Marsh Comments on Effect of EU’s ‘REACH’ Regulations

On 29 October 2003, the European Commission adopted a proposal for a new EU regulatory framework for chemicals. The new system, dubbed REACH (Registration, Evaluation and Authorization of CHemicals), outlined a complex regulatory system. Basically it mandates that enterprises who manufacture or import more than one ton of a chemical substance per year would be required to register it in a central database.

After years of discussion and input the EC has laid out what it calls “a streamlined and cost-effective system,” that is now being considered by the European Parliament and the Council of the EU for adoption under the so-called co-decision procedure. Assuming that happens, the new regulations are scheduled to go into force throughout the EU June 1.

A full treatment of the regulations, discussions and proposals may be obtained on the EU web site at: http://ec.europa.eu/enterprise/reach/overview.

As the implementation date nears concerns have grown over its effect on business. A recent bulletin from Marsh’s London office charges that, “global supply chains are at risk from ‘duty of care’ rules that are part of the European Union’s REACH legislation.”

In its report, “The Risk Management Impacts of REACH”, Marsh outlines the increased business risks that chemicals suppliers and users globally are facing as a result of REACH.” According to Marsh the EC “has stated that REACH will cost the chemical industry €2.3 billion [$3 billion] over 11 years.”

Marsh’s report says that “more than 100,000 chemical substances are commonly in use within the EU, most of which have not had their properties evaluated and documented for safety.”

The overall aim of the proposed regulations, as specified in the EU bulletin, were to “improve the protection of human health and the environment while maintaining the competitiveness and enhancing the innovative capability of the EU chemicals industry.” The proposals indicated that “REACH would furthermore give greater responsibility to industry to manage the risks from chemicals and to provide safety information on the substances. This information would be passed down the chain of production.”

While Marsh’s report recognizes that goal, it points out that the net effect will require “any company trading in the EU which either directly supplies chemicals into the EU, or has investments in the EU which manufactures chemicals or uses chemicals, will have to be compliant with REACH.”

In essence “REACH imposes ‘duty of care’ within the supply chain, which creates an obligation to communicate substance usage and exposure data to those working with the substance,” said Marsh. “Manufacturers, importers, downstream users and distributors will have a requirement to keep records for 10 years after the last supply. For example, a manufacturer of children’s toys may use materials originating from outside of the EU, but as their products are sold within the Union, both they and their suppliers are bound by REACH.”

Christopher Bryce, Marsh’s Industry Practice Leader, Chemicals and Life Sciences-EMEA, stated: “REACH is one of the most important and complex pieces of regulation to be introduced by the EU in the past 10 years. The risks arising from REACH are many and varied and its effect will be strategic, operational and financial, depending upon whether a firm is a manufacturer, importer or downstream user.

“The ‘duty of care’ rules are onerous. Firms that have either direct or indirect trading relationships with, or investments in, the EU need to evaluate how they may be affected by the REACH regulation, understand what the risks are and decide on the action they should be taking to ensure that they can comply with the wide obligations that REACH will impose.”

The full report may be obtained at: http://www.marsh.co.uk.