Legal Spotlight: Companies rethink the role of importers under REACH

CW Briefing June 2008

In the wake of the recent Commission clarification that, under REACH, an ‘only representative’ (OR) must submit one registration dossier per substance for each and every non-EU manufacturer it represents, many companies are revisiting their REACH compliance strategies.

In particular, those companies with several non-EU manufacturing entities which were considering appointing one of their EU-based subsidiaries as an OR, are now questioning whether imports into the EU can be channelled through one EU-based entity and whether that entity could register on behalf of their corporate group as the importer. Given that importers must submit only one registration dossier regardless of the origin of the substance, the question of whether an entity could register as an importer rather than using an OR is all the more pertinent. The crux of the matter will lie in whether the selected entity indeed qualifies as an importer under REACH.

The Regulation defines an importer as any natural or legal person established in the EU who is responsible for import (Article 3(11)). Import means the physical introduction into the customs territory of the EU (Article 3(10)). Therefore, in order to assume the role of importer under REACH an entity must be: (i) a natural/legal person; (ii) established in the EU; and (iii) responsible for the physical introduction into the customs territory. Other than these basic rules, there is little guidance on how to designate importers.

Also, because under REACH an importer must be "established" in the EU, it may not be the same entity as an importer under other EU/national law. Indeed under EU customs law, there is no such requirement for importers to be established in the EU so this does not offer an analogy that could be used under REACH.

The crucial question will be which EU-based entity is responsible for physical introduction into the customs territory. Indeed, as specified in the REACH guidance on registration (as updated on 29 April 2008) international companies sometimes have several subsidiaries in the EU, all of which can potentially be an "importer" under REACH and it is for the relevant companies to assign the tasks and responsibilities between them. Therefore, when assessing whether an entity is indeed an importer under REACH, regard must be had not just to the individual entity’s characteristics (i.e. being a legal entity established in the EU), but to the tasks and responsibilities of that entity.

The guidance also specifies that whether an entity is responsible for the physical introduction of the goods will depend on many factors such as who orders, who pays, and who is dealing with the customs formalities, but it does not make an exhaustive list of factors nor does it specify whether some of these factors are more important than others. In our view, the following factors should be used to determine whether an entity is the importer under REACH:

  • Ownership/title of the goods - who has title/ownership of the goods at the point of "physical introduction" of the goods into the customs territory?
  • Risk/liability - who is liable for the goods and when liability/responsibility/risk for the goods passes from the seller to the buyer? This may be the same as when title of the goods is transferred.
  • Payment - who makes payment, to whom and when is payment made for the goods by the buyer? Again, this may occur at the same time as title and/or risk passes from the seller to the buyer.
  • Carriage/transportation of the goods - who makes physical delivery of the goods (or who arranges a third party to make delivery/transportation) and who pays for these costs?
  • Import duties/customs formalities - who pays the import duties (i.e. the customs duties and other charges payable on importation into the EEA), who is responsible for ensuring compliance with customs formalities, and who is liable for non-compliance?

Clearly, whether a particular entity constitutes an importer under REACH must be assessed on a case-by-case basis. In international sales contracts, who carries out the above duties is often determined by reference to the International Chamber of Commerce’s (ICC) International Commercial Terms ("Incoterms"). For example, with regard to Ex works (EXW) contracts under Incoterms, since the EU based buyers carry out all the relevant duties (risks, customs formalities, transportation costs, etc) they will likely assume the role of importer under REACH. At the opposite end of the spectrum, under Delivered Duty Paid (DDP) terms, since the non-EU based sellers carry out all the relevant duties, an EU based entity with relatively little responsibility for the physical introduction of goods into the customs territory might become the importer under REACH.

The specific supply chain and the particular contractual terms used in the relevant contracts will of course be determinant. There are complex cases such as those supply chains involving a number of EU based entities each playing some role in the physical introduction of goods into the customs territory.

In cases such as these, the determination as to which of the EU based entities is/are REACH importer(s) will require careful weighing of all the factors.

It is important to get this right. Only the company that qualifies as importer under REACH can lawfully import the goods into the EU.

Article written for Chemical watch by Marcus Navin-Jones MNavin-Jones@mayerbrown.com and Jean-Philippe Montfort jpmontfort@mayerbrown.com of the global law firm Mayer Brown, which has extensive experience in the field of chemicals regulation www.mayerbrown.com.