UK breakaway from EU chems regulations could shut off market access for some firms - CBA

Author: Tom Brown

2020/06/10

LONDON (ICIS)--The decision by the UK government to abandon hopes of remaining tied to the EU’s chemicals regulatory framework Reach effectively shuts off access to the market for some UK-based companies and makes access for others far more expensive, trade group CBA said on Wednesday.

Despite mentions of the European Chemicals Agency (ECHA) in numerous draft texts on the UK’s post-Brexit trade relationship with its former partners, the country is no longer seeking to negotiate membership of the regulator, according to a letter from a government minister.

The chemicals, aerospace and pharmaceuticals sectors were the industries the UK had expressed hopes of remaining aligned with the EU on post-Brexit through negotiating some form of continued associate membership.

The country has abandoned those plans for the chemicals sector, meaning that contingency plans for a domestic regulatory system based on the EU framework will come into effect once the country has left the customs union.

“While the transition to UK REACH will take some adjustment, we believe that the benefits of having control of our own laws outweigh the costs,” UK Parliamentary Under Secretary of State at the Department for Environment, Food and Rural Affairs (Defra) Rebecca Pow said in a letter last month.

SUBSTANTIAL IMPACT
The breakaway from regulatory alignment with the UK chemicals sector’s key trading bloc is likely to have a substantial impact on domestic production, according to CBA chief Peter Newport.

“Market access is solely dependent on regulatory compliance. No compliance means there can be no trade,” he said, in response to a request for comment on the news by the UK’s Environmental Audit Committee (EAC)

“The UK Government’s intended actions effectively prevents access to EU markets for many UK companies and makes continued access more expensive for others,” he added.

The creation of a local regulatory body means that UK chemicals firms will need to create EU-based subsidiaries or forge partnerships with firms on the continent to maintain access to the EU, which is likely to reduce economic growth for the country, Newport said.

The uncertainty over the status of the UK’s post-Brexit relationship with ECHA and the fact that retaining access to EU Reach has been a stated priority of the UK government from early in Brexit negotiations through to statements late last year means that many UK companies have taken little action to prepare for a break.

A survey by UK trade body CIA and EU group Cefic in September 2019 showed that almost half of UK firms had not moved to transfer their EU Reach registrations to an only representative (OR) on the mainland.

The transfer of dossiers to ORs is a likely condition of continued market access.

The move to drop overtures to remain tied to ECHA has been driven by the desire to no longer be subject in any form to European Court of Justice (ECJ) oversight, but the court has had very little involvement with legal disputes around the chemicals sector, according to Newport.

“The Government’s decision appears based on its political determination to escape the jurisdiction of the European Courts of Justice (ECJ),” he wrote.

“Yet during the ten years, 2010-2020, the ECJ heard just 27 cases involving ECHA and only one of these involved a member state (France) as a party to the action,” he added.

The creation of UK Reach system means that companies will need to re-register products in the country.

Pre-existing UK company Reach dossiers will be grandfathered in to the system, according to lawmakers, but the collaborative way that registrations have been carried out means that access to that information will be at the discretion of the other EU firms that worked on each submission.

“Selling access to this data is a commercial decision for its current owner(s) and will not be governed by the EU’s Reach data-sharing rules,” Newport said.

“There is also anecdotal evidence that some EU-based chemical manufacturers will not make their data available for UK REACH, as they consider the UK market is too small to be of economic interest.

“If access to the data necessary to support a registration under UK REACH is not available, companies will have to start the process of duplicative testing before the registration process can even begin. This is unlikely to be completed within the UK Government’s two-year time horizon,” concluded Newport.

Focus article by Tom Brown

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