U.S. Department of Defense has no program in place for completing substance registrations. Hundreds of substances are at risk in the supply chain. Sometimes working with suppliers can result in exemptions therefore eliminating the need to register.
The European Union’s REACH (Registration, Evaluation and Authorization of Chemicals) Regulation requires manufacturers, importers and downstream users to ensure their supply chains are compliant with the regulation.
If suppliers do not register substances used in foreign military sales, it is possible that downstream users will be stuck footing the bill for the registrations. The European Chemicals Industry Council (CEFIC) (www.cefic.be) stimates the average cost per registration between $112,000 and $140,000.1
With hundreds of substances at risk in the supply chain, it is critical for defense procurement personnel to ensure their suppliers have registered so they do not end up paying for suppliers’ mistakes.
#1: Quantify the magnitude of the risk (how many substances do you use?)
The most critical substances are those which cannot be replaced, those which are key to the highest dollar-value programs and those which are used in mission-critical military applications. It is for these substances that shortages in materials may lead to delays in delivery.
A survey of your materials selection professionals can identify those products which would be most likely to present these types of problems. Seeking out the suppliers of these materials first makes sense as the risk is highest and thus the benefit of risk mitigation is also highest.
#2: Determine which of those substances have not been pre-registered
For each critical substance, visit the European Chemicals Agency (ECHA) website (www.echa.eu) and key in the substance CAS number in the “Pre-registered Substances” section to determine whether it has been pre-registered. If it has not been pre-registered you are probably currently using an illegal substance on the EU market.
#3: See if there is an exemption that can be applied
If your critical substance is being manufactured or imported at greater than one metric ton per year in the EU and has not been pre-registered your supplier must immediately register or you are illegally on the market and are subject to all of the applicable fines and penalties of the member state.
You can work with the supplier to see if there is an exemption that can obviate the need to register.
For example, polymeric substances need not be registered. However, monomeric constituents of polymers must be registered so a detailed analysis is necessary to ensure exemptions are being correctly applied. There is no blanket defense exemption that would eliminate the need to register; however there is the possibility that substances used exclusively on US installations which do not fall under the jurisdiction of the EU member state can be totally excluded from the scope of REACH since US sovereignty could be claimed.
#4: Provide compelling incentives for suppliers to register
Suppliers of non-exempt substances must register immediately, either on their own if they are an EU-based importer or manufacturer, or via an ‘Only Representative’ if the supplier is based outside of the EU. If the supplier does not agree to register immediately he must be de-sourced immediately.
#5: … and if the supplier refuses to register, and you can’t stop using the substance immediately
You will have to register the substance yourself, either through your EU-based affiliate or through an Only Representative. At the time of publishing this article, the U.S. Department of Defense has no program in place for completing substance registrations so all aerospace and defense contractors must determine how to do this on their own.
#6: Possible ways to avoid performing registrations
i) Find a new supplier who is willing to register the substance.
ii) Find a supplier (or several suppliers) who can provide the product in volumes less than one metric ton per year, thus avoiding the registration threshold.
iii) Shift manufacture of the product outside the EU and import it through customs as an article.
Illegal product
If your supplier has not pre-registered a non-exempt substance then you are currently putting an illegal product on the EU market. Your choices are to either get the supply chain to register the substance immediately or register it yourself via an EU affiliate or Only Representative.
Without a registration the only other options are ceasing production, switching vendors, switching production out of the EU or lowering volumes below the registration threshold.
1. “CEFIC SIEF Guidance.pdf”,published by CEFIC, Nov., 2008, available at www.cefic.eu p. 1, numbers converted from Euros to Dollars at 1.40/1.00 exchange rate.
VentureOutsource.com, August 2009
Comments