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Opinion: Cost of UK-REACH to BASF UK & Ireland will be £70 million
Richard Carter, BASF Head UK/Ireland explains possible post-Brexit regulatory scenarios and why the cost of UK-REACH to BASF UK & Ireland will be £70 million.
As Prime Minister Boris Johnson tells Brussels there is no need for the UK government to follow EU rules on trade, while the EU called for a level playing field, industries face different outcomes for the regulatory framework they operate within.
The UK chemicals industry, which has an integrated European supply chain, until January 31st operated within REACH, the Registration, Evaluation, Authorisation and Restriction of Chemicals, a European Union regulation dating from 18 December 2006. REACH addresses the production and use of chemical substances and their potential impacts on both human health and the environment.
BASF UK & Ireland has analysed the scenarios and has explained to government the potential impacts along with proposing some practical mitigation mechanisms.
A form of “UK-REACH” , where the UK creates its independent regulations that manage to comply with most of REACH while being self-determined, follows here and is estimated to cost BASF about £70 million, without enhancing professional, consumer or environmental safety, the primary objective of chemical legislation.
BREXIT & Chemicals (REACH) Legislation
The UK officially left the EU on January 31st, 2020. At this point, an 11-month transition period began during which the “future relationship” negotiations will take place. If these are not agreed or extended, a “no-deal” Brexit scenario for the UK is possible as early as 31st December 2020.
In Autumn 2018, the UK government shared how chemical legislation would be administered in case of a no-deal Brexit. The statutory instrument (UK-REACH) was passed by Parliament in March 2019.
Future Relationship Negotiations
BASF believes it would be best for them and the UK chemicals sector if the UK remains part of the EU-REACH framework, still accessing the services of the European Chemicals Agency (ECHA). A concept referred to as “Associate Membership” in UK government white paper, Jul 18 (paragraphs 30/31).
Consequences of a no-deal and UK-REACH for EU/UK chemical industry
• The UK will have its own UK-REACH regulation. A copy/paste from EU-REACH, adjusted for operability. There is no UK authority acceptance of existing EU-REACH compliance in this legislation.
• To continue manufacturing and/or importing substances (>1te/yr), UK-held REACH registrations will require re-registration through means of data in a dossier.
• Chemicals supplied to the UK from EU27 states will no longer be regarded as downstream-use. EU27 sourced chemicals will be regarded as import and require registration (>1te/yr).
• Registration timeframes are very challenging, two years from point of exit.
• Access to registration data requires negotiation with owner, this will be time-consuming and expensive.
• EU data-owners have no obligation to share data with UK registrants. Repetition of studies, including animal studies, is perceived.
• UK fees copied directly from EU-REACH. This is disproportionate considering size of UK market.
• For UK affected chemical supply-chains, this is the worst-case scenario.
Consequences of UK REACH for BASF
The chemical sector is the “Industry of Industries” and BASF supplies chemicals into the UK market for applications including medical/pharmaceutical, automotive, food and nutrition amongst others.
• Approximately 90% of BASF’s UK sales are products sourced from EU27 countries. BASF supplies ~1,200 different substances to the UK market at volumes >1te/yr.
• Using industry association estimations, expected costs for dossier compilation in region of £60mn. Dossier submission fees will be ~£10mn.
• ~£70mn expense for BASF, without enhancing professional, consumer or environmental safety, the primary objective of chemical legislation.
BASF expects costs combined with restrictive timelines will lead to supply chain disruption.
BASF expects product/substance rationalisation due to commercial factors and assumes that other companies with broad portfolios will face similar challenges and decision making.