milestones scheduled over the following decade. The law regulates the chemicals industry, and its stated purpose is protection of human health and the environment. The legislation spans over 800 pages, and regulates over 30,000 chemicals; it took many years to pass, and has been described as “the most complex legislation in the Union’s history.” As such, REACH impacts many industries, and like RoHS, although it is an EU law, it has forced the unprecedented cooperation within global supply chains both in and outside of the EU.
The gravamen of REACH is the registration of chemical substances and mixtures, and the motto of the legislation is, “No Data, No Market.” In other words, all chemicals used in products sold in the EU in quantities of over one metric tonne per year must be registered with the European Chemicals Agency (ECHA), and must be supported by a technical dossier, the comprehensiveness of which increases if a manufacturer uses the substance in amounts greater than 10, 100, or 1000 metric tonnes per year.
REACH also bans so-called Substances of Very High Concern (SVHCs), chemicals thought to be carcinogenic, mutagenic, toxic for reproduction, bioaccumulative, biopersistant, or otherwise harmful to human health or the environment. SVHCs are prohibited under REACH unless their user can show that the risks associated with use of the SVHC are adequately controlled or that the socio-economic benefits of using the SVHC outweigh the risks, but in this case, the user must also demonstrate a plan to eventually substitute the SVHC with a safer alternative, or a research and development plan if no safer alternative presently exists. As of January 2017, there were 173 substances on the SVHC list.
REACH has express provisions that apply to supply chains and therefore have extraterritorial impacts on any countries with EU customers. First, suppliers of hazardous or toxic substances must provide downstream supply chain recipients with safety data sheets (SDSs), and even for non-hazardous substances, suppliers must provide downstream users with basic information about the chemical. Downstream users, on the other hand, must give suppliers notice of their uses of the suppliers’ chemical substances so that appropriate exposure scenarios can be made and included in supplier SDSs. If trade secrets are a concern, REACH allows downstream users to keep their uses of chemical substances a secret from suppliers, but in that case, they must themselves perform a Chemical Safety Assessment for their intended use of the chemical substance.
Thus, compliance with REACH for companies impacted by it is a multi-step process. First, REACH-impacted companies must list all of the chemicals used in manufacturing. This list must include all chemical substances used during the manufacturing process, even if they are not ultimately incorporated into the final product. Manufacturers of “articles” that use chemicals must also determine what chemicals will be released if the articles are disposed. Second, companies must determine which chemicals are used in volumes higher than 1, 10, 100, and 1000 metric tonnes per year. Third, companies must identify all chemical suppliers. Fourth, companies must look both upstream and downstream along their supply chain to ensure that the required information is being shared. If companies determine that they are using SVHCs, plans must be made to either phase the prohibited chemical out or ensure that it is not sent to the EU. Finally, companies must then draft certificates of compliance with REACH.
Especially for companies that must comply with both REACH and RoHS, supplier fatigue is a concern.
The REACH protocols are further complicated by the fact that, under REACH, the ECHA wants only “one substance, one registration” – meaning that if multiple companies use a particular chemical substances, there should be one coordinated registration for that substances for all of the companies that use it. REACH provides for Substantive Information Exchange Forums (SIEFs) to facilitate this efficiently, but in reality, coordination between business competitors is often difficult. REACH requires cooperation among common chemical users on vertebrate animal testing, and encourages joint submission in all other respects of registration, although exceptions are provided if joint submission would be disproportionately costly, would lead to the disclosure of commercially sensitive information, or if disagreements arise between registrants.
Enforcement of REACH is left to each of the EU Member States.