03 June 2011 18:38 [Source: ICB]
Logistical providers and chemical producers alike have had to come to learn to live with Reach and its regulations
As key actors in a host of industrial supply chains, both within the EU and between the trading bloc and other global markets, distributors in Europe are having to keep themselves well informed of their legal obligations, and those of their customers and suppliers.
Most of the legal obligations contained in the two key legal instruments - Reach and the Classification, Labelling and Packaging (CLP) regulations - fall on chemical manufacturers, importers or downstream users (any company, other than a manufacturer or importer, that uses chemicals). Distributors not only escape mention in this way, they are also explicitly excluded from both regulations' definition of the term "downstream user". But because distributors are increasingly offering services such as blending, mixing, compounding and repackaging, they are falling under the downstream user definition, while those that import substances must register those substances under Reach. They also had to meet the deadline at the beginning of this year for the submission of substance notifications to the European Chemicals Agency (ECHA) for each substance they placed on the EU market.
There are also some cases where distributors pick up a legal obligation because a requirement is placed on chemical "suppliers", a term which under both regulations includes distributors. One example is that the CLP regulation requires suppliers to act "without undue delay" to update safety data sheets as soon as new information on a chemical's hazards or risk management measures emerges.
Reach and CLP have presented distributors with a new set of opportunities, concerns and costs, even for major players. "The main impact on day-to-day business has been a significant challenge to the organisation and the processing of communication along the supply chain in both directions," says Brenntag's European operations director Gordon Hay. "To allow smooth communication it is important to have an IT system in place that allows an efficient and frictionless flow and storage of information, in addition to safety data sheets, referring to issues such as a substance's registration status, the registration type, and substances of very high concern (SVHCs).
"This information should be made available to the sales force in order to put them in a position to provide our customers with the right information on Reach compliance."
The Reach training Brenntag provides to its sales and product managers is, he says, "one of the most important measures to ensure Reach-compliant business processes".
Additionally, says Hay, a distributor which acts as a downstream user will have legal obligations such as checking whether safety data sheets cover the use for which it is acquiring a substance, and that the appropriate risk management measures for that use are in place.
Although not significant, the main costs for Univar, says product safety, health and environment (SHE) manager Peter Cooper, are associated with staff resources, whether this be recruiting additional personnel or expanding existing staff roles to include Reach responsibilities. For example, Univar has established a pan-European cross-functional steering team to oversee its Reach activity as well as nominated a dedicated project leader and a product stewardship and Reach specialist. The practical impact has not been great, but "investing to ensure that you have the right people and resources available to ensure ongoing compliance is crucial in demonstrating to customers that you are committed to excellence in product stewardship", says Cooper.
The impact for IMCD in terms of investments or cost has been quite low, says Reach manager Michael Paetzold. "We decided to use existing IT systems such as Lotus databases, our SDS [safety data sheet] system and ERP [enterprise resource management] system and modified them so that they could maintain the information required by Reach and CLP." The company did not need to hire extra staff, but there was a need for training and internal meetings to build the company's Reach and CLP strategies.
For the European distributor sector as a whole, "Reach may offer opportunities for those distributors that are prepared and are compliant, while it will be a challenge for those that have not yet accepted Reach as common business practice", says Brenntag's Hay.
It might also lead to consolidation of the number of importers, he says, because some importing distributors will not be willing to register some imported substances, even in cases where there is no third party - known under Reach as an Only Representative (OR) - taking on this role for producers outside the EU.
One of the first big hurdles for chemical manufacturers, importers and ORs was last year's deadline for the registration of high-volume substances. What did distributors learn from this process?
"IMCD decided at a very early stage in 2007 not to register any substance on its own or to become an OR," says Paetzold. "Nevertheless, we pre-registered many substances and were also involved in many information requests from Substance Information Exchange Forums (Siefs). What we learned is that an obligation to communicate within a Sief is no guarantee that if you make an effort to fulfil this obligation, the other Sief members will do the same. "Even at late stages, some companies never replied to emails. We hope that all learned their lessons and try to improve their communication when it comes to agreements on common classification and labelling under CLP and to meet the Reach registration deadlines in 2013 and 2018.
"In general, a distributor does not have many studies to share during the registration process and if it wants to register a substance it must buy a letter of access from the manufacturer or the consortia.
"But business and cost calculations led small companies to decide not to register," reveals Paetzold.
Univar discovered that because not all customers have dedicated Reach specialists, "many were not fully aware of the process or timeframe associated with registration", says Cooper.
"We have since increased our communications with customers on this subject, regularly sending out Reach guidance notes and providing a local Univar specialist that they can contact directly if they have any questions or need advice. This has been very well received; customers appreciate Univar's commitment to the Reach process and the peace of mind this gives them when purchasing products."
IMCD decided not to become an OR, says Paetzold, because the role would have been very challenging. A distributor normally has a lean SHE organisation, he says, and lacks the resources to support companies over many years in the way an OR has to.
Brenntag similarly decided not to offer OR services, says Hay, because it is not its core business. To take over responsibilities as an OR and do a good job for third parties would, he says, require investment in skilled resources.
"However, we use the concept of OR for some of our own imports. What we offer to some of our key accounts instead is dedicated registration and direct import for products for which no EU registrant has submitted a registration, or where only an intermediate registration is in place.
This is a dedicated service we offer to our key customers in order to safeguard their supply of business-critical products."
For those distributors that intend to register substances by the 2013 and 2018 deadlines, the process will be different from that of last year. "In 2010, many of the manufacturers of high-volume products were involved, holding a lot of information and taking the lead in many registration consortia," says IMCD's Paetzold.
"For 2013 and 2018 there will be a lot more SMEs involved and there will be less data available than for the high-volume substances. It may happen that a substance is only represented by one or two registrants, who will share the registration costs and the burden of preparing registration dossiers and chemical safety reports."
Brenntag's Hay says Siefs are likely to contain fewer members and this could mean that less experience will be available. He also says there might be more reluctance with regards to sharing information among Sief members due to unsubstantiated fears of losing competitive advantage through the sharing of intellectual property rights.
But on the other hand, says Univar's Cooper, 2013 and 2018 registrations should be less demanding both because product information requirements are less onerous and because "we are now familiar with the process".
A key issue for all actors in chemical supply chains is the greater importance, size and complexity of safety data sheets - or extended safety data sheets (eSDSs), as the new ones with exposure scenarios included are now called.
"Over the past months, the discussion about the content of eSDSs became a real mess for all involved," says Paetzold. "The Reach annex that defines the content of its 16 sections is very clear and precise, but it was published very late in 2010, which meant SDS service companies were all very late in adopting it. In addition, the format for the extended part is very flexible and so different companies prepared their first eSDSs in different ways.
"The result is that we receive eSDSs that range from 20 to 640 pages long and are unreadable for the people they are made for - the workers handling the substances.
"Many eSDSs have also not been produced in the correct languages and this has been an additional problem for our European customers, who expect us to distribute eSDSs frequently and according to the amending regulation. We hope that industry will agree on a standard format that will make them easy to read and understand. Today this is not possible."
This is echoed by Univar's Cooper. "The main difficulty in managing eSDSs is that there is very little clarity on exactly what needs to be included in the exposure scenarios, making it very difficult for chemical manufacturers and importers to develop a document that is usable by most downstream users.
The issue, he says, is something that the European Commission could consider when Reach is reviewed next year. "The industry would welcome more clearly defined eSDS standards that are readily translatable. This way we can develop more manageable documents that will have a real impact on facilitating the safe and efficient handling and use of chemicals across Europe."
Brenntag's Hay agrees and says standards for eSDSs formats should be imposed, together with standards for communication to simplify processes and help downstream users. "To ease communication and to allow downstream users to customise eSDSs according to their needs, it would be a big advantage to allow web-based access to eSDSs without the need to physically or electronically ship documents," he says. "This would simplify communication and underline the responsibility of the downstream user for safe use, which is one of the key intentions of the regulation."
Another concern that has been raised by downstream users in the past few months is that analysis of the classification and labelling notifications submitted to ECHA last year for inclusion in the agency's inventory shows that different companies have submitted different classifications for the same substance, and that it is a major task for companies to track these different classifications, decide which they agree with and amend safety data sheets and labels accordingly.
"As a distributor and as an importer, the tracking of harmonised classifications and the communication of them is a key factor for IMCD," says Paetzold, "as is transferring this information to the label or SDS we produce ourselves. The notification to the CLP inventory when a new substance is imported and placed on the market by IMCD for the first time is key as well. In general we are well prepared in our organisation to fulfil the requirements of CLP."
The CLP regulation is based on the UN Globally Harmonized System (GHS) of chemicals classification and labelling - a system created in order to bring greater harmonisation to the phrases, symbols and label formats used around the world for chemicals. As more countries base their national rules on the system, distributors hope it will make their lives easier.
"As the GHS framework becomes increasingly ubiquitous, international labelling systems will converge, though local language translations will still be needed." This can only be a good thing for a global distributor such as Univar, says Cooper, as it should remove the need to reclassify products when shipping across borders. "There will definitely be a benefit if the GHS system is used in more and more countries," agrees IMCD's Paetzold. "A global classification will help to improve the quality of information."
Geraint Roberts is a contributing editor to Chemical Watch. For more information contact him at email@example.com
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