European Union: REACH: European Union Proposal to Regulate Toxic Chemicals

Toxic chemical law will undergo a major change in 2006 when the European Union is expected to enact legislation known as the Registration, Evaluation, and Authorization of Chemicals (REACH). REACH will replace more than 40 existing directives and regulations.¹ It requires registration of chemicals made in or imported to the EU, assessment of the risks arising from chemical use, and implementation of measures to manage risks.²

Under REACH, chemical producers will be required to provide authorities, the public, and customers along the supply chain with basic toxicity and exposure information. Absent such information, the chemical will not be allowed on the market. Companies seeking to use the most dangerous chemicals (carcinogenic, mutagenic, toxic to reproduction, persistent, or bioaccumulative) will be required to seek permission for their continued use, and they will have to demonstrate that there are no alternatives, that they can be used safely, or that there is a compelling need for their use.

REACH will result in new standards among chemical producers and users not only in Europe, but also in the United States and other countries. It is the most far-reaching piece of environmental legislation in Europe in the past 30 years, addressing perceived limitations in current regulatory programs for chemicals management that presume most chemicals on the market are safe until proven harmful. REACH will have a significant impact on the $20 billion chemical industry in the United States and other U.S. manufacturers exporting their products to Europe.

Between now and the implementation of REACH, there may be significant amendments to the legislation in response to comments from governments and other interested parties. This article provides an overview of this complex regulatory scheme and an analysis of some practical considerations in adapting to the new EU policy.

On Oct. 29, 2003, the European Commission (Commission), the EU’s executive body, issued a final proposal for the REACH regulatory framework. The Commission pointed to the inadequacy of current chemical regulations, citing studies finding that the vast majority of high production volume chemicals (those produced in volumes of 1 million pounds or more a year) lack basic toxicity and exposure information.³ Where risks are identified, they are slow to be assessed and controlled by risk management measures.⁴ The Commission believed the current systems also hampers research and innovation, causing the EU chemicals industry to lag behind its counterparts in the United States and Japan.⁵

Modern chemical legislation passed in the late 1970s in Europe and the United States instituted rigorous data and review requirements for substances placed on the market after 1980. However, chemicals already on the market. were perceived’ to be grandfathered with few regulatory requirements. While new chemicals must be tested, there are no such provisions for the 100,106 "existing" chemicals representing more than 99 percent by volume of chemicals on the market today.⁶ The number of "new" chemicals introduced since 1981 is a bout 3,000.⁷

Moreover, the Commission sought to reverse the implicit presumption. that chemicals are safe unless proven dangerous. Under the current system in Europe, regulation of chemical exposure puts the burden on the agencies to demonstrate risk on a chemical-by-chemical basis through quantitative risk assessments. The result is a slow, expensive, and resource-intensive process, during which the substance is considered safe and exposure continues.

Although there is a Commission regulation that requires information on high-volume, existing substances to be submitted, it has been up to public authorities to determine which of them need to be examined, and if so, to do the work themselves. The procedures are lengthy and cumbersome: for example, since 1993, only 140 high-volume chemicals have been singled out for risk assessment.⁸ Only a limited number of public authorities have completed this process so far, including agreeing upon appropriate risk management measures.⁹

In early 2001, the Commission issued its White Paper on a Future Chemicals Strategy, which outlined a new approach to chemicals regulation to address problems of the past.¹⁰ The White Paper, set out the strategy for a future Community Policy for Chemicals and proposed a sweeping new chemicals policy called REACH. After comments were received, the Commission issued a final proposal Oct. 29, 2003.

However, a dispute over committee jurisdiction in the European Parliament, coupled with parliamentary elections in June and the addition of 10 new states to the Union, delayed legislative action on the measure. A new EU Parliament convenes in July, and the newly structured Environment Committee--which will shepherd the legislation through Parliament-is not expected to produce a report on the REACH proposal before mid-autumn, probably later.

Supporters had hoped the REACH regime would be enacted into law by 2006, but controversy over the legislation, which industry has said will be both costly and an administrative headache, combined with a new Parliament in an expanded EU could further delay action on the proposal.

REACH applies to:

1. manufacturers, who produce the chemicals;
2. importers, who purchase chemical from non-EU countries;
3. distributors, who store or place chemicals on the market; and
4. downstream users who make industrial or professional use of chemicals (that is, not end-use consumers).¹¹

The majority of the REACH provisions apply directly to manufacturers and importers of chemicals.¹² In addition, REACH requires distributors to ensure that safety data sheets and other safety information about chemicals are provided with the products they sell.¹³ For downstream users, they must:

(a) ensure safety data sheets are included if they provide the chemicals to other users,

(b) follow the safety information provided with the chemicals they purchase,

(c) recommend to manufacturers and importers any other risk-reduction measures for use of the chemicals known to them, and

(d) report to the regulatory agency exposure information not found on the safety data sheet.¹⁴

Registration is the main element of REACH, and it applies to manufacturers and importers. Chemicals manufactured or imported in quantities of at least 1 ton per year must be registered in a central database.¹⁵ Manufacturers and importers of articles must register constituent chemicals if they meet the criteria for classification as dangerous, are intended to be released during normal and reasonably foreseeable conditions of use, and at least 1 ton per year is present in the article type.¹⁶

The registration is to include information on properties, uses, and safe ways of handling the chemicals.¹⁷ This includes providing information on the intrinsic properties and hazards of each substance (such as physicochemical, toxicological, and eco-toxicological properties).¹⁸ This information, if not already available, will be found through a variety of means such as computer modeling and epidemiological studies or through testing. Where testing is necessary and involves animals, companies are encouraged to share existing data to reduce associated costs.¹⁹

Manufacturers and importers will be required to issue a chemical safety report for the identified uses for substances manufactured or imported in volumes. of 10 tons or more per year per manufacturer or importer.²⁰ For lower volumes, safety information produced for the safety data sheets win be submitted as part of the technical dossiers, and only partial hazard testing will be necessary.²¹ A chemical safety report will include a human health hazard assessment, a human health hazard assessment of physicochemical properties, an environmental hazard assessment, and assessments for chemicals of very high concern.²² The reports do not have to take into account uses in food contact or cosmetic products.²³

Based upon these assessments, if a manufacturer or importer concludes that the substance is dangerous, then it must perform an exposure assessment and a risk characterization. After all assessments are performed, manufacturers must themselves identify and apply the appropriate measures to control risk adequately.²⁴

The registration is effective only for the claimed uses of the chemical. and must be updated for new uses. The scope of how broadly to claim the particular "use" of the chemical is currently undefined and a subject of possible dispute with regulators. A new European Chemicals Agency (ECA) will manage the database, receive the registration dossiers, and provide nonconfidential information to the public.²⁵

There are exemptions from REACH. Those manufacturing or importing less than 1 ton of chemicals are exempt from registration. Some chemical groups are exempt from registration, including certain intermediates, hydrates, polymers, food additives and flavorings, and medicines covered by other EU legislation.²⁶ Naturally occurring substances are exempt "if they are not chemically modified" during extraction and processing.²⁷ By-products and impurities are exempt unless they are imported or placed on the market.²⁸ Substances used in research and development are exempt for. a period of five years.²⁹ To qualify for this exemption, the registrant may need to submit customer lists, which will be protected by confidentiality provisions in most cases.

The time to notify EU member states after registration to allow the manufacture, import, and distribution of a new substance will be three months.³⁰ Substances that are already on the market will be phased gradually into REACH. The deadlines for registration are set according to the volume of the substance on the market or the hazard.³¹ The shortest deadlines apply to very high volume substances (more than 1,000 tons), and carcinogenic, mutagenic, or reproduction toxic substances above 1 ton. These must .be registered within three years.³² Medium volume substances ‘(100 tons to 1,000 tons) must be registered within six years, while low volume substances (1 ton to 100 tons) must be registered within 11 years.³³

The next element of REACH is to evaluate the chemical information from manufacturers and importers. A "dossier evaluation" will determine, among other things, whether sufficient test data are already available to evaluate a substance, and if not, to decide the quantity of testing to be prepared.³⁴ Required tests will seek to minimize animal testing^.35 REACH requires the sharing of data obtained in tests and encourages the use of alternative sources of information. A dossier evaluation also will confirm that the registration was in compliance with the registration requirements.³⁶

The ECA may also evaluate any substance’ where it had justified reasons for suspecting there is a risk to human health or the environment.³⁷ These "substance evaluations" will take into account relevant registration dossiers and any other available information.³⁸ The ECA will develop risk-based criteria to assist with the prioritization of substance evaluations.³⁹ The program of substance evaluations will be based on rolling schedules prepared by competent authorities in the EU member states, covering a period of three years.⁴⁰ The plans will be updated annually and will specify the substances each member state plans to evaluate each year.⁴¹

Both dossier and substance evaluations will be performed by competent authorities from the member states.⁴² A competent authority from one member state will be designated in each case to carry out an evaluation. For dossier evaluations, the competent authority will be from the member state in which the manufacture or importation takes place.⁴³ For substance evaluations, member states must establish evaluation rolling plans covering three years, and the authorities will identify the substances they will evaluate.⁴⁴ A competent authority will have a maximum of 12 months to complete an evaluation.⁴⁵

Once a substance has been evaluated, the competent authority may decide further action to manage that substance should be taken. This includes action under authorization or restrictions (see below), or by referring relevant information to the authorities responsible for other legislation.⁴⁶ The registrant(s) may need to provide additional information, either to bring their registration into compliance with the requirements or to help clarify risks.⁴⁷ If the member states do not agree on whether more information is necessary, the Commission will decide whether more information should be requested.⁴⁸

The Commission is responsible for granting or refusing authorizations to manufacture, import, or use chemicals.⁴⁹ Primarily, authorization is required to manufacture, import, or use substances categorized to be "of very high concern."⁵⁰ These substances are carcinogenic, mutagenic, or toxic to reproduction (called CMRs); persistent, bioaccumulative, and toxic (PBTs); or very persistent and very bioaccumulative (vPvBs). Substances of very high concern also include those identified as having serious and irreversible effects to humans and the environment equivalent to the other three categories.⁵¹ Authorization is not required for PBT or vPvB substances present in concentrations of less than 0.1 percent or to substances being used solely for scientific research.⁵²

The aim of the authorization system, according to the REACH directive, is to. ensure the good functioning of the internal market and that substances of very high concern are used either in. a way that risks are adequately controlled or are replaced by suitable alternative substances or technologies.⁵³ Applicants making, importing, or using substances of very high concern must demonstrate that the risks related to the use of those substances are adequately controlled or that they are outweighed by socioeconomic benefits.⁵⁴ Authorizations granted for socioeconomic reasons will normally be time limited.⁵⁵ If application for such an authorization is for an unlimited time of use, the applicant will have to provide justification.⁵⁶

Once an application is received, the ECA will have 10 months to prepare two opinions, one to address the risk posed to human health and the environment, and one to address socioeconomic factors such as impact to the applicant, consumers, and the job market.⁵⁷ Applicants will then be allowed to comment on the opinions within a two-month period. The final opinions will be made available to the Commission, member states, and the applicant.⁵⁸ Nonconfidential sections will be published on the ECA Web site.⁵⁹

The authorization mechanism also contains provisions that enable risk-reduction measures to be introduced across the EU when risks are found to be "unacceptable."⁶⁰ Restricted substances cannot be manufactured, placed on the market, or used unless they comply with the conditions of the restriction.⁶¹

Proposals for restrictions may consist of conditions for the manufacturer, use(s) and/or placement on the market of a substance, or the prohibition of these activities if necessary.⁶² The proposals must be prepared by member states or the Commission in the form of a structured dossier. The dossier must demonstrate that there is a risk to human health or the environment that needs to be addressed at the EU level and explore the different options for managing that risk.⁶³ The dossier will be sent to the member state for conformity, and then the ECA will make it available on its Website. Interested parties will have three months to submit comments or a socioeconomic analysis before the restrictions become final.⁶⁴

The starting point in assessing the practical impact of REACH is by comparison with existing chemical regulatory programs, in particular the U.S. Toxic Substances Control Act (TSCA), originally enacted in 1976.⁶⁵ Other relevant statutes include the U.S. Federal Insecticide, Fungicide & Rodenticide Act (FIFRA)⁶⁶ and statutes and regulations under the authority of the Consumer Product Safety Commission. Several key differences highlight the potentially expansive scope of REACH. In addition, there are many uncertainties and points of conflict to be addressed before REACH is considered for adoption in 2006.

REACH is based upon the "precautionary principle," but it is not the first EU environmental directive to do so.⁶⁷ This principle is summarized in a statement issued by the international participants at the Wingspread Conference Center in Racine, Wis., on Jan. 23-25, 1998:

When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause-and-effect relationships are not fully established scientifically.

The precautionary principle is not a completely open-ended shifting of the burden of proof to establish the safety of a chemical. Nor does it mandate zero risk or absolute safety. It allows factors of "proportionality" in risk assessment and subsequent control measures. However, it places a greater burden on the applicant to develop all the information necessary for a reviewing agency to make a reasoned decision.

REACH implements to precautionary principle by placing the burden on businesses to document for the regulating agency that the chemicals they make or import are "safe" for the stated uses.⁶⁸ Once sufficient data are submitted, the regulating agency for evaluation is provided great latitude to determine whether further testing of the substance is necessary, whether uses with controls are or are not "acceptable," or whether the risk involved is though to be "negligible" or "adequately controlled."⁶⁹

The lack of clarity regarding the risk standard and how it will be defined and implemented are the most important issues. It is the novelty and uncertainty of how the regulating agency will make such determinations--along with very limited rights or procedures for appeal of agency conclusions--that has the greatest potential for REACH to exceed the restrictiveness of counterpart U.S. laws. REACH does not define the levels or characteristics of risk that may trigger responses quantitatively. REACH requires consideration of the socioeconomic importance of a chemical and its uses, and the appropriate levels of controls that reduce risk, but provides little specification. Thus, the potential for inconsistent or strict regulation is high.

In contrast, TSCA allows greater freedom for multiple uses of chemicals once basic data are prepared. Under TSCA, the Environmental Protection Agency must make a finding that circumstances of use present an "unreasonable risk of injury" to health or the environment before imposing a testing requirement, manufacture or use restriction, or a ban.⁷⁰ When undertaking this analysis, EPA must make comparisons with risk management of other federal statutes where quantitative measures and balancing factors have a long history.⁷¹ The relative predictability of the TSCA process will be the baseline for measuring the REACH process.

The cost of REACH compliance is uncertain. The implementation and enforcement of REACH will be funded largely by the applicants for registration.⁷² For example, there will be registration fees for each substance.⁷³ In addition, businesses will bear costs for testing, documentation, and recordkeeping, and monitoring to comply with REACH. Additional costs should be anticipated where there is a need to reformulate products, find substitute chemicals, and locate new suppliers.

REACH also poses the risk of inconsistent regulation with existing toxic chemical regulations, including TSCA. These issues fundamentally arise from unsettled risk standards and the multiple EU agencies implementing this program. While many U.S. companies have experience with addressing varying TSCA-like statutes in different countries, the sweep of REACH is much broader to cover "existing" chemicals and a broader geographic and market-capitalized region. While the proponents of REACH assert that the standardization of toxic chemical regulation is intended to avoid conflicting standards, there is no provision in REACH specifically designed to incorporate or provide comity for existing standards (such as TSCA).

The absence of comity and clear risk standards under REACH creates the unintended risk of misallocating resources to the testing and evaluation of the lest risky chemicals. Under current chemical regulation regimes, chemicals that pose the most risk in terms of hazards and exposures take top priority for regulation. However, under REACH, there is no currently well understood of uniform risk-based analysis to differentiate chemicals. Without prioritization, the allocation of resources is as likely to be determined by the market for the chemicals rather than the potential dangers a particular chemical may pose.

REACH also places new burdens on the relationship between downstream users and the manufacturers and importers of their products. REACH requires downstream users to provide recommendations regarding additional risk management measures. Yet REACH does not specify when manufacturers and importers must follow those recommendations or the consequences of declining them. The result is potentially increased liability to all entities involved. Both government action and product liability actions will have a potential new standard of care if the manufacturer or importer does not follow the recommendations and an injury occurs. At a minimum, all regulated parties will need to re-examine their existing supply contracts for appropriate indemnity and risk-sharing provisions. These informational provisions of REACH therefore come with both recordkeeping and compliance burdens, and with an undefined new standard imposed upon the transactions involving these regulated substances.

In addition, while large, multinational companies have significant experience in managing inconsistent regulations from various countries, smaller more localized companies may lack this experience. There is concern about whether REACH will affect how manufacturers and downstream users will choose suppliers. Because of the stringent requirements for registration and testing, REACH may cause manufacturers or downstream users to prefer EU suppliers or large multinational suppliers to ensure maximum compliance.⁷⁴ These market inefficiencies appear to be inevitable under the more highly regulated environment of REACH.⁷⁵

REACH defers specifying the penalty system or other sanctions for a violation of its provisions, leaving those issues to the member states.⁷⁶ Although REACH provides some factors for assessing possible fines (such as "gravity and duration of the infringement" and "extent of damage to the environment and human health"),⁷⁷ it provides no guidance regarding the ranges of fines.

Under TSCA, civil penalties can be imposed up to $32,500 for each day of violation.⁷⁸ Knowing or willful violations are subject to criminal penalties including up to $25,000 for each day of violation and imprisonment up to one year.⁷⁹ The usual rule of law is that a "knowing" violation is one in which the defendant knowingly engaged in the conduct prohibited, not that the defendant had knowledge that its conduct violated the law. ⁸⁰

REACH’s vague enforcement structure risks inconsistent and excessive penalties. In addition to the potential for liability in each member state in which a violation occurs (there will be 25 member states after May 2004), the fine for similar violations could vary widely depending on the member state. Cumulative penalties could also result for the same occurrence.

In addition, unlike many U.S. statutes, there is no express citizen suit provision under REACH to bring civil enforcement actions to enjoin the member states or the regulated entities from violations. The REACH program relies upon the regulatory agency (the ECA) or member states to enforce its provisions and correct any violations. Member states have a duty to ensure maximum effectiveness of EU law by implementation of national laws enforcing EU law.⁸¹ Private parties in the EU may also be able to seek redress in the form of damages and other relief from businesses or the state in courts because of a violation of REACH, even if it remains unimplemented by member states.⁸²

By comparison, TSCA has a citizen suit provision requiring 60-day notice to the alleged violator before bringing suit, allowing for injunctions and penalties, and authorizing the recovery of attorneys’ fees.⁸³ Citizens also have the right to petition EPA to initiate rulemaking proceedings.⁸⁴

Finally, REACH specifies the legal venue to challenge regulatory decisions from the ECA. The first appeal is heard by the agency’s board of appeal.⁸⁵ Subsequent appeals would have to be taken up before the Court of Justice of the European Communities.⁸⁶ Pointedly, REACH does not define the standard of review for the complex scientific and risk-based decisionmaking required by its program. By comparison, TSCA provides an appeal to an administrative board, the EPA Environmental Appeals Board, for penalty actions.⁸⁷ TSCA also provides for direct judicial review in the federal Court of Appeals for rulemaking activities. These appeals are considered under the deferential "substantial evidence test" for rules including chemical testing and hazardous chemical listings, and the more lenient "arbitrary and capricious" test for rules including the regulation of existing chemicals.⁸⁸

Compliance with REACH will require new scrutiny to protect confidential business information and other intellectual property rights. Under REACH, some sensitive data are given automatic nondisclosure protection. However, the regulated entity is otherwise required to justify confidential business information in the form of a written declaration before registration.⁸⁹ Similarly, TSCA requires substantiation for businesses to claim protection from disclosure as confidential business information.⁹⁰ In each case, the burden is upon the regulated party to substantiate the need for protecting trade secrets. Under TSCA, businesses may also claim protection from disclosure by designating information as confidential during the premanufacture notice period.⁹¹

REACH provisions that certain information is to be nonconfidential, unless substantiated to be trade secrets, should be carefully considered. These provisions may be inconsistent with European Community and World Trade organization agreements protecting trade secrets in disclosures to regulators.⁹² Until the final REACH proposal is adopted in 2006, the extent to which the confidentiality provisions of REACH differ from those standards in U.S. and world trade agreements is a major unresolved issue.

When finalized, the REACH proposal will shift the landscape of toxic chemical regulation in the EU and around the world. At this point, citizens, businesses, and governments alike will have to ensure that they will be prepared for REACH’s consequences, while keeping a watchful eye for any further changes the EU may make to the proposal. Whatever the final product may be, it is sure to present complex challenges for those dealing with toxic chemicals, in its implementation, and in dealing with its ultimate consequences--both intended and unintended.

Copyright © 2004 by the Bureau of National Affairs, Washington, D.C.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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