ECHA voices Reach funding concerns

Bringing funding within Reach

16 September 2008 00:00  [Source: ICB]

As the deadline looms for preregistration ofsubstances under Europe's new Reach chemical legislation, concerns are mounting over the funding of the agency that runs the program

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PREREGISTRATION OF substances under the EU's new Registration, Evaluation, Authorisation and Restriction of Chemicals (Reach) plan has surged in recent months, ahead of the deadline on December 1. But the European Chemicals Agency (ECHA), which is responsible for running the mammoth process, is concerned that revenues from registration fees will be lower than expected.

Three months before the deadline, preregistrations had already exceeded 200,000 - the total number that the ECHA had been expecting. However, there are fears that a substantial proportion of the preregistrations, for which companies pay no fee, will not convert into revenue-generating registrations.

Geert Dancet, executive director of the ECHA, has appealed to the European Parliament for additional subsidies for 2009. "We're worried about whether or not we will have sufficient funding," says Dancet, who, in August, supplied the ECHA's revenues forecasts to the Parliament as part of efforts to secure the additional funding. "We had a comfortable start in 2007 and 2008 but budgets will have to be managed more tightly in 2009."

The agency, which was created in June 2007, is funded partly by revenues from fees and partly from European subsidies. The subsidies will vary over time, depending on the deadlines for product registrations, and are expected to represent 30% of the total funding over a 15-year period. Revenues are expected to account for 70%.

PREREGISTRATIONS OVERWHELM

By September 1, more than 200,000 pre-registrations had been created by 7,500 companies that had signed up via the Reach-IT system. The number of preregistrations has soared, following the introduction on July 22 of bulk registrations, which allow companies to preregister up to 500 substances at once. Companies were prevented from registering products in bulk from the start of June, when individual preregistrations started, because of IT delays.

The preregistration process covers substances that already exist in the EU market, and allows companies to benefit from transitional arrangements that allow registration at a later stage. Depending on the properties of the substance and its tonnage, the substance will need to be registered by December 1, 2010 or June 1, 2013, or June 1, 2018. The obligation to register new substances started on June 1, 2008.

DEADLINE LOOMS

Companies that fail to preregister products by the December 1 deadline cannot market those products until they have registered them. "It will be up to the national inspection authority to verify that they stop their sales activities until the product has been registered," explains Dancet, a Belgian national, who joined the ECHA as interim executive director in June 2007, and became executive director in January 2008.

There are some exceptions to the rule. When the ECHA publishes, by January 1, 2009, a list of preregistered substances, downstream users can verify that all their chemicals are listed. If one does not appear, they can try to identify another supplier who may then wish to preregister, he says.

Firms that want to start selling, importing or producing a particular chemical will also be allowed to preregister after the deadline. "But it's a different story for companies that have simply been sleeping, and are already importing heavily. They will be in breach of Reach if they don't preregister."

A sharp rise in preregistrations is expected in the remaining weeks before the deadline. Preregistration numbers are higher than expected, explains Dancet, because traders are preregistering potential products. Under Reach regulations, traders can act as legal representatives, known as only representatives (ORs), for companies importing substances into the EU.

There is evidence that some ORs are not only preregistering substances that they are interested in selling, but are also buying time by preregistering large numbers of additional substances that they might decide to sell in the future, says Dancet.

Firms that have preregistered become members of a Substance Information Exchange Forum (SIEF). These group together companies registering the same substance, so they can share data and costs.

When members of a SIEF have shared and assessed the available data, they will prepare the common parts of their registration file, and the nominated lead registrant will submit a joint submission.

The creation of SIEFs will enable members to agree on the classification and labeling of the substance, and avoid duplication of studies. In particular, when the available information is not sufficient for registration, the SIEF collectively identifies the need for further studies.

SEEKING CONSOLIDATION?

Commentators have observed that Reach could become a catalyst for consolidation in the industry, particularly for small and medium-sized enterprises (SMEs). When the SIEFS are formed, companies will know which competitors have preregistered certain substances, say Fred du Plessis and Frans van Antwerpen from US-based specialty chemical consultancy Kline. This will open up strategic opportunities for SMEs to divest product lines, buy new lines or even acquire competing companies, they suggest.

It is difficult to estimate the ECHA's future subsidy requirements, says Dancet, because it is not known what proportion of companies will prefer to safeguard their data and register substances individually, thereby generating higher fee revenues for the ECHA, and what proportion will prefer to cooperate with competitors to register a substance together. "As financing of ECHA is built mainly from revenues from registrations and, to a minor extent, from authorizations in the future, there are uncertainties surrounding the long-term financing," says Dancet.

Although the ECHA was never designed to be self-sufficient in the long term, Dancet notes that there will be times when the Agency will be self-funding, thanks to cash influx, principally following the first deadline for full registrations on December 1, 2010. However, the validity of European Commission estimates that the ECHA will not require any subsidies from 2010-2013 may need to be reviewed, he says.

Dancet is proud of the agency's achievements, despite problems with the development of the IT system. "It's unprecedented that an agency has been created and tasked with so many obligations that started just 12 months after its creation."

Since much of the EU's older chemical legislation ceased to exist on June 1, 2008, not only did the ECHA have to be ready to start Reach, it also had to continue some of the work arising from the older legislation, Dancet says. In addition, the agency will be responsible for the new classification and labeling legislation, which is being voted on by the European Parliament.

Since its creation, the ECHA has built up its staff levels to more than 200, including about 30 temporary and contract staff. "To grow from two to 200 staff members in 15 months is spectacular," remarks Dancet. The ECHA expects staffing levels to reach a total of 250 by the end of the year, 350 by the end of 2009 and 450 by the first registration deadline at the end of 2010.

The ECHA could have prepared the Reach path more smoothly, says Dancet. "Twelve months was very little time to have to prepare for so many activities, particularly when we were depending on IT contractors. But we are proud of the fact that we were ready to work on June 1, that we have the staff in place and that the industry accepts that our system is working."

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By: Anna Jagger
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