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Regulatory certainty as a key ingredient for industry resilience

Credit: BASF SE

Neil Hollis, Regulatory Affairs Manager

Neil Hollis, Regulatory Affairs Manager | BASF

5 min read Partner content

Chemicals are essential for modern lifestyles and industry sectors such as pharmaceuticals, automotive, technology and water purification depend on chemical products as critical raw materials.

Chemicals are also rightly highly regulated for environmental and human protection: science-based regulation is key to achieving those goals. But regulation also needs to consider the chemicals value-chains that exist and which are highly complex. The manufacture of a single chemical product can be multi-layered and as such, there is a reliance throughout the value-chain for robustness, competitiveness and efficiency.

These issues have come into the limelight as the UK is taking steps towards implementing UK REACH. The UK Government has explored the implications of domestic regulation in an area which had previously seen alignment with our closest trading partners through EU wide legislation such as EU REACH – which will also continue to apply in Northern Ireland. Government, business and other stakeholders agree that health and consumer safety standards must be upheld while also maintaining robust value chains for chemicals to support British businesses and exports.

The issue is complex and to illustrate this complexity, at BASF, one of the largest global chemical producers, we conducted a value-chain analysis for a range of products manufactured at one of our six UK sites. At this specific UK site, the finished chemical product sits at the sixth level of the value chain. This means that for the site’s UK operations to be timely and cost-effective, a synthesis path containing at least fourteen pre-cursor chemicals over five ‘value-chain levels’ is required (figure 1).

Figure 1   Typically, a chemical manufacturer only has visibility of their immediate supplier and customer levels. Hence, the chemicals in this and similar value-chains may be manufactured by multiple companies, at numerous international locations. Goods are moving and crossing borders continuously. Given the BASF product is regarded as a large-volume commodity, this particular value-chain is most likely pan-European.

It is clear from this example that for BASF, and many UK chemical producers, remaining part of European and global value-chains is key to competitiveness and this requires a degree of regulatory pragmaticism and proportionality. This applies to trade rules such as border controls but also to specific chemicals management laws.

In this respect, one key aspect of UK REACH, which is a mirror legislation to its EU equivalent, was that it did not run continuously from the point of the UK’s exit from the EU. In other words, the resources that British businesses invested to ensure compliance with EU REACH have not been taken into account. As a result, businesses in Great Britain were faced with the requirement to repeat the registration of chemicals so that they could be placed in the GB market. The registration process involves the collection of data about the safety and use of individual chemical substances. The European Commission estimated that the EU REACH registration costs for industry approached €5 billion1. With GB industry having to replicate this, the probability arises that British companies will have to pay again for the rights to use registration dossier information from data-owners or to repeat studies, in the worst-case animal studies. BASF, with its extensive portfolio covering over 1,000 substances marketed in the UK alone, estimates its cost to comply with UK registration at approximately £70 million. The Defra impact assessment estimated the costs to the industry between £1.3 and £3.5 billion2.

BASF believes this cost factor will ultimately lead to a distortion of the UK chemicals market. Some chemical substances will disappear from the domestic marketplace or may only be available in lower volumes due to commercial viability considerations. Those chemicals remaining on the market will become more expensive as the additional regulatory overhead costs are absorbed within the supply-chain.

To remain competitive in both domestic and international markets, the UK chemicals sector along with relevant downstream chemical-user industries have long campaigned for a more pragmatic and proportional approach to UK REACH registration. Trade bodies have advocated for an approach that recognises the compliance of EU sourced chemical products without the need for re-registration for use in Great Britain.

Following extensive consultation and engagement with industry and stakeholders, in November 20233, Defra indicated that a potential alternative registration model is being considered which will lead to a “significant reduction of the estimated £2 billion costs to industry”. This is a welcome step and industry will continue to engage with policymakers as the detailed proposals emerge.

The announcement also gave an insight into Defra’s views for “refining what information on ‘use and exposure’ in Great Britain registrants will need to provide… to ensure they fully understand and manage risks”. Enhanced granularity on the use of substances has been on the wish-list of suppliers for many years but due to complexity and confidentiality within multi-level value-chains and supply-chains, this is often challenging for the upstream manufacturer or importer to obtain and will need to be looked at carefully.

Following over five years of engagement with stakeholders on UK REACH, it is positive to see progress being made. Adopting a more pragmatic approach to UK REACH, will not only keep costs, bureaucracy and trade barriers to a minimum without lowering existing standards but it will also be an opportunity for the UK to showcase its commitment to creating a predictable and proportional policy framework for regulating the chemicals sector, a foundational industry that directly supports and provides critical raw materials to most manufacturing sectors. A policy that recognises compliance of EU sourced goods would allow UK chemical users to continue sourcing from a wide and competitive supplier market without the burden of additional cost and duplication of workload.

1. Study on the impacts of the 2018 REACH registration deadline - Publications Office of the EU (europa.eu)

2. Impact Assessment IA.pdf (defra.gov.uk)

3. UK REACH alternative transitional registration model (ATRm) - GOV.UK (www.gov.uk)

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