OUTLOOK '08: High Reach costs will add to burden

28 December 2007 14:15  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Anyone producing, purchasing, selling or trading chemicals in Europe knows that the EU’s new chemicals legislation Reach is going to hurt. The trouble is, they don’t know how much.

Reach crossed the final political hurdle around this time last year and came into effect in June 2007. The first major milestone for the legislation that will enforce the registration, evaluation and eventual authorisation for sale of all chemicals traded within the EU is just 12 months away.

As far as companies can tell now, Reach registration alone will cost more than $60,000 per chemical. That number was put forward by BP last year for the 1,000 plus products it expects to register under the new rules. Most chemical industry players believe that registration costs will be as much as double that.

But it is not just the costs of registration that will hurt chemicals producers and traders.

Since June companies and their advisors – legal and otherwise – have been poring over this mammoth piece of legislation paragraph by paragraph.

The EU’s executive arm – the European Commission – has also been bringing to conclusion its Reach implementation projects (RIPs) which have involved stakeholders in a process designed to show how Reach may work in practice.

Despite this activity this could prove to be a relatively quiet period before the six months from 1 June 2008 which sees the pre-registration of all existing chemicals marketed in the EU in volumes of more than one tonne a year.

Pre-registration is important because it helps producers and traders to spread the burden of registration. The one substance, one registration (OSOR) concept was built into the legislation and allows the creation of producer consortiums to jointly register substances.

The arguments in the first half of 2008 will centre on the costs of registration under Reach and how Reach consortia can be set-up effectively.

Consortia are believed to be the most efficient ways in which companies can deal with OSOR and help cut down on Reach burdens. They will not, however, be simple to set up and run.

Consultancies including the European chemical industry federation’s (CEFIC’s) ReachCentrum have created consortium management tools and services.

The European chemical industry understands that one of the biggest challenges it faces in 2008 and beyond is the increasing legislative burden which is expected to tip the competitive playing field against it.

CEFIC continues to investigate the costs of Reach in what it has called “real money terms”.

It has pledged to ask 100 companies each year how their businesses have been affected by Reach. Under a previous study a worst case scenario suggested that some companies may have to abandon 20% of their products because of the new rules.

In recent months the number of sector groups, many not directly chemicals related, that have begun to complain loud and hard about the expected impacts of reach has increased.

The Reach fee structure will occupy many minds in the first months of 2008. The EC proposed a highly complex fee structure in October 2007 that was soundly attacked by CEFIC and other industry groups.

The UK’s Chemical Business Association, one of the most vociferous European chemicals trade groups, this month said the new European Chemicals Agency needed to go back to the drawing board on its proposed fee structure.

Reach fees are “out of control” it suggested. Reach is going to be felt particularly by small and medium-sized enterprises (SMEs) the CBA said in a statement.

“They do not have the resources to cope with overbearing, over-complicated and over-expensive regulation,” its Reach Task Force chairman, Melvyn Whyte said.

“The key fact is that [the] industry will carry most of the workload for the operation of Reach. The agency cannot also expect to impose excessive charges and fees for this privilege,” he added.

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