Think Tank: SMEs could see Reach costs fall

22 February 2013 10:18  [Source: ICB]

Small to medium-sized chemical companies have been rightly worried for years about the European Union's over-arching Reach legislation, alongside tougher rules governing the classification and labelling of chemicals.


 Reach compliance costs could fall SMEs

Copyright: Rex Features

But a crunch point is looming, when the first registrations under Reach of chemicals marketed in the EU in the 100-1,000 tonnes band are due. As the first wave of Reach registrations up to a 30 November 2010 deadline showed, the registration process is complicated, sometimes difficult to manage and potentially exceedingly costly. The European Commission has admitted that Reach was causing some chemical players real difficulties, leading to the withdrawal of certain products from the market. The cost of registration, which has been up to $1m per substance per registration, had been higher than expected, it said.

Documents released by the Commission under its review of Reach illustrate the extent of the impact of the registration process. The burden is expected to rise as lower tonnage chemicals, often produced by Europe's small- to medium-sized enterprises (SMEs) are caught in the Reach net. Putting the competitiveness of EU companies subject to Reach in a wider, global context, does not seem to be easy but the Commission says the short-term financial situation of most firms is reported to be negatively affected. "The severity of this impact depends on the type of product traded," it adds. "For firms in highly competitive markets - as is the case for basic chemicals and metals that are treated as commodities - already low profit margins appear to have been further squeezed, as there is limited capacity to transfer these costs to customers through price increase."

Speciality chemical makers appear to be more confident that they can raise prices and sustain profit margins without damaging their competitive position overall. After only five years, the data on which the Commission and others can make an appraisal of the impact of Reach is limited, although it is clear that chemical producers have been subject to a significant bureaucratic and financial burden.

The Commission is proposing that the European Chemicals Agency (ECHA) and industry trade associations try harder to help SMEs keep costs down as they prepare to register substances for the May 2013 deadline. A possibly more significant, final Reach registration deadline (for substances in the 1 tonne to 10 tonnes range) is in 2018. The recommendations include possibly imposing a flat fee on SIEFs for letters of access and a graded scale of registration fees from the ECHA.

By: Nigel Davis
+44 20 8652 3214

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