The REACH Regulation and Its Impact on the Coatings Industry
CEPE has three types of members:
- national associations of the paint, printing ink and artists' colours industry in Europe;
- companies producing paint, printing ink and/or artists' colours in Europe; and
- companies producing raw materials, equipment or services for the paint, printing ink and/or artists' colours sectors.
The increasing importance of the European Union and its legislation has strong effects on the paint and printing ink industry. Consequently, the importance and scope of CEPE's work as representative of the industry's interests at the European level is growing as well.
For CEPE, the most important level with regard to legislation is the European Union. Here, CEPE's main contact is the European Commission. CEPE also maintains close links with the European Parliament, particularly with the Environment Committee dealing with health, safety and environmental matters. To be successful in its advocacy, CEPE needs to achieve a broad consensus between all the stakeholders: the national associations of paint makers, the member companies and the associations representing the sectors downstream (for example the automotive industry) and upstream (the raw material suppliers).
REACHThe European Industry is faced with a major proposal for European legislation, which will have a strong impact on the chemical industry as well as on the paint, printing inks and artists' colour industry and their customers. This legislation, called REACH, will cover all chemicals sold in quantities exceeding 1 t/a in the 25 Member States of the European Union.
What does REACH mean? REACH is the abbreviation for Registration, Evaluation and Authorisation of Chemicals. New chemicals have had to be registered in the EU since 1981. This procedure will now be extended to all existing chemicals sold at a level exceeding 1 t/a. The manufacturers or importers will have to register them for their use. This new legislation will have a major impact on the availability and price of final products and articles.
The White Paper was published as a strategy paper for the future chemicals policy in 2001. It was followed by the first draft of REACH on May 16, 2003. In a worldwide Internet consultation, the industry, NGO and the general public were able to comment on this draft and give proposals for important topics in this paper. On October 29, 2003, a second draft was published, which took account of some of the recommendations of the industry.
Figure 1 is an illustration of the REACH timeline: what has happened is shown in black, the current status in red and the future steps in blue. We are now in the most critical phase: the Commission proposal is being discussed both in the European Parliament and in the Council of Ministers. In comparison with the first REACH proposal, the last version of October 2003 has shown some improvements after the Internet consultation. Polymers are exempted, intermediates are partially exempted, and a chemical safety report is sufficient for chemicals with a usage of more than 10 t/a. This means less bureaucracy for substances produced at volumes lower than 10 t/a. Downstream users will get an expanded safety data sheet including both hazard and recommended exposure data. Instead of having decentralized agencies, one Central Agency located in Helsinki will be responsible (Figure 2).
Procedures under the current REACH proposal will have significant consequences for the chemical industry as well as for downstream users like the paint and printing ink industry, automotive industry, professional painters, printers and consumers. A risk assessment of more than 30,000 chemicals is required, and the producers as well as the downstream users will be responsible for their products until end of life. There is nothing wrong with that, and CEPE supports the same objectives, in principle.
Whether or not, and when a chemical will have to be registered, evaluated or authorized will depend on its annual sales volume in the EU or if it is a dangerous chemical.
- For Registration, information is necessary on production quantity, intended use and a chemical safety report for a tonnage of more than 10 t/a.
- An Evaluation for chemicals sold at a volume of more than 100 t/a requires an assessment of the data by the national authorities. They can ask for extra testing.
- An Authorization is necessary for all substances classified carcinogen, mutagenic or reprotoxic categories 1 and 2, substances that are persistent, bio-accumulating and toxic or very persistent and very bio-accumulating, and for endocrine disruptors (Figure 3).
We have four main concerns about REACH.
- 1. The REACH process requires a vast amount of bureaucracy and is unnecessarily complex.
2. Disclosure of product formulas means that product confidentiality, know-how and intellectual property will no longer be protected.
3. Higher costs will force low-margin chemicals to disappear from the market, resulting in far less variety of formulations and inferior performance. (See case studies discussed below.)
4. EU-based manufacturers will be less competitive in export markets and will be facing unfair competition from imports in their home market. In its current form, REACH will encourage manufacturers to shift production to outside the EU, thus leading to unrecoverable losses in employment and know-how.
Business ImpactThe estimated direct costs put forward by the EU Commission are around 4 billion . Studies performed on behalf of industry have shown that the costs will be two to four times higher than estimated by the European Commission. Other studies on behalf of NGO show lower costs and unexpected high benefits, in a range between 18 and 54 billion . However, the methodology used in all these studies has been criticized by the other stakeholders. Therefore the European Commission has considered producing another business impact study focusing more particularly on downstream users, covering four different sectors: automotive, electronics, packaging and inorganics. CEPE members are involved with automotive body paint and printing inks on food packaging.
Other studies focus on the impact on new EU Member States and on benefits from REACH. Conclusions from these studies are expected to be published by the end of this month.
To study the impact of REACH, our industry has conducted several case studies. They cover the sectors of automotive paints, vehicle refinishes, printing inks, and a study on decorative paints is under preparation. To assess the business impact of REACH we have looked at different types of additional costs created by REACH (Figure 4).
- The increase of raw material costs due to registration of the chemicals. Registration costs will vary between around 50,000 for a small-volume chemical, to up to more than 1 million for a large-volume chemical.
- The costs of reformulation due to the deselection of raw materials, in case of withdrawal of the chemical from the market as a consequence of REACH.
- The costs of document management.
- The costs of developing exposure scenarios, to be included as annexes to the Safety Data Sheets.
Automotive Case StudyWith the introduction of the REACH system, the European automotive and vehicle refinish paint industry will be faced with costs of up to 0.5 billion , corresponding to 20 percent of annual sales of this industry. The largest components consist of registration and reformulation costs in companies, because many important raw materials will no longer be available in the future. Depending on the number of raw materials taken from the market, reformulation costs will total up to 335 million. REACH will make raw materials more expensive; this element will amount to 183 million. Moreover, our industry will have to spend roughly another 3 million on information management.
These costs will not arise all at once; they will be spread over a longer period of time. The bulk of these costs will have to be borne ca. 10 years after introduction of the REACH system (Table 2).
Printing Ink Case StudyThe introduction of the REACH system will result in the printing ink industry facing costs of up to 660 million, which represents 20 percent of annual European printing ink sales. The largest component consists of reformulation costs of up to 475 million for our industry, because many important raw materials will no longer be available in the future. The bulk of these costs will have to be borne ca. 10 years after introduction of the REACH system.
It will be very difficult to pass on costs to customers, mostly printing plants in the graphic and packaging industries. Therefore, the proposal for a REACH regulation will considerably strain profit margins within the printing ink industry, and competitiveness will decline.
Furthermore, the reduced choice of raw materials will impair the innovative strength of the European printing ink industry. Suitable printing inks will no longer be available for every specific use in the future, and in many cases it will not be possible, by way of new formulations or reformulations, to maintain the performance of marketed printing inks or to adapt formulations to constantly changing and technically and economically growing requirements.
The introduction of the REACH system will speed up the growing trend for customer industries to relocate production facilities to countries outside the European Union, because in those countries printing inks suitable for particular uses are still available and/or are sold at much lower prices than printing inks made in the EU.
Obviously European printing ink manufacturers will suffer significant competitive disadvantages compared with companies from outside the EU to which they will lose market shares. As a consequence, European enterprises will be forced to shift some of their production activities to locations outside the EU, and they will do so not primarily to save costs but to follow their sales markets.
Case Study ConclusionsAccording to the studies, the industry will be confronted with high bureaucracy, complexity and costs. The high cost burden is influenced by price increases of raw materials, reformulations due to deselection of raw materials and the necessary employee costs involved in REACH administration. This will reduce the turnover of business, which will have major consequences for the companies. The expectation is that a lot of companies will disappear from the market. It is also expected that imports of painted and printed goods will dramatically increase from outside the EU. Influenced by these high costs and reformulation burdens there will be a loss of market opportunities and competitiveness outside the EU. This is in accordance with a time loss of the introduction of new products and will be followed by a loss of innovation.
The REACH process in its current form will translate into huge amounts of administrative bureaucracy, complexity and uncertainty - and therefore costs. These are out of proportion to any potential benefits and will undermine the fundamental objectives of REACH. REACH represents a potentially enormous burden for the paint, printing ink and artists' colours industry. This burden takes many forms.
It remains unclear how compliance with REACH will be administered. In order to ensure consistency, science-based decisions and minimal bureaucracy, the European Chemicals Agency - as opposed to national authorities - should be solely responsible for the entire process.
Regarding authorization, the Agency should only verify the work done by the industry and not perform a separate risk assessment. The additional notification required under REACH by downstream users is an unnecessary burden when the supply chain is well known and the product already authorized.
Timing requirements are not realistic. Sufficient time should be allowed for the obligation to report and obtain approval for newly identified uses of substances. This involves revising and submitting Chemical Safety Reports, Safety Data Sheets, risk assessments and control measures. The reporting system as currently envisaged will cause duplication of effort, coordination problems and therefore delays and costs.
Customers will get too much regulatory data. Requirements for updating information must be pragmatic to avoid bombarding customers with each small new piece of information.
There are no minimal concentration limit exemptions. The concentration thresholds at which substances are exempted from the safety assessment and reporting obligations should be proportionate to risk and exposure. There is no benefit to be derived in health or environmental terms from the tracking down of every last molecule when quantities present in mixtures are very low and exposure to such chemicals in paints, printing inks or artists' colours even lower. Another concern for CEPE is that REACH will not protect the confidentiality of intellectual property such as product formulations and know-how.
The confidentiality of such intellectual property is a prerequisite to maintaining a healthy business. Disproportionate requirements to communicate the registration numbers of all the substances in preparations will result in the total disclosure of the formulation and the subsequent loss of confidentiality.
Intellectual property must be protected by effective confidentiality safeguards to maintain a healthy, level playing field and avoid unfair competition from free riders. The loss of such information would increase the opportunities for unfair competition and manufacture of counterfeit goods. The threat to intellectual property is a major disincentive to invest in research and development to achieve greater product, health and environmental performance. Under REACH, there is a very real danger that cost will be the main factor determining whether a product will remain on the market, instead of human health, environmental protection or benefit to the consumer.
Thousands of different chemicals are used in the formulation of coatings and printing inks. All have an essential function in the performance of the product. Without them, products may no longer be fit for use or may lose some of their crucial properties. Many of the specialty chemicals we use are produced in low volume. The cost of obtaining the hazard data sets envisaged in REACH will outweigh any possible economic return, and supply will cease.
The loss of so many chemicals at one time would impose a crippling cost and resource burden on the coatings and printing ink industries, in particular on small and medium-sized companies that may have to bear the cost of registration themselves.
Loss of raw materials at the top of the supply chain will result in product reformulations at each step down the chain, adding to development costs. Formulated coatings and printing inks typically contain between 10 and 60 individual substances. If no adequate substitutes are found or not enough time is left for substitution, production in Europe will stop or industry will be forced to manufacture products of lower quality. Customers will use non-EU suppliers who may offer fewer guarantees on safety.
REACH threatens to upset the competitive balance between EU and non-EU enterprises. EU-based companies will suffer from unfair competition through imports.
CEPE is particularly concerned about the import of printed and coated articles - such as household goods, magazines, books and packaging - made from substances that are not subject to the same rules as those used in the European Union. The EU will be unable to restrict market access for fear of breaching the rules of the World Trade Organization.
Even if REACH only addresses substances and not finished products, there is a risk that the EU will create a situation where products from within the EU become so expensive that cheaper products manufactured using coatings and printing inks which contain unregistered or unauthorized substances will be imported from outside the EU. Controls on imports are unlikely to prove effective and they will represent an additional bureaucratic burden for business.
As for the paint, printing ink and artists' colours industry, like any other global industry it can only survive if it remains competitive on a worldwide basis. The REACH process will not allow the paint and printing ink industry to meet the objectives on competitiveness set out in the Lisbon strategy. The administrative and reformulation burden involved will divert them from these objectives.
ConclusionThe paint, printing ink and artists' colours industry comprises a handful of large, multinational companies and thousands of highly specialized, often family owned, small- and medium-sized enterprises. Ours is a diverse, vibrant and innovative industry. We would like it to stay that way.
CEPE supports the main objectives of the European Commission's White Paper for a new Chemical Strategy published in 2001. We do not, however, believe that the new chemical regulation proposal presented by the European Commission on 29 October 2003 - known as REACH - is the appropriate way to achieve the White Paper's objectives: a high level of protection for human health and the environment; an innovative and competitive industry.
Some of our initial concerns have been addressed by the Commission, but further improvements are necessary. In its current form, REACH remains a major threat to our industry's diversity, prosperity and innovation. It must be improved.
Further information is available in a brochure published by CEPE in English, German, French, Dutch, Italian and Spanish. Their Web site is www.reach-coatings.org, or they may be contacted by phone at +32 (0)2 676 74 80 or by fax at +32 (0)2 676 74 90.
This paper was presented at the 8th Nürnberg Congress, Creative Advances in Coatings Technology, April 2005 in Nürnberg, Germany. The Congress is sponsored by FPL, PRA and the Vincentz Network.