New regulation may put EU out of reach for some exporters

New regulation may put EU out of reach for some exporters
Comment E-mail Print Share
First Published: Mon, May 12 2008. 05 54 AM IST
Updated: Mon, May 26 2008. 08 10 PM IST
Hyderabad: For Indian companies exporting pharmaceutical and chemical products to the European Union, or EU, dealing with complex regulations is business as usual. But, for even the seasoned ones in the business, 30 November is proving to be a confusing and costly deadline to keep. For, they will have to register with EU authorities on a new chemical substances’ regulatory regime—Registration, Evaluation and Authorisation of Chemical Substances, or REACH in short—by then.
To comply with the new regulation, all chemical substances manufactured in or imported into the EU, estimated to number around 30,000, must be registered with the European Chemicals Agency, or ECHA, the authority responsible for implementing REACH.
By 30 November, the deadline for pre-registration by all exporters to the EU, manufacturers and importers in member nations of the European grouping must submit detailed technical information about the products they deal with so that authorities can verify that those are safe for humans and the environment. Substances and manufacturers that are not pre-registered with ECHA will not be allowed to do business with EU buyers from 1 December. Pre-registration starts 1 June.
According to the European Commission’s external trade data, EU countries imported chemicals worth €2.32 billion, or Rs13,514 crore, from India in 2006. According to the Indian Chemicals Council, pharmaceuticals account for more than 35% of this.
Aimed at making chemicals manufacturing and use environmentally friendly, REACH requires that a large number of chemical substances, from industrial- to household-use substances, go through a health and safety screening and registration process over an 11-year period running to 2019. But, most of India’s exporters who export less than 1,000 tonnes of chemicals or drugs will have to comply with the regulation in the next two-three years.
The registration process, seen by some experts as a trade barrier, runs through multiple stages, can cost up to Rs6.5 crore and could take several months for Indian exporters to clear.
Depending on the quantity exported—in slabs of 1-10 tonnes, up to 100 tonnes, and up to 1,000 tonnes—the registration, testing and certification process could take up to two years to complete.
REACH rules do not allow non-European entities to register themselves with ECHA, but mandates them going through a European representative.
Though, technically, there are some 10 Indian labs following what are called good lab practices set by EU regulators, most of the testing will have to be done by European labs or their certified counterparts here, say industry insiders. Lab tests that will need to be done to furnish the requisite data to ECHA to prove the safety of chemicals will be the most expensive component. According to REACH compliance consultant Thierry Cascales, it could range anywhere from €10,000 to more than €1 million, depending on the chemical and the quantity in which it will be imported into the EU.
Cascales, who runs Dynasource, a company based in France that offers representation services to Indian companies wanting to register their chemicals with ECHA, predicted the regulatory pain will be felt by exporters of early stage drug intermediates, which are closer to raw chemicals in form, from India in the immediate term.
Small and medium businesses that deal with such intermediates, which bigger pharmaceutical companies no longer engage in as they have moved up to more valuable parts of the drug chain, will likely be the worst hit.
Exporters of active pharmaceutical ingredients, the final-stage building blocks of a drug, and finished dosages will not be affected as their products are already covered under existing European rules quite similar to REACH.
Despite the pre-registration process starting in two weeks’ time, very few Indian pharmaceutical companies are even aware of REACH, its implications or its potential impact on their exports, as was evident in a workshop organized here last week by Pharmaceuticals Export Promotion Council (Pharmexcil). The event, scheduled to run for an hour, lasted more than 3 hours as representatives of more than 40 small and medium drug firms voiced their doubts and sought clarifications.
“(The) industry is viewing it as a non-tariff trade barrier and everybody is alarmed as they don’t know what REACH involves or what its impact will be,” said Suven Life Sciences Ltd chief executive Venkat Jasti. Suven, a medium-sized pharma company, exports nearly $18 million, or nearly Rs75 crore, worth of drugs to EU buyers.
Jasti, who is also the Pharmexcil chairman, said small and medium pharma companies are hoping that their importers will take the burden of compliance and do the required pre-registration for the chemical substance they import from Indian suppliers. However, none of the pharma companies that Mint contacted on the sidelines of the workshop had communicated with their trading partners in Europe to find out if they will pick up the compliance tab.
Deepak Maduskar, general manager (commercial) of Glenmark Pharmaceuticals Ltd, who attended the workshop, was concerned about the confidentiality of technical information submitted to ECHA through an EU representative.
“How can I be sure that my data will not end up in the hands of my competitor,” he asked.
The real threat in REACH, according to K. Rangarajan, a professor at Indian Institute of Foreign Trade, New Delhi, goes beyond chemicals. “REACH provisions give EU authorities such powers that they can prevent any product that uses chemicals, including electronics, automobiles and textiles, from entering the EU market,” he said, warning against assuming REACH will only impact export of chemicals or pharmaceuticals.
A senior government official agreed Indian exporters would be hurt by the new EU rule. “REACH will definitely have an impact on Indian exports to the EU. Indian companies will have to act quickly to ensure compliance,” said director general of foreign trade R.S. Gujral. India is expected to take up the issue in trade negotiations with the EU in the future, he added.
Comment E-mail Print Share
First Published: Mon, May 12 2008. 05 54 AM IST
More Topics: EU | REACH | Export | Pharma firms | Home |