The New REACH Fees Regulation: Expensive and Flawed

The New REACH Fees Regulation: Expensive and Flawed

Publications

On 16 April 2008, the controversial REACH fees regulation was enacted.1 The fees regulation sets the fees to be charged by the European chemicals agency (ECHA) for its tasks under the EU’s chemical regulation, REACH.

Under REACH, in order to be manufactured or marketed in the EU, chemical substances on their own, in preparations or in articles, are subject to mandatory registration and/or authorization requirements. This regulation details the fees that will be payable to ECHA, for example, for registration and authorisation dossiers, for updating registrations and for appealing against regulatory decisions.

The basic registration fee will range from €1600 for substances produced in volumes below ten tonnes to €31000 for those above 1000 tonnes. Joint registration is charged somewhat less, from €1200 for substances produced in volumes below ten tonnes to €23250 for those above 1000 tonnes. SMEs’ fees are further reduced, depending upon whether the company is a “small”, “medium” or “micro”-sized and whether it notifies alone or jointly with other similarly-sized companies.

Fee revenue will finance ECHA’s operations, which will begin handling registration applications from 1 June 2008. The fees will be reviewed by 2013.

Comments

A couple of flaws in the fees regulation deserve mention. Apart from criticisms concerning the surprisingly high level of the fees, the regulation sets up a potential disadvantage for EU enterprises versus their foreign counterparts. Second, the fees that ECHA will charge registrants (EU or foreign) for requests for confidential treatment of the proprietary information they submit is inappropriate and open to legal challenge.

Discrimination against EU companies:

According to REACH, a non-EU company can choose to be represented by an “only representative” (OR).2 EU companies cannot do so; each manufacturer or importer established in the EU must register, on its own or jointly.3 So far, the EU has insisted that if more than one non-EU company retained the same OR to register a common substance, the OR had to submit a single registration on their behalf. A single registration and a single fee.

As a practical matter, that stance meant that a foreign company producing the same quantity of a substance as a European company with more than one EU establishment could end up paying lower fees. A concrete example: an OR representing (1) a Japanese company exporting 3000 tonnes of a certain chemical and (2) a US company exporting 3000 tonnes of the same substance would make a single registration and pay one fee (€31000). The OR could divide the fee between them – and could even spread the fees more thinly if it represented more companies for the same substance. Meanwhile, an EU company making the same quantity as the Japanese company might have an establishment in France, Spain and Italy, each one manufacturing a bit more than 1000 tonnes. The EU company would have to make three separate registrations and pay the registration fee three times (€93000, or €69750, in the case of joint submissions).

In the final version of the regulation, the size or number of the entities the OR represents is only taken into consideration in determining the OR’s eligibility for the SME-discount:

In the case of an only representative . . . the assessment of whether the reduction for SMEs applies shall be determined by reference to the headcount, turnover and balance sheet information of the non EU manufacturer, formulator of a preparation, or producer of an article that is represented by that only representative in connection with that transaction, including relevant information from linked and partner companies of the non EU manufacturer, formulator of a preparation, or producer of an article. . . .4

There are late-breaking rumours that the EU has said (orally) that it intends to reverse its stance, such that an OR would pay multiple fees. Although changes to its Guidance on Registration5 have been promised, so far this important reversal of position has not been formalized.

Confidentiality and fees

The fees regulation imposes fees on requests for confidential treatment of elements of the registration dossier.6 For example, a company might request confidential treatment of required elements of the technical dossier, for example, summaries of toxicological studies.7 Under Article 119 of the REACH regulation, such information is otherwise to be made available on the internet free of charge. This is allegedly in conformity with the Aarhus Convention on access to information, public participation in decision-making and access to justice in environmental matters.8

If, however, a company wants to withhold such information from the public as its intellectual property and/or a business secret, it must make an application for confidential treatment – and pay a fee for each such request. For example, a request for confidential treatment of a study summary or “robust study summary” is EUR 4500, and the fee is levied for each study summary for which the request is made.9

Confidentiality is likely to be a headline issue in REACH, considering companies’ enormous investments in research and development and testing. Such data is the intellectual property of the company. REACH requires that such data be submitted as part of a registration, and in certain cases, it requires that it be shared (when it is the product of animal testing, to avoid unnecessary duplication of tests).10 In such circumstances, it is unacceptable for the EU to charge companies for doing what it is required under the EC Treaty to do, namely, respect the obligation of professional secrecy. Article 287 of the EC Treaty says:

The members of the institutions of the Community, the members of committees, and the officials and servants of the Community shall be required, even after their duties have ceased, not to disclose information of the kind covered by the obligation of professional secrecy, in particular information about undertakings, their business relations or their cost components.

We can draw comparisons to other activities of the EU where companies share their confidential data, for example in competition cases and in anti-dumping cases. In both instances, the EU protects business secrets from disclosure, without charging a fee for doing so. Also under the WTO rules, the EU’s fees regulation is legally questionable. As far as certain substances and articles are concerned, charging a fee for confidential treatment may also constitute a TRIPs violation.11 It is doubtful that the EU can legitimately extract payment for doing what it is required to do under the TRIPs.

The rationale that the fee is necessary to finance ECHA’s work in considering the application for confidential treatment is unacceptable. Protecting confidentiality is a part of ECHA’s responsibilities; the cost of doing so ought to be a part of the registration fee, not a penalty for a company who asks for it. If anything, a company could be assessed a fee for asking for confidential treatment when it turned out to be unjustified, but it is not appropriate for the Agency to penalize legitimate requests for protection of business secrets.

In short, companies should not take the emergence of the fees regulation as an inalienable fact of life; the imposition of such fees is open to legal challenge.

1 Commission Regulation 340/2008 of 16 April 2008 on the fees and charges payable to the European Chemicals Agency pursuant to Regulation 1907/2006 of the European Parliament and of the Council on the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), hereafter “Fees Regulation”, OJEC 2008 L107/6.

2 REACH Regulation, Article 8.

3 Article 6 of the REACH Regulation says that “any manufacturer or importer of a substance, either on its own or in one or more preparation(s), in quantities of one tonne or more per year shall submit a registration to the Agency.” Manufacturer is defined under Article 3 as “any natural or legal person established within the Community who manufactures a substance within the Community”; importer is defined in the same article as “any natural or legal person established within the Community who is responsible for import”.

4 Id, at Article 12. See also “whereas” recital 10.

5 Available at http://guidance.echa.europa.eu

6 Fees Regulation, Article 6.

7 Requests for confidential treatment are envisaged by REACH, Article 10(a)(xi).

8 Convention On Access To Information, Public Participation In Decision-Making And Access To Justice In Environmental Matters Done At Aarhus, Denmark, on 25 June 1998 http://www.unece.org/env/pp/documents/cep43e.pdf

9 Fees Regulation, Article 6(2).

10 See REACH Regulation, Article 30.

11 See Article 39.3 TRIPS.