Heng Li, a senior associate at Mayer Brown law firm in Beijing, compares China’s latest draft chemical regulation with EU-REACH to determine the impact it will have on companies.
China has introduced a groundbreaking draft law covering all existing and new chemical substances, a big change from the past decade where regulators focused on new substances, especially under the ambit of the Ministry of Ecology and Environment (MEE).
The MEE published the draft Regulation on the Environmental Risk Assessment and Control of Chemical Substances on 8 January, with public comments accepted until 20 February.
The wide-ranging draft will affect companies manufacturing, processing and using, importing and exporting chemicals in and from China. It covers the environmental risk assessment and control of chemical substances, and offers a preview of changes that may be incorporated into China’s new substances management regime.
When the text of the draft law was unveiled, some in China referred to it as the 'real' China-REACH. This article examines the draft in detail to determine whether that description is accurate and what companies need to know about the changes.
China’s changing laws
A single chemical is now regulated by a variety of laws and Chinese authorities depending on its legal status as, for example, a new, existing, or hazardous chemical.
The MEE has promulgated MEP Order 7, which has been in effect since 15 October 2010 and is now being revised. It introduces REACH-like requirements for the registration of new chemical substances but has a different scope from EU-REACH, which covers existing and new chemical substances.
The ministry has been laying the groundwork for the regulation of existing chemical substances since 2016. China drafted the technical guidelines for screening chemicals subject to prioritised assessment and it issued the first batch of priority control chemicals in 2017. The changes indicate that the MEE does not intend to regulate all types of existing substances, focusing instead on those that are prioritised.
The draft Regulation is expected to become the overarching legislation governing existing and new chemical substances but with an emphasis on the control of environmental risk. This is defined as "the degree and probability that a chemical substance with environmental or health hazard properties will enter into the environment and cause harmful effects on the ecological environment and human health".
Since the draft Regulation is likely to be promulgated by the State Council pursuant to China’s Legislative Law, its legal effect is expected to be superior to the departmental rules promulgated by the relevant ministries (including the revised MEP Order 7), reflecting the MEE's intention to intensify the regulation of chemicals.
'Its legal effect is expected to be superior to the departmental rules promulgated by the relevant ministries, including the revised MEP Order 7, reflecting the MEE's intention to intensify the regulation of chemicals,' Heng Li, Mayer Brown
Important points for companies
There are several key features that companies may want to consider.
The draft Regulation governs both existing substances and new substances that are not included in the Inventory of Chemical Substances of China (ICSC). The MEE will establish and update the ICSC, which is newly introduced in the draft. It is likely to be based on the current Inventory of Existing Chemical Substances of China (IECSC). It is not clear if the ICSC will include all of the existing substances in the IECSC, however.
The draft will not apply to substances "used for laboratory-scale research or reference standards", but there is an exception for new chemical substances manufactured or imported in quantities at or above 100kg/year. While the phrase "used for laboratory scale research or as reference standards" is not defined, this may be clarified in the implementation rules or MEE guidelines.
The draft Regulation highlight involves the provisions on environmental risk assessment and control, which apply to any 'chemical substance', not distinguishing between existing and new substances.
'The draft Regulation highlight involves the provisions on environmental risk assessment and control, which apply to any chemical substance, not distinguishing between existing and new substances,' Heng Li, Mayer Brown
In essence, the draft requires the MEE to organise the environmental risk assessment of chemical substances subject to prioritised assessment, based on information acquired through industry reporting and specific activities carried out by the MEE, including environmental risk screening.
Any company manufacturing, processing and using, and importing a chemical substance would need to provide the MEE with an annual report including basic information about the substance, including its name, quantities and uses.
As part of the environmental risk screening, the MEE is to establish a plan for the risk assessment of chemical substances subject to prioritised assessment. Companies manufacturing, processing and using, and importing a substance in the plan would need to provide information, including data on emissions, physico-chemical properties, toxicology and eco-toxicology.
Once the risk assessment is complete, the MEE will promulgate the relevant risk control measures, along with other ministries, to establish:
- a catalogue of chemical substances subject to prioritised control (the Prioritised Control Catalogue, or PCC), including substances that must abide by additional laws such as the Prevention of Atmospheric Pollution, of Water Pollution and of Soil Pollution Laws;
- a catalogue of restricted chemical substances (the Restriction Catalogue), including substances selected from the PCC subject to restrictions on uses and relevant import/export licensing;
- a catalogue of prohibited chemical substances (the Prohibition Catalogue), including substances selected from the PCC that would be strictly prohibited from being manufactured, processed and used, imported and exported in and from China; and
- an Information Publication Platform for Chemical Substances Subject to Prioritised Control requiring companies to disclose information annually.
Key changes for new substances
The draft Regulation reveals key changes that are likely to become part of China’s substance management regime. These are:
- new substances would be subject to registration or filing. The current requirement of simplified registration provided by MEP Order 7 appears to be replaced by the filing process;
- registration would apply to the new substances that are manufactured or imported at or above one ton/year;
- filing would apply to the new substances below one ton/year (except for the new substances which are "used for laboratory scale research or as reference standards" and are below 100 kg/year) and the other specified substances (for example, low-concern polymers);
- the application for the registration of persistent bioaccumulative toxic chemicals (PBTs) and "the substances possessing the same hazards" would be rejected, and they would be included in the Prohibition Catalogue; and
- registration would be subject to a fee payable to the MEE.
The draft Regulation maintains the statutory timeframe for inclusion of a registered new substance into the ICSC, which is five years after completion of the registration. In addition, the draft empowers the MEE to provide, in the ICSC, the restrictive conditions on the uses of certain substances where necessary.
The draft Regulation introduces the possibility of severe penalties for companies manufacturing, processing and using, and importing and exporting chemicals in and from China.
'A company failing to complete the required new substance registration could face an administrative fine of up to RMB2,000,000 ($295,000),' Heng Li, Mayer Brown
For example, a company failing to complete the required new substance registration could face an administrative fine of up to RMB2,000,000 ($295,000), compared with a fine of up to RMB30,000 under MEP Order 7. In the most severe cases, they may be ordered to cease business. Companies are encouraged to submit their comments before the public consultation deadline in February.
Rapid promulgation of the legislation is not expected, given China’s legislative priorities and the need to align the interests of the various affected ministries before the State Council can take action.
The draft may also be revised and subject to additional consultations leading up to its promulgation, so companies should submit comments if they want to propose changes or introduce new provisions.
It is vital that companies actively monitor the enactment of the implementation rules of the draft. While the draft Regulation introduced general requirements, many detailed requirements must be specified by the relevant departmental rules and official guidelines to be promulgated by the MEE and other ministries.
- the definition of technical terms such as PBTs and 'substances possessing the same hazards';
- the detailed procedure of environmental risk assessment and control, specifically whether the industry would be provided with opportunities to defend their products;
- the protection of CBI; and
- detailed requirements on new substance management to be provided in revised MEP Order 7 and the associated official guidelines.
Companies are also encouraged to assess the draft Regulation’s impact on their products, supply chain organisation and global compliance strategy from a legal and regulatory standpoint at the earliest possible stage.
The 'real' China-REACH?
There are certainly REACH-like elements in the draft Regulation. Like EU-REACH, it governs existing and new substances.
The environmental risk assessment process also appears to be similar to substance evaluation under EU-REACH, where the MEE will play a dominant role and could ask industry to submit additional data.
Furthermore, the process for including a substance in the Restriction Catalogue is similar to the restriction process under the European law. Both are risk-based and are initiated by the authorities.
But the draft Regulation differs in other respects.
While the draft covers only environmental risk, EU-REACH covers all types of risks, including those caused by the physical and health hazards of a chemical substance.
The draft requires the registration or filing of new substances only, irrespective of the tonnage. EU-REACH, however, requires the registration of existing and new substances at or above one ton/year.
China’s draft Regulation introduces the inclusion of a substance in the Prohibition Catalogue but it doesn’t provide an authorisation process. Listing in the catalogue would result in a ban on its manufacturing, use, import and export in and from China. Under EU-REACH, however, even if an SVHC is included in Annex XIV the industry can apply for an authorisation to continue its use(s) in the EU.
In summary, the draft Regulation has REACH-like elements but it cannot be considered 'China-REACH'.
The differences between this legislation and EU-REACH, and its relationship with the other laws in China, reflect the unique nature of the country’s legal and administrative systems. Chinese legislators take this into consideration when drafting legislation.
The views expressed in this article are those of the expert author and are not necessarily shared by Chemical Watch.