December 2017

The Effects of Brexit

The UK withdraws from the EU

In a referendum on June 23, 2016, 51.9% of the participating UK electorate voted in favor of leaving the European Union (EU). The UK notified the European Council of its intention to withdraw from the EU on March 29, 2017, prompting a negotiating process to establish a Withdrawal Agreement by March 29, 2019.

This noteworthy decision (known popularly as “Brexit”) has generated shockwaves across the globe, leaving many questioning how this will affect their European business dealings.

Several outcomes are possible with respect to the Withdrawal Agreement between the UK and EU. The UK could negotiate membership of the European Economic Area (EEA), negotiate a bilateral agreement with the EU or could fully separate and conduct under the World Trade Organization rules.

Chemical and regulatory legislation in the UK, among other items, could change because of Brexit. Rules surrounding hazardous chemicals that are intended to protect human health and the environment have far-reaching consequences. If the UK chooses to no longer be subject to EU chemical legislation, new laws will need to be developed as a replacement. The consequences of such changes may impact British companies, consumers, and the environment.

According to advice published by the European Chemicals Agency (ECHA), if the UK does not gain membership of the EEA or enter into a similar arrangement, it will become a “third country.” All British companies will be considered non-EU manufacturers and will no longer be subject to the requirements of ECHA.

Impact on ECHA

ECHA is the regulatory authority responsible for implementing hazardous chemical legislation in Europe. The overall aim of ECHA—to work towards the safe use of chemicals within the EU—is not affected by the UK withdrawal.

At these early stages of the withdrawal negotiations, it is not possible to fully predict the ultimate impact of Brexit on ECHA or on economic operators within the EU-27. ECHA has stated that its cooperation with UK authorities will be significantly reduced compared to when the UK was a part of the EU.

REACH in the UK

EU member states are bound by various provisions in ECHA’s establishing regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) to be involved in implementing the EU chemicals legislation. If an alternate agreement is not established, the UK may no longer be bound by REACH once it has withdrawn membership from the EU.

If the UK were no longer subject to REACH, UK authorities would not be required to ensure that UK-based companies comply with EU chemicals legislation. Enforcement of EU regulatory decisions addressed to UK-based companies could also come to a halt. The UK would not be legally obligated to maintain a national helpdesk to provide British companies with assistance in fulfilling their obligations under REACH. It is certainly a possibility that the UK will create new requirements for similar obligations outside of REACH. However, the fact that REACH was written under the assumption that participants are operating within the EU regulatory framework means that it will not be straightforward for the UK to transpose REACH regulation directly into UK law.

ECHA holds the largest database on the properties of chemical substances. UK authorities may lose access to this database as well as other regulatory databases and IT tools that are provided by ECHA. UK authorities would then only have access to the substance specific information that is made publicly available on ECHA webpages.

 Impact on UK-based companies

Future obligations of British companies will be determined by existing and future UK legislation. If your company has UK-based operations, it is advisable to stay current on legislative developments, as well as the withdrawal negotiations, in the UK.

The provisions of the Regulation for Classification, Labeling & Packaging (CLP) may continue to remain valid within the UK on the basis of the Repeal Bill, which will temporarily convert existing EU law directly into the UK legal system. Additionally, it should be noted that British companies will still need to comply with CLP Regulation when exporting to other EU countries.

UK companies have undergone more than 6,000 REACH registrations.1 There are some reports that those companies that have already absorbed the cost of these registrations are concerned that they may not remain valid once the UK withdraws from the EU. The cost burden for REACH compliance could potentially double if current registrations need to be replaced by importers or Only Representatives (ORs) in the EU. UK-based ORs that have made registrations for non-EU manufacturers will also need to relocate to keep their presence in the EU.

Recently, over 100 companies signed an open letter urging lead Brexit negotiators to seek a three-year transitional period after withdrawal.2 The chemical industry hopes to see an extension of REACH throughout the transition. However, it is not certain that the EU will agree to grant such an extension. The EU wants to maintain its current membership and therefore will not be likely to grant non-EU members the benefits of EU membership for free.

The future of regulatory compliance in the UK

Much is still up in the air with respect to the impact of the UK’s withdrawal from the EU. The outcome of negotiations over the next months will have a huge impact on how companies do business in the UK. We can expect complicated policy shifts and new legislation that will impact regulatory compliance and international trade.

Companies that operate in the UK will need to carefully consider their presence in the EU, ensuring that steps are taken to prepare for the inevitable legislative changes.

Visit https://echa.europa.eu/uk-withdrawal-from-the-eu for the latest information from ECHA on the UK’s withdrawal from the EU.

Updated CLP Guidance

In July 2017, ECHA released version 5.0 of Guidance to Regulation (EC) No 1272/2008 on CLP of substances and mixtures and version 3.0 of Guidance on Labeling & Packaging in accordance with Regulation (EC) No 1272/2008.

Several revisions have been made to the guidance on the classification, labeling and packaging document, including partial updates to follow the 8th Adaptation to Technical Progress to the CLP Regulation and removal of unnecessary information, including sections pertaining to the repealed Dangerous Substances Directive and Dangerous Products Directive.

A new section of particular interest in the revised guidance on labeling and packaging is 5.4.2 Packaging Used for Consolidation of Supply Packaging During Transport. This section has been added to clarify the issues surrounding CLP labeling of multi-layer packages during transport.

CLP labeling rules apply to all layers of packaging used for supply purposes. Transport packaging, used for the consolidation and/or protection of supply packages during transport, is outside the scope of CLP and is not required to have CLP labeling. Once the product is no longer in transport, the transport packaging must be removed to enable the CLP label to be visible or a CLP label must be added to what was previously the transport packaging.

The full text guidance documents can be found at https://echa.europa.eu/guidance-documents/guidance-on-clpSPRAY

1https://echa.europa.eu/regulations/reach/registration/registration-statistics/overview-all-countries

2http://www.cbi.org.uk/news/more-than-100-firms-sign-letter-to-lead-brexit-negotiators/