Uncertainty surrounding Brexit continues to be a concern for UK metals traders from small- and medium-sized enterprises conscious that The Registration, Evaluation, Authorisation and Restriction of Chemicals (Reach) deadline is looming, Metal Bulletin learned at last week’s REACH Under The Microscope Forum.
While some traders are still unregistered and grappling with paperwork to meet the deadline of May 31, 2018, most are concerned what will happen to Reach after Brexit.
“We spent €100,000 [$122,761] on registration already. We cannot afford to spend again on a UK system,” a trader from a small metals trading firm said. “Even though we have paid for registration, we won’t get a refund on our fees and might also lose rights to the registration data.”
The UK’s Department for Environment, Food & Rural Affairs (Defra) reiterated its hard stance on Brexit at the REACH under the Microscope event in London.
The government department said it will establish a separate UK regulatory system for chemicals rather than be subject to the European Chemicals Agency’s (ECHA) chemical control system which requires every substance used or produced in Europe to be registered.
“The UK will create a UK-based platform, similar to the current REACH-IT, which will cost around £5.8 million [$8 million] and include a database of chemicals manufactured in or imported into the UK,” Simon Johnson, a member of the EU Exit Team on chemicals, pesticides and hazardous waste and environmental quality, said at the event.
The United Kingdom is scheduled to leave the European Union on March 29, 2019, less than one year after the deadline for all EU metals companies to register to Reach, although the UK will continue to comply with EU law during the transition period to the end of December 2020.
Johnson assured traders there would be no reduction in environmental standards under the UK-based platform.
“Decisions have been taken and we will ensure that existing UK institutions will continue to be recognized in the EU. That is our aim,” he added.
Johnson said the UK would look at international systems, such as the regulatory models in Switzerland and South Korea, which had arrangements in place similar to Reach.
Traders worried over costs
But small traders are concerned the move towards a UK-based regulatory system will create obstacles to their business.
“If the EU does not recognize the UK system, we will lose our ability to import,” a trader said. “If we can no longer import, we may be driven out of business.”
The loss of smaller traders could change the UK’s market share in global metals trading, leaving only larger companies competing in the international market.
While big companies already have offices in other jurisdictions in Europe to which they can transfer their Reach registrations to, smaller companies are disadvantaged.
For one, the rules state that only entities with “legal personality” (i.e. legally registered corporations) can be Reach registrants. This means companies cannot simply have a post box in another country in Europe to qualify. Also, only certain changes in legal personality of a company, such as changes in shareholders, ownership-type, absorption and asset transfer are allowed in order to transfer registration.
Moreover, there are myriad factors to consider when transferring to an EU entity.
“Registrants need to consider costs, rights to data, contractual arrangements and tax implications,” Raminta Dereskeviciute, special counsel at law firm K&L Gates, said.
She said companies should also review legitimate rights to Reach data held by UK entities.
“We are a small company and will be unable to set up offices elsewhere in Europe,” a second trader said. “I am worried I will be driven out of a job.”
“I have been speaking to many traders and the main concerns they have expressed is many of them have spent significant money and time in order to comply with the EU regulation for access to the market,” an industry source told Metal Bulletin.
“Many UK market participants have also been lead registrants in SIEFs (Substance Information Exchange Forum),” the source added. “Now do they lose that access to the database?”
Dereskeviciute said firms worried about Reach data held by UK entities should conduct a review.
“Companies should start using Brexit clauses in Reach contracts, such as letters of access and licenses to use,” Dereskeviciute said.
But another trader said he was not particularly concerned over Reach. “There is no point fretting over something that has happened yet,” he said. “The easiest thing to do would be to clone whatever is currently in place. Even if the EU does not recognize our system, I’m sure we will find ways around it.”