REACh – Issues for Exporters to the EU

1. REACh – Issues for Exporters to the EU V.M. (Jim) DeLisi Fanwood Chemical, Inc. Booth #2133 Fanwood, NJ 07023 908-322-8440 jdelisi@fanwoodchemical.com

2. Implementation Date – June 30, 2007REACh • R – Registration • E – Evaluation • A – Authorization & Restrictions • Ch – Chemicals Foundation Precautionary Principle Substitution Principle

3. REACh Avoidance • Reacted Chemical Substances • Require the EU importer of record to comply • Formulated Products • All ingredients sourced from the EU are exempted – but the rules for claiming such exemption are still in transition. • Convince your suppliers to cover your end uses. • Use of your supplier’s “OR” for their ingredients MAY allow for cost savings.

4. Domestic Dilemma #1 I’ve got $1 M in sales in the EU and I need to register 50 compounds. Answer: Pull out of the EU.

5. Domestic Dilemma #2 I’d abandon my sales in the EU but the plant across the street will no longer be able to purchase my chemicals if I don’t continue to supply their EU facilities. Answer – Spend the money to comply and hope that the customer will compensate for the costs involved.

6. Domestic Dilemma #3 I don’t have any exports to the EU but my most important customer is telling me if I don’t comply with REACh he can no longer buy my products. Answer – make a careful calculation of the cost for compliance versus loosing the customer.

7. Domestic Dilemma #4 • I want to change my formulation to make it better, cheaper, or I lost a supplier, but part of my output goes to the EU • Answer – if at all possible, don’t make any changes in the portion that goes to the EU or use the first import rule to account for the change – REACh adds a costly additional consideration in either event!

8. Macro Concerns • Downstream users, many of whom don’t know anything about Chemicals, are just now beginning to understand the requirements of this regulation. • Can ECHA, a brand new agency, effectively administer this complicated regulation? • The fact that IT system has had a rocky start is not a good sign! • US EPA has been skeptical that this rule can be effectively administered. • Budgetary issues beyond 2009. It’s been widely reported that the Agency will run out of funds in the very near future.

9. Agency Issues • On December 9, 2008, the ECHA reported the following: • 140,000 pre-registered items – almost 5 times the anticipated number • 2.6 million pre-registrations – 20 times the expected number of pre-registrations • That it would publish an alert on or about January 9 stating when it would finalize the publication of the list of pre-registered substances

10. COSTS • ECHA registration fees • Only Representatives • SIEF Participation fees • Testing Costs • Strict Liability • “IT” upgrades to assure compliance • Document Preparation • Safety Assessment – estimated to require 7 man days of effort.. • Technical Dossier – estimated to require 7 man days of effort.

11. Only Representative “OR” • Cost to contract an “OR” are significant and ever-lasting. • Availability – There are only a limited number of qualified companies. • Accountability – Will be difficult since if an error is made, it will be very difficult to remedy. • Independence – Many “OR’s” are part of testing laboratories who may be primarily interested in generating testing activities for their laboratories. • One “OR” per foreign Manufacturer • Country by Country or Industry by Industry distribution arrangements will be difficult to maintain. • Competitors cannot “team up” with one “OR” • Makes it very difficult for traders to maintain their businesses.

12. What should you expect from your “OR” • Cost effective guidance on: • SIEF Participation • Sample selection and “read across” • Data availability & sharing • Labeling and MSD issues • Market intelligence • Details from SIEF participants list • Market intelligence from SIEF meetings • Market “niches” • Market size • Customers

13. Intellectual Property Rights • Proprietary Additives • Non-hazardous additives below 1% are not listed on our MSD sheets – may have to be disclosed under REACh. • Confidential Formula may have to be disclosed. • Unique “Identifiers” – how will they be used? • MSD Sheets • Import declarations and invoices. • SIEF (Substance Information Exchange Forum) participation • One substance – one registration. • Non-Biocidal use for Biocides. • Non-Agricultural uses for Agricultural Chemicals.

14. Anti-Trust REACh compliance could involve a breach of U.S. Antitrust Laws! • SIEF participants may need to disclose • Markets served • End uses • Volume range • Agree on label elements

15. Forced Product Substitution and Voluntary Withdrawals • Will impact US Production. • Domestic sales • Export sales • Will reduce the variety of materials available worldwide as our customers and suppliers turn away from consuming substances rejected for use in the EU.

16. US Based Trading Companies Non EU based traders can not register without the permission of the manufacturer: • A non-EU based trader must partner with the manufacturer of materials destine for the EU and expose the customer and the end use to the “OR” since a non-EU manufacturer can only work through one “OR”. This will expose highly sensitive marketing information to the manufacturer. • Those with EU platform may change the way they invoice customers to allow their EU company to invoice – reducing US income – and the taxes it generates. These same provisions will have an impact on companies that purchase materials for re-sale to fill our “their pallet”

17. Polymers Polymers can not be registered, the monomers from which they are manufactured must be registered. • Will expose proprietary data (IPR) • Is not justified by sound science since “Hazardous Monomers” will not be in free circulation in the EU. • Very complex for Paints, Coatings, etc that can contain multiple polymers

18. Pharmaceuticals • Pharmaceutical intermediates will need to be registered because of the definition of the word IN. • Previous rules (ELINCS & EINECS) exempted these products (as does TSCA) which will make it difficult to pre-register and then register these substances. • Could have a particular impact on Generic Drugs manufactured in the EU for distribution worldwide since many of these manufacturers are not backward integrated.

19. Cosmetics • Lack of registration under the previous regime (EINECS and/or ELINCS) caused disruptions. • Cosmetic directive is in conflict with REACh for dual use substances since cosmetic ingredients cannot be tested on Animals – REACh requires a certain amount of Animal testing.

20. Military Supply Implications • Military items MAY be exempt upon application of a member state. • Dual use products. • Product withdrawals may cause issues. • Impact on US and NATO Bases? • DOC, DOD, & DOS need to carefully study impact especially concerning dual use technologies – such as communication satellites and other items included in ITAR (International Trade in Armaments Rules).

21. “Definition Issues” • Chemically “modified” can cause products that should be exempted to come under this regulation: • Minerals – if processed in anyway. • Article versus Substance • Metals industry – very confusing to understand the difference between a article or substance for this industry. • Air Fresheners, Candles, Deodorizers • Automobiles??????

22. Multinational Company Issues • Much of US/EU trade in Chemicals is Inter-Company transfers. • Products manufactured in the EU but not consumed in the EU are covered by REACh. This was not the case with previous regulations (or TSCA). • Will likely have a significant impact on production sites for Agricultural and other highly regulated chemicals. • Will encourage firms to alter their invoicing patterns resulting in reduced US taxable income. • IT challenge is enormous! • Penalties are potentially ruinous – 10% of Global Turnover • May cause firms to relocate production into the EU.

23. Issues Unique to Toll Producers • A company that purchases “toll produced” products is not an “actor in the supply chain” under REACh The “actual Producer” is responsible for REACh compliance – may allow toll producers to learn more about the end uses of their products – or turn tolled materials into proprietary products. • Maybe an opportunity for non-EU based toll producers to “move” production outside of the EU where end uses are outside of the EU and therefore not subject to REACh. • Special case for Pharmaceuticals where intermediates did not have EINECS/EINECS numbers making it difficult and costly to continue to produce the API in the EU.

24. Candidates List • Creates a “banned” list of substances without the need for sound science. • May take decades to review. • May “force” substitution with untested materials. • Already having a worldwide impact.

25. SIN List ~ 300 chemicals • Distributed by EDF in DC. • Based on Hazard assessment – not Risk assessment • Will grow much longer, very quickly. • Will cause “product bans” • State by State listing of sites – 37 different states • List by Company • No references to end products • No reference to jobs • No reference to investment

26. Key issues for Exporters to Europe • Who will be your registrant? • Data – availability and cost. • Selling into the EU on a “CIF” (cost, insurance & freight) basis will be impossible unless your customers have pre-registered your substances. • Will all of the components your customer needs “survive” this process? • Strict Liability – Producer Pays – including downstream liability. NO REGISTRATION - NO MARKET

27. Authorization - Key issues for Exporters to Europe • It will be difficult and expensive for EU consumers to use items subject to authorization. (Note: All four of the currently used base oils in news inks are class 2 carcinogens in 67/548/EEC, considered safe (GRAS list) in the USA.) • Suppliers need to understand if other components consumed by the customer are potentially subject to Authorization since this might effect your sales. • May accelerate the movement out of Europe for finished chemical products as well as articles including printed matter, furniture, tires, etc.

28. Looking Forward • REACh USA • CHAMP • Kid’s Safe Chemicals Act • WTO Challenge • Could happen in 2009 but would likely have little impact, except potentially for monomers in polymers for the foreseeable future.

29. Web Sites • http://europa.eu.int/comm/enterprise/reach/index_en.htm • http://europa.eu.int/comm/environment/dansub/home_en.htm • http://www.cefic.be/ • http://www.cia.org.uk/newsite/ • http://www.americanchemistry.com/s_acc/index.asp • http://www.socma.com/ • http://www.etad.com/ • http://www.etad.com/etadna/committee_us.php • http://www.reachready.co.uk

30. GlossaryECHA – European Chemical AgencyELINECs – EU’s old “TSCA”new chemicalsEINECS – EU’s old “TSCA” for “old” chemicalsGRAS – US list of materials “Generally Recognized As SafeIT – Internal Control SystemsIP – Intellectual PropertyMSD – Material Safety Data SheetsSIEF – Substance Information Exchange ForumTSCA – US Chemical Control Law Thank you! V.M. (Jim) DeLisi Booth #2133