The impact of Brexit on the supply chain and how to get ahead

• United Kingdom

• Brexit
• Environment
• Health and safety
• Industrials - Chemicals

11-05-2018

To date, Brexit headlines have focused on the impact on UK based businesses – but Brexit is not just a UK issue. Any business based outside the UK with a supply chain involving the UK will be impacted. Many businesses will not even be aware that one, or more, of their supply chains involve the UK.

Over the years, supply chains have become increasingly complex and international, with materials and parts often transferred through different countries, and being subject to different processes, before assembly into the final product.

This article focuses on some potential challenges resulting from REACH: the overarching EU legislation which applies to chemical substances and mixtures as well as articles. Evidence suggests that many senior business leaders are unaware of the potentially serious consequences for the supply chain as a result of Brexit. 

With a transition period post-Brexit until 31 December 2020 looking increasingly likely, the REACH-related compliance issues around Brexit will be deferred in practice until 31 December 2020, when the transition period expires. However, businesses should still be preparing for the worst case scenario of a no-deal/hard Brexit on 29 March 2019. Contractual protection will only get you so far.

Are you relying on a UK REACH Registration for compliance?

In the event of a no-deal Brexit, UK based REACH registrations will be invalid from 29 March 2019. This means that any supply chain which relies on a UK based REACH registration for compliance will need to take action to maintain a compliant supply chain.

As a customer based in the EU-27, you should be checking with your UK supplier to see how it intends to respond to this, otherwise you might end up with the registration obligation yourself (or risk not being able to source that product). The UK based entity may be entitled to appoint an Only Representative (OR) to register relevant substances on behalf of the EU-27 based importers. Remember however, only manufacturers/formulators can appoint an OR.  Alternatively, the UK based entity may be able to transfer the registration to a different entity in the EU-27. It can take time to determine the right company to hold the REACH registration taking into account issues such as data access, customs and logistics as well as legal. So, it’s worth considering the implications of these (and other) options now.

The reality is that if your UK based supplier cannot put in place a valid REACH registration then you  will have to find a new supplier in the EU-27 or register that substance yourself.

Do you benefit from a REACH Authorisation?

UK based REACH authorisations will also be invalid. A REACH authorisation allows the particular use of a specific substance (e.g. the use of Chromium trioxide as an oxidising and hardening agent in the manufacture of coloured stainless steel). Businesses based in the EU-27 should be aware whether they benefit from a UK based authorisation for their specific use. However, businesses further down the supply chain which receive a product which has been manufactured through the use of a UK authorisation may not be aware of this.

Where the use of the authorised substance occurs in the EU-27 then steps will need to be taken to maintain compliance. Otherwise you may need a new EU-27 authorisation yourself. The UK entity which currently holds the authorisation may be able to appoint an OR, but only where it is a manufacturer/formulator. Alternatively, the UK entity may be able to transfer the authorisation to a different legal entity in the EU-27. This may trigger a review of the authorisation by the European Commission. The alternative is obtaining a new EU-27 authorisation that is time-consuming and costly  (applying for an authorisation can take more than 2 years). This may mean that certain supply chains cannot continue post-Brexit.

If use of the specific substance subject to authorisation only occurs in the UK and an article is imported into EU-27 then this supply chain will not require a new authorisation post-Brexit.

Where a UK based business relies on a REACH authorisation granted to an EU-27 legal entity the steps needed will depend on how the UK enacts its own form of UK REACH post-Brexit.

If your UK based supplier cannot put in place a valid REACH registration, you will have to find a new supplier in the EU-27 or register that substance yourself.

Are you obtaining products (known under REACH as articles) from the UK?

Often businesses are unaware that REACH also impacts articles (i.e. completed products such as a shoe or a chair).

The main REACH obligation relates to passing information on Substances of Very High Concern (SVHCs) along the supply chain. Subject to the form of UK REACH adopted post-Brexit and specific contractual arrangements EU-27 businesses contracting with UK suppliers may no longer be able to require their UK based supplier to provide them with information on SVHCs. This means that they will have to undertake their own testing to meet their own compliance obligations.

Three steps you can take to get ahead

1: assess the impact of a no-deal/hard Brexit

Ensure your inventories of substances/products are up to date, including details of suppliers and up to date safety data sheets (SDS) where relevant.

Try to obtain information from your suppliers about what happens further up the supply chain. Suppliers may be unwilling to disclose this information, to avoid their customers attempting to “go direct” and remove them from the supply chain. It’s worth trying however, so that you can better understand where your supply chain is vulnerable. The key is to raise the profile of this issue within your own supply chains.

2: consider amending relevant contractual documentation

For key substances/products consider whether there are potential alternative suppliers. 

3: raise awareness of the impact Brexit will have on your own business

You can do this through trade associations or direct political engagement.