impact assessment of implementing the ghs

Impact Assessment of

Implementing the GHS:

Work Package 1

Final Report

for DG Enterprise and Industry

European Commission

RPA

May 2006

Impact Assessment of Implementing the GHS:

Work Package 1

Final Report

prepared for

DG Enterprise and Industry, European Commission

by

Risk & Policy Analysts Limited, Farthing Green House, 1 Beccles Road, Loddon, Norfolk, NR14 6LT

Tel: +44 (0)1508 528465 Fax: +44 (0)1508 520758 Email: [email protected]

London Economics

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Tel: +45 4576 2055 Fax: +45 4576 2455 Email: [email protected]

RPA REPORT – ASSURED QUALITY Project: Ref/Title

J528 GHS

Approach:

In accordance with our Tender and subsequent discussions on the Interim and Draft Final Reports

Report Status:

Final Report

Report prepared by:

M Postle, Director J Vernon, Business Development Director A Footitt, Senior Consultant M Peacock, Researcher

In association with: Paula Ramada, London Economics Anne Lyngbye, DHI/DTC

Report approved for issue by:

Meg Postle, Director

Date:

3 May 2006

If produced by RPA, this report is printed on 100% recycled, chlorine-free paper

Risk & Policy Analysts

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Study Summary (Work Packages 1 and 2)

1. Aims of the Study

In December 2002, the Globally Harmonised System of Classification and Labelling of Chemicals (GHS) was agreed by the UN Committee of Experts on the Transport of Dangerous Goods and the Globally Harmonised System of Classification and Labelling of Chemicals in Geneva. The aim of the GHS is to bring together the major world classification and labelling (C&L) systems into one single new system, having three main elements:

• a globally harmonised classification system for chemical substances; • a globally harmonised classification system for mixtures/preparations; and • a globally harmonised system for hazard communication for workers, consumers

and in transport (which includes labelling and safety data sheets (SDS)).

It is anticipated that the GHS will enhance protection of human health and the environment at the international level and provide a recognised framework for those countries without an existing system. For companies in the EU, this may have the benefit of facilitating the international trade in chemicals whose hazards have been properly assessed and identified on an international basis.

The aim of this study is to support the Commission in developing the information that it requires to prepare an impact assessment of its forthcoming proposals for introducing the GHS in the EU. The work required under the study has been divided into two work packages: • Work Package 1: to provide empirical and factual evidence on the likely impacts

(costs and benefits) of GHS implementation on chemical companies that have to classify and label substances and preparations/mixtures for EU and non-EU markets, based on questionnaire responses and interviews with relevant companies and industry associations. This work is to include examination of assumptions that the GHS is unlikely to deliver new health and environmental benefits; and

• Work Package 2: to provide an assessment of the global trade implications of

GHS implementation, with an emphasis on the impacts on chemical exports from and imports to the EU. Quantitative estimates of the trade effects should be provided for a range of different scenarios based on well-founded assumptions and in conformance with best academic practice in such modelling.

The amount of information available to carry out the above analyses has been limited. This is due to the fact that most companies in the EU are currently focused on understanding the implications of REACH for their activities; they have not yet turned their attention to understanding the implications of the GHS for their activities. As a result, those responding to the questionnaires for Work Package 1 and national experts have been reluctant or are unable to attach quantitative figures to what they believe might change under the GHS, given the uncertainty surrounding such

Impact Assessment of Implementing the GHS

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outcomes. In addition, responses suggest that companies are also focusing on the short-term impacts of GHS implementation rather than also looking to the medium to longer-term benefits that may arise. This has affected not only the robustness of the findings of Work Package 1, but also those of Work Package 2 which has also relied on responses to the questionnaire. The modelling carried out for Work Package 2 has also been affected by the nature of the data available as measures of tariff and non-tariff barriers affecting trade flows of chemicals and related products.

2. The EU Chemicals Industry

The total value of production for the EU chemicals industry for 2005 is estimated at €586 billion, accounting for approximately 33% of €1,776 billion in world sales in 2005 (Cefic, 2005). The chemicals industry in general is characterised by a large number of small and medium sized enterprises (SMEs). The total number of companies operating in the EU according to Cefic (2005) is around 27,000 (excluding pharmaceuticals and agrochemicals); 95% of these are classified as SMEs (where this is defined as employing less than 250 staff). Around 25% of EU sales are accounted for by extra-EU exports, with an analysis of the international trade in chemicals indicating that the EU is the largest market for chemicals, ahead of Asia (Japan, €186 billion; China & the Rest of Asia, €320 billion) and the United States (€415 billion). The EU industry can be broken into several different market sectors. Of most relevance to this study are the following sectors: • the detergents and cleaning products industry; • paints, printing ink and artists’ colours industry; • the dyes and pigments industry supporting sectors such as the textile industry; • the adhesives and sealants sectors; • the cosmetics and perfumes sectors (in particular in relation to fragrances); • fine and basic chemicals producers; and • distributors trading in substances and mixtures.

3. The Current EU System

The current EU classification and labelling (C&L) system is implemented primarily through three Directives: • the Dangerous Substances Directive (67/548/EEC); • the Dangerous Preparations Directive (1999/45/EC); and • the Safety Data Sheet Directive (91/55/EC as amended by 2001/58/EC). The objectives of the current EU C&L system are to identify: physico-chemical hazards (explosive, oxidising and flammable properties); all toxicological properties of substances and preparations, which may constitute a risk during normal handling or


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use (effects on the health); and eco-toxicological hazards (acute or long-term toxicity to aquatic or non-aquatic ecosystems). The current system sets out detailed requirements for how both substances and mixtures are classified, the preparation of safety data sheets to be sent to professional and industrial users and the manner in which their packaging is labelled. These existing systems are considered to provide a high level of protection for workers, consumers and the environment. The classifications derived under the current system also underpin a range of other Directives (and implementing national legislation). Any changes to classification under the GHS could, therefore, have impacts on the way these Directives are applied to substances and preparations, with potentially significant impacts for business. This report does not cover any changes in such legislation, as the relevant Commission services have not yet decided how they will adapt existing legislation when the GHS is adopted.

4. The Requirements of the GHS

An assessment of the classification criteria set out in the GHS identifies three possible outcomes with regard to both substances and mixtures, taking into account both the core requirements and the options that are open to implementing authorities:

• Higher Classification: this occurs when the move from the EU system to the GHS

involves some substances and preparations/mixtures moving to a higher than equivalent classification under the existing system. Consequently, hazard warning labelling and classifications will have to be revised upwards, with a potential negative impact on the markets for these chemicals;

• Lower Classification: this refers to cases where a substance or preparation/mixture

moves down a hazard category under the GHS compared to the existing EU system. These impacts can broadly be categorised as potential advantages of the GHS as they could result in a lower classification, potentially important for industry in carrying out workplace risk assessments and applying exposure guidelines; and

• New Classification: across a range of end-points, the GHS introduces the option

to adopt additional hazard categories for classification and labelling purposes (the so called optionalities). These categories relate to potential hazards and in some cases, thresholds previously above current testing requirements. Adoption of these additional categories is expected to result in significant impacts for industry and consumers as much of the information required is not yet tested for or recorded in many standard testing regimes. Similarly, additional resources will be necessary to classify and label substances and mixtures against these new end-points.

Omitted from the above list is the fact that the same or equivalent classification may occur. In these cases, the impacts would be minimal and relate only to the need for


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manufacturers and suppliers to revise their SDS and labelling so as to comply with the GHS requirements.

5. Responses to the Questionnaire

Responses were collected from 14 companies and five trade associations (16 responses in total when taking into account national associations). Responses reported by the key sub-sectors can be summarised as follows. • Basic Chemicals: this grouping focuses on those companies producing mainly

substances for supply to other parts of the chemicals industry and other sectors; they may also produce mixtures as part of their overall portfolio. The costs of labelling and revisions to SDS are small due to the automation of IT and computer systems, the international sales base of producers and the bulk nature in which the products are transported (requiring minimal labelling by volume manufactured). They did not expect significant adverse impacts resulting from changes in classification under the GHS, with only 10% of substances predicted as being affected by changes in classification criteria. The preference of this group was for a GHS transition concurrent with REACH. Positive trade impacts from the GHS were expected to be small and to arise only in the medium to longer-term. This group also raised concern over how the C&L of complex substances would be dealt with under the GHS, compared to the current system.

• Consumer Products: this grouping covers household and personal care

products, with companies largely producing mixtures, with numbers ranging as high as 50,000 per company. The group’s exposure to GHS and consequent costs are determined by the large amount of packaging and labelling used, the automation of computer systems for C&L and the proximity to customers at the bottom of supply chains. Changing labels on stocks, disposing of labels, reformulation and stock loss were all identified as potential impacts in this sector should there be an inadequate period allowed for stock replacement/withdrawal. Classification related impacts due to changes in criteria and the calculation method for mixtures were expected to be severe; adoption of the optional new Cat. 5 classifications was a particular concern as this is expected to result in the labelling of significant numbers of consumer end products. Transition periods that allow greater time for mixtures classification were generally preferred. Shorter periods could have considerable adverse impacts on SMEs and resources in general. Trade impacts were thought to be small, given that markets tend to be EU- or nationally-based (although one company indicated that they export a significant proportion of their production).

• Non-consumer Products: this group covers paints, pigments, dyes and inks and

produces the largest number of products as a sector and by company on average, compared to the rest of the EU chemicals industry. SMEs and multinationals are both prevalent, as are mixtures and substances. Specialisation and skills within the EU make it one of the largest export sectors. Companies within this sector expect the costs to be high due to the amount of packaging and labelling required for often small volumes of products, combined with the large number of product


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lines and SMEs involved in this sector. A mixed view emerges from the responses with regard to the impacts of changes in classification criteria and the mixtures calculation method. Some minor benefits of harmonisation were also identified.

• Traders/Distributors: this group deals in both substances and mixtures, usually

importing products for the EU market but also exporting to companies outside the EU. Costs are expected to arise in relation to both labelling and preparing and distributing revised SDS. These companies preferred a short transition period as they believed that they can implement most of the GHS measures within the first couple of years. As business is conducted globally, a worldwide ‘big bang’ would benefit the sector and, as such, respondents indicated that the GHS could yield some trade benefits (although some indicated that any such benefits would be small given that the level of effort that they put into monitoring and complying with other countries requirements would not necessarily change significantly with the GHS).

6. The Analysis for Work Package 1 6.1 The Analysis Framework

The consequences of the GHS implementation cannot be assessed without taking into account the requirements that will be introduced by the REACH Regulation. In particular, it has been important to take into account the series of duties that REACH places on manufacturers and importers of substances and preparations (mixtures). In the context of the GHS, the most relevant of these duties include: • the registration of substances including the provision of a registration dossier,

which involves the classification and labelling of substances as necessary; in case of the substances already placed on the market, the registration has different deadlines depending on volume;

• duties on the communication of information down (and up) the supply chain for substances and preparations; in particular, the requirements concerning the preparation of safety data sheets and the supply of these to downstream users;

• provisions concerning the establishment of a classification and labelling inventory at the Community level for all registered substances and all substances which are classified as dangerous and placed on the market; and

• notification to the C&L Inventory three years after entry into force of REACH.

These provisions have the effect of potentially reducing the degree to which the GHS will require classification and labelling work specific to its introduction, as opposed to such work also being tied into implementation of REACH and, therefore, not reflecting an additional cost. Based on a comparison of what REACH is expected to deliver and what will be required under the GHS, it has been concluded that the costs arising from implementation of the GHS may relate to direct and indirect impacts. Direct impacts are the changes in costs stemming from the need to undertake C&L activities specific


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to the GHS for both substances and mixtures, where this may result in the need to invest in new IT and staff training, as well as any additional classification work, revisions of SDS, redistribution of SDS and labelling. Indirect impacts are the changes in costs (for example, demands for product reformulation) that will arise due to retailers or customer responses to changes in classification under GHS; and impacts associated with the more rapid adoption of GHS in other countries. It should be stressed that not all of these impacts are measurable (see also the next section).

Estimation of the direct impacts has taken into account the potential for the GHS to result in higher classifications, lower classifications or new classifications of both substances and mixtures. Estimates have also been developed for adoption of the core GHS classifications only or the core plus optional hazard classifications. The modelling underlying the cost estimation relies on a range of data sources, and assumptions based on these. In general, the approach has been to adopt conservative assumptions so as to err more on the side of over- versus under-estimation. Key data sources include those developed to assist in predicting the impacts of the REACH Regulation; data held by the European Chemicals Bureau; and analyses produced by various sources on the impacts of GHS adoption. A spreadsheet based model was then developed to bring the various data together. In some cases, this included the development of new sub-models, for example, a Monte Carlo analysis based model to predict the number of mixtures that would change classification when moving from the EU to the GHS systems.

6.2. The Work Package 1 Scenarios

The questionnaire used to elicit information from companies and associations asked respondents to indicate their preferences for different transition periods for the GHS implementation. This included transition periods based on the REACH phase-in period, which is the timeline for the registration of substances, extending beyond the REACH registration timeline or shorter than the timeline allowed for under REACH. The responses indicated that preferences vary greatly from a long period to a short period, depending on the nature of a company’s activities. After discussions with the responsible Commission officials, it was decided that Work Package 1 would consider three scenarios in detail. A fourth scenario based on an eleven year transition period for substances (in line with the timeline for the registration of substances under REACH) followed by a further six years for mixtures was considered and excluded for economic, legal and political reasons. The economic argument against such a long transition period relates to the need to run and maintain dual C&L systems for a lengthy period of time. Discussions with one of the main EU C&L software manufacturers (Safeware, pers comm., 2006) suggested that if the EU system was to be maintained over a lengthy transition period, requiring on-going updating after GHS is introduced, then this would be likely to present major problems. Not only would it cost users a lot to continually review products in response to up-dates of two C&L systems, but more importantly the costs associated with the confusion that this would cause are inestimable. The only practicable way to proceed would be to move to the GHS system over a reasonable transition period and


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build in the capability to produce data sheets, etc. according to both systems and read across between the two. A lengthy transition period would also be likely to increase confusion for industrial and professional users and consumers. This is due to the differences in the timing of when substances in different tonnage bands would have to meet the GHS requirements. Adopting the same assumptions as for the REACH BIA, most low volume substances would not have a GHS C&L until towards the end of the 11 years. In addition, if mixture manufacturers want to minimise costs, they will not undertake the C&L of their mixtures until after the end of year 11. Thus, until the end of year 17, this scenario cannot guarantee to result in the consistent provision of information across both substances and mixtures, and does not adhere to ‘good regulation’ requirements for legal certainty. As a result, the level of effort that Competent Authorities would have to put into enforcing the GHS would be higher, particularly in relation to mixtures. The long transition period may also result in an uneven playing field within the EU chemicals markets, as some customers (i.e. retailers) may demand the earlier adoption of the GHS by their mixture manufacturers than required by the GHS Regulation; similarly, those companies that export substances and mixtures will be incurring the costs of the GHS in very different timeframes than those EU companies that do not. This could give rise to inequities within the EU market itself. It is also expected to result in trade with the EU being less attractive for those countries that have moved to the GHS more quickly, negating some of the overall trade benefits of adopting the GHS (see also Working Package 2 which highlights the significant losses in trade that are predicted to result under such an extended transition time scenario). In addition, given the political and technical involvement of Member States and the Commission, EU trade associations (including Cefic, CEPE, AISE, EIGA, Concawe, Eurometaux, etc.), and EU companies in the various UN meetings, adoption of such a long time period would result in a lack of political credibility. Adopting a 17 year period would put Member States and the Commission in a difficult position in terms of further negotiating the technical detail of the GHS. It is also likely to reduce the overall credibility of the GHS, at least in the short term, which could result in its adoption becoming fragmented globally. Such fragmentation could also have significant costs to EU chemical companies and the EU more generally, increasing the costs of international trade and possibly reducing the attractiveness of trade with the EU vis-à-vis other countries (see also Working Package 2 which examines this type of scenario). Given the above considerations, it was decided to predict the cost implications of three different scenarios for the timing of GHS implementation. These scenarios were developed so as to link with REACH registration or C&L notification dates for substances, and to provide a long enough transition period for mixtures so as to ensure the workability of the move to the GHS. In general, it is assumed that mixture manufacturers will require a longer transition period than substance manufacturers due to the increased complexity and length of the mixture supply chain (e.g. there may be fourth or higher level mixtures), the reduced (or more periodic) frequency of


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supply and the longer retention time of mixtures by both professional users and on consumer shelves. The three scenarios can be summarised as follows (with these all assessed against a baseline of the EU not adopting the GHS): • Scenario 1: this scenario has the greatest overlap with registration obligations

under REACH, allowing six years for application of GHS C&L to substances. A further five years is then allowed for the GHS C&L of mixtures, with this corresponding to a total transition period of 11 years;

• Scenario 2: this scenario takes the requirements under REACH to notify the

Agency of the C&L of substances for inclusion in the Classification and Labelling Inventory as its basis for setting the transition period for substances. Such notification must be made within three years of the Regulation coming into force. A further two years is then allowed for application of the GHS to mixtures. The total transition period is therefore five years; and

• Scenario 3: this scenario also assumes a transition period of three years for

substances based on the same reasoning as for Scenario 2, but allows a further five years for the application of the GHS to mixtures. The total transition period is therefore eight years.

6.3 The Estimated Costs of GHS Implementation

Table 1 presents the quantifiable costs as estimated in Work Package 1 of the EU adopting the core GHS requirements for each of the three scenarios with and without IT costs. It should be stressed that the costs related to workability impacts such as those mentioned in the previous section are not included in the cost figures, as it is not possible to properly quantify these impacts. These workability costs are expected to be higher the longer the transition period is. The cost picture of Table 1 is therefore only a partial one. Table 1: Present Value of the Quantifiable Costs of Core GHS Requirements by Scenario (discounted at 4% over Scenario time horizon)

Total Substances Mixtures Excluding IT Including IT

Scenario 1 € 31,927,760 € 116,610,420 € 211,120,300 € 276,259,910 Scenario 2 € 39,743,250 € 211,449,960 € 318,797,900 € 391,241,360 Scenario 3 € 39,743,240 € 162,532,470 € 269,879,590 € 342,323,870

As can be seen from Table 1, the total predicted costs for each of the scenarios are (discounted at 4% over each scenario time horizon): • Scenario 1 (6 years for substances and a further 5 for mixtures): €276 million

(€211 million excluding IT costs);


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• Scenario 2 (3 years for substances and a further 2 years for mixtures): €391 million (€319 million excluding IT costs); and

• Scenario 3 (3 years for substances and a further 5 years for mixtures): €342 million (€270 million excluding IT costs).

As expected, Scenario 1 is the scenario with the lowest quantified implementation costs as it allows companies to maximise the degree to which GHS requirements are undertaken at the same time as substances are registered under REACH. This also minimises the degree to which mixtures may need to be re-classified due to new information coming available from REACH. In contrast, Scenario 2 is predicted to give rise to the highest costs due to it requiring the greatest level of GHS C&L prior to REACH delivering new information. In all cases where mixtures are reclassified before the completion of REACH registrations, the costs of C&L administrative work to mixture manufacturers and distributors far outweigh those to substance manufacturers and distributors. As would be expected, Scenario 3 falls in between Scenarios 1 and 2. It is important to note the large share of total costs comprised by the costs associated with new IT systems and the one-off training of staff. These account for €65 million and €72 million respectively for Scenario 1 and then Scenarios 2 and 3 (which have the same IT and training costs).

A key concern in the adoption of new legislation such as the GHS is the share of costs that will fall on SMEs as opposed to larger companies. Given that there is a lack of information on the number of substances and mixtures that are produced/traded by SMEs compared to larger companies, apportioning the above costs across these two types of companies is difficult. For the purposes of this assessment, we have assumed that 75% of all substances (i.e. of the 29,342) and mixtures (i.e. of the 2 million) are produced by large companies, with SMEs only producing 25% of the total numbers. Based on these highly uncertain assumptions, SMEs’ share of the administrative costs of implementing the GHS vary from 13% to 16% across the three scenarios. However, the picture changes to a degree when the costs of new or modified IT systems and training are also considered. Because 95% of companies are SMEs, they will bear the majority of these costs. The additional costs associated with adoption of the optional new classification criteria under the GHS (i.e. the Cat 5 criteria) are estimated at between €358 million (Scenario 1) and €539 million (Scenario 2). This corresponds to additional costs compared to the total (direct) costs of the introduction of the GHS of between 30% and 38%. Not included in these increases are the additional costs of testing to the new criteria.

6.4 The Expected Benefits and Cost Savings

The total value of production for the EU chemicals industry for 2005 is estimated at €586 billion, accounting for approximately 33% of €1,776 billion in world sales in 2005 (Cefic, 2005). Around 25% of EU sales are accounted for by extra-EU exports, with an analysis of the international trade in chemicals indicating that the EU is the


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largest market for chemicals, ahead of Asia and the United States. The EU has a large trade surplus in chemicals, estimated at over €50 billion based on Eurostat data. The UN notes that there should be significant benefits for companies involved in the international trade in chemicals, based on consultation with the regulatory agencies of individual countries, industry representatives and experts from chemical companies. These benefits are expected to arise post-implementation and to include (Sullivan, 2006): • reduced potential for legal liability claims due to inconsistent hazard data being

provided on SDSs and labels; • an improved corporate image and credibility with both customers and the public

more generally; • reduced costs in complying with global hazard communication regulations, where

this includes: a reduced need for testing against multiple classification systems; a reduced need for evaluation against multiple classification systems; and a better use of expert resources;

• greater harmonisation of domestic classification and communication systems in relation to transport, worker and consumer safety; and

• the standardised translation of hazard information.

The above listed benefits to companies participating in international trade are expected to accrue to companies within all countries that implement the GHS, not only to those with no current system. The responses of companies to this study ranged from those that did identify the potential for savings to be realised (in relation to either their own import or export activities) to those that did not anticipate significant benefits. However, many of these responses failed to recognise the increase in costs that could arise should the rest of the world move to the GHS but the EU did not. There are two other potential benefits that could be lost should the EU not adopt the GHS: • the creation of a more level playing field in international trade for companies, by

reducing the need for expertise on differences in C&L systems worldwide; a reduction of these overhead costs related to international trade seems to be of particular relevance for SMEs; and

• larger and better access to the global market for chemicals and, thus, a wider choice for EU companies in sourcing the chemicals inputs required for EU production processes; this may benefit not only producers of mixtures but also downstream users of substances and mixtures and, thus, consumers.

The potential savings in trade related costs that were highlighted by different companies for this study related to the expenditure that they incurred from the non-harmonisation of C&L requirements; this ranged from €400 up to €80,000 per country. At an annual level, the lack of harmonisation for one company was associated with costs of around €100,000 for just one of the countries it exported to and equivalent to one person year for another company and country combination. Such costs related to both exports (monitoring, understanding and complying with C&L requirements) and imports (correcting and adding to data supplied by importers so that it meets EU requirements for substances placed on the market).


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Unfortunately, due to the varying responses from the interviews, it has not been possible to fully quantify the benefits of the GHS in terms of reduced trade related costs due to globally harmonised C&L requirements. As a result, the approach taken here has been to calculate what the total savings in C&L costs would have to be per annum and per company involved in international trade for the benefits of harmonisation to equal the costs to the EU as a whole; i.e. for there to be a breakeven outcome between the costs of GHS introduction and the savings stemming from this to EU companies. The results are presented in Table 2 in terms of the required reduction (or savings) in the C&L costs faced by EU importers and exporters and the equivalent annual value (EAV) of this required savings in costs (calculated over 30 years using a discount rate of 4%). Table 2: Cost Reduction (Savings) Necessary for an EU wide Breakeven Outcome, per Importer/Exporter and for Different Country Assumptions Total Savings

per Company (Present Value)

Annualised Savings per Company

(EAV over 30 years @ 4%)

Annualised Savings per

Company spread across 7 countries





Scenario 1 € 40,626 € 2,348 € 335 € 157 Scenario 2 € 57,535 € 3,326 € 475 € 222 Scenario 3 € 50,342 € 2,910 € 416 € 194 Notes: EAV stands for equivalent annual value

The savings in C&L costs to importers and exporters only have to be small for the proposals to be justified in cost-benefit terms (i.e. for a breakeven outcome to occur). The total annual savings in C&L costs per trading company that would have to be realised vary from around €2,350 to €3,330. These equate to savings of just a few person-days per company and would appear to be far below the savings such companies are likely to realise as inferred from the responses received for this study.

7. The Trade Analysis for Work Package 2 7.1 The Analysis Framework

The general objective of Work Package 2 was to gather empirical evidence on the likely trade impacts of GHS implementation. The emphasis is therefore on the chemicals exports from and imports into the EU area. The methodology employed for this work has three main components: estimation of an empirical relation between trade flows and trade barriers; estimation of the change in the level of relevant barriers resulting from GHS implementation; and estimation of the total impact taking into account the two above.

The first step was to devise and empirically estimate a model of the relevant trade flows as a function of a number of variables, including those that represent measures of trade barriers, such as labelling requirements. A key challenge to this work arose from the high level of heterogeneity in the very large underlying dataset. The final


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model used in the study, belonging to the class of “gravity equation” models, has been estimated with a Tobit estimation procedure with instrumental variables (IV). This estimation procedure was adopted to account for the presence of zero trade flows (for some products and for some country pairs) and the fact that there is also a greater likelihood of finding high barriers to trade in relation to trade flows that are large. The elasticity of trade flows with respect to the level of non-tariff barriers (NTBs) is estimated at around -0.02 with a 95% confidence interval from -0.01 to -0.04.

The second component of the work was to predict the impact of GHS implementation on the size of the barriers affecting trade flows in and out of the EU area. This component was to rely heavily on the responses to the questionnaires sent out to chemicals companies and trade associations as part of Work Package 1. Unfortunately, most respondents were unable to answer questions concerning trade related impacts and the current level of NTBs that they face. As a result, for these aspects the study has had to rely on the responses of only a few of the companies contacted, which adds to the uncertainty of the estimates. The third and last component combined the results of the two previous components to reach estimated ranges for the trade impact of a global GHS implementation. The numerical results are summarised below. Ranges for the 95% confidence interval can be constructed from the point estimates given below. The range includes 50% below to 50% above the point estimate.

7.2 The Work Package 2 Scenarios

The scenarios considered in Work Package 2 focus on the timing of the GHS implementation in the EU as compared with that elsewhere in the world, in particular to differences in the respective transition periods which give rise to temporary reversals of trade effects. The baseline adopted in Work Package 2 is consistent with the one in Work Package 1, assuming: that the GHS is implemented by non-EU countries; that the transition period adopted by non-EU countries is 3 years for substances and 5 years for mixtures; and that EU C&L and SDS are no longer accepted by non-EU countries, with GHS-based information required.

The four scenarios examined in this part of the study were: (1) “GHS global with EU lagging behind” • The GHS is globally implemented; • The transition period for non-EU countries is 3 years for substances and 5 years

for mixtures; and • The transition period for the EU is 11 years for substances and 6 years for

mixtures, lagging behind the rest of the world. (2) “GHS global and simultaneous” • The GHS is globally implemented; and • The transition period for non-EU countries and the EU is 3 years for substances

and 5 years for mixtures. (Note that the 3 year period in the EU corresponds to the timing for notification of the C&L of substances to the REACH Inventory).


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(3) “GHS global with EU delay for partial REACH implementation” • The GHS is globally implemented; • The transition period for non-EU countries is 3 years for substances and 5 years

for mixtures; and • The transition period for the EU is 6 years for substances and 5 years for mixtures,

with this linked to the first two tranches of substance registration under REACH. (4) “Fragmented Global C&L” or “worst case scenario” • The GHS is not implemented; • All countries/trade blocks fall back to national C&L systems (either one already

in place or newly created where none currently exists); and • EU C&L not assumed to be automatically accepted.

7.3 The Estimated Change in Trade Flows

In order to assess the impact of the different scenarios on trade costs and trade flows, the analysis was separated between imports and exports. From the analysis we conclude that the impact on chemicals trade flows into and out of the EU that can be expected to result from the different possible scenarios of GHS adoption/non-adoption are summarised by: • Scenario 1 (GHS global with EU lagging behind): the lengthy delay to the

adoption of GHS (at 11+6 years) results in a loss of roughly €224 million for exports and €184 million for imports.

• Scenario 2 (GHS global and simultaneous): there are no significant trade

impacts compared to the current situation under this scenario, as the EU position vis-à-vis its trading partners is not affected. Note that due to the uncertainty of the statistical estimates, this conclusion would also effectively apply for EU transition periods which are a bit shorter or longer as compared to the one in the non-EU countries (as for example a 3+2 transition period).

• Scenario 3 (GHS global with EU delay for partial REACH implementation):

a less delayed adoption of GHS (at 6+5 years) results in a loss of roughly €113 million for exports and €74 million for imports.

• Scenario 4 (Fragmented global C&L or worst case scenario): non-adoption of

GHS results in a loss of roughly €504 million for exports and €420 million for imports.


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TABLE OF CONTENTS Page Study Summary 1. INTRODUCTION 1.1 Background 1 1.2 Objectives of this Study 2 1.3 Organisation of the Report 3 2. MARKETS AND USES 2.1 Introduction 5 2.2 The EU Chemicals Industry 5 2.3 Base and Fine Chemicals 11 2.4 Consumer Products 13 2.5 Non-consumer Products 16 2.6 Distributors of Substances/Mixtures 19 3. THE CURRENT EU SYSTEM 3.1 Introduction 21 3.2 The EU System of Classification and Labelling 21 3.3 Other Relevant EU Regulations and Directives 25 4. OVERVIEW OF THE GHS SYSTEM 4.1 Introduction 29 4.2 General Overview of GHS Classification and Labelling Requirements 29 4.3 Health and Safety Hazard Categories 33 4.4 Environmental Hazard Categories 43 4.5 Physico-chemical Hazard Categories 44 5. FUTURE DEVELOPMENT OF CLASSIFICATION AND LABELLING SYSTEMS

IN OTHER COUNTRIES 5.1 Introduction 47 5.2 The United Nations Institute for Training and Research (UNITAR) 48 5.3 The United States 48 5.4 Japan 53 5.5 Canada 54 5.6 Australia 55 5.7 South Africa 56 5.8 APEC Countries 57 6. RESULTS OF THE INDUSTRY SURVEY 6.1 Introduction 59 6.2 Company Selection and Interviews 59 6.3 The Questionnaires 61 6.4 Production, Import and Export of Substances 62 6.5 The Costs of Classification and Labelling Activities 64


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6.6 Changes in Classification 68 6.7 Transition Periods 73 6.8 Advantages and Disadvantages 74 6.9 Impacts on the Costs of Trade 76 6.10 Further Issues 78 7. THE COSTS OF GHS IMPLEMENTATION 7.1 Overview 81 7.2 The REACH Baseline 81 7.3 Impact of REACH Baseline for Assessing the Impacts of GHS 84 7.4 Substances 88 7.5 Mixtures 95 7.6 Cost Assumptions 103 7.7 The Estimated Costs of GHS Implementation 106 8. BENEFITS OF ADOPTING THE GHS 8.1 Overview 113 8.2 Global Benefits 113 8.3 EU Trade and Other Benefits 116 9. SUMMARY AND CONCLUSIONS FOR WORK PACKAGE 1 9.1 Aims and Approach 121 9.2 Responses to the Questionnaires 121 9.3 The Scenarios for GHS Implementation 123 9.4 The Estimated Costs of the GHS 125 9.5 The Benefits of GHS Implementation 126 10. REFERENCES 129 ANNEX 1: INDUSTRY QUESTIONNAIRE ANNEX 2: CALCULATIONS UNDERLYING NUMBERS OF SUBSTANCES AND MIXTURES AFFECTED BY GHS


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1. INTRODUCTION 1.1 Background

Different systems for the classification and labelling of substances and preparations/mixtures exist in different jurisdictions around the world. While existing laws or regulations are similar in many respects, their differences are significant enough to result in multiple labelling to provide different health and safety information for the same product in different countries and/or markets, even though the chemicals are traded internationally. As a result, companies involved in the international trade in chemicals must have experts who can follow the changes in these laws and regulations and prepare different labels and Safety Data Sheets (SDS) for the different jurisdictions. Given the reality of the extensive global trade in chemicals, and the need to develop national programmes that ensure their safe use, transport and handling by emergency response teams, it has been recognised that an internationally harmonised approach to classification and labelling is an essential starting point for such programmes.

In December 2002, the Globally Harmonised System of Classification and Labelling of Chemicals (GHS) was agreed by the United Nations Committee of Experts on the Transport of Dangerous Goods and the Globally Harmonised System of Classification and Labelling of Chemicals in Geneva. It was formally adopted by the United Nations (UN) in July 2003 and can now be implemented, with the World Summit on Sustainable Development encouraging countries to implement the new system as soon as possible with a view to it being fully operational by 2008.

The aim of the GHS is to bring together the major world classification and labelling (C&L) systems into one single new system, with three main elements:

• a globally harmonised classification system for chemical substances; • a globally harmonised classification system for mixtures/preparations; and • a globally harmonised system for hazard communication for workers, consumers and

in transport (which includes labelling and safety data sheets (SDS)).

It is anticipated that, when implemented, the GHS will enhance protection of human health and the environment at the international level and provide a recognised framework for those countries without an existing system. For companies in the European Union (EU), this may have the benefit of facilitating the international trade in chemicals whose hazards have been properly assessed and identified on an international basis.

In the 2001 White Paper presenting a Strategy for a Future EU Chemicals Policy, the

European Commission identified actions in relation to the GHS. The Council subsequently invited the Commission to submit proposals for implementation of the GHS. On October 2003, the Commission stated that it would come forward with the necessary proposals for having the GHS adopted at the same time as the final adoption of the REACH Regulation.


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1.2 Objectives of this Study

As part of the Better Regulation Initiative, Commission proposals for new regulations or changes in regulation should be accompanied by an impact assessment. Although the Commission intends to prepare the overall impact assessment concerning its proposals for implementing the GHS, it has sought external support in assessing some of the potential impacts for EU stakeholders. In particular, this applies to the assessment of potential costs or savings to companies of adopting the GHS, the impacts on the global trade in chemicals and the resulting macroeconomic effects of these. The work required under the study has been divided into two work packages: • Work Package 1: to provide empirical and factual evidence on the likely impacts

(costs and benefits) of GHS implementation on chemical companies that have to classify and label substances and preparations/mixtures for EU and non-EU markets, based on interviews with relevant companies and industry associations. This work is to include examination of assumptions that the GHS is unlikely to deliver new health and environmental benefits; and

• Work Package 2: taking the results of Work Package 1, to provide an assessment of

the global trade implications of GHS implementation, with an emphasis on the impacts on chemical exports from and imports to the EU. Quantitative estimates of the trade effects should be provided for a range of different scenarios based on well-founded assumptions and in conformance with best academic practice in such modelling.

This final report provides the results of Work Package 1. It sets out the information that has been collected through literature review and consultation, the model developed for the analysis undertaken for this Work Package, and the results of the analysis. It should be recognised that the amount of information available to prepare this assessment has been severely limited by the fact that most companies in the EU have yet to give much consideration to the potential costs and/or benefits arising from adoption of the GHS. Companies are still focused on understanding the implications of REACH for their businesses. As a result, they have not investigated the implications of GHS for their products, for example, carrying out any sample testing of any changes in classification that may arise for their products. Nor have they estimated the longer-term reductions in resources required for classification and labelling activities due to increased global harmonisation. Similarly, without better industry data, the experts contacted as part of this study have been reluctant or unable to attach quantitative figures to what they believe might change under the GHS. As a result, this assessment has had to rely on a number of ‘best guess’ assumptions and the conclusions should be viewed in this context.


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1.3 Organisation of the Report

The remainder of this Report has been organised as follows: • Section 2 describes the EU chemicals industry and its various markets, with a focus

on the sectors most likely to be affected by the GHS; this includes a discussion on the importance of the international trade in chemicals to the EU industry;

• Section 3 presents a review of the current EU classification and labelling system and related downstream user legislation;

• Section 4 sets out the key requirements of the GHS and compares these to the current system;

• Section 5 gives a brief overviews of other key national systems and their progress towards adoption of the GHS;

• Section 6 presents a summary of the responses to the questionnaire sent out to individual companies and industry associations;

• Section 7 provides details of the scenarios examined when assessing the costs of moving to the GHS, the key assumptions made in modelling these and the results of this modelling;

• Section 8 discusses the benefits that are anticipated from the introduction of the GHS;

• Section 9 presents the model developed to examine the trade impacts associated with the adoption of the GHS and the results of this analysis; it also examines the other benefits that are likely to arise as a result of the adoption of the GHS; and

• Section 10 provides a summary of the key conclusions of the study.


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2. MARKETS AND USES 2.1 Introduction

Chemicals, whether produced, exported, imported or formulated, are used in virtually every facet of life by around 454 million consumers and over 4 million professional users in the EU-25 Member States (Eurostat and Cefic, 2005). The implications of the GHS and the consequent move away from the current EU system could therefore be significant for a large range of applications and industries. Due to the difficulties in estimating such impacts across all EU industry sectors, the scope of this study is focused on those sectors that are likely to be most severely affected by a move to the GHS. More specifically, this relates to those sectors where the potential for re-classification of substances and mixtures is the greatest and the reaction of consumers to possible changes in labelling are of concern. The remainder of this Section summarises the importance of the chemicals sector and its many sub-sectors to the EU economy, taking into account those characteristics that may help in understanding how the various industries may be affected by the GHS. Trade data is also discussed here, as these provide a crucial link between this study and Work Package 2.

2.2 The EU Chemicals Industry 2.2.1 Number and Size of Companies

Key statistics for the EU chemicals industry (as of 2005) are shown below in Table 2.1. In general, a relatively small number of multinationals account for a large share of the EU production of chemicals (the ten largest chemical companies based in the EU account for 44% of global sales, with 16 EU companies in the world’s 30 largest companies accounting for 54% of global sales) (Cefic, 2005). These large EU companies are based in an equally select number of countries. In total, the EU accounts for approximately 33% of the global chemicals production in 2005 (Cefic, 2005).

Table 2.1: Production of EU Chemicals Industry by Sector (2005)

Sector Sub-sector Constituents % of Production (2005)

Base Chemicals -Petrochemicals and derivatives (plastics, synthetic rubber, man-made fibres) -Basic organics (industrial gases, fertilisers)

38%

Speciality and Fine Chemicals

-Dyes, pigments, oleochemicals, paints and inks -Pharmaceutical and chemical intermediates 27%

Consumer Chemicals

-Soaps and detergents -Perfumes and cosmetics 10%

Pharmaceuticals -Pharmaceutical preparations 25% Total Value of EU Production 2005 €586 billion Total Value of Global Production 2005 €1,776 billion Source: Cefic (2005)


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The chemicals industry in general is characterised by a large number of small and medium sized enterprises (SMEs), which, due to their size, may experience greater adverse impacts from GHS compared to larger companies. This is associated with the absence of economies of scale and global production facilities and their not being able to share classification and labelling resources across facilities both within and outside the EU. The total number of companies operating in the EU according to Cefic (2005) is around 27,000 (excluding pharmaceuticals and agrochemicals), with 95% of these classified as SMEs (where this is defined as employing less than 250 people). A full breakdown of the industry by number of employees and category is provided in Table 2.2.

Table 2.2: Number of EU Chemical Enterprises by Number of Employees Category No. of Employees % of Enterprises No. of Enterprises Micro 1-9 59% 15,200 Small 10-19 13% Small 20-49 12% 6,400

Medium 50-99 6% Medium 100-249 5% Medium 250-499 3%

3,600

Large 500-999 1% Large 1,000+ 1% 600

Total 100% 27,000 Source: Machin (2005)

Figure 2.1: Percentage of EU Sales by Country

24.3 16

12

8.9

8.1

7.2

6.2

5.8

2.45 1.8

1.24

1.08 0.98

0.75 0.69 0.66 0.62

1.27

0 5 10 15 20 25 30 Germany

France Italy

United Kingdom Belgium

Spain Netherlands

Ireland Sweden Poland

Denmark Finland Austria

Portugal Czech

Slovak

Hungary Others


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Collectively, Germany, France, Italy and the UK account for around 61% of EU production (Cefic, 2005), as indicated in Figure 2.1 above. With the addition of Belgium, Spain, the Netherlands and Ireland, this concentration increases to around 88% of production. The new Member States are relatively small producers and consume mainly imports of chemicals from other European countries; this highlights the importance of intra-EU imports and exports. Italy, the UK and France have the largest number of SME companies, in contrast to Germany, which has the highest number of the larger chemical companies in the EU.

2.2.2 The Importance of International Trade

Figures developed by Cefic (2005) also indicate that, in terms of EU sales by destination, domestic markets represents 26% of sales and intra-EU trade represents 49% of sales. Extra-EU trade accounts for the remaining 25% of sales. The EU is also the largest market for chemicals (€586 billion), ahead of Asia (Japan, €186 billion; China and the rest of Asia, €320 billion) and the United States (€415 billion). Other significant markets include Latin America and Eastern European countries given their proximity to the EU

(Cefic, 2004). Due to the EU industry’s success and the globalised nature of the chemicals sector, the EU is the only major economic region with a positive trade balance, as illustrated in Figure 2.2, and Table 2.3 overleaf. As can be seen from these data, the most important trading partners are the United States and Eastern and Central Europe. Figure 2.2: Trade Balance in Chemicals by Country/Region (€ billion) (Source: Cefic (2005))

0

10

20

30

40

50

60

70

EU Asia North America Rest of Europe Latin America Africa Oceania

% Imports % Exports


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Table 2.3: Breakdown of EU Trade Surplus by Region Country/Region Percentage of Surplus North America 37% Central and Eastern Europe 25% Asia 16% Africa 11% Other 6% Oceania 5% Total EU Trade Surplus €35 billion Source: Cefic (2005)

These trade surplus data mask, to a degree, the number of countries involved in trade with the EU chemicals industry. Table 2.4 provides a more detailed breakdown of the top 39 trading partners with the EU for the SITC category 5 chemicals and related products. This Table highlights the globalised nature of the EU’s export activities, and the diversity of countries with which such trade takes place (furthermore the Table is not comprehensive as exports will also take place to countries not included but accounting for very small percentage shares). This is important in the context of this study as the GHS should help reduce any non-tariff barriers related to differences in classification and labelling requirements affecting chemical exports. Within this context, the level of imports is equally important as the GHS may also affect the willingness of those outside the EU to supply chemicals to the EU market and the quality of C&L data received by those importing both substances and mixtures. Table 2.5 provides a breakdown by share of imports from the main originating countries.


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Table 2.4: Share of EU Exports by Main Trading Partners

Partner Total Value of

Trade (€ billion)

% of EU Exports Cumulative % of EU Exports

United States 77.76 35.6% 35.6% Switzerland 34.46 15.8% 51.4% Japan 14.46 6.6% 58.0% Russian Federation 9.43 4.3% 62.3% China (excl. Hong Kong) 8.42 3.9% 66.2% Turkey 7.26 3.3% 69.5% Singapore 6.71 3.1% 72.6% Norway 5.4 2.5% 75.1% Canada 5.21 2.4% 77.4% Australia 4.59 2.1% 79.5% Brazil 3.99 1.8% 81.4% Korea (Republic of) (South) 3.89 1.8% 83.2% Israel 3.66 1.7% 84.8% Saudi Arabia 3.46 1.6% 86.4% India 3.25 1.5% 87.9% Taiwan 2.58 1.2% 89.1% South Africa 2.42 1.1% 90.2% Hong Kong 2.26 1.0% 91.2% Romania 2.25 1.0% 92.3% Ukraine 2.13 1.0% 93.2% United Arab Emirates 1.53 0.7% 93.9% Algeria 1.47 0.7% 94.6% Thailand 1.39 0.6% 95.2% Iran (Islamic Republic of) 1.21 0.6% 95.8% Morocco 1.21 0.6% 96.4% Malaysia 1.21 0.6% 96.9% Indonesia 1.16 0.5% 97.4% Argentina 1.03 0.5% 97.9% Tunisia 1.00 0.5% 98.4% Chile 0.78 0.4% 98.7% Nigeria 0.56 0.3% 99.0% New Zealand 0.56 0.3% 99.2% Kazakhstan 0.48 0.2% 99.5% Libyan (Arab Jamahiriya) 0.47 0.2% 99.7% Syrian Arab Republic 0.38 0.2% 99.8% Cộte d’lvoire 0.24 0.1% 100.0% Iraq 0.09 0.0% 100.0% Total 218.36 100% 100% Source: Eurostat (2004)


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Table 2.5: Share of EU Imports by Main Trading Partners

Partner Total Value of

Trade (€ billion)

% of EU Imports Cumulative % of EU Imports

United States 66.24 40.2% 40.2% Switzerland 41.28 25.0% 65.3% Japan 13.66 8.3% 73.6% Singapore 8.99 5.5% 79.0% Russian Federation 6.25 3.8% 82.8% Israel 4.18 2.5% 85.4% India 3.35 2.0% 87.4% Saudi Arabia 2.96 1.8% 89.2% Canada 2.90 1.8% 91.0% Korea 2.32 1.4% 92.4% Turkey 1.76 1.1% 93.5% Brazil 1.64 1.0% 94.5% Taiwan 1.45 0.9% 95.3% Mexico 1.38 0.8% 96.2% Australia 1.23 0.7% 96.9% Ukraine 1.15 0.7% 97.6% South Africa 0.98 0.6% 98.2% Morocco 0.70 0.4% 98.6% Chile 0.65 0.4% 99.0% Libya 0.44 0.3% 99.3% Argentina 0.42 0.3% 99.6% Hong Kong 0.35 0.2% 99.8% New Zealand 0.31 0.2% 100.0% Peru 0.07 0.0% 100.0% Total 164.61 100% 100% Source: Eurostat (2004)

2.2.3 International Trade by Sector of the Industry

Figure 2.3 adds to the above data by illustrating the importance of different sectors within the EU chemicals industry to the trade surplus. As can be seen from Figure 2.3, most of the sectors within the EU contribute significantly; the sector with the lowest contribution is the detergents sector, which only contributes 6% to the trade surplus. As discussed below, this sector is characterised by a high level of domestic production and consumption, in contrast to the basic chemicals sectors and the cosmetics sectors which together account for almost 50% of the EU trade balance. Interestingly, the paints, inks, dyes and pigments sector also accounts for a significant percentage of the trade surplus.


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Figure 2.3: Breakdown of EU Trade Surplus by Sector (Source: Cefic (2005))

Breakdown of Trade Surplus by Sector %

24%

18%

15%

13%

6%

24%

Perfumes & CosmeticsInorganics, Organics, Fertilisers, etcPlasticsPaints, Inks, Dyes & PigmentsSoaps & DetergentsOther Chemicals

2.3 Base and Fine Chemicals 2.3.1 Base Chemicals

Base chemicals are those substances and mixtures produced from organic or inorganic compounds and which form the key building blocks for many different downstream chemical and plastics products. Examples include petrochemicals, synthetic rubber and industrial gases. Due to the often large-scale production and supply required by downstream users for the more commonly used substances and mixtures, companies in this sector often benefit extensively from economies of scale, giving the market a relatively high concentration of a few multinationals producing a large proportion of output in the petrochemicals, industrial gases and plastics sectors. However, where manufacture moves away from bulk substances towards mixtures, particularly those that can be described as ‘custom’ mixtures, many more SMEs are prevalent. A profile of this sector according to information provided by Cefic (2005) is given below in Table 2.6.


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Table 2.6: EU-25 Extra and Intra Trade in Selected Chemical Groups (2003)

Sector Value of Extra EU-25 Trade (€ billion)

Value of Intra EU-25 Trade (€ billion)

Imports 5.55 10.60 Inorganic Chemicals Exports 5.48 10.22 Imports 26.62 50.03 Organic Chemicals Exports 37.66 50.73

Source: Eurostat (2005) 2.3.2 Fine Chemicals

Speciality and fine chemicals refers collectively to dyes, pigments, auxiliaries for industry, oleochemicals, crop protection, pharmaceutical intermediates, chemical intermediates, paints and inks. Paints and inks have already been discussed above, while crop protection and pharmaceutical products are outside the scope of this study. For simplicity, therefore, we focus here on the remaining sub-sectors. The remaining sub-sectors account for around 16% of the EU chemicals industry in terms of value and around 20% by the number of enterprises. The specialist and fine chemicals aspect of this sector refers to the way preparations and substances are often custom produced exclusively for a specific use in a production process. The products are therefore not generally sold to consumers or professional users; instead, they enter the production process towards the start or middle of the production supply chain for a finished product. The textiles industry is an example of such an industry. Details of the number of enterprises operating in the textile sector and making chemical auxiliaries more generally are given in Table 2.7 using information provided by the European Association for Dyes and Pigment Producers (ETAD, 2005) and information provided by Cefic (2005). Table 2.7: Speciality & Textile Chemicals Sector Info.

Sector Number of Enterprises % SMEs Sales Value

(€ Billion)

No. of Substances Produced

No. of Mixtures Produced

Dyes & Pigments 40 37% 13.47 4,000 15,000-20,000

Auxiliaries for Industry 6,600 97% 61.55 - - Source: ETAD (2005), Cefic (2005)

Significant trade in the speciality or fine chemicals sector occurs due to the global spread of downstream users and demand worldwide for the expertise of the EU chemicals industry. For example, exports outside of the EU can therefore be as high as 70% according to ETAD (2005), particularly to large textile and manufacturing regions, such as Russia, Eastern Europe, Asia and North America.


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2.4 Consumer Products 2.4.1 Soaps, Detergents and Cleaning Products

The detergents and cleaning products industry in Europe is represented by AISE, which has member companies in the EU-25 and in Norway, Switzerland and Iceland (European Economic Area (EEA) countries)1. The GHS may be of particular significance to this sector of the chemicals industry due to the large number of mixtures that it produces and the proximity of the products manufactured to the final consumer, and the consequent responsiveness of consumers to any changes in labelling or hazard classification. This sector can be divided into two distinct sub-sectors, household products and industrial and institutional (I&I) products; a brief summary of each market is given below in Table 2.8 for the EEA. Table 2.8: Value of European Household and Industrial Cleaning Products Market by Sub-Sector Household Products Percentage Soaps 3% Fabric Washing 51% Dish Cleaning 14% Hard Surface Cleaners 15% Maintenance Products 13% Bleaches 4% Total Value €23 billion Industrial & Institutional Products Laundry 10% Food and Beverage 18% Kitchen and Catering 23% Building Care 15% Technical Cleaning 26% Other 8% Total Value €6 billion Source: AISE (2004)

In general, the market for cleaning products (including soaps) is dominated by a few multinational producers of multiple own-brands, competing against each other and with non-branded products sold by larger retailers and cooperatives. Competition within the sector has grown rapidly in the last decade or so and has remained intense between the non-branded and branded products in terms of performance, fragrance, price, and most recently in the application method of each product, due to innovations made in liquids, mousses and cleaning wipes. SMEs are located in niche markets where price competition and returns are much more favourable. Consequently, SMEs are less frequently involved in the production of some product groups (household), compared to other more specialist markets, such as I&I products (see Table 2.9 below). Despite this initially simple structure, recent trends in

1 EEA refers to the European Economic Area which combines the EU-25 countries, plus other Western

European countries outside the EU.


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product innovation have led many larger producers to enter what were previously the more specialist sectors; this is also due to the increased buying power of many retailers and the increased competition generated by these retailers’ own brands. This has even involved larger manufacturers integrating products and marketing with that of other industries (e.g. product ties with ceramics, electrical appliance and clothing manufacturers/retailers).

Table 2.9: Percentage of Enterprises which are SMEs by Selected Product Groups Product Group % SMEs* Soaps 22 Maintenance Products 35 Fabric Washing 22 Bleach Products 11 Dish Cleaning 25 Industrial & Institutional Products 56 Cleaners 35 Total Number of Enterprises in the EEA >900 Note: *Based on AISE national figures. Officially, overall figures suggests approximately 60% of companies are SMEs. Source: AISE (2004)

Overall, these changes in the market are driven by the desire of companies to maintain profitability in the face of retailer buying power and tough on-the-shelf competition. Innovation therefore plays an important role at the formulation level, right through to the packaging of final goods, with the aim of satisfying consumers while keeping pace with technological developments in cleaning appliances and processes.

In terms of international trade, turnover for the detergents and cleaning sector is estimated to have reached €30.8 billion in 2004, showing a growth rate of around 3.7% on the previous year (AISE, 2005). Due to the transport and packaging costs of producing in one country and supplying another national market where consumer tastes and branding may be different, extra-EU trade is minimal. However, the potential international trade impacts of the GHS cannot be ignored, as many companies may formulate mixtures and brands for sale globally.

2.4.2 Cosmetics and Perfumes

Although under the present system cosmetic and perfumes are covered by the EU Cosmetics Directive (76/768/EEC), under GHS this may change as some ‘borderline’ products may require new labelling and/or classification (particularly in the case of skin sensitisers). For this reason, an overview of the cosmetics industry is provided below2. It is important to emphasise though that fragrances and other related ingredients used in sectors apart from cosmetics are covered by the existing C&L systems within the EU. The cosmetics industry (covering manufacture, distribution and sale) is a global industry within which the EU is a major player. The EU market for cosmetics is larger than the US market and twice the size of the Japanese market. Although data are not comprehensive, the value of the output of the EU cosmetics industry is estimated at

2 Excerpt taken from RPA Cosmetics Report (2004)


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around €35 billion in 2001. This is equivalent to 0.4% of total EU GDP and 2-3% of manufacturing value-added. The industry employs over 150,000 people directly. This is equivalent to 0.6% of total manufacturing employment and nearly 9% of total chemical industry employment. A further 350,000 jobs in retail, distribution and transport depend upon the cosmetics industry. The cosmetics sector is characterised by global brands, with most multinational companies selling a high proportion of their products across all key markets. Most cosmetics products have lifetimes below five years, with up to 40% of products being reformulated or replaced each year. The exception is fine fragrances, some of which have remained on the market for 100 years. Although the major markets (the EU, USA, Japan and Canada) account for a large proportion of total world cosmetics sales, third countries represent significant and growing markets. Table 2.10 sets out exports of cosmetics from the EU to major markets and third countries in 2001.

Table 2.10: Exports of Cosmetics from the EU in 2001

Region Value (€ billion) Percentage of EU Exports

USA 1.43 20% Other European Countries1 (excluding EU 25) 1.24 17%

Middle East2 0.91 13% Asia (excluding China and Japan) 0.94 13% Eastern Europe3 0.88 12% Japan 0.44 6% Africa 0.34 5% South and Latin America (excluding Mercosur Countries) 0.33 5%

Australasia 0.23 3% Mercosur4 0.23 3% Canada 0.20 3% China 0.03 >1% Total5 7.16 100% 1 Other European countries include: Iceland, Norway, Liechtenstein, Switzerland, Faroe Isles, Andorra,

Gibraltar, Turkey, Croatia, Bosnia and Herzegovina, Serbia and Montenegro. 2 Middle East countries include: Lebanon, Syria, Iraq, Iran, Israel, Gaza & Jericho, Jordan, Saudi Arabia,

Kuwait, Bahrain, Qatar, United Arab Emirates, Oman and Yemen. 3 Eastern European countries include: Romania, Bulgaria, Albania, Ukraine, Belarus, Moldova, Russia,

Georgia, Armenia, Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan and Kyrghistan. 4 Mercosur countries include Brazil, Argentina, Paraguay, Uruguay and Chile. 5 Exports to Accession Countries have not been included; these account for approximately €895 million. Source: Eurostat (2003)

The key market regions for European cosmetics outside Europe and the other major markets include the Middle East, Asia and Eastern Europe. However, it is not only the current size of markets that is significant for cosmetics trade, equally important is the potential for future growth. Cosmetic products are subject to regulatory controls in all markets, in order to ensure the safety of products and avoid adverse impacts on the health of users. In the EU, the


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regulatory framework is provided by the Cosmetics Directive and its subsequent amendments. However, regulatory frameworks between the different markets vary significantly and the regulations for the major markets are far from being harmonised.

2.5 Non-consumer Products 2.5.1 Paints, Inks and Coatings

The European paints, printing ink and artists’ colours industry produced approximately 6.5 million tonnes of material in 2005 (EU-15 plus Switzerland and Norway), valued at €18.7 billion (CEPE, 2003). The numbers of formulations that are expected to exist across this sector number in the hundreds of thousands, with German producers alone believed to manufacture more than 500,000 formulations for colour paints and varnishes (based on an estimated 7,000 substances). Similarly, thousands of formulations exist within the food coatings sector and it can be expected that there will be large numbers of formulations in other sub-sectors.

Consistent with the detergents and cleaning products industry, production is dominated by a relatively small group of large-scale manufacturers who have undergone significant consolidation in recent times. In the decorative paint sector, competition is tough between multiple brand producers and retailers’ own formulations. In the more specialised sub-sectors, such as the general industry, coil, can and marine coatings, the multinationals tend to compete against a larger number of SME formulators and in-house coatings producers. Importantly, vertical ties often link these SMEs and independent formulators to the multinationals, as most of the basic bulk chemical inputs they require are supplied by these larger enterprises. There are also strong ties between the coatings manufacturers and the downstream industries. Coatings sales by product group in terms of value and quantity are given below in Table 2.11. As can be seen from the Table, this is a relatively mature sector characterised by stable growth. However, strict downstream market requirements and continually changing consumer tastes ensure high levels of product development and innovation, with this driving the on-going development of new formulations. The products manufactured by companies within this sector can be highly complex, comprised of a large number of substances and many ‘layers’ of mixtures (i.e. mixtures of mixtures). For example, in the can coatings sector, an individual coating may be composed of a large number of substances and mixtures, developed from a list of over 900 substances (CEPE, 2000).


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Table 2.11: Percentage of Sales of Paint by Sector 2002-2003 % of Sales by Volume % of Sales by Value Sub-Sector 2002 2003 2002 2003

Decorative 63% 63% 50% 50% General Industry 11% 10% 12% 12% Vehicle Refinishing 2% 2% 7% 7% Protective 3% 3% 4% 4% Auto OEM* 5% 5% 7% 7% Marine 2% 2% 3% 3% Wood 7% 7% 7% 7% Powder 4% 5% 6% 6% Coil 2% 2% 3% 3% Can 1% 1% 1% 1% Total 5.5 m tonnes 5.4 m tonnes €15.2 billion €15.0 billion Source: CEPE (2005) Note: *OEM: Original Equipment Manufacturer

Due to the diversity of colour shades and final application specification, paint manufacturers place millions of decorative paint products on the European market. Each product is usually sold in lithographed plastic or metal containers of varying sizes. Hundreds of thousands of industrial coatings are also sold in lithographed containers, but the largest part is sold in bigger containers or drums with paper-type labelling affixed on them. Consequently, labelling implications may vary considerably from those of other sectors where a stick-on label may be the preferred option when implementing the GHS. Printing ink sales in terms of value and tonnage are given below in Table 2.12 by sub-sector. Packaging inks, newspaper inks, heat-set inks and publication gravure are generally manufactured by large multinational companies. The four largest multinational companies represent 85 to 90% of these sectors’ turnover. In comparison, sheet-fed offset inks and screen inks are usually manufactured by SMEs producing and packaging in much smaller quantities, making the market far less concentrated. Table 2.12: Percentage of Sales of Inks and Artist Supplies by Sector 2002-2003 Sub-Sector % of Volume % of Value 2002 2003 2002 2003 Packaging Inks 25% 26% 29% 33% Heat Set Inks 22% 23% 17% 18% Sheet Fed Inks 7% 6% 17% 11% News Ink (cold) 12% 12% 9% 8% Print Varnish 8% 9% 8% 9% Publication Gravure 17% 17% 9% 10% Energy Cured 2% 1% 4% 5% Screen Ink 1% 1% 2% 2% Auxiliaries 6% 5% 5% 4% Total 0.96 m tonnes 1.0 m tonnes €3.6 billion €3.2 billion Source: CEPE (2005)

The artists’ colours market represents a relatively small sector in this industry grouping, offering tens of thousands of products to schools, professional artists or amateurs. The specialist nature of this business and the low volumes manufactured, lends itself to a


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globalised market in which EU producers play an important role through this sector’s reliance on exports. Packaging tends to be small or very small with individual labelling for each product.

2.5.2 Adhesives and Sealants

Adhesives and sealants are composed of complex mixtures of substances, which can in some cases involve the use of solvents, making them particularly susceptible to changes in classification and labelling. As for the coatings sector, there are several thousands of formulations in use across the EU industry, and it is likely that these will be based on several hundreds (if not more) substances. Production data for adhesives and sealants in selected EU Member States is given below in Table 2.13. Table 2.13: Overview of the Adhesives Sector in Selected Member States Sub-sector Austria Belgium Germany Italy Natural Polymers 2% 2% 0.5% - Dispersions, Emulsions 27% 28% 55% - Hot melt Adhesives 15% 9% 15% - Solvent Based Adhesives 19% 13% - Reactive Systems 19% 36% 5.5% - Water Soluble Polymers 11% 6% 8% - Other Adhesives 7% 6% 16% - Total Value (€ billion) 0.05 0.06 1.23 0.01 Total Production (tonnes) 18,300 - 660,000 - Sources: DETIC, VOK Osterreich (FEICA) (2003)? , Industrieverband Klebstoffe e.V. (2004), Federchimica (2005)

The use of adhesives and sealants is important to many downstream sectors including DIY3, paper, construction, and transport and manufacturing markets. In contrast to the above-mentioned sectors, international trade is much more significant as specialist formulations are often sold globally, whether this is for a specific type of plastic in high technology manufacturing or as special sealants in the consumer DIY market. Changes to classification and labelling could therefore make the marketing of such products in different countries either easier or more difficult depending on the responses of professional users and consumers to changes in classification and/or labelling information. Trade data on the import and export of adhesives for the EU-15 are provided below in Table 2.14 for 2003.

3 Do-It-Yourself (DIY) market refers to home decoration, repair and design markets.


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Table 2.14: EU-15 Trade in Adhesives and Glues (2003) NACE Code Product Group Imports

(€ million) Exports

(€ million) 24621013 Casein glues 0.52 8.90

24621015 Caseinates and other casein derivatives (excluding casein glues) 23.47 69.54

24621020 Albumins; albuminates and other derivatives 11.50 15.17

24621030 Gelatin and its derivatives; isinglass (excluding casein glues and bone glues) 63.71 153.95

24621050 Bone glues; other glues of animal origin 9.08 8.06

24621060 Glues based on starches; dextrins or other modified starches 0.43 15.90

24621070 Products as glues or adhesives p.r.s. 43.12 101.40

24621080 Adhesives based on rubber or plastic (incl. artificial resins 96.90 251.30

24621090 Prepared glues and other prepared adhesives 49.77 126.11 Source: Eurostat (2005)

2.6 Distributors of Substances/Mixtures

The EU chemicals distribution and trading sector (importers and exporters of substances to and from the EU-25 Member States) employs an estimated 20,000 people and has annual sales of €27 billion associated with an estimated 3 million tonnes of chemical products (based on data provided by the UK BCDTA). This sector includes a range of larger companies involved in pan-European distribution activities, as well as more than 1,200 smaller distributors (i.e. mainly small and medium sized enterprises) in Member States. Many of these companies are engaged in importing chemicals from outside the EU; it is estimated that 10 to 15% of annual sales relates to imports. Some of this import/export activity will include re-packaging and re-labelling both substances and preparations to meet the requirements of the EU or other national markets. Key statistics for this sector provided by the EU traders and distributors association, the FECC, are shown below.

Table 2.15: Key Statistics for the Trade & Distribution Sector (EU-25)* Parameter Value Total Number of Enterprises 1,190 Total Number of Traders 340 Total Number of Distributors 850 Sector Turnover (€ billion) 27.4 Number of Employees (FTE) 34,400 Note:*Excludes Austria Source: FECC (2005)


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3. THE CURRENT EU SYSTEM 3.1 Introduction

The GHS is the culmination of more than a decade of work at national and international levels to develop a single, globally harmonised system to address classification of chemicals, their labelling and their safety data sheets. Since harmonisation already exists for physical hazards and acute toxicity in the transport sector, based on the work of the United Nations Economic and Social Council’s Committee on the Transport of Dangerous Goods (UNCEDTG), this concept is not completely new. In order to evaluate the potential costs and benefits of implementing the GHS, an understanding of the current system operating in the EU is required. This Section provides an overview of the key aspects of the current system.

3.2 The EU System for Classification & Labelling 3.2.1 Introduction

The current EU classification and labelling (C&L) system is implemented primarily through three Directives: • the Dangerous Substances Directive (67/548/EEC); • the Dangerous Preparations Directive (1999/45/EC); and • the Safety Data Sheet Directive (91/55/EC, as amended by 2001/58/EC). The objective of the current EU system is to identify:

• physico-chemical hazards (explosive, oxidising and flammable properties); • all toxicological properties of substances and preparations, which may constitute a

risk during normal handling or use (effects on the health); and • ecotoxicological hazards (acute or long-term toxicity to aquatic or non-aquatic

ecosystems). 3.2.2 Classification

Dangerous Substances Directive The Dangerous Substances Directive (67/548/EEC) was introduced to approximate national laws relating to dangerous substances, so as to ensure the protection of public health, in particular the health of workers handling dangerous substances. The Directive introduced common provisions on the (Europa, 2006): • classification of dangerous substances, placing a substance into one or several

defined classes of danger so as to characterise the type and severity of the adverse effects that the substance can cause;


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• packaging of dangerous substances, since adequate packaging protects from the known danger(s) of a substance; and

• labelling of dangerous substances, since the label on the packaging informs about the nature of the danger(s) of the substance inside and about the safety measures to apply during handling and use.

It has been amended several times since 1967. For example, the 6th amendment of the Directive, adopted in 1979, introduced classification and labelling with the aim of protecting the environment. It also introduced the notification system for “new” substances and, consequently, required the establishment of the list of “existing” substances. EINECS, the European Inventory of Existing Commercial Chemical Substances, lists all substances that were reported to be on the market on or before 18 September 1981. The substances placed on the market for the first time after this target date are “new”. Article 6 of the 7th amendment of 1992 places a duty on manufacturers, distributors and importers of dangerous substances which appear in EINECS to carry out an investigation to make themselves aware of the relevant and accessible data which exist concerning the properties of such substances. On the basis of this information, they are to package and label the substances. In other words, it placed a duty on manufacturers to self-classify their substances for dangerous properties. The 7th amendment also laid down the principles underlying the risk assessment for “new” substances as part of their notification. It further introduced the “sole representative” in the notification system, and added the Safety Data Sheet as a hazard communication facility for the professional user. Currently there are fifteen classes of danger in Directive 67/548/EEC, such as “explosive”, “very toxic”, “carcinogenic” or “dangerous for the environment”. The Directive also includes a list of substances classified as dangerous in Annex I, with these being those substances that have gone through a formal EU classification procedure. Currently there are over 3,300 (including 29th Adaptation to Technical Progress (ATP)) substances on Annex 1 (ECB, 2006). Substances that are known, probable or possible carcinogens, mutagens or reprotoxins (CMRs) are classified into categories 1, 2 and 3 respectively. CMR substances classified in categories 1 and 2 are subject to Directive 76/769/EEC, which imposes restrictions on the marketing and use of dangerous substances and preparations with the objective of improving human health. Under a recent amendment to this Directive (2005/90/EC) such substances and preparations containing ingredients classified in categories 1 and 2 in Annex 1 are prohibited from being placed on the market; this amendment is also carried forward under the REACH regulations, which will oversee restrictions on such substances in the future. The Annex 1 list is regularly updated through Adaptations to Technical Progress (ATP). The latest 29th ATP (Directive 2006/8/EC) was introduced earlier this year with ATP 30-31 currently under development as new information on existing substances becomes available. Importantly, this helps identify a baseline level of C&L that occurs within each sector in the EU regardless of any changes made to testing (REACH) and/or classification criteria (GHS).


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For classification and labelling purposes, the Directive also sets out the agreed danger symbols (such as a skull with crossed bones underneath) in Annex II, standard phrases on the nature of special risks from substances (R-phrases) in Annex III and the wording of safety precaution phrases (S-phrases) relating to the handling and use of dangerous substances in Annex IV. Annex V contains testing methods to determine the dangerous properties of substances, while Annex VI provides detailed criteria on the proper choice of the class of danger and on how to assign the danger symbols, R- and S-phrases to a tested substance. Dangerous Preparations Directive The general principles of the classification and labelling of preparations are laid down in Directive 67/548/EEC on the classification, packaging and labelling of dangerous substances. Preparations are classed as dangerous and subject to the provisions of Directive 1999/45/EC if they meet the following criteria: • contains at least one dangerous substance within the meanings laid out in the

Directive; • is considered to be dangerous, after evaluation, because of its physico-chemical

properties, or the dangers that it poses to health or to the environment; or • is not considered dangerous within the strict meaning of the Directive but may

nevertheless present a specific danger. The Directive also lays down provisions regarding the packaging and labelling of preparations that fall within its scope.

3.2.3 Labelling

Once a hazardous property is identified through classification, the substance or mixture must be labelled to indicate the hazards in order to protect the producer, the user and the environment. The most severe hazards are highlighted by symbols. All hazards are specified in risk phrases, with safety phrases giving advice on necessary precautions. When preparations/mixtures of substances that are dangerous are manufactured, concentration limits according to the Dangerous Preparations Directive 1999/45/EC have to be applied to determine the appropriate classification and labelling. In general, a label is to contain the following information: • for preparations, the trade name or designation; • for substances, the name of the substance; • for preparations, the names of the substances present in the preparation; • the name, full address and telephone number of the person responsible for placing the

substance or preparation on the market, whether manufacturer, importer or distributor;

• the symbol(s) and indication(s) of danger; • phrases indicating particular hazards (R-phrases); • phrases indicating safety advice (S-phrases);


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• for substances, the EC number and for those appearing in Annex I, the word ‘EC label’; and

• for preparations offered or sold to the general public, the nominal quantity of the contents unless specified elsewhere on the package.

Specific rules are set out in Annex VI to Directive 67/548/EEC on the EU C&L R-phrases that, together with S-phrases, must be presented on labels according to. The wording of any labels must also comply with these rules. In the case of substances and preparations, such as compressed gases and metals (e.g. alloys) listed in Annex VI to 67/548/EEC, certain labelling derogations apply and will be continued under the GHS. This has important implications for the GHS as, following re-classification, a change in labelling may not be required or may be mandatory only after an extended transition period, reducing the potential for stock loss and re-labelling where the GHS and REACH do not run concurrently.

3.2.4 Safety Data Sheets (SDS)

In addition to the requirements of the existing C&L system, REACH will incorporate some important measures currently laid out in the Safety Data Sheet Directive (91/55/EC, as amended by 2001/58/EC). Under this Directive, producers and/or importers of a substance that is to be placed on the EU market must provide a Safety Data Sheet (SDS) on that substance, including S- and R-phrases. Classified substances and preparations, and certain other preparations (not classified but containing at least one substance classified above a specific concentration limit), must carry a SDS based on the best available information that the manufacturer or importer has at his/her disposal, if supplied to professional users. A SDS is mandatory for chemical substances and preparations intended for professional use if one or more of the following conditions are met: • it is classified as dangerous according to the Dangerous Substances Directive

67/548/EEC or the Dangerous Preparations Directive 1999/45/EC; • it is a preparation containing ≥1% by weight for non-gaseous preparations and ≥0.2%

by volume for gaseous preparation of a substance posing health or environmental hazards; and/or

• it contains a substance for which there are Community workplace exposure limits. The SDS should help the user carry out his risk assessment and identify appropriate measures in order to avoid adverse effects on human health at the workplace and the environment. The SDS also contains information on emissions to the external environment and on waste handling to reduce such emissions. It must be supplied at the latest on the first delivery of a hazardous substance or preparation. When there are significant changes to the information contained in a SDS, an updated version must be submitted to anyone who has received a product during the previous 12 months.


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In addition, an SDS includes information of relevance for number of other regulations: • Dangerous Goods Regulation (ADR, IMDG, IATA); • Young People at Work Directive (94/33/EC); • Chemical Agents Directive (98/24/EC); and • Dangerous Wastes Regulation (EU 2000/532).

During the past decades, a number of IT tools have been developed to facilitate the hazard classification calculation and systematise SDS preparation. The existing IT tools range from one country coverage based on EU regulations to multi-lingual systems covering different regional regulatory systems (EU, US OSHA, etc). IT tools provide a high degree of standardisation and consistency, but the quality depends on the logic behind the software as well as the quality of the regulatory data and the phrase catalogue applied including its proper translation. Although SDS IT tools may save a lot of time when elaborating the basis of a standard SDS, an expert is always required to check, revise and specify the information.

3.2.5 New EU Chemicals Strategy (REACH)

The proposed new EU chemicals strategy will introduce a process of Registration, Evaluation, Authorisation, and Restriction of Chemicals (REACH), under which hazard and safety data must be provided for all existing and new substances, providing a basis for classification and labelling. REACH essentially includes requirements for the testing of substances from which a substance and preparation is classified based on the data obtained. However, REACH does not provide classification criteria, but relies on Directives 67/548/EEC and 99/45/EEC for this purpose. The implication for GHS is that, because of potential differences in classification categories (see also Section 4), a substance classified under the current EU system combined with REACH may need re-classification under GHS. REACH does not alter the scope, provision and or detail of SDS and labelling set out in Directives 67/548/EEC, 99/45/EEC, 91/55/EC and 98/24/EEC. Instead, they are incorporated in the REACH Regulation or the REACH Regulation refers to them. Any changes in this regard are therefore attributable to GHS. Further discussion on the interplay between REACH and the GHS is given in Section 7, as REACH acts as an important factor in calculating the costs associated with GHS implementation.

3.3 Other Relevant EU Regulations and Directives 3.3.1 Introduction

The impacts of GHS implementation are not exclusive to the regulations it replaces or changes, described in the previous section. The classifications derived under the C&L regulations underpin a range of other Directives. Any changes to classification under GHS could, therefore, have impacts on the way these Directives are applied to substances


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and preparations, with potentially significant impacts for business. Some of the most significant of these other Directives are outlined below. The intention of this Section is to identify those downstream regulations and legislation that may be affected by the GHS. It is not possible at this time to carry out a full impact assessment covering changes in such legislation, as the relevant Commission services have not yet decided how they will adapt existing legislation when the GHS is adopted, given that the transition period and the options within the GHS to be adopted are still undecided.

3.3.2 Substances Dangerous to Health and the Environment

In addition to the Directives mentioned above, Safety Datasheets Directive (2001/58/EC) and regulations that are planned to be replaced by REACH) other regulations of significance in relation to the marketing of substances dangerous to health and the environment include: • Pesticides Directive (91/414/EEC) and relevant amendments concerning the placing

of plant protection products on the market. All such products will be covered by the GHS;

• Biocidal Products Directive (98/8/EC), concerning the placing on the market of

biocide products, establishes a positive list of substances which may be used in biocidal products. Substances classified under Directive 67/548/EEC as CMR category 1 and 2, sensitising or bioaccumulative and not readily degradable cannot be used in low-risk biocidal products. Any changes to classifications as a result of GHS could therefore affect the ability to include substances on the positive list;

• Marketing and Use Directive (76/769/EEC) restricts the marketing and use of

substances and preparations classified in Annex I to Directive 67/548/EEC so as to protect professional users and consumers. This includes a requirement that carcinogenic and mutagenic substances or preparations may not be used in products sold to the general public;

• Prior Informed Consent Regulation (Rotterdam Convention; Regulation 304/2003)

concerns the export and import of dangerous chemicals to and from the EU. Under this regulation, all chemicals exported must be classified, packaged and labelled in accordance with community rules when sold outside the EU. Similarly, information gathered during classification and restrictions imposed in the EU must be indicated on the Export Notification Form to be sent to the Designated National Authority of the importing country.


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3.3.3 Worker Health and Safety

Chemical Agents Directive (98/24/EC) This Directive requires employers to control the overall exposure of workers to hazardous chemical agents in the workplace. The definition of hazardous chemical agents includes: • those meeting the criteria for classification as a dangerous substance according to the

criteria in Annex VI of Directive 67/548/EEC (whether or not the substance is classified under that Directive, other than substances which only meet the criteria for classification as dangerous for the environment); and

• those meeting the criteria for classification as a dangerous preparation under

Directive 88/379/EEC (other than those which only meet the criteria for classification as dangerous for the environment).

Carcinogens and Mutagens at Work Directive (90/394/EEC) This Directive controls the exposure of workers to carcinogens and mutagens in the workplace. The definition of carcinogens and mutagens makes reference to the criteria for classification set out in Annex VI (for substances) and Annex I (for preparations/mixtures) to Directive 67/548/EEC. Young Workers Directive (94/33/EC) Chemical agents to which young workers’ exposure is restricted are defined in relation to classifications under Directive 67/548/EEC and Directive 88/379/EEC. Pregnant and Breast Feeding Workers Directive (92/85/EEC) This Directive limits the exposure of pregnant and breast-feeding workers to certain chemical agents that may endanger the health of pregnant women and their unborn children. The Directive makes reference to substances labelled with certain R-phrases under Directive 67/548/EEC.

3.3.4 Major Industrial Accidents

Seveso II Directive (96/82/EC) The Seveso Directive is aimed at the prevention of major accidents which involve dangerous substances and mixtures, and limitation of their consequences for man and the environment. It sets rules to ensure the safety of establishments where dangerous substances and preparations/mixtures are present above defined threshold quantities. Substances and mixtures are classified according to the provisions of Directives 67/548/EEC and 1999/45/EC.


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3.3.5 Consumer Products

Eco-label (Regulation no 1980/2000 and related Decisions) Eco-labels may not be awarded to substances or preparations/mixtures classified as toxic, very toxic, dangerous to the environment or CMR in accordance with Directives 67/548/EEC or 1999/45/EC. In addition, cleaning products cannot be awarded an eco-label if they contain substances or preparations classified under specified R-phrases, including R42 and R43 (sensitisation). In addition, changes to classification under the GHS may affect national/regional eco-labelling schemes, such as the ‘Nordic Swan’. Toys Directive (88/378/EEC) The Toys Directive is a New Approach Directive and requires that toys must not contain dangerous substances or preparations within the meaning of Directives 67/548/EEC and 88/379/EEC in amounts which may harm the health of children using them. Aerosol Dispensers Directive (75/324/EEC) The Directive on aerosol dispensers derives particular labelling provisions from the classification of aerosol contents according to Annex VI to Directive 67/548/EEC. Cosmetics Directive (76/768/EEC) The Cosmetics Directive prohibits the use in cosmetic products of substances classified as CMR category 1 and 2 under Directive 67/548/EEC; category 3 CMRs may be used if they have been evaluated as safe by the Scientific Committee on Consumer Products (SCCP). Quantitative information on dangerous substances contained in cosmetics products should be made easily accessible to the public.

3.3.6 Waste and Pollution

Hazardous Waste Directive (91/689/EEC) The classification of wastes as toxic, harmful, corrosive, irritant or CMR under this Directive is based on Annex VI of Directive 67/548/EEC. The Directive also refers to the test methods set out in Directive 67/548/EEC, which will be taken adopted by REACH. Ambient Air Quality Directive (96/62/EEC) and the VOC Directive (1999/13/EC)

Under Annex III of Directive 96/62/EEC, the criteria for selecting air pollutants for consideration for control include “the pertinent danger criteria established under Directive 67/548/EEC and its successive adaptations must be taken into account”. Article 5 of Directive 1999/13/EC requires that substances or preparations classified as CMRs under Directive 67/548/EEC because of their VOC content are replaced as far as possible by less harmful substances or preparations. Discharges of such VOCs are also subject to specific emission limits.


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4. OVERVIEW OF THE GHS SYSTEM 4.1 Introduction

The foundations of the GHS can be found in the UN RTDG regulations on the classification and labelling of chemicals in the transport sector. Progressive development between international and national bodies (both governmental and non-governmental) has led to the drafting of the GHS system and its various optionalities. By combining the requirements of the existing EU system with the classification criteria and labelling requirements of the proposed GHS system, it is possible to provide an initial indication of the numbers of substances and preparations/mixtures likely to be affected by changes in classification requirements under the GHS. The Commission and Cefic have provided the conclusions of previous work aimed at determining the likely implications of GHS implementation in this regard. This information has been supplemented with information collected in consultation, including expert opinion to identify and then quantify the impact of a move to the GHS. The amount of information available to compile this Section of the Report is heavily restricted because the majority of companies in the EU are still focused on understanding the implications of REACH for their activities; they have not yet put much effort into understanding or investigating the implications of GHS for their activities, for example, carrying out any sample testing of any changes in classification that may arise for their products. Similarly, without better data, the experts contacted as part of this study have been reluctant or unable to attach quantitative figures to what they believe might change under the GHS, given the uncertainty surrounding such outcomes. Therefore, the conclusions drawn from this Section at this stage should be viewed as a best effort rather than a reliable predictor of GHS shifts in C&L.

4.2 General Overview of GHS Classification and Labelling Requirements 4.2.1 Classification

An assessment of the classification criteria set out in the GHS identifies three possible outcomes with regard to both substances and mixtures, taking into account both the core requirements and the options that are open to implementing authorities: • Higher Classification: This occurs when the move from the EU system to the GHS

involves some substances and preparations/mixtures moving to a higher than equivalent classification under the existing system. Consequently, classification and labelling will have to be revised upwards, with a potential negative impact on the markets for these chemicals. The degree to which a negative impact will arise is likely to be determined by a variety of factors (see also Section 6);

• Lower Classification: this refers to cases where a substance or preparation/mixture

moves down a hazard category under the GHS compared to the existing EU system. These impacts can broadly be categorised as potential advantages of the GHS as they


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could result in a lower classification, potentially important for industry in carrying out workplace risk assessments and applying exposure guidelines; and

• New Classifications: across a range of end-points, the GHS introduces the option to

adopt additional hazard classes and categories for classification and labelling purposes (the so-called optionalities). These categories relate to potential hazards and, in some cases, thresholds above current testing requirements. Adoption of these additional categories is expected to result in the greatest impacts for industry and consumers as much of the information required is not yet tested for or recorded in many standard-testing regimes. Similarly, additional resources will be necessary to classify and label substances and mixtures against these new end-points.

Omitted from the above list is the fact that the same or equivalent classification may occur. In these cases, the impacts would be minimal and relate only to the need for manufacturers and suppliers to revise their SDS and labelling so as to comply with the GHS requirements. This also applies to classifications in the EU system that are not included in the GHS but which the Commission may wish to carry forward. Revisions to SDS and labelling are mandatory under GHS despite any change in C&L criteria or test data as pictograms depicting hazards must be attached to labels and SDS, in addition to SDS format changes. The numbers of substances and preparations/mixtures that have been calculated by industry as falling into each category of GHS classified hazards are discussed in Section 4.3 onwards. Impacts are presented by sector where material has been made available, supplemented with information compiled by DHI/DTC own in-house experts and contact made with other Competent Authority and industry experts in various fields of health and environment C&L.

4.2.2 Classification Methods for Mixtures

The classification of preparations/mixtures can vary considerably under the GHS compared to the EU system. As discussed in Section 3, if a mixture is tested as a single entity then these results are used to determine whether the preparation is dangerous to human health and or the environment. In these cases, test data on humans or animals take priority over other data. However, test data are often not available, particularly given that formulations may change frequently over fairly short time periods. Specific ‘mixture rules’ are therefore often applied to determine the classification of a mixture. In the EU system, four key characteristics should be explained further with details of the GHS changes: 1) Concentration limits and calculation methods: both the current EU system and the

GHS make use of concentration limits and calculation approaches. However, these are not necessarily applied in the same way. For the example of acute toxicity, the EU system defines a concentration limit whereas the GHS does not. Also, the calculation formulae used in the EU differ from the formulae used under GHS, e.g. for acute toxicity or for irritation / corrosion hazards.


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2) Availability of knowledge on the ingredients: components of a preparation for which no information is available are regarded as non-dangerous and similarly are not included in the calculation in the EU system. The GHS may provide for different formulae, e.g. in the case of acute toxicity, the application of a particular formula depends on the availability of knowledge on 90% or less of the ingredients.

3) Alternative application of calculation approaches under GHS, (see below). For the

aquatic hazard, the summation method as well as the additivity formula can be applied to determine the toxicity or the classification of a mixture.

4) The application of so-called “bridging principles” under GHS, in cases where a

mixture of unknown classification is very similar to another mixture with known classification, (see below). Corresponding principles are not defined in the current EU legislation.

Essentially, the GHS uses the same basic approach and calculation methods as the EU system, with some changes made to its mechanisms, such as the summation and additivity rules resulting from the inclusion of more data. For acute toxicity, a key issue in moving from the EU to the GHS system is that the EU system explicitly relies on the use of percentage cut-off points, while the GHS system does not. There is a concern, therefore, that the GHS will over-classify mixtures for acute toxicity due to the formulae used for calculating whether a mixture should be classified (point 2 above), as these fail to take into account dilution effects (point 3 above). Animal test data always takes priority in GHS, followed by bridging and calculation methods of classification. Finally, the special expertise provided by designated experts is employed to determine a classification, although this is unlikely to take place for some time, as experts need to be established and trained accordingly. Each calculation method is summarised below to help explain how a classification is derived and the impacts that GHS might have to the outcomes under each method. Calculation Methods The summation rule of GHS used for the determination of the aquatic hazard, for example, aggregates up all the components of a mixture >0.1 mg/l with the same hazardous properties to determine its classification. If the same components are hazardous at ≤0.1 mg/l, then a multiplying factor is added to the calculation to take account of the toxic contribution of components below this threshold. Where the summation of the toxicity is above a threshold of 25% for each category, then the highest is taken, such that if the mixture is classified under this rule as category 2 acutely toxic, then there is no need to calculate category 3 toxicity. In some jurisdictions, it may be necessary to consider the summation and additivity method of classifications and select whichever is the more conservative option. An incentive therefore exists for industry, through REACH, to provide the best data available to downstream users and formulators,


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as this will aid the compilation of more ‘correct’ C&L, and avoid more severe classifications where a more conservative calculation method might be adopted. Additivity should be used for components for which adequate data exist but which have not been classified. Toxicity derived by this method should then be used to derive a classification for such components, which is then used in the summation method. This is unlikely to arise in the EU, considering that REACH should provide enough data to facilitate classification. Only in cases where a mixture contains components for which no information exists does the additivity formula come into use. Under such a scenario, this method tends to over classify, by increasing the concentration within the calculation. Bridging Where a mixture has not been tested, its classification can be inferred from that of a similar mixture which has been tested. ‘Similar’ can refer to the ‘dilution’, ‘batching’, ‘concentration’ of highly hazardous mixtures and ‘interpolation’ of the mixture. ‘Dilution’ means that if, for example, a toxic substance or mixture with a LC50 of 6 mg/l is given a classification of aquatic toxicity category 2 under GHS, then diluting it in a ratio of 2:1 with a non-toxic component would result in the toxicity being calculated at around LC50=12 mg/l; so the classification becomes category 3 acute aquatic toxicity. With simple mixtures, dilution can be effective in providing a classification without testing, if information is provided on the other two or more components. ‘Batching’ simply states that, as long as two production batches of a mixture follow the exact same ‘recipe’ so that no variation is believed to occur in the manufacturing process or in the feedstock, then the classification can be shared across batches. ‘Concentration’ applies to those mixtures that contain a component classified, for example, as acute 1 or chronic 1 toxicity; provided a mixture contains a concentration of either component the mixture must be classified as acute 1 or chronic 1 toxicity. ‘Interpolation’ operates closely to dilution as, provided a mixture A has the same components in different quantities as two other mixtures B and C, in which A is an intermediate, then if B and C have the same classification so must mixture A. Finally, ‘substantially similar mixtures’ refer to two mixtures that differ in only one component, but otherwise have the same composition. If the components that differ have the same classification, then the two mixtures can be assumed to have the same classification. Overall, bridging allows for the classification of a large number of mixtures without testing, under the proviso that all the information is made available on the classification of component mixtures and or substances.


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4.2.3 Labelling

GHS labelling is essentially built on the UN transport regulations such that the symbols and warning statements are identical. The transport labels such as those relating to flammability may, however, be unfamiliar to a small number of consumers, leading to possible changes in perceptions where the graphics and/or the nature of the warnings change. The impact of changes in labels is less likely to be an issue for downstream industrial and professional users who are more aware of the transport symbols and are used to working with hazard warnings. In relation to the costs of the new labelling requirements, the most likely impacts will be related to the need to replace existing labels with new ones, to update computer systems and to provide training to staff at different grades within each company.

4.3 Health and Safety Hazard Categories 4.3.1 Overview

Based on a preliminary analysis of the EU and GHS classification criteria, presented in Annexes 1 and 2, the following criteria were identified as being significantly different enough to warrant further analysis: • acute toxicity (oral, dermal, vapour, gas and particulate); • eye damage/irritation; • skin corrosion/irritation; • aspiration hazard; and • organ toxicity (single and repeat exposure).

With regard to the changes proposed for the classification methods of mixtures, the GHS may have impacts not only in relation to the above criteria, but also in relation to: • respiratory and skin sensitising mixtures; • carcinogenic, mutagenic and reprotoxic mixtures; • oxidising mixtures; • explosive mixtures; and • flammability.

4.3.2 Acute Toxicity Substances

The EU system for classification of substances in relation to acute toxicity is composed of three categories of toxicity: very toxic (T+); toxic (T); and harmful (Xn). By comparison, the GHS system uses four categories to classify substances within the same final endpoint but with different cut-off values for each category. Significant differences may therefore arise in the classification assigned to a substance. In general, the GHS


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system should result in a shift to a lower toxicity category than for the EU system for substances. It is unlikely that a substance will move up a toxicity classification based on the simple logic that four categories will replace three within the same spread of toxicity. Broadly speaking EU very toxic (T+) can be equated with GHS categories 1 and 2, EU toxic (T) with GHS category 3 and finally EU harmful (Xn) with GHS category 4. In addition, the GHS system can include an optionality to introduce an entirely new classification for substances and mixtures for those substances with a relatively low level of toxicity. This is the GHS Category 5 and it is predicted that a large number of previously non-classified substances will fall into this Category if adopted. In order to provide an indication of the possible shifts in classification, Table 4.1 below shows the figures developed in an earlier (unpublished) study provided by the Commission relating just to substances.

Table 4.1: Shifts in Classification of Substances Based on Acute Oral Toxicity

EU Categories

Number of Substances in

EU System

GHS Categories

Number of Substances in GHS System

% Shift by EU Classification

Category 1 69 T+ 340 Category 2 512 +71%

T 1,242 Category 3 1,498 +21%

Xn 3,863 Category 4 3,366 -13%

N/A Category 5 1,662 All new Source: Royal Haskoning (2004) (unpublished) based on NOISH (2004)4

Under the classification criteria shown above, 19% of those substances currently classified as toxic (241 substances) would fall under GHS categories 1 and 2, accounting for an increase of 71% compared to those substances currently labelled T+. Conversely, if it was assumed that the current ‘very toxic’ category was only equal to GHS category 1 then 80% of the very toxic substances would be in the ‘lower’ GHS category 2. Those substances falling under GHS category 3 relate to an increase of 21% compared to those currently classified as toxic. This means that the number of substance classified as harmful (category 4) would reduce by 13% under the GHS classification system, as substances are classified under other ‘higher’ categories. It should be noted that similar conclusions result for dermal and inhalation toxicity, which are not, therefore, discussed further. Although the authors of this Report have been unable to corroborate the validity of the results presented in Table 4.1, questions have been raised in the literature and through consultation with experts. For example, similar work carried out by Förster & Wiertulla (2005) for the German VCI has concluded that against the background of more categories and of the proposed optionality (category 5) it is likely that products not previously classified as acutely dangerous to health will be regarded as “dangerous”. “The

4 Toxicity data, LD50 rat oral in mg/kg was collected for 7,107 substances (RTECS) (NIOSH, 2004). Where there was

more than one value for a substance, the lowest value was used. Substances were classified in EU hazard categories as well as in GHS hazard categories.


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properties of these products have, however, not changed” (Förster & Wiertulla, 2005). Förster & Wiertulla (2005) estimate that overall, the threshold values for toxicity, below which a product is classified as harmful, are raised by 150% owing to the introduction of Category 5 for all exposure routes. The paper also concludes that the limit values for classification into categories 3 and 1 with the indication “toxic” and “very toxic” are increased by 50% for oral applications, by 150% for dermal application and by as much as 500% for inhalation of gases. Other experts contacted through interviews conducted by DHI/DTC concluded that it is very difficult to predict the change of classification due to implementation of the GHS system. The number of substances classified as acutely toxic in the exiting EU classification scheme is most likely to be low due to the lack of test data. In general, experts were of the opinion that the number of substances with an acute toxicity classification will increase due the testing requirements under REACH. GHS will as a consequence, due to the more severe cut-off limits, naturally increase the number of classifications. Mixtures Mixtures appear to imitate substances, as by reasoning, it seems entirely plausible that any increase in substance classification should lead to increases in mixtures classification on average, although some cases classifications may be reduced. The widely published CAL-TASK1-2/015 and CAL-TASK1-2/029 (ECB, 2005) documents have tried to calculate the extent of any increase in mixtures classification using Swedish data. However, the method used to calculate the number of mixtures requiring classification is considered to be an over simplification (as it is known that many more mixtures/preparations are classified as toxic (T) compared to very toxic (T+), as opposed to the flat distribution adopted). The calculations identify two broad reasons why more classifications are likely to be required under GHS than under the existing EU situation: 1) there are many more mixtures than substances, such that many more mixtures

containing a hazardous substance are present on the market. This is particularly true given that there will be multiple formulations using a given mixture; and

2) the concentration criteria for a single substance contained within a mixture to trigger

classification of that mixture/preparation is such that many more chemicals will need to have hazard categories assigned to them through the GHS as opposed to the status quo.

The figures obtained from the CAL-TASK1-2/015 study estimating the shift in classification of mixtures/preparations is provided below in Table 4.2. These calculations indicate that 8% more mixtures are to be classified very toxic under the GHS than under the EU system; while for the other two EU classifications, 6% and 39% fewer mixtures are expected to be classified respectively.


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Table 4.2: Shifts in Classification of Mixtures Based on Acute Oral Toxicity

EU Categories

Number of Mixtures in EU System

GHS Categories

Number of Mixtures in GHS System


Category 1 T+ 2,325 Category 2 2,500 +8%

T 13,275 Category 3 12,500 -6%

Xn 138,873 Category 4 85,000 -39%

N/A Category 5 150,000 n/a Source: ECB (2005)

By incorporating the new Category 5 classification into the calculations, approximately an additional 100,000 new mixtures are predicted as requiring classification, increasing the total numbers which would be classified compared to the EU system.

After consulting the experts on the acute toxicity of mixtures, it has become clear that the CAL-TASK1-2/015 and CAL-TASK1-2/029 analysis of the potential impact of classification of preparations (mixtures) is very simplistic as it only encompasses one-component mixtures of a hazardous substance or mixture. Given that the EU chemicals industry is much more complex than this, with an endless number of potential substances/ and mixtures contained within an individual product, the conclusion has been reached that CAL-TASK1-2/015, although not incorrect, is severely simplistic. Another study provided by the Commission using the “additivity formula” to derive classification for one-component mixtures (i.e. dilution of the main component with a non-toxic solvent) presents the results summarised below in Table 4.3. This indicates that the cumulative impact is far from clear, as the potential exists for mixtures to move up or down classification. However, as with the Swedish results, these findings need to be verified by results that apply to multi-component mixtures, which are unavailable at this time. Table 4.3: Estimates of Shifts in Classification according to CAL-TASK 1-2/015

EU Classification GHS Classification % Overall Fraction of Mixtures Reclassified

T+ Category 1 Category 2 4% upgraded to Cat.1 and 2

T Category 3 17% downgraded to Cat.3 Xn Category 4 19% downgraded to Cat.4 --- Category 5

Source: ECB (2006) Conclusions reached by Förster & Wiertulla (2005) for VCI also argue that where limited information is available resulting in the Acute Toxicity Estimate (ATE) being used, the ATE will significantly over classify compared to the GHS full information. This finding held for virtually every scenario tested in their analysis. A strong motive therefore exists for industry to provide as much information as possible to downstream users under GHS as this would prevent over classification. However, the system is constructed with a


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certain conservative approach to classification in order to account for the uncertainties surrounding test results. Overall, experts generally found it very difficult to predict the increase or decrease in the classification of mixtures. Industry has a natural interest in reformulating preparations or substituting very hazardous substance in order to get the lowest possible hazard classification. However, with greater information provision coming from REACH, it is agreed that the most likely impact will be an increase in classification, although unquantifiable at this stage, for the bulk of mixtures. As a result of the above findings, for the purposes of this study a model was developed on the principles of Monte Carlo analysis to predict the number of mixtures that would change classification when moving from the EU to the GHS systems. This model is discussed further in Section 7 and Annex 2 to this report. However, as will be seen from Section 7, the results of this analysis do not support the conclusions of the CAL-TASK1-2/015 analysis.

4.3.3 Carcinogens, Mutagens & Reprotoxicity (CMRs)

Cut-off concentration limits for classification purposes are used in the EU for carcinogenic, mutagenic and/or reprotoxic preparations. Substances on the other hand are classified purely on the evidence provided prior to being processed through the EU classification system, as described in the previous Section. The GHS system applies the same criteria for each category as in the EU system for substances. However, the GHS approach additionally provides the opportunity to choose not to classify a preparation as C, M or R if conflicting information from experts or studies can be provided such that it can be proven that a hazardous substance contained within a preparation is unlikely to pose a hazard provided it remains in that preparation and is no released due to its physio-chemical properties. Examples are likely to include alloys where as long at the preparation remains in its inactive form, the hazard posed to human health or the environment can be described as minimal, such that a classification is not deemed necessary. The likely impact is therefore to reduce the number of mixtures/preparations being classified as noted in the GHS official text (UN, 2005) section 1.3.2.4.5 which states that: “The effect of a substance or mixture on biological and environmental systems is influenced, among other factors, by the physico-chemical properties of the substance or mixture and/or ingredients of the mixture and the way in which ingredient substances are biologically available. Some groups of substances may present special problems in this respect, for example, some polymers and metals. A substance or mixture need not be classified when it can be shown by conclusive experimental data from internationally acceptable test methods that the substance or mixture is not biologically available. Similarly, bioavailability data on ingredients of a mixture should be used where appropriate in conjunction with the harmonized classification criteria when classifying mixtures.”


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Due to the large number of mixtures present on the EU market, estimation of the number of mixtures that may be affected by the change in classification requirements would have to be carried out sector by sector. Where a sector or company does not envisage any benefits from a mixture moving down a classification category, they may be unwilling to employ the resources required to conduct the necessary testing; in such cases, fewer preparations will be re-classified with the net effect of introducing the GHS being minimal. It should be mentioned that a company’s reluctance to test is largely because no testing of mixtures for CMRs is permitted in the EU, such that classification is based on available individual substance data in the mixture. CMR test data are accepted under the GHS, but only under well/strictly defined conditions.

Within the context of this study, the only sector where such an analysis might be relevant is in the production and use of alloys. Although alloys are considered to be ‘preparations’, they are substantially different chemically than the substances comprising them. Evidence presented to date by industry suggests that where an alloy is classified as a C, M or R at present, a moderate decrease in classification under the GHS would be expected.

A final addition to the CMR debate is that although the cut-off concentration limits are the same for carcinogens and mutagens, in the case of reprotoxicity limits are set lower for GHS (0.3% and 3%) than for the existing EU system (0.5% and 5%), with the potential for marginally more mixtures to be classified. Again, due to the magnitude and diversity of preparations used in the EU, no estimates are available at this stage. In reference to new substances, information gathered by the European Chemicals Bureau (ECB, 2006) suggests that very few, if any, substances and, therefore preparations, will be classified as CMR, largely because if a company knows that a new substance under development has CMR properties they will be hesitant to bring it to market.

Consistent with the findings for acute toxicity, experts believe that the number of CMR classification for mixtures would generally increase due to the lack of test data in the current EU system and the calculation methods adopted in GHS.

4.3.4 Aspiration

The EU criterion for classification with R65 risk phrase is a kinematic viscosity of less than 7x10-6 m²/s at 40°C. The second criterion is a dynamic viscosity of less than 33 mN/m at 25°C.

The GHS criterion is more stringent and defines two cut-off levels at a higher level of 20.5 mm²/s and 14 mm²/s (mm²/s = 10-6 m²/s). Based on this criterion alone, a higher number of substances and mixtures will be classified for aspiration hazards.

Experts were of the clear opinion that the number of substances and products classified for aspiration danger, even if only category 1 was introduced, will increase based on the changed definition of classification. The increase in the cut-off levels will increase the number of classified substances and include product groups which are not currently classified, such as lubrication oils, diesel and heating oils. In particular, consumer


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products, such as skin care oils and massage oils, are likely to fall within the definition for classification for aspiration danger.

It is not predicted that GHS will lead to more tests as the viscosity data should already be available for the preparations on the market.

4.3.5 Eye Damage / Eye Irritation

Under the present EU system, hazards relating to eyes can be defined in one of two ways, each carrying its own R-phrase: • Serious Damage (R41): where a substance/preparation potentially causes serious

damage to the surface of the eyes, which cannot be reversed, based on a range of criteria; or

• Significant Damage (R36): where after significant damage to the surface of the eye

within a set period including the time over which any symptoms must persist, the eventual damage can be reversed and therefore any effects are temporary.

Broadly speaking the classification criteria is the same for GHS with R41 replaced by GHS category 1 and R36 by category 2A, although the criteria do change slightly for the latter group which should lead to some substances/mixtures falling into a new, lower category 2B, referring to mild irritation. This new category may therefore capture some substances/mixtures that currently fall under R36 and which have effects that reverse within 7 days of observation. However, work undertaken by one large producer of laundry detergent and cleaning products in the EU tested 198 formulations of products against the EU classification and GHS. The results of this exercise are presented in Table 4.4 below. This suggests the reverse of the above conclusions – that more products will move up a classification under the GHS, than move down.

Table 4.4: Comparison of Eye Damage/Irritation Classification under the EU System and the GHS

Classification

% of products classified under the EU system

(Conventional Calculation Method)

% of products classified under the GHS

GHS category 1 (=~R41) 80% 100% GHS category 2A (=~R36) 20% 0% GHS category 2B (=~R36) 0% 0% Source: Hilgers (2005)


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4.3.6 Skin Corrosion and Irritation Substances which are defined as being corrosive to skin are classified as either R35 or R34 under the EU system, with this relating to skin corrosion in which the skin tissue is actually destroyed when exposed to a substance or preparation/mixture. Under the GHS, such substances would fall under category 1. The risk phrase R38 refers to skin irritation that can be defined as inflammation to the skin which persists for a set amount of time; these substances would fall under GHS category 2 or 3. The corrosive and/or irritation properties of a substance or preparation are determined by applying the substance in question to an animal’s skin or eyes, with observations made of the presence of corrosion or irritation over a specified period. This can include burning, redness or sores appearing on the skin. Both systems set lower limits on these classification criteria, but those contained in the GHS are below those set in the EU system. As a result, more substances are likely to fall under the GHS than the EU system; furthermore, substances may move into more severe hazard categories. Until significant testing is undertaken, the impact in this area is considered unquantifiable by those in industry who have examined this issue and the experts contacted by DTC/DHI. For preparations/mixtures, classification relies on concentration limits of already classified substances. As the number of substances classified under GHS is considered likely to increase, it is therefore only natural to assume that the numbers of preparation/mixtures requiring classification will also increase. However, the overall concentration limits appear to be lower for the GHS than for the EU system. Under GHS, the lowest limit is 1% and highest 10%; by comparison, the lowest limit is 1% under the EU system, but only for the most corrosive component, while the highest limit is 20%.

Referring back to the preliminary analysis by Hilgers (2005) presented above for eyes, the same 198 formulations were tested for skin classification. The results are presented in Table 4.5 and indicate a significant increase in the classification assigned to these preparations/mixtures. It should be borne in mind that these figures only represent one company’s analysis and are presented in this Report only as a guide to the potential impacts of harmonisation. Table 4.5: Comparison of Skin Corrosion and Irritation Classification under the EU System and the GHS

Classification

% of products classified under the EU system

(Conventional Calculation Method)

% of products classified under the GHS

GHS Category 1 (=~R35, R34) 0% 4.5% GHS Category 2 (=~R38) 52% 94%

GHS Category 3 (Not existing in EU) 48% (not classified based on EU-CCM system) 1.5%

Source: Hilgers (2005)


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4.3.7 Respiratory or Skin Sensitisation

Sensitisation is assessed for both respiratory (R42) and skin (R43) contact by evidence gained from a substantial number of humans and/or tests on animals. In both cases, the criteria required for classification are very similar in the GHS compared to the existing system. Consequently, changes in this area are thought to be minimal for substances. For preparations/mixtures, however, it is expected that the numbers classified will increase, as the calculation methods will change to include chemicals which ‘can’ induce sensitisation rather than there being evidence that a chemical ‘does’ cause a hazard.

4.3.8 Organ Toxicity

The GHS includes two types of Target Organ Systemic Toxicity (TOST); single exposure and repeated exposure. TOST is partially comparable to R39 and R48 in the EU classification system. It can also be compared to other effects included in the EU system, such as respiratory inhalation (R37). The difference in these two approaches is that in the EU system, it is initiation and intrinsic hazards that are assessed, compared to the event and risk-based approach of the GHS. The impacts of these differences in approach are unknown at this stage without further analysis, although conclusions reached in an earlier Commission report (EC, 2004) suggests that this is not likely to be a major issue. A description and basic comparison of hazard phrases and criteria is provided below in Table 4.6. Overall, the GHS appears to use slightly more stringent criteria that may lead to greater numbers of substances being classified. However, the shift away from intrinsic to risk-based hazard classification could have a balancing effect so that overall, very little changes. Unfortunately, none of the experts consulted or literature reviewed could enlighten the authors in determining the potential impacts.

4.3.9 DTC Data on Numbers of Classifications

DTC maintains a database of chemical products and their composition. The information in the database is based on DTC’s consultancy work and represents a broad range of products including paints, car care chemicals, detergents, petroleum products and analytical reagents. 2,775 records have been examined for classification in the different hazard categories as presented below in Table 4.6. These database records are regarded as being representative for the chemicals on the market and, thus, are likely to represent the average proportion of products which are classified according to different hazards. The records have been examined for single end-points and therefore there may be some products which are classified for more than one hazard. The distribution of the classifications shows that changes in eye and skin categories will affect a high number of preparations where as changes in organ toxicity will only affect a small proportion of the chemical products.


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Table 4.6: Summary Comparison of GHS and EU TOST Classifications GHS Class Phrase EU

Class Difference in Classification Phrase

Difference in Classification Criteria

Single Exposure Category 1

Causes damage to organs

T+, R39 T, R39

EU – Danger of very serious irreversible effects. GHS requires specification of organ damage.

GHS generally contains a higher dose/concentration limits below which the substances or mixture is classified. GHS probably more stringent.


Suspected of causing genetic defects

Xn, R68

EU – Possible risk of irreversible effects.

Criteria basically identical, although GHS allows human evidence to be used to place a substance in Category 2 in exceptional cases.


May cause respiratory irritation and/or may cause drowsiness and dizziness

R37, R67

EU – Irritation to respiratory system and/or may cause drowsiness and dizziness. Therefore move to risk based definition although minimal change as R67 remains the same.

GHS Category 3 only includes narcotic effects and respiratory tract irritation based on human data although animal data is likely to be permitted in the weight of evidence evaluation. GHS not as broad, although more substances likely to be encompassed under other classifications.

Repeated Exposure Category 1

Causes damage to organs through prolonged or repeated exposure

T, R48

Repeated Exposure Category 2

May cause damage to organs through prolonged or repeated exposure

Xn, R48

EU – Danger of serious damage to health by prolonged exposure. GHS defines more clearly the difference in hazard by separating in to two different categories. Again based on risk as opposed to intrinsic properties.

As comparable to single exposure TOST, GHS includes higher dose/concentration limits below which a substance can be classified, therefore likely to be more stringent compared to T and Xn R48 EU classifications.

Table 4.7: Numbers of Chemical Products Classified in DTC Database by Hazard Category

Hazard No. of Products Classified under EU Conventional Method (CCM) % of Products Classified

Acute toxicity 385 14% CMR 250 9% Organ toxicity 60 2% Eye and skin 915 33% Source: DTC (2006)

4.3.10 Numbers of Substances in Annex 1 Classified by R-Phrase Finally, Table 4.8 provides a summary of data provided by the ECB which indicates the

number of substances listed in Annex 1 holding different classifications under the EU system. Note that these numbers have been used in the model discussed in Section 7.


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Table 4.8: Numbers of Substances in Annex 1 Classified by R-Phrase R-Phrase Description No. Annex 1

Substances No. New Substances in Annex 1

R42 May cause sensitization by inhalation 77 14 R43 May cause sensitization by skin contact 568 409 R48 Danger of serious damage to health by

prolonged exposure 118 104

Carcinogen Cat 1 188 1 Carcinogen Cat 2 650 14 Carcinogen Cat 3 134 12 Mutagen Cat 1 0 0 Mutagen Cat 2 176 3 Mutagen Cat 3 77 18 Reprotox Cat 1 17 9 Reprotox Cat 2 66 22 Reprotox Cat 3 105 80 R28 Very Toxic (Oral) 43 2 R26 Toxic (Oral) 150 6 R22 Harmful (Oral) 527 282 R27 Very Toxic (Dermal) 34 1 R24 Toxic (Dermal) 80 7 R21 Harmful (Dermal) 161 33 R41 Serious damage to eye 234 229 R36 Significant damage to eye 350 63 Total Number of Substances Listed in Annex 1 3366 1045 Source: ECB (2006)

4.4 Environmental Hazard Categories

The GHS and EU systems differ at some points with respect to environmental classification. The GHS includes a broader range of acceptable test animals in addition to QSAR data being officially accepted. Nevertheless, the GHS is not considered very different from the current situation in practice, as QSAR data is often supplied and data based on other test animals are often accepted. Acute toxicity categories II and III, which are new in the GHS, apply to marine transport and solely to very large crude oil carriers; these will not be included for normal transport in the RTDG Model Regulations (the Commission will not include these two categories as they will not be taken up for normal transport). They are therefore not expected to influence classifications a great deal. Lower limits for bioaccumulation, the biological concentration factor and the oil-water partition coefficient are higher under the GHS than in the EU system. This is likely to result in a decrease in the number of substances classified.


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4.5 Physico-chemical Hazard Categories 4.5.1 Oxidising Substances

The classification criteria for oxidising substances in the GHS are more detailed than those within the current EU system. The GHS makes the distinction between solids, liquids and gases; by comparison the EU system applies only to solids and liquids. In addition, the prescribed reference material used in testing will alter slightly. The reference material is a known oxidising material, and that to be used under the GHS is more sensitive than required under the EU system. This means that the lower limit for the classification of substances and preparations as oxidising will in practice be lower in the GHS than in the EU system. It is therefore expected that the number of substances classified as oxidising will increase with the adoption of the GHS. However, the implications should be mitigated due to the similarity with the criteria for transport classification. Furthermore, in the EU system, less than 1% of the substances in Annex I of the Dangerous Substances Directive are classified as oxidising. In contrast, classification of organic peroxides under the GHS is completely different from the current system. The EU system classifies organic peroxides based on their chemical structure; the GHS classifies them according to their properties. Consequently, a difference in the hazard class definition exists for organic peroxides. Explosive organic peroxides are currently classified within the ‘hazard class explosives’ while under the GHS they are covered by the hazard class for organic peroxides. Again, the impact is believed to be minimal. Overall, very limited impacts are expected from the implementation of GHS in this context, largely due to the similarities with various chemical transport regulations and its limited scope under some categories.

4.5.2 Explosives

Under the current EU system, explosive substances are classified based on their sensitivity in combination with thermal and mechanical influences. The GHS, on the other hand, integrates criteria that rely on the intrinsic properties of the substance. Substances and preparations that fall within the hazard class for explosives are assigned to one of six divisions depending on the type of hazard they represent. Quantification of the likely changes in classification is difficult, but the degree to which the GHS criteria correspond with the current criteria for transport classification will mitigate the implications of such differences. Again, changing systems will not be a difficult process, as many producers and professional users will already have existing knowledge of the current system for transport.

4.5.3 Flammability

Under the EU system, classification criteria for flammable substances and preparations are primarily based on flash points. Flash points delimit three categories of flammability.


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Boiling point is of minor importance in the distinction between the three categories. Under the GHS, there are two categories for flammability and these are based on flash points; category 1, the most severe category, is also dependant upon the boiling point. In a previous analysis undertaken for the Commission (Royal Haskoning, 2004), a comparison was made between both systems based on flash points as well as on boiling points, with this given in Table 4.9 below.

Table 4.9: Shifts in Classification of Flammable Substances

EU Categories

Number of Substances in EU

System GHS Categories

Number of Substances in GHS System


F+ 14 Category 1 14 0% F 137 Category 2 151 +10% Flammable 115 Category 3 122 +6%

N/A Category 4 90 All new Source: Royal Haskoning (2004) (unpublished), based on Lide (1992)5

Substances currently classified as extremely flammable (F+) will all be classified under GHS category 1. GHS category 1 is not influenced by any of the other current EU categories, thus, no implications are expected from the transition of ‘extremely flammable’ into GHS category 1.

Substances with a flash point lower than 21°C are currently classified as ‘highly flammable’ (F). In the GHS, substances that have a flashpoint lower than 23°C (and an initial boiling point greater than 35°C) will fall under ‘flammable liquid category 2’. It is anticipated that 13% of substances currently classified as “flammable” will fall within the GHS category 2, leading to an increase of 10% in the number of substances classified as ‘highly flammable’. Under the GHS criteria, those substances with a flash point equal or greater than 23°C and lower than or equal to 60°C will fall under ‘flammable liquid category 3’. The upper flash point of 55°C in the current EU system will be extended to a limit of 60°C in the new GHS system. The extension of the flash point range will lead to more substances being classed as flammable liquids. Assuming that the EU category ‘flammable’ will be replaced by GHS category 3, the total range of substances within that category will increase by 6%. However, experts contacted indicated that the figures given above are a clear overestimation of the impacts, as industry has to make the same changes to C&L under the transport regulations, and that these changes are currently ongoing. Flammability and explosive hazards are therefore deemed to already or soon to be classified in relation to the GHS at little or no additional cost.

5 Substances checked on flashpoint properties using Lide (1992).


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5. FUTURE DEVELOPMENT OF CLASSIFICATION AND LABELLING SYSTEMS IN OTHER COUNTRIES

5.1 Introduction

As indicated in the introduction to this report, the GHS was formally adopted by the United Nations in July 2003. Since July 2001, however, there have been regular meetings of the ECOSOC Sub-Committee of Experts on the GHS, with the most recent meeting held in December 2005. The importance attached to these meetings and hence the introduction of the GHS at the international level is demonstrated by the number of countries that either participate as experts or attend as observers. For example, representatives of twenty-four non-EU countries have attended these meetings, over the period from 2003 to 2005. This is in addition to the numerous EU countries that attend, together with attendance by the European Commission and many EU trade associations. Attendees include representatives of key EU trading partners such as the US, Switzerland, Japan, Russia, China and Brazil, as well as many smaller nations within Africa, the Middle East and Southeast Asia. Selected countries submit regular formal up-dates on their progress in adopting the GHS, with Japan, South Africa, Australia and Brazil being notable in this regard. These countries are all making good progress towards the adoption of the GHS. More generally, though, it is clear from this level of interest that the GHS will become the new global standard, as countries that do not currently have their own C&L systems adopt it rather than develop their own approach. It is also understood from some industry representatives that a few countries (e.g. New Zealand and Thailand) are already seeking SDS and labels to be supplied in a manner that is consistent with the GHS. This finding is important as it provides a broader context to the potential impacts of the EU joining or not joining the GHS. Currently, the EU C&L system is recognised by many countries as being of the highest standard, with EU data accepted even though it may not strictly be provided in a manner consistent with an importing country’s own requirements. In the future, however, this is unlikely to be the case for the majority of importing countries, and EU exporters will be forced to provide information in accordance with the GHS. Unfortunately, there is a general lack of information on the dates when countries expect to implement the GHS and the transition periods that they will allow after adoption. As a result, and in order to aid the understanding of the impacts of GHS implementation to EU companies, we provide below a brief review of the systems operating in a few of the EU’s major trading partners. This includes the United States (US), as the major trading partner and the other trading block with C&L requirements that are considered to be as (or more) onerous as those in the EU (see also Section 6), Japan, Canada, Australia, other Asia Pacific countries and South Africa.


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An overview of the capacity building work that is being undertaken by UNITAR is given first, however, as it illustrates the extent to which the GHS is likely to be adopted at the global level.

5.2 The United Nations Institute for Training and Research (UNITAR)

UNITAR together with the International Labour Organisation (ILO) have established a Global GHS Capacity Building Programme. This programme comprises a series of country-based activities and regional activities, as well as with guidance development and other work. The reason for highlighting this programme is that it demonstrates the wide range of countries that are likely to move to the GHS in the future. For example, country-based activities are on-going in: Indonesia, Nigeria, Philippines, Senegal, Slovenia, Thailand and the Gambia. Further countries are expected to initiate national capacity building projects early in 2006, with the support of the Government of Switzerland. A series of regional workshops for ASEAN countries (South East Asia Nation) has been held and informal consultation has been undertaken with participants from the SADC (Southern African Development Community) countries to find out the status of their work towards adoption of the GHS. A workshop for countries of central and Eastern Europe, and central Asia is scheduled to take place in 2006, as is a workshop for Arabic speaking countries.

Finally, a Global Thematic Workshop on Strengthening Capacities to Implement the GHS, held in November 2005 in Johannesburg, brought together 87 representatives from developing countries, countries with economies in transition, industrialised countries, international organizations, industry and non-profit civil society organisations.

5.3 The United States 5.3.1 Introduction

In the US, substances are regulated at federal level by different government agencies. Pesticides and other biocidal products come under the jurisdiction of the Environmental Protection Agency (EPA), while most other substances are regulated by the EPA in relation to environmental impacts (and man via the environment) and the Department for Labour’s Occupational Safety and Health Agency (OSHA) in relation to worker exposure to hazardous substances. The GHS is also important to the activities of the Consumer Product Safety Commission and the Department for Transport. The key US regulations regarding dangerous substances and preparations are given below in Table 5.1, including information on the regulating authorities.


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Table 5.1: Key US Federal Regulations Regarding Hazardous Substances and Preparations Regulating Authority

CFR Citation Explanation

Environmental Protection Agency (EPA)

Title 40 CFR parts 700-799 based on the Toxic Substances Control Act (TSCA)

Provides EPA with the authority to regulate any chemical substance whose manufacture, processing, distribution in commerce, use or disposal may present an unreasonable risk of injury to health or the environment.

Occupational Health and Safety Administration (OSHA)

29 CFR parts 1900 to 2000 based on the Occupational Health and Safety Act

Also known as the Hazard Communication System (HCS), this provides the Department of Labor with the authority to set comprehensive workplace health and safety standards. Includes the requirement for communication of known hazards to workers through product labelling and Material Safety Data Sheets (MSDS).

Food and Drug Administration (FDA)

21 CFR parts 200-799 based on the Food, Drug and Cosmetics Act

Provides the FDA with the authority to regulate the manufacture of drugs and pharmaceuticals and the use of additives in food and cosmetics.

Department of Transport (DOT)

49 CFR parts 100-177 based on the Hazardous Materials Transport Act (HMTA)

Provides the Department of Transportation with authority to regulate the movement of hazardous materials. This has now been superseded by the UN Transport of Dangerous Goods (UNCEDTG) regulations.

Consumer Products Safety Commission (CPSC)

16 CFR part 1500 based on the Federal Hazardous Substances Act (FHSA) and the Poison Packaging Prevention Act (PPPA)

The FHSA provides the CPSC with the authority to regulate hazardous substances for consumer use. Includes prohibition of certain substances (e.g. lead in painted toys) and labelling requirements. The PPPA provides the CPSC with the authority to set standards for the special packaging of any household product to protect children from a hazard.

Source: OSHA website The US Environmental Protection Agency (US EPA) is the implementing agency for the Toxic Substances Control Act (TSCA), which acts as a filter through which most new substances must pass before being allowed access to the US market. This applies equally to both domestically produced and imported substances alike. TSCA requires all substances placed on the market in the US to be exempt or to be notified and then listed in the TSCA inventory. Broadly speaking, the TSCA inventory is the equivalent of the European Inventory of Existing Commercial Substances (EINECS) and the European List of Notified Chemical Substances (ELINCS) combined. If not on the TSCA inventory or exempt from so being, then the manufacturer of a substance must notify the EPA of its intentions of placing the substance on the market and/or of its manufacture by submitting a Pre-manufacture Notification (PMN). The EPA then determines what, if any, controls should be placed on the substance based on its human health or environmental risk. Such restrictions are referred to as Significant New Use Rules (SNURs) and are approximately equivalent to the EU marketing and use restrictions. The role of OSHA, by comparison, is to set maximum worker exposure levels for chemicals. This effectively enables OSHA to issue marketing and use restrictions on chemicals by setting exposure limits so low that a substance is omitted from a


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preparation voluntarily by the manufacturer. However, this is not the most common form of intervention. In the vast majority of cases, OSHA uses it powers under the Hazard Communication System (HCS) to provide worker protection through ‘hazard communication’ using material safety data sheets.

Individual states also have some freedom to make regulations more stringent, but they must enact the federal requirements as a minimum. This is important in the case of states like California which is known to have strict environmental controls and may be a major market for some substances and preparations/mixtures.

5.3.2 Classification

Jurisdiction over the classification of chemical products in the US depends on the end use of the product. If the chemical product is a pharmaceutical, or will be used in the manufacture of a pharmaceutical, the Food and Drug Administration (FDA) is responsible for classification. Detergents, which are consumer products, are classified by the Consumer Products Safety Commission (CPSC)6. This report focuses on OSHA’s classification system, because it covers the large majority of chemicals under consideration for this study.

The possible classes under OSHA’s rules are listed in Table 5.2 (overleaf) in a manner

which highlights the similarities and differences. As one can see from this table, the US has fewer classes relating to the basic physico-chemical properties, more classes of specific health hazards, and no classes for hazards to the environment. These differences reflect in part the fact that OSHA’s mission is to protect human health in the workplace.

Differences in the classes and their definitions can lead to differences in whether certain substances are considered dangerous or not. For example, in the EU, neither calcium carbonate nor linseed oil is considered ‘dangerous’, while in the US both are considered ‘hazardous’ (Ignatowski, 1997). If a preparation has been tested as a single entity, then both the EU and the US require the results of these tests to determine if it is dangerous. In particular, should any data on human health effects of a preparation be available, these data take priority. Generally, however, test data are not available for preparations. Therefore, classification of preparations is usually determined according to ‘mixture rules’ which allow the hazards posed by preparations to be defined from the properties and concentrations of the mixture’s (preparation’s) component substances. However, differences between the EU and US ‘mixture rules’ can result in a particular preparation being classified differently in the US than in the EU.

6 By way of example, the detergents sub-sector noted that toilet soap is regulated as a cosmetic in the EU, but

as a detergent in the US (by CPSC), unless the product is a moisturizing soap, in which case it is regulated as a cosmetic (by FDA).


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Table 5.2: Comparison of EU and US OSHA Classification Categories

EU Categories of Dangerous Substances (Directive 67/548/EEC)*

US OSHA Categories of Health Hazards ( 29 CFR 1910.1200)*

explosive explosive

oxidizing -

extremely flammable extremely flammable

highly flammable highly flammable

flammable flammable

very toxic highly toxic agents

toxic toxic agents

harmful -

corrosive corrosives

irritant irritants

sensitising sensitisers

carcinogenic carcinogens

mutagenic -

toxic for reproduction reproductive toxins

dangerous to the environment -

- agents which act on the hematopoietic system

- nephrotoxins (toxic due to the effect on kidneys)

- Neurotoxins (toxic due to effect on nervous system)

- Hepatotoxins (toxic to liver cells)

- agents which damage the lungs, skin, eyes or mucous membranes

* Note that EU Dangerous Substance classes use adjectives to describe the nature of the substance, while US Health Hazard classes use nouns to state the nature of the hazard. Source: OSHA website

In the EU, the potential for health effects is determined by a combination of four things: the physico-chemical properties of the preparation, the classification of its component substances, and their concentration in the preparation and concentration limits specified in the legislation. These concentration (or ‘cut-off’) limits are used to determine the classification of the preparation7. For example, using the concentration limits in the Dangerous Preparations Directive, a preparation would only be classified as corrosive if it contained over 10% of a corrosive substance. If the corrosive substance comprised 5-10% of the preparation, the preparation would be classified as ‘irritant’, while at concentrations below 5%, the preparation would not be classified.

7 If its component substances are listed in Annex 1 of 67/548/EEC (the ‘Substances Directive’), then the


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In those instances where a preparation contains a number of substances which have similar hazardous characteristics (e.g. they are classified as ‘very toxic’) but which are present individually in concentrations less than the given cut-off limits, the Dangerous Preparations Directive provides formulae which can be used to determine whether the mixture is dangerous or not8.

As can also be seen from Table 5.2, the EU system is more specific, with regard to categories of physical properties, than the US system. With respect to properties, such as flammability or explosively, both the EU and the US require the dangerous characteristics of a preparation to be determined by actual testing. This is because the physical hazards of preparations cannot always be predicted from the hazard of components and because testing of physical hazards is less problematic than testing for health or environmental hazards. However, both systems also allow for those circumstances where physical hazards can be predicted “with a great deal of certainty” without testing. For example, the EU system provides rules for assessing the physical characteristics of preparations with respect to the flammability and oxidising properties of gaseous mixtures produced to order in small quantities9.

5.3.3 Requirements for Labelling and for Material SDS Labels and Material SDS are used to communicate the hazards posed by chemical

products. As indicated above, in the EU the information included on labels and SDS is integral to and predetermined by the classification of the substance or preparation. Specific risk and safety phrases are associated with each of the classification categories, and these phrases must appear on the labels and SDS. The rules are highly prescriptive, mandating details such as the size of a label according to the size of the container on which it is placed, and the size and colour of warning symbols which must appear on labels. For SDS, the rules specify the categories of information which must be addressed and the order in which these categories must appear.

The equivalent US (OSHA)10 regulation, 29 CFR 1910.1200, is far less prescriptive. For example, the requirements for label contents are no more than as follows: “(i) Identity of the hazardous chemical(s); (ii) Appropriate hazard warnings; and (iii) Name and address of the chemical manufacturer, importer, or other responsible party”11. As there are no

concentration limits given in this annex are used. If the substance is not in Annex 1, or if concentration limits are not given therein, then the concentration limits given in Annex II and III of Directive 1999/45/EC are used.

8 It should be noted, however, that no formulae are given to determine effects which are carcinogenic, mutagenic or toxic to reproduction. These effects are determined solely via the concentration limits in Annex I of 67/548/EEC, Annex II of 88/379/EEC and Annex II of 1999/45/EC.

9 Directive 67/548/EEC, as amended, Annex VI, Part II, Point 9.1.

10 If EPA has issued a 5(e) consent order on a substance, it can require certain information to be included on labels and MSDSs. This is handled on a case-by-case basis. The FDA also has authority to specify labelling information, although most products under their remit do not fall within the scope of this study.

11 There is an exception: “If the hazardous chemical is regulated by OSHA in a substance-specific health standard, the chemical manufacturer, importer, distributor or employer shall ensure that the labels or other


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standard risk phrases in the US, each company is responsible for determining its own ‘appropriate hazard warnings’. OSHA requirements for Material SDS are less brief than the label requirements, but they are still far less prescriptive than the EU requirements. However, labels and Material SDS for preparations in the US must disclose the presence of any carcinogenic substances at a concentration of 0.1% or more and of any other hazardous substance at a concentration of 1% or more.

A key difference between the two systems is that EU labels and SDS only cover chemical exposure during normal use, while the US system covers chemical exposure during normal use and foreseeable misuse (encompassing a wider range of risks).

5.3.4 Progress to Date The latest information made available by OSHA indicates that they will adopt GHS for worker safety, therefore encompassing health and safety aspects of the GHS, but not environmental hazards. This is to be conducted by OSHA, for other departments focussed on consumer protection and pesticides the situation is far less transparent.

5.4 Japan As reported in Section 2, Japan’s export of chemical products to the EU amounted to around €13.7 billion in the year 2004 (with imports at around €14.5 billion), highlighting the importance of Japan as a principle trading partner with the EU in chemicals. In addition, large amounts of foreign direct investment has entered the EU from Japanese companies in recent years, making it a significant market with regard to the potential trade related impacts of implementing the GHS. Japan is a member of the Asia Pacific Economic Cooperation (APEC), which as a whole is moving towards adoption of the GHS. Information supplied by the Japanese Expert to the Expert Sub-Committee of Experts on the GHS in December 2005 indicates that the Japanese Government is working hard towards GHS implementation in 2006, the non-binding target for the APEC countries, although this may not be achievable. To date, the work undertaken in Japan has included (as reported to the 10th Session of the Sub-Committee of Experts on the Globally Harmonized System of Classification and Labelling of Chemicals, UN/SCEGHS/10/INF.12):

• information sharing among ministries with respect to relevant domestic laws and a

review of potential problems in relation to existing legislation (through a gap analysis);

• helping industry prepare for the implementation of GHS by translating the GHS document into Japanese, by discussing what measures the Government should adopt in implementing GHS;

• development of safety data sheets (SDS) under the Japanese Industrial Standards which take into account future amendments as a result of the GHS;

forms of warning used are in accordance with the requirements of that standard”.


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• commencement of work to classify the approximately 1,500 hazardous substances for which SDS are currently required based on the GHS, with this examining how classification may vary depending on judgements by experts and selection methods of data based on the current GHS;

• the development of a GHS classification manual12, which provides unified guidance for the classification work (including classification of the 1,500 substances referred to above);

• preparation of guidelines on labelling methods corresponding to the GHS; • training seminars and a public information campaign; and • research on the public awareness of the GHS, the better information transmission of

information for the blind people, investigation of the necessary experiences and knowledge for the production of the labels; and R&D into a computer programme as an education tool for the better understanding of the GHS.

The Japanese Government has also conducted a survey regarding the GHS activities in ASEAN countries as a joint project with UNITAR. The Government has also organised seminars in several Asian countries, with approximately 1,000 experts attending for training. Workshops have also been held on hazard classification. Taken together, these efforts of the Japanese Government can be seen as a major stimulus for the adoption of the GHS more generally in Asia.

5.5 Canada

Canada is another member of APEC and a key driver for harmonisation in the North American Free Trade Association (NAFTA) and is understood to be working towards adoption of the GHS in 2008. So far, the Canadian authorities have raised awareness and identified industries, agencies and laws that might be affected. Material posted on Health Canada’s website indicates that decisions will need to be made as to the hazard classes and the hazard categories within each hazard class that are adopted into the existing systems. It stresses that as the needs for regulation vary across the sectors that will be affected by the GHS, and that as long as the hazards covered by a sector are covered consistently with the GHS criteria and hazard communication requirements, the sector will be seen to have implemented the GHS. The following points are noted: • The existing requirements for consumer chemicals in Canada do not include hazard

classification and labelling requirements for skin or respiratory sensitization, mutagenicity, carcinogenicity, reproductive toxicity, target organ toxicity. Pest control products in Canada do not include hazard labelling requirements for chronic hazards but are evaluated through a risk assessment approach. The issue of chronic hazards for both consumer products and pest control products may be examined as the GHS is implemented in Canada.

12 See http://www.safe.nite.go.jp/ghs/index.html


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• The existing labelling requirements for the transportation of dangerous goods focus on acute and physical hazards. The classification criteria and pictograms used in the GHS for physical hazards are based on the UN Recommendations for the Transport of Dangerous Goods and therefore, very few changes will be required in the Transportation of Dangerous Goods Act as C&L is the same as for GHS. The GHS classification criteria for aquatic toxicity are now being considered by the International Maritime Dangerous Goods Code and the UN Sub-Committee of Experts for the Transport of Dangerous Goods, increasing harmonisation between legislation.

• Under the Workplace Hazardous Materials Information System (WHMIS), which

details classification and labelling requirements for workplace chemicals, a number of products are excluded, namely: explosive within the meaning of the Explosives Act; cosmetic, device, drug or food within the meaning of the Food and Drugs Act; control product within the meaning of the Pest Control Products Act; nuclear substance, within the meaning of the Nuclear Safety and Control Act, that is radioactive; hazardous waste; product, material or substance included in Part II of Schedule I of the Hazardous Products Act and packaged as a consumer product; wood or product made of wood; tobacco or a tobacco product as defined in section 2 of the Tobacco Act; or manufactured article. Adoption of the GHS in Canada may provide impetus for a review of these exclusions.

It is also understood that Health Canada will be looking at the costs and benefits of different options for implementing the GHS; interestingly, this may focus on the implications of including environmental labelling as such labelling does not currently exist.

5.6 Australia

The Australian Expert to the Sub-Committee on GHS also submitted an update of their activities and progress to the 10th Session of the Sub-Committee of Experts on the Globally Harmonized System of Classification and Labelling of Chemicals (Agenda Ref. UN/SCEGHS/10/INF.14) and the following text summarises the contents of that report.

Work on implementation of the GHS is proceeding across various chemical regulatory sectors in Australia, with the key sectors being workplace chemicals, poisons, agricultural and veterinary chemicals, environmental chemicals, dangerous goods transport and therapeutic goods.

In relation to the workplace chemicals sector, Australia is currently developing a new National Standard and Code of Practice. This new Standard will align existing requirements for hazardous substances and dangerous goods with the classification and labelling principles of the GHS. A new code of practice for labelling of workplace hazardous chemicals is also being developed, and this will provide guidance on labelling workplace chemicals consistent with the principles set out in the GHS. A significant issue that the Government has indicated has yet to be overcome is the development of transition requirements to move from the current regime, including the existing


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classification and labelling requirements, to the GHS while ensuring that this transition is implemented consistently across the workplace chemical regulatory agencies in each state and territory jurisdiction.

The report notes that progress towards implementation of the GHS across other chemical sectors in Australia is ongoing, but that there are issues in achieving its consistent adoption due to the use of risk-based approaches to labelling in the agricultural and veterinary chemicals sector and the poisons regulatory area.

Australia is working towards being able to implement the GHS in 2008.

5.7 South Africa

A study into the implications of implementing the GHS and the development of an implementation strategy for South Africa was concluded in December 2003 (Report to the 10th Session, UN/SCEGHS/10/INF.11). As part of this study an implementation plan was prepared under the auspices of the National Economic Development and Labour Council (NEDLAC) and co-funded and supported by UNITAR. In terms of the NEDLAC agreement, South Africa sees the implementation of the GHS as part of its chemical management system. Although currently fragmented, almost all the elements of the infrastructure for the sound management of chemicals are in place in South Africa. The following areas (among others) have been identified as requiring action: • a review of legislation and policy instruments to ensure alignment with GHS

requirements, which will be incorporated into legislation by means of a national standard;

• development of a harmonized implementation strategy that will include compliance and enforcement requirements and support to industry for the transition;

• the development of training programmes for workers; • awareness raising programmes; and • a strategy to increase the availability of test methods and to encourage the

accreditation of laboratories and potential service providers.

Interestingly, South Africa has also established a National Committee on Chemicals Safety and Management (NCCSM). Two of the aims of this Committee are to have early warnings of potential technical barriers to trade and to align national activities with international trends to facilitate trade and the protection of the South African consumer and environment. A draft South African National Standard on GHS has been prepared and is currently out for comment. This standard will be completed by middle 2006. However, the report indicates that South Africa will not meet the 2008 deadline for implementation of the GHS and will make provision for a transition period in the relevant national legislation.


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5.8 APEC and Other Countries More generally, it is understood that other APEC countries have started work towards

implementing the GHS. This includes identifying the relevant agencies, awareness raising, identifying the laws that may require changing and identifying the industry sectors most likely to be affected. Little action has been taken to date to identify the costs or benefits of implementation.

New Zealand has already introduced the GHS and is currently in transition. In a bilateral meeting between the European Commission and the Chinese authorities, it has been confirmed that China is working on the technical aspects of GHS implementation and is aiming for a target date of 2006. However, it would appear that most other APEC countries are likely to adopt the GHS in 2008, rather than meet the target start date of 2006. For example, Singapore, Malaysia and Taiwan are currently holding workshops and conducting surveys to clarify what existing legislation would be affected by the GHS.

Finally, although not an APEC country, it is understood that a joint-industry government

committee has been established within India to discuss GHS adoption. At this time, it is not clear how far work has progressed on the GHS specifically, however, as the current focus in India is on developing Responsible Care systems.


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6. RESULTS OF THE INDUSTRY SURVEY 6.1 Introduction

In order to collect information on the likely impacts of adopting the GHS on EU companies, detailed questionnaires (see Annex 1) were sent out to a small number of companies and industry associations. These were drawn from the sectors identified in Section 2 as likely to be most affected by the GHS. The aim of the questionnaires was to gain information on those variables which would potentially affect the costs and benefits realised by individual companies and hence the EU industry as a whole from implementation of the GHS. For a further discussion of the model underpinning the development of the questionnaire, see Section 7. The conclusions we have drawn from the questionnaires are presented below. In presenting the findings of the consultation, care has been taken to protect the identity of those companies that responded to the survey. For this reason, not all of the data collected is necessarily presented; however, these data are available to the Commission for validation purposes.

6.2 Company Selection and Interviews 6.2.1 Company and Association Selection The selection of companies and industry associations to be surveyed as part of this study

was facilitated by the Commission and Cefic. RPA also contacted other industry associations to gain the involvement of their members and, as appropriate, the association itself.

Because the GHS is still in the early phases of implementation, many EU companies have not sufficiently considered its potential as a source of information for business impact assessment work and associated trade impact modelling. We therefore focused on involving those companies that have already started work on, or who are currently considering, the implementation of the GHS. In practice, this has meant that there is a disproportionate involvement of larger companies compared to SMEs. The companies to whom questionnaires were sent represent members from the following sectors: • bulk and speciality chemical manufacture; • domestic and institutional and industrial cleaning products; • the paints, inks and coatings sector; • adhesives and sealants; • cosmetics; and • distributors/traders.


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6.2.2 The Interview Process and Response Rates The interview process operated as follows: • questionnaires were sent to the interviewees in December for them to consider13; they

were able to contact RPA to clarify the intention of any question or the associated data requirements in more detail;

• telephone interviews were arranged with companies willing to be re-contacted to go

through their responses to the questionnaires; any further points that companies wished to make were also be discussed at this time; and

• face-to-face meetings were held with the industry associations.

22 separate companies were sent questionnaires (in one case, questionnaires were sent to two divisions of the same company). Of these companies, six indicated that they were unable to provide sufficient information to merit their involvement. A further two indicated that they were unable to provide the data as it was commercially confidential. The end response rate for companies was 14 completed questionnaires, although none of these included answers to all of the questions. A further five companies contacted RPA in order to express their views on GHS implementation (from the coatings and photographics sector); these companies did not complete the questionnaires. Data were also collected from a pesticides manufacturer, including information drawn from experiences in relation to revised classification and labelling of substances following introduction of the Dangerous Preparations Directive (1999/45/EC). Although we approached companies specifically in relation to their production of lubricants and related products, we did not get a positive response. However, some of the companies that did respond have included such products in their overall portfolio. We also contacted companies and an association from the metals sector but did not have a positive response in time for them to participate in the study. Face-to-face meetings were held with representatives of Cefic, AISE, CEPE, and FECC; it is of note that national representatives of CEPE and FECC also provided responses to the questionnaire. EIGA provided a written response to the trade association questionnaire. CONCAWE also provided responses to the Commission to questions raised during the study.

13 It should be noted that the questionnaires were first sent on the 16 December 2005. Two companies did not

appear to receive this initial mailing and the questionnaire had to be resent in 2006; this may have affected their ability to provide a complete set of data.


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6.3 The Questionnaires Two separate questionnaires were developed: one for companies (supplying substances or mixtures either as a result of own manufacture, import from a related company or as a distributor or trader) and one for associations. The aim of the questionnaires was to collect the empirical data required to assess the costs and benefits that would arise from the GHS. This included gathering the type of information required for the trade modelling work required under Work Package 2. There were five separate sections requiring information on: 1) contact details; 2) general information (Parts A and B) on companies activities in terms of the

production, import and export of substances and mixtures); 3) current costs related to classification and labelling of substances (Part C); 4) current costs related to classification and labelling of mixtures (Part D); and 5) trade related costs associated with the provision of SDS and labelling (Part E).

The bulk of the data needed to assess the change in costs that will arise from the

introduction of the GHS are collected in Parts C and D of the questionnaire. These two sections are very similar, essentially repeating similar questions aimed at collecting the same information but separately for substances and mixtures. One reason for breaking the data collection into the two parts is that some of the detail in terms of current and future requirements under the GHS vary; in addition, as the impacts may vary across substances and mixtures, separate treatment is warranted to ensure that any differences in implications are made clear. Furthermore, some of the interviewees are involved in the production of substances and not mixtures, and vice versa. Any overlap in questions for those involved in both was addressed by companies answering both parts or by discussing differences during the interview process. Similarly, differences between manufacturers and distributors were addressed as necessary during the interview process.

The objective of these questions is to identify current sector activities in terms of product lifecycles, rates of re-classification, % of portfolio classified against different end-points and the costs of classification work. This information has fed into the development of estimates on the likely compliance costs of GHS, where this would require re-classification and labelling related activities. Details of training costs, in terms of days and staff numbers by grade, were also requested to help understand current levels of training related to the existing system. Similarly, the costs of up-dating IT systems were requested. As the costs of adopting the GHS will vary depending on the timing of its implementation and the associated transition times, industry respondents were also asked to give their views on the preferred transition periods. The final two questions in Part D of the questionnaire relate to the possible health and environmental benefits to result from GHS adoption. This includes both a general question on what these might be and details of what would be the most significant of the potential benefits.


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The trade questions (Part E) concern the possible trade related implications of moving to the GHS. They focus on export costs (including production/manufacturing costs, transport costs, marketing costs, tariff costs, non-tariff trade costs etc), C&L requirements and non-tariff trade costs (licensing costs, costs of delays due to additional testing or other requirements, legal or administrative costs etc). In addition, these questions provide some of the information required to analyse the effects of the GHS on international trade. Few companies or associations were able to give detailed responses to the above questions mostly due to their inability to separate cost data out in the way requested (in some cases within the time available), with non-tariff costs viewed as the ‘costs of doing business’. As a result, companies were sent a second set of follow-up questions aimed at identifying the potential for changes in non-tariff (SDS and labelling) related export and import costs to arise. Only a subset of the respondents answered the questions to this Part, including the follow-up questions. As a result, there are few hard data on which to base estimates of changes in trade related costs and benefits from the questionnaire returns.

The write-up of questionnaire responses provided below is organised by Part, with significant differences in response by industry sub-sector highlighted so as not to over-simplify or neglect significant variations in the C&L activities across the sub-sectors. Such variations could potentially have a large bearing on the final impacts of GHS implementation. Finally, trade association responses have been included in this reporting.

6.4 Production, Import and Export of Substances 6.4.1 Production

Table 6.1 provides an indication of the number of substances and mixtures produced per company in the different sectors considered.

Table 6.1: Number of Substances and Mixtures Produced by Sector Sector Number of Substances Produced

per Company Number of Mixtures Produced

per Company Basic Chemicals 100-1,000 0-2,000 Consumer Products 20-50 5,000-50,000 Non-consumer Products 200-10,000 1,500-50,000

The basic chemicals grouping contains respondents which mainly produce substances but may also produce mixtures. When producing mixtures, companies in this group tend to concentrate on simple mixtures of two or three substances, i.e. primary mixtures, which can be re-mixed several times before creating the final mixture. Products include petrochemicals, plastics ingredients, industrial gases, basic organics and inorganic chemicals.

In the basic chemical sector, one respondent noted that their figures for numbers of substances produced relate to numbers of ‘complex’ substances and mixtures as defined


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from a current EU regulatory standpoint. A ‘complex’ substance as currently defined relates to substances and mixtures, whose constituent parts may vary across a range. This company was concerned that under the GHS such ‘complex’ substances and mixtures might be treated differently for regulatory purposes (although the Commission has indicated that this will not be the case). Consumer product companies have a limited level of substance manufacture for their own internal purposes, with the focus instead being on mixtures. Both large branded and non-branded manufacturers will have production facilities in several (if not all) EU countries, as well as offices (while SME operators in this sector will tend to be nationally focused). The reason for the large number of facilities is because many of the products are formulated and labelled for national markets. The number of substances and mixtures manufactured are largely dependant upon the number of different product lines produced, which ranged from 5,000 to 10,000+, including different sized containers of the same product. The AISE response confirms the above figures, suggesting that, as a whole, the industry can be assumed to use one thousand or more substances and that it produces tens of thousands of mixtures.

The non-consumer products sector (including the paints, inks, coatings, pigments and dyes sectors) has the largest numbers of products on the market (around 0.5 to 1 million products) and uses large numbers of ingredients – both substances and mixtures. SMEs tend to produce a greater quantity of mixtures than the larger companies, but in much smaller volumes. They often produce mixtures to order for specific companies, on a rapid turn-round basis. Producers within this group will supply substances and mixtures in bulk or in lower volumes, depending on the nature of the end use (whether for packaging, textiles, automobile manufacturing, the construction industry, or artists materials). Companies in the non-consumer products sector indicated that they produce a significant number of substances, and the number of mixtures produced ranged widely depending on the size of company and sub-sector served. Manufacturers of inks, pigments and textiles were in the lower range of up to 10,000 mixtures, while the paints and coatings manufacturers reported the higher range figure.

6.4.2 Imports and Exports

Table 6.2 provides an indication of the importance of exports to companies in the three producing sectors considered here.

Table 6.2: Proportion of EU Production Exported by Sector Sector Exports Outside EU

(% of Production) Basic Chemicals 20% Consumer Products 10% Non-consumer Products 20%-70%

For basic chemicals, roughly 80% of production (by tonnage) would appear to be sold within the EU, with the other 20% comprised of largely Euro-Asian or Euro-African sales. In some cases, sales outside the EU are mainly to affiliated companies.


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A range of substances and mixtures are purchased from third parties and used in the end products produced by the consumer products companies, including fragrances, dyes, preservatives, and colourants and detergents. One of the companies estimates that these inputs are comprised of, or contain, approximately 2,000 individual substances. The bulk of these inputs are bought in from other companies, inside and outside the EU. For example, one of the companies imports around 30% of its inputs. Given that these products tend to have a national focus, it is not unexpected that the companies responding to the survey indicate that around 90% of output is sold to countries inside the EU with the other 10% being exported.

Export related activities are particularly important for companies operating in the non-consumer product group. Exports account for anything from between 20% to 90% of turnover, or 20% to 70% of production by tonnage. There is a wide variety of sources of chemical inputs. One company indicated that up to 75% of its inputs are imported from outside the EU, while other companies indicated that this figure was as low as 1%. In general, those companies with the lower levels of exports also had a lower level of imports. Companies acting as distributors of substances and mixtures are involved in the handling, storage and transport of chemicals. Respondents from this group include traders for both substances and of substances and mixtures, serving a wide range of sectors. The numbers of substances and mixtures traded by the responding companies ranged from around 100 substances and 30 mixtures to over 1,100 substances and 200 mixtures. The total tonnages of substances and mixtures traded by these companies ranged from over 70,000 t/y to around 400,000 t/y, taking into account both trade in the EU and worldwide. For some companies over 90% of trade was within the EU, while for other companies between 25% to 30% of their trade (by value) was external to the EU. Interestingly, the picture is equally variable with regard to the sourcing of the traded substances and mixtures. One company sources around 95% of its inputs from within the EU, while another sources around 80% of inputs from outside the EU.

6.5 The Costs of Classification and Labelling Activities 6.5.1 Annual Rates of Classification and Re-classification

Table 6.3 provides an indication of the proportion of products classified by sector and the annual rate of re-classification. It should be noted that for mixtures these figures will reflect the need to re-classify following full implementation of the Dangerous Preparations Directive (1999/45/EC) and the Detergents Regulation (648/2004).

Table 6.3: Annual Rates of Classification and Re-classification Sector % of Products

Classified Rate of Annual Re-

classification Average Lifetime of Substances/Mixtures

Basic Chemicals Not given 8% or higher 10-20 yrs Consumer Products 67-90% <10% 2-10 yrs Non-consumer Products

10-35% - 90% as an upper limit

10 to 35% 5-50 yrs


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In the basic chemicals sector, classification and re-classification work is an on-going annual activity. For some products, classifications are reviewed on an almost annual basis due to rapidly changing legislation; for other products, classifications almost never change. Approximately 90% of the re-classification and labelling activities related to products manufactured by the companies of concern, rather than those imported from either affiliated companies or other companies. In the consumer products sector, high proportions of products are classified, with products such as detergents, perfumes and hair dyes classified for irritancy and/or being sensitisers, although there will also be some that are corrosive and/or dangerous for the environment (this latest endpoint recently leading to a degree of reformulation). It should be noted that a review and re-evaluation of the classification assigned to a detergent can occur several times per year, as opposed to perfume pre-mixes which may only be reviewed every 10 years, and hair dye pre-mixes which are reviewed more irregularly (and thus generally less often). The percentages of classified substances in the non-consumer products sector are reported to range from 10% to 35% and 50% to 60% for mixtures. One company has 90% of substances classified. For a few of the companies a significant proportion of substances and mixtures are re-classified or re-evaluated each year. For others re-classification occurs every three to five years. The main drivers of re-classification work are: • changes in regulations; • the export of substances and mixtures to new markets with slightly varying

requirements; • changes in the properties of the substances or reformulation of mixtures being

marketed (e.g. which may in fact be due to regulatory requirements or customer request); and

• availability of new data and changes in the classification of ingredients.

6.5.2 In-House versus External Across all of the respondents, classification and labelling work is undertaken in-house (except for a minimum level of third party translation work), relying on the use of IT systems to produce both SDS and labels. In some cases, the label design and SDS are prepared by a central office or regional headquarters, where translations into different languages are also carried out. Changes or updates in information are input into the computer system, which automatically produces new labels and SDS. Therefore, once data has been inputted into the computer system, the re-classification of a mixture entails a minimal additional cost related to expert checks on the outputs. IT systems may be updated annually, but some of the companies have also completely replaced their systems within the last 5 years. Based on the experiences of its members,


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EIGA indicated that new releases of the classification software would vary in costs from €2,500 (for the majority of companies in this sector) to €50,000 for a small subset. CEPE notes that the cost of new IT systems could be as high as €20,000+, excluding the person-time needed to input the data. However, it should also be recognised that such systems are up-dated regularly, with one company indicating that their system is up-dated or modified between two and five times a year, depending on changes in regulatory requirements.

As classification and labelling is mainly undertaken in house, staff are trained every year to the appropriate ISO standards. For the larger companies, this may involve basic training of some 100 staff, with around 20 staff undergoing more specialist training every other year (where these tend to be more senior staff), while for smaller companies this may only be training of one individual. Staff are also trained to maintain and use the computer systems providing the basis for C&L activities. Average wages per hour were quoted as being around €150.

6.5.3 Costs of Classification and Labelling Activities

Table 6.4 summarises the costs quoted by substance manufacturers and by mixture manufacturers separately. Ranges in costs have been given to provide an indication of the variation in figures quoted by the different respondents. It is of note that the figures quoted by one of the mixture manufacturers varied significantly from those quoted by the other respondents, with these quoted in the brackets. This company also indicated that if an IT re-classification system based on the use of group-SDS should not be allowed under the GHS, then they would face significant costs in re-classifying and producing new SDS for products such as hair dye mixtures, where a group approach is applied under the current system. However, discussions with the Commission have indicated that, in their view, a group approach should be allowed in the future as there is nothing in the GHS that forbids such an approach.

The responses of distributors to the questions under this part relate to the activities covered by importation and supply of substances and mixtures. They do not classify or re-classify substances, other than to ensure that the SDS and labels provided are, to their knowledge, correct. As a result, only one of the respondents within this group answered these questions.

Only two respondents provided cost estimates at either the sector or company level. EIGA suggested that re-classifying all of the substances and mixtures supplied by a single large company would take about one man month, at an estimated cost of around €10,000 per company. Replacement of labels (banana labels covering 90% of inventory and additional body labels for special gases (10%) would cost around €15 million (50 million receptacles x €0.3 average cost). Compilation of new SDS would take around 2 man-months, at an estimated cost of €20,000 per large company; distribution of these new SDS would cost around €15 million (15 million letters x €1). Disposal of old labels if adequate time were not allowed would cost an estimated €78 million. However, it should be noted that these figures do not take into account the cost savings that would arise from implementing the GHS at least in part concurrently with REACH.


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Table 6.4: Costs of C&L Activities Substance Manufacturers € per Substance Average costs of re-classification 10,000 Average costs of labelling Not significant Average costs of revising a SDS 5,000 Average costs of a new label - Average costs of disposing of old labels - Average costs of changing labels on stocks - Average costs of distributing revised SDS 30,000 Mixture Manufacturers € per Mixture Average costs of re-classification 200 - 400 Average costs of labelling 75 - 500 Average costs of revising a SDS 100 - 1,000 Average costs of a new label 75 - 500 (110,000) Average costs of disposing of old labels 100 - 1,000 (70,000) Average costs of changing labels on stocks 500 (215,000) Average costs of distributing revised SDS 75 - 1,000 Average cost of reformulation due to stricter classification 1,000 - 30,000 (500,000) Distributors € per Substance/Mixture Average costs of re-classification 100 Average costs of labelling 400 Average costs of revising a SDS 250 Average costs of a new label 300 Average costs of disposing of old labels 25 Average costs of changing labels on stocks 35 Average costs of distributing revised SDS 50 Average cost of reformulation due to stricter classification 100

It is also of note that a company which has recently completed the re-classification of its pesticide products under 1999/45/EC provided estimates of the costs that it incurred. Across 280 products, it estimates that it spent on average around €1,655 per product in re-classifying preparations, about €500 in amending global SDS, and around €7,600 in changing the artwork of labels. The latter figure is not additional though as the changes in artwork would have been incurred regardless of the classification changes and by careful scheduling these costs were absorbed into routine operations. Consequential costs were also calculated, with the most relevant of these being Seveso related. It is of note that the costs of re-classification and modifying SDS were significantly less than the costs of submitting classification proposals to national authorities, responding to their queries and then preparing local SDS.

More generally, comments regarding costs across respondents indicated that:

• companies produce SDS in up to 25 different languages, although several also produce SDS in only one or two languages; in a few cases, SDS are sent to agents in non-EU countries for them to translate;

• provision of revised SDS due to changes in classification can represent significant

costs due to the need to check who has been sold the produce and to re-transmit the SDS to customers;


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• in addition to producing labels in different languages, multiple versions of labels may be produced to account for different size packages and different national requirements;

• re-designing labels can result in significant costs, requiring changes in artwork and

re-programming of IT systems; this can include not only re-design of the label for an individual package but also for cases used to hold smaller packages (e.g. in the consumer products sector);

• if sufficient time is not allowed for the replacement of labels and packaging stock,

significant costs can arise where consumer products are sold in containers where the label is fully integrated (printed on the cardboard/plastic or embedded within the packaging); these essentially relate to the loss of current packaging stocks; and

• the above costs may be compounded by the fact that some product tends to stay in the

market for several years (over 10 in some cases), and changes in classification and labelling requirements could result in product stock losses.

6.6 Changes in Classification 6.6.1 Classifications under the EU System

Distributors, given the nature of their activities, were unable to address the more technical questions regarding changes in classification. The FECC has indicated though that across its members there are varying views on how many substances would require re-classification. Some companies thought that the proportion could be very high (up to 70% of currently classified substances).

Table 6.5 provides a summary of company responses concerning the percentages of their

products that are currently classified against the various EU criteria. Note that these responses came mainly from mixture manufacturers. Also, the responses under the last column in the table reflect percentages across four different product types; the percentage within any given product type may reflect the lower or upper bound. As can be seen from this table, the highest percentages relate to acute oral toxicity (R22), skin corrosion (R34 and R35) and skin irritation (R36/R37/R38). These findings correlate well to the data presented in Table 4.6 for these endpoints. In interpreting these data, it should also be remembered that substances may be classified against more than one end-point (i.e. the percentages are not additive).


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Table 6.5: Summary of Responses Concerning Percentages of Substances/Mixtures Classified under the EU System Percentage of Substances/Mixtures (by company) EU Classification EU Criteria

a b c d e f g* Acute Oral Toxicity R22 200-2000 mg/kg bodyweight 15% 25% <10% X 3% 3% 2%-62% Acute Oral Toxicity R25 25-200 mg/kg bodyweight 1% <3% <1% <1% 0%-2.4% Acute Oral Toxicity R28 0-25 mg/kg bodyweight 0% <1% <0.1% <0.1% 0% Acute Dermal Toxicity R21 400-2000 mg/kg bodyweight 1% <1% X <1% <1% 0%-9% Acute Dermal Toxicity R24 50-400 mg/kg bodyweight <0.5% <1% 0% 0%-0.9% Acute Dermal Toxicity R27 ≤50 mg/kg bodyweight 0% <1% 0% 0% Acute Toxicity (Aerosols & particulates/Dusts/Mists) R23

0.25-1 mg/l 4hr 2% <1% <0.1% 0% 0%-0.9%

Acute Toxicity (Aerosols & particulates/Dusts & Mists) R26

0-0.25 mg/l 4hr <0.1% <1% 0% 0%

Aspiration Hazard R65 ≤33mm²/s viscosity <0.1% <1% X 0% 0%-5%

Skin Corrosion R34 3 minutes – 4 hours exposure 4% <5% 1% 1% 0%-2% Skin Corrosion R35 Less than 3 minutes exposure 1% <3% 0% 0%-1% Skin Irritation R 38/R36/R37 Irritation/Mild Irritancy 14% 15% 15-30% X 7% 7% 0%-70% Carcinogenicity R45/R49 0.1% Cut off value triggering classification

due to impurity 1% <1% <0.1% <0.1% 0%

Carcinogenicity R40 1 % cut off value triggering classification due to impurity

<0.1% <1% <1% <0.1% 0%-0.6%

Reprotoxicity R60/R61 Cut off value of 0.5% triggering classification due to impurity

0.5% <1% 0% 0%

Reprotoxicity R62/R63 Cut off concentration value of 5% triggering classification due to impurity

0% <1% 0% 0%-0.4%

Note: * Numbers reflect the fact that the percentage affected varies across different products produced by the responding company. Figures given for four product category types. See Annex 2 for further discussion.


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6.6.2 Anticipated Changes in Classification of Mixtures Tables 6.6 and 6.7 provide responses concerning the numbers of mixtures that companies predict would be classified under the different core GHS criteria and the four main optionalities. It is of note, that one of the respondents (column g) ran a sub-set of their mixtures through the GHS in order to provide these predictions. This company estimated that the following changes would occur (based on the GHS standardized approach and) for detergent marketed products with a move to GHS: • around 5% of mixtures currently classified as irritant (R35 and R 34) would be

classified as corrosive; • around 58% of mixtures are currently classified as R38 (skin corrosion/irritation), but

under the GHS around 94% would be classified as skin irritant category 2 (based on an assessment of approximately 200 detergent formulations); and

• by moving to GHS, 98% to 99% would be classified as skin irritant/corrosive or irritant category 2 rather than R38.

Should the four main optionalities be adopted, these would result in the classification of the following additional numbers of mixtures manufactured by this company: • acute oral toxicity category 5: 75% of detergent marketed products, 5 to 15% of

perfume pre-mixes’ and over 30% of hair dye pre-mixes; • acute dermal toxicity category 5: between 10 and 30% of detergent marketed

products and some unknown percentage of hair dye pre-mixes; • skin irritation category 3 (mild irritation): around 1.5% of detergent marketed

products and 10% of hair dye pre-mixes (estimated); and • eye irritation (category 2b): around 10% of hair dye pre-mixes will be split into

category 2b (compared to all of these substances being classified as R36). Given the above, this company expects the majority of its mixtures to have a more severe classification under the GHS. This company notes that where a ‘new classification’ would be introduced this can have a range of knock-on effects, leading to additional costs. Under the DPD, some classifications can lead to specific packaging requirements, can limit the claims which may be made on consumer products and can force industry to submit information related to health to authorities such as Poison Control Centres. In addition, changes in classification can obviously have impacts on a company’s regulation under other classification-based legislation, (but as noted in Section 4, this issue is being addressed by the Commission separately from this study).

The above company reflects the consumer products sector, while the other responses provided in the table reflect non-consumer products. These non-consumer product companies’ predictions (columns c to f) vary significantly from the consumer product company’s. In particular, Table 6.6 highlights their general concerns over shifts in classification with regard to acute oral and dermal toxicity. These companies also have greater concern over the introduction of the optional categories with regard to skin and eye irritation (see Table 6.7).


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Table 6.6: Summary of Responses on the Percentage of Mixtures Falling under Different GHS Classifications Percentage of Mixtures Changing Classification from EU to GHS GHS Classification Criteria

EU Category

c d e f g Acute Oral Toxicity Cat.2 5-50 mg/kg bodyweight R28, R25 Not relevant >30% >30% 0% Acute Dermal Toxicity Cat.2

50-200 mg/kg bodyweight R27, R24 Moderate >30% >30% 0%

Acute Dermal Toxicity Cat.3

200-1000 mg/kg bodyweight R24, R21 Not relevant X >30% >30% 0%

Acute Toxicity (Dusts/ Mists) Cat. 2

0.005-0.5 mg/l R26, R23 Not relevant 0 0%

Aspiration Hazard Cat.1 20.5 mm²/s viscosity R65 Not relevant X 0 0% Aspiration Hazard Cat.2 14 mm²/s viscosity R65 Not relevant X 0 0% Skin Irritation/Corrosion Cat.1 (3 Categories)

R35, R34 Moderate X >30% >30% 5%

Skin Irritation/Corrosion Cat.2

R38 Not relevant >30% >30% 94%

Skin Irritation/Corrosion Cat. 3

R38 Not relevant >30% >30% 98-99%

Carcinogenicity Cat.2* cut off value 1% triggering classification due to impurity option to lower to 0.1%

R40 Not relevant 0 0%

Reprotoxicity Cat.1 A/B* ≥0.3% Cut off concentration /value triggering classification due to impurity option to lower to 0.1%

R60, R61 Not relevant 0 0%

Reprotoxicity Cat.2* ≥3 Cut off concentration/ value triggering classification due to impurity option to lower to 0.1%

R62, R63 Not relevant 0 0%

* Note: The GHS includes a similar paragraph as in the DSD Annex VI 1.7.2.1; 1.3.3.1.3 …. Note also that where impurities, additives or individual constituents of a substance or mixture have been identified and are themselves classified, they should be taken into account during classification if they exceed the cut-off value/concentration limit for a given hazard class.


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Table 6.7: Summary of Responses on the Percentage of Mixtures Affected by GHS Optionalities

Percentage of Mixtures Affected New Classification GHS Criteria a b c d e f g

Acute Oral Toxicity (GHS Cat 5)

2000-5000 mg/kg bodyweight 75% 20% >50% 30-40% 30-40% 5-75%

Acute Dermal Toxicity (GHS Cat 5)

2000-5000 mg/kg bodyweight - 20% Not relevant

30-40% 30-40% 10-30%

Skin Irritation (Addition to GHS Cat 3)

Substances <1.5 (Mild Irritation)

- - 20-50% ? 40-50% 1.5 ->10%

Eye Irritation (GHS Cat 2.b) Mild Irritation - - 20-50% ? 40-50% >10%


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6.7 Transition Periods

In relation to transition periods, multinational companies whose main activity is substance manufacture indicated that resource issues are not likely to be significant. However, it is recognised that SMEs may experience difficulties, depending on the timing of the GHS vis a vis REACH. This resulted in a preference for a transition period concurrent with REACH; although the substance manufacturers also recognised that planning could be very complex and would need to be scheduled so as to address families of products. One of these respondents indicated that they would expect to face twice the costs of implementing the GHS if the transition period were three years for substances and five to six years for mixtures rather than the longer 11 year REACH timeframe. Mixture manufacturers expressed differing views on the preferred transition periods for GHS. Some argued for implementation alongside REACH, while another set preferred simultaneous implementation of GHS alongside REACH for substances followed by a further six years for mixtures. This set of companies would want to minimise the complication of operating two systems at the same time and, given the large number of mixtures involved, would prefer a transition period that compensates for the extra time needed in addition to REACH. Others however argued for a shorter implementation period for both substances and mixtures, for example a 3 to 6 year transition period for substances followed by a further 6 year period for mixtures (this was also the second best option for several of the respondents indicating a first preference for 11 years for substances plus a further five or six for mixtures). A few companies highlighted that implementation of the DPD after the Dangerous Substances Directive, with a further three year implementation period for preparations was a good model. The key issue for mixture manufacturers is ensuring that industry has enough time to make the necessary changes while avoiding any duplication of efforts and unnecessary work. They argue that this would only be achieved if the re-classification of substances was undertaken first. The importance of an adequate transition period for mixtures was also stressed, to allow consumer product manufacturers to have an adequate period to adjust labels and clear stock. CEPE also noted the importance of sensible enforcement – not prosecuting companies who cannot complete classification because their suppliers have been late providing information. Again, the response of other countries to GHS introduction, including the transition period over which implementation will be required may have a significant impact on EU exporters’ activities. This resulted in some respondents identifying the need for the EU transition period to be in line with global adoption. However, it was also argued that the GHS should not be implemented in the EU well ahead of the transition periods set in other countries (e.g. US and Asia), as this would not generate anticipated internal business savings.

The FECC notes that the key issue for its distributor membership is the transition period

for GHS implementation. Several of its members believe that 17 years is too long. Many also argue that, in practice, most of the work will be carried out in the first few years of


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implementation, although other believe the converse is true – that manufacturers will wait until the last minute. This issue is a key concern for small companies as they will have to learn about the GHS (with most not having dedicated HSE staff), and in many cases may have to rely on external consultants. In contrast, larger companies will carry out the work centrally at lower cost.

In any case, for FECC members the market is more important than the legislation. If a company has sufficient market power to demand that a supplier complies with GHS in order to ensure it can sell its’ product, the supplier will do so. Similarly, if a customer demands GHS immediately, companies will do their best to provide it. The problem arises when suppliers are in a position of strength and will not provide GHS data until the last minute even though downstream customers demand it immediately. (Suppliers can be very variable – as shown by the Preparations Directive – some respond very quickly and others wait until the last minute).

All respondents agreed that there must be different timescales for substances and preparations, in order to guarantee that substances are classified before the preparations/mixtures deadline. Problems will arise for preparations when a single low-volume substance is not classified under GHS until the last minute, with this then delaying re-classification of the preparation as a whole, even if all other constituent substances are already covered by GHS. Unless the regulation makes it clear that there are different compliance dates for mixtures, deadlines will not be met and customers are likely to demand GHS data for preparations as soon as possible.

6.8 Advantages and Disadvantages of GHS 6.8.1 Trade Impacts

The trade impacts arising from the GHS in terms of reductions in the non-tariff barriers represented by classification and labelling requirements are discussed in more detail in Section 6.9 below. However, many companies made more general comments regarding trade related issues and the perceived advantages and disadvantages of the GHS. In many cases there are contradictory views as to the impacts that GHS may have on trade. These are summarised in Table 6.8 below. Table 6.8: Perceived Advantages and Disadvantages of GHS Advantages Disadvantages • Greater clarity and consistency for C&L

requirements worldwide would bring long-term benefits for companies wishing to enter into worldwide markets

• It would address the current situation where non-EU products with poor/unacceptable labelling are unable to enter EU

• Rationalisation of C&L activities for global companies

• Nature of the market and confidentiality would make it difficult for EU companies to challenge the classifications provided by suppliers outside the EU if they suspected that different suppliers had classified substances differently

• The advantage of providing greater clarity and consistency worldwide may be offset by increasing competition

• There is the potential for the GHS to result in a disproportionate regulatory burden on SMEs


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It is suggested by respondents that consistency in implementing the GHS (in both the nature of implementation – minimising the use of the ‘building blocks’ approach and harmonising the timing of introduction) is essential for ensuring that the advantages are realised. For example, if local labelling rules still apply (and a requirement for additional labelling is permitted under GHS), the benefits of reducing the need for local expertise will be lost. However, one company indicated that it has frequently had to review and modify the SDS provided by certain suppliers, as the information provided was not correct. Although this is more an issue of compliance, if the GHS results in the cessation of such anomalies then significant cost savings could be realised. However, the company expected only limited savings, as they would continue to undertake their own data collection to ensure that they had the information required to ensure that the products they supplied would be used safely. Overall, there was a general view that that there would be no significant benefits from moving to the GHS as the EU system is already a globally recognised classification system, which is harmonised where the majority of sales occur. However, as discussed later, this view assumes that EU C&L would continue to be accepted in the future even though other countries will have moved to the GHS. It is not clear why this should be the case given the momentum that has grown concerning the adoption of the GHS internationally and the strong likelihood that key chemicals manufacturing countries will be moving to it; rather it would seem more likely that the failure for the EU to adopt the GHS could have impacts on costs to both EU imports and exports.

6.8.2 Environmental and Health Impacts With regard to benefits, it was considered that environmental and health gains would only be realised in those countries that do not currently have any C&L requirements. The health benefits would be greater than the environment benefits, as the GHS should help users better discriminate between endpoints such as toxicity and carcinogenicity. Conversely, other companies considered that the GHS may not result in health benefits as the potential increase in the number of products that are labelled may result in people no longer responding to labelling, even in those cases when it is very important that they do so. Furthermore, it was considered that a change in the labelling of a product under an existing category will be difficult to explain to customers who are not chemists/toxicologists and who may not understand that the new label does not signify any change to the risk posed by the product. Some respondents also expressed the concern that the level of protection to consumers would decrease if a risk-based approach to labelling on consumer products was not adopted. (Risk based labelling under GHS is not harmonised it is included in an Annex and is only possible for chronic effects such as CMR, but not for acute effects such as acute toxicity and skin irritation. It is based on the Consumer Protection Safety Guidelines of the US). These respondents argued that the new information (particularly if the new classes for acute toxicity Cat 5 and skin irritant Cat 3 are adopted) may well confuse consumers and increase anxieties over many household products.


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6.8.3 Consumer Sales Impacts

Respondents noted that changes in labelling could have the following disadvantages in relation to consumer sales: • a product may become unacceptable to retailers due to a new classification, which

may give rise to consumer perceptions of increased health and environmental risks; • consumers often have adverse reactions to unfamiliar or uncharacteristic symbols or

text appearing on products, therefore, retailers (and other professional customers) prefer products that require as little labelling as possible;

• customers (such as major retailers, electronics manufacturers, etc.) may also have purchasing rules that prohibit products bearing certain classifications; and

• retailers may demand reformulation to ensure that they are not selling under their own brand names more severely classified products than are being sold by branded product manufacturers.

In such cases, it is suggested that the potential loss of markets could far outweigh the direct costs of GHS. However, the impact on markets are impossible to assess at this stage.

6.8.4 Existing Portfolio and Stock Two potential disadvantages were identified in relation to the impacts on existing

products:

• all substances and mixtures in a company’s portfolio will have to be examined to determine if a change is needed to meet GHS (this will include currently non-classified substances, particularly if the optionalities are included within the EU Regulation); and

• ensuring that products leaving the factory after a certain date comply with GHS is

very different from ensuring that all products on customers’ shelves are compliant by that date. Products such as paint can have a very long shelf-life, especially in small retail outlets, and recalling and re-labelling products already in retail outlets would be very costly.

6.9 Impacts on the Costs of Trade As indicated above, respondents import significant percentages of substances and

mixtures from a range of different global suppliers. The reverse is also true with regard to exports. For example, companies within the survey export to as many as 70 countries, with the number of substances/mixtures exported ranging from one to 60 per country. The upper ranges of these figures apply not only to distributors but also to manufacturers of mixtures.

Not all companies answered the questions on the trade impacts that are likely to arise

from the GHS. The view expressed by some is that because the EU C&L system and the


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associated SDS are currently accepted by most non-EU countries, and due to the ability of current IT systems to classify and label for many international destinations, the benefits of harmonisation are likely to be small.

Companies did note, however, that there are some differences in requirements across

countries. For example, the US was identified as having potentially more onerous C&L requirements. In contrast, with the exception of Switzerland and Japan, all other countries were indicated as having less onerous C&L requirements than the EU (with Israel and Australia being rated at a level below the EU but more onerous than the remaining countries). Differences in requirements were also noted, for example, there has been a requirement for full ingredient labelling in Russia for a number of years.

Although, companies indicated that the benefits would be small, the following examples highlight the potential savings in trade related costs that could be realised: • One respondent indicated that there is an approximately ten-fold increase in the costs

of understanding, complying and monitoring changes in C&L across the countries that it exports to. Across the various countries these equate to: €1,000 to €10,000 for understanding C&L requirements; €3,000 to €20,000 for complying with C&L requirements; and €1,000 to €10,000 for monitoring changes in C&L requirements.

• A company that exports to over 70 countries around the world indicated that non-

tariff trade costs account for around 5% of total costs. The costs associated with understanding and monitoring C&L requirements in a country with a less onerous system were estimated at about €400 per annum, while those associated with the same activities in relation to the US were estimated at about €80,000 per annum. The company estimated that it currently expends around €100,000 per annum because of non-harmonised systems around the world.

• Other companies note that there would be trade benefits if the need to re-label

imported products was reduced, but they were unable to attach a figure to such benefits. Similarly, companies indicated that if the introduction of the GHS improved the quality of the data that they receive from overseas suppliers, then significant cost savings could be realised. For example, one company currently incurs costs of around €80,000 in collecting additional information or correcting information provided on the substances it imports for trade purposes.

• One of the companies provided data on non-tariff trade costs, sub-divided into C&L

related requirements, legal or administrative costs and Agents fees or commissions. Applying the percentages given suggests that approximately 0.3% of the total costs of sales relate to C&L requirements. This respondent indicated though that they can also incur a similar level of non-tariff trade costs on sales to other EU countries and their domestic market.

A company also expressed concern that non-tariff trade costs may increase under the

GHS due to other countries implementing their own version of the GHS which EU companies would have to comply with, rather than accepting EU C&L as is now the case. However, arguments such as this, in our view, fail to recognise that the development of


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the GHS has prevented countries in Africa, Asia and the Middle East from developing their own systems which may or may not have been based on the EU’s approach.

Several companies indicated that in the short- to medium-term (say 10 years),

implementation of the GHS may increase the costs of trade as countries move to its adoption; however, they also recognised that in the longer term, trade transaction costs should reduce. The most significant advantage of the GHS over time would be the uniform classification of substances and mixtures worldwide (assuming consistent implementation globally) and the consequent reduction of re-classification and re-labelling for international trade purposes; this in turn would lead to an increased recognition and understanding of labelling for end users over time. However, in order to minimise the short-term costs of achieving these longer term benefits, adoption in the EU should be coordinated with the timing of implementation in other countries.

All of the companies that contacted RPA to register an opinion expressed the view that there will be some reduction in the costs of exporting, and in the costs faced by their affiliates located outside of the EU in meeting import requirements.

Finally, another respondent indicated that their company would realise no trade benefits,

indeed the converse would be true. GHS implementation would provide an opportunity for less competent companies to enter the EU market and to sell similar products at a lower price. The counter argument by downstream users though is that should the entry of new sellers into the EU market result in reduced prices for chemical inputs, the net effect for the EU should be positive (although for any individual company it may be negative).

6.10 Further Issues 6.10.1 Lack of True Harmonisation

There is a concern that different suppliers of substances may classify their substances differently. Companies commented that the GHS enables substance manufacturers to classify substances based on the information available to them and that there is no requirement to take account of data from other countries (e.g. data produced in the EU under REACH). The above is a particular concern of mixture formulators, because they source ingredients from all over the world. They argue that it will be very difficult for them to challenge the classifications provided by suppliers outside the EU, because of the nature of the market and (for ingredients which are mixtures) confidentiality over the precise composition. However, the Commission notes that, in contrast to the above interpretation, their understanding is that all available data need to be taken into account. Furthermore, the above arguments fail to recognise that a C&L Inventory is to be created under REACH, and that there will be public access to this inventory. As a result, the C&L for substances submitted to the Inventory (and as updated over time) will be available to those outside the EU and is likely to act as a de facto global reference source.


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Companies also expressed concern over the degree to which there will be agreed lists of classifications under the GHS as there is under the current EU system. All of the trade associations indicated that they would very much welcome such a list and understand that the EU is planning an equivalent of Annex 1 in the GHS implementing regulation. The associations would like to see such lists incorporated into the GHS book for international recognition, as has happened for the Transport of Dangerous Goods. Again, it is our understanding that such a list, as laid down in REACH Article 112 will focus on CMR and respiratory sensitisers and other endpoints on a case-by-case basis where actions at a community level are justified. The C&L of the other endpoints will be registered in the Inventory described above.

6.10.2 Impacts on Downstream Regulations

From across the sector groupings, respondents expressed concern about the level of understanding in the Commission of the impacts on downstream legislation of changes in classification under GHS. This applies not only to the Seveso Directive, but also to IPPC BREF notes (for example the BREF note on storage facilities), etc. If a change in classification means that a site comes under the Seveso Directive, there is a major burden as a completely new risk assessment will be needed. Respondents believe that the number of substances included under the Directive will increase dramatically. There are also implications for national legislation, for example the German rules for storage of toxic and oxidising substances, which could mean that site permits have to be changed. The transition period is a key issue; if GHS and the current system are to run in parallel, then there is an issue as to which will drive the inclusion of companies under the Seveso Directive. Clarity is vital for local enforcement – there have been issues in the past regarding differences between labelling requirements for transport and for storage.


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7. THE COSTS OF GHS IMPLEMENTATION 7.1 Overview

This study has examined the costs of GHS implementation in the EU and, in particular, the difference in costs associated with different options for the timetabling of GHS alongside REACH. An overview of the model and assumptions used for these purposes is provided in this Section; a more detailed description of the assumptions and methods used is provided in Annex 2. In analysing the influence of REACH on the costs of adopting the GHS, one of the most significant factors is the timing of the data outputs from registrations under REACH and how this interacts with the classification and re-classification activities necessary for GHS implementation. Another significant consideration is the extent to which requirements for Safety Data Sheets (SDS) under REACH align with those for the GHS. Using a simple example, if the GHS is introduced before the registration of a given substance under REACH, then there is the potential for the classification of that substance to change once all of the required information has been collated and analysed for a REACH registration. This may lead to an inefficient use of resources, as any earlier work on the classification of that substance under the GHS (i.e. before the REACH registration) may need to be repeated in the future. In addition, any changes in the classification of that substance may also have an impact on the classification given to a mixture that contains it. In this respect, because by definition mixtures contain more than one substance, mixtures are more susceptible to changes in the classification of their constituents due to new information coming from REACH registrations. This is exacerbated by the fact that mixtures may contain two or more substances registered under different annexes of REACH (and hence to different time periods). In order to understand the interplay between REACH and the GHS (and associated timing and cost apportionment issues), it is worth reviewing the requirements of REACH and how they overlap with those of GHS.

7.2 The REACH Baseline 7.2.1 Key Duties under REACH

The REACH Regulation places a series of duties on manufacturers and importers of substances and preparations (mixtures). In the context of GHS, the most relevant of these duties include: • the registration of substances including the provision of a registration dossier; • requirements concerning the preparation of safety data sheets and the supply of these

to downstream users;


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• duties on the communication of information down (and up) the supply chain for substances and preparations; and

• provisions concerning the establishment of a harmonised classification and labelling inventory at the Community level for certain substances.

Each of these sets of duties is described in more detail below followed by a discussion on their implications for analysing the impacts of the GHS.

7.2.2 Registration of Substances

REACH requires the registration of substances manufactured or placed on the market, on their own, in preparations or in articles where these meet certain criteria14. A range of information is to be provided for registration purposes, with this including a technical dossier setting out the classification and labelling of the substance together with a chemical safety report where required. Technical dossiers are to include data on the physicochemical, toxicological and ecotoxicological properties of a substance, in accordance with information requirements that vary by tonnage. Chemical safety assessments (CSAs) are required for all substances manufactured or imported in quantities exceeding 10 t/y per manufacturer/importer. The CSA is to be documented within a Chemical Safety Report and is to include an assessment of human health hazards, physicochemical hazards, environmental hazards and a PBT and vPvB assessment. Should these assessments indicate that a substance meets the criteria for classification as dangerous in accordance with Directive 67/548/EEC, or is assessed to be a PBT or vPvB, then the chemical safety assessment is to include an exposure scenario and a risk characterisation. CSAs do not need to be prepared, however, for a substance which is present in a preparation if the concentration of that substance in the preparation is less than the lowest of: • the applicable concentrations defined in Article 3(3) of Directive 1999/45/EC, as well

as the concentration limits given in the respective Part Bs of Annexes II and III; • the concentration limits given in Annex I to Directive 67/548/EEC; • the concentration limits given in an agreed entry in the classification and labelling

inventory established under Title X; and • 0.1% by weight if the substance meets the criteria in Annex XII. The timing for the submission of registration dossiers varies by tonnage and properties. Substances which must be registered within three years of the Regulation coming into force include those classified as CMR categories 1 or 2 manufactured or imported at 1 t/y or more per manufacturer or importer, those classified as very toxic to aquatic organisms manufactured or imported in quantities of 100 t/y or more per manufacturer or importer,

14 Based on the current agreed text these criteria are as follows: for substances, those manufactured or

imported on its own or in a preparation at greater than 1 t/y per manufacturer or importer (or in the case of an importer in one or more preparations); for articles, the criteria relate to whether the substance is present in those articles in quantities totalling over 1 t/y per manufacturer or importer and whether the substance is intended to be released under normal and reasonably foreseeable conditions of use.


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and substances manufactured or imported at 1000 t/y or more per manufacturer or importer. A period of six years applies to the remaining substances manufactured or imported at 100 t/y or more and a period of 11 years applies to all other substances manufactured or imported at 1 t/y or more. In addition, the currently agreed text sets out rules for data sharing as part of the registration process, with this based on the principle of ‘one substance, one registration’. These rules require registrants to share the test and other information required in a technical dossier through participation in a substance information exchange forum (SIEF). One of the aims of SIEFs is to facilitate the exchange of data but, more importantly in the context of this study, an aim is also to agree the classification and labelling of a given substance. Finally, registrants must update their registrations if they gain any new knowledge on the risks of the substance to human health and/or the environment which leads to changes in the safety data sheet or the CSR and to any changes in the C&L of the substance.

7.2.3 Provision of Safety Data Sheets When substances or preparations meet the criteria for classification as dangerous in

accordance with Directives 67/548/EEC and 1999/45/EC or meet criteria for being a PBT or vPvB, then the supplier of that substance must provide a safety data sheet (SDS) to those he/she supplies. In the case of preparations, those supplying the preparation may provide an SDS for the preparation in line with a chemical safety assessment carried out for that preparation, rather than providing SDS for the individual substances within that preparation.

When a preparation does not meet the criteria for classification as dangerous under

Directive 1999/45/EC, but contains at least one substance posing health or environmental hazards above certain thresholds15, then the supplier shall provide downstream users with a SDS. When a SDS is not required to be supplied for a substance on its own or in a preparation (e.g. because it present at levels below the thresholds), then the supplier must still provide information on the registration number of any substance that is subject to authorisation or restrictions.

SDS are to provide a range of information including physical and chemical properties,

stability and reactivity, toxicological information, and ecotoxicological information. SDS are to be provided on paper or electronically at the latest at the first time of delivery for a substance or preparation. Furthermore, suppliers will be required to update their SDS without delay once: new information which may affect risk management measures becomes available; an authorisation has been granted or refused; or a restriction has been imposed.

15 By weight at >1% for non gaseous preparations or at >0.2% by volume for gaseous preparations.


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7.2.4 Information through the Supply Chain Downstream users have obligations to prepare a CSR for any uses of a substance on its

own or in a preparation that are outside the conditions described in the exposure scenario communicated to him in a SDS. However, he need not prepare a CSR if the substance is present in a preparation in a concentration lower than those set out above in Section 7.2.2 (i.e. Article 13(2) of the Regulation).

7.2.5 Classification and Labelling As indicated above, one of the aims of SIEFs is to agree on the classification and

labelling of substances, although the harmonisation of the C&L of substances is not mandatory for those substances that are not placed on Annex I of Directive 67/548/EEC. However, it is expected that differences in classifications will disappear over time through cooperation or EU harmonisation (for CMRs and respiratory sensitisers). The creation of an Inventory of the C&L of substances under REACH is expected to assist in this process, with non-confidential data being publicly available. Notification to the Inventory is within three years after entry into force of the Regulation for all substances that meet the criteria for classification as dangerous.

7.3 Implications of REACH Baseline for Assessing the Impacts of GHS 7.3.1 Inter-relationships between REACH and GHS

There are several implications of the above requirements in terms of the costs that should be attributed to REACH and those that would be attributable to GHS. Firstly, it is important to recognise that all substances and mixtures are currently self-classified16 or subject to harmonised classification under Directives 67/548/EEC. REACH will have the effect of companies re-classifying both substances and mixtures should the further information generated through the registration process indicate that the existing classifications are not correct. As substances are registered under REACH, therefore, manufacturers and importers will review the C&L of them. Such reviews will take place whether or not the GHS is implemented in the EU. Thus, any overlap in the transition period of GHS with REACH should mean that there are no additional costs to manufacturers and importers as the GHS C&L can be undertaken at the same time as the REACH registration. New toxicological data generated by REACH would need to be entered into companies’ IT systems, as well as new labels designed and printed whether the GHS were in place or not. Similarly, REACH places obligations on manufacturers or importers of mixtures to provide SDS for their mixtures (based either on the substances within them or for the

16 As some of the companies participating in this study have noted, industry associations may also have

programmes aimed at harmonised C&L within a sector; an example, of this is the initiative that has been operating in the photographic sector for several years aimed at the harmonised C&L of photographic substances and mixtures.


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mixture itself) where they would be classified as ‘dangerous’ under the existing system; they also have an obligation to up-date these SDS once new information becomes available which would affect risk management. Again, this means that as REACH generates new information which results in a revised C&L of a substance, mixture manufacturers and importers would need to respond to this by checking whether the new C&L of the substance would also revise the C&L of their mixtures and, if so, would need to provide up-dated information in their SDS and a revised C&L. Thus, there will be a level of repeat C&L activities under REACH regardless of GHS implementation. Nevertheless, one would expect that the differences between the GHS system and the existing system which will be carried forward under REACH may result in some review and additional re-classification work for mixture manufacturers. For those substances where it is required, the CSA and SDS prepared under REACH will provide detail on toxicological properties, which should be sufficient for manufacturers of mixtures to carry out GHS classification. Where a CSA is not required (e.g. for the < 10 t/y substances), the data for mixture classification may be limited (although the GHS provides a means of accounting for ‘unknown’ substances and information about the classification of marketed substances below 1 t/y will be in the Classification and Labelling Inventory).

7.3.2 Identification of the Additional Costs of GHS Based on the above comparison, the costs arising from implementation of the GHS relate only to those actions that would be required of companies and that are additional to what would occur under REACH implementation. These can be divided into two types. The first type is those cost elements that are truly additional to REACH (i.e. costs that would not be faced in the absence of the GHS). These include: • costs of installing new computer/IT systems for the purposes of automated

classification and labelling (unless such IT systems are designed to address both REACH and GHS requirements, such that the latter has no additional cost);

• costs of any training that would be required specific to GHS over and above that undertaken annually under the existing system;

• costs of re-designing and re-printing labels (but only where REACH would not have otherwise required this); and

• costs of any stock losses that may arise due to an inadequate transition period; and • reductions in the costs of C&L activities as part of international trade. The second type of costs relates to those cost elements that, though they may also be part of REACH, could potentially be duplicated (or be faced earlier) in some circumstances due to the misalignment of timetables between REACH and GHS (for example where an earlier GHS classification needs updating because new information comes to light during the REACH registration). These costs include the following: • costs associated with the classification of a substance or mixture and/or the review of

classifications; • costs of preparing revised SDS and of distributing these;


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• costs of re-designing and re-printing labels; and • costs of changing labels on stocks and disposing of labels or labelled packaging.

7.3.3 GHS Implementation Scenarios

As discussed in Section 6, the questionnaire used to elicit information from companies and associations asked respondents to indicate their preferences for different transition periods. This included transition periods based on the REACH timeline for the registration of substances, extending beyond the REACH registration timeline and shorter than the timeline allowed for under REACH. The responses to the questionnaire indicated that preferences vary greatly from those that would prefer a longer period to those that would prefer a much shorter period; no respondent preferred a transition period for both substances and mixtures that coincided with the 11 year timeline for registration under REACH. After further discussion within the study and team and with the Commission, it was decided that this Work Package would consider three scenarios in detail. These are summarised below. A fourth scenario was initially considered but after further consideration of its legal and political implications, it was excluded from this analysis. This scenario assumed an eleven year transition period for substances (in line with the timeline for the registration of substances under REACH) followed by a further six years for mixtures. There were several reasons for excluding this scenario, including economic, legal and political. Most importantly it has been agreed that the scenario is legally and politically infeasible. The economic argument against such a long transition period relates to the need to run and maintain dual C&L systems for a lengthy period of time. Discussions with one of the main EU C&L software manufacturers (Safeware, pers comm., 2006) found that in terms of transition periods, there should be no significant costs associated with running a dual IT system capable of providing both GHS and EU data. The database of information will be the same and users will be able to choose what output they want (GHS or EU) whenever they want using the same system and software. However, if the EU system has to be maintained over a lengthy transition period, requiring on-going updates after GHS is introduced, then this would be likely to present very major problems. Not only would it cost users a lot to review products in response to any up-dates, but the costs associated with the confusion that this would cause are inestimable. In the software manufacturer’s view, the most practicable way to proceed would be to move to the GHS system over a reasonable transition period and build in the capability to produce data sheets, etc. according to both systems and read across between the two. Not only would a lengthy transition period lead to such confusion for substance and mixture manufacturers, but it is also likely to increase confusion for industrial and professional users and consumers. Realistically, an industrial or professional user may be put in the position of working with a range of chemicals, some of which carry a GHS C&L while others which quite legitimately carry an EU-based C&L. This is due to the differences in the timing of when substances in different tonnage bands would have to meet GHS requirements and the overall length of time over which substances would have


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to meet the requirements; adopting the same assumptions as for the REACH BIA, most low volume substances would not have a GHS C&L until towards the end of the 11 years. It is also due to the fact that, if mixture manufacturers want to minimise costs, they will not undertake the C&L of their mixtures until after the end of year 11. Thus, until the end of year 17, this scenario cannot guarantee to result in the consistent provision of information across both substances and mixtures, and does not adhere to ‘good regulation’ requirements for legal certainty. The above is also likely to increase the level of effort that Competent Authorities would have to put into enforcing the GHS, particularly in relation to mixtures. In our view, it could lead to considerably higher enforcement costs than would arise under the other scenarios and could essentially become unworkable in light of the likelihood that the GHS will be adapted over such a long period of time. The long transition period may also result in an uneven playing field within the EU, as some customers (i.e. retailers) may demand the earlier adoption of the GHS by their mixture manufacturers than required by the GHS Regulation; similarly, those companies that export substances and mixtures will be incurring the costs of the GHS in very different timeframes than those EU companies that do not. This could give rise to inequities within the EU market itself. It is also expected to result in trade with the EU being less attractive for those countries that have moved to the GHS more quickly, negating some of the overall trade benefits of adopting the GHS (see also Working Package 2 which highlights the significant losses in trade that are predicted to result under such an extended transition time Scenario). In addition, given the political and technical involvement of Member States and the Commission, EU trade associations (including Cefic, CEPE, AISE, EIGA, Concawe, Eurometaux, etc.), and EU companies in the various UN meetings, adoption of such a long time period would result in a lack of political credibility. As noted in Section 5, other countries/jurisdictions are already moving to adopt the GHS and will be doing so under much shorter transition periods than 17 years. In our view, adopting a 17 year period would put Member States and the Commission in a difficult position in terms of further negotiating the technical detail of the GHS. It is also likely to reduce the overall credibility of the GHS, at least in the short term, which could result in its adoption becoming fragmented globally. Such fragmentation could also have significant costs to EU chemical companies and the EU more generally, increasing the costs of international trade and possibly reducing the attractiveness of trade with the EU vis a vis other countries (again, see also Working Package 2 which examines this type of scenario). Given the above, it was decided to predict the cost implications of three different scenarios for the timing of GHS implementation. These scenarios were developed so as to link with REACH registration or C&L notification dates for substances, and to provide a long enough transition period for mixtures so as to ensure the workability of the move to the GHS. In general, it is assumed that mixture manufacturers will require a longer transition period than substance manufacturers due to the increased complexity and length of the mixture supply chain (e.g. their may be fourth or higher generation mixtures), the reduced (or more periodic) frequency of supply and the longer retention time of mixtures by both professional users and on consumer shelves.


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The three scenarios can be summarised as follows (with these all assessed against a baseline of the EU not adopting the GHS): • Scenario 1: this scenario has the greatest overlap with registration obligations

under REACH, allowing six years for application of GHS C&L to substances. A further five years is then allowed for the C&L of mixtures, with this corresponding to a total transition period of 11 years;





7.4 Substances

7.4.1 Identification of Substance Types

Based on consideration of the cost components of REACH and the timing of interactions with GHS, Figure 7.1 provides a flowchart illustrating the assumptions made on how different sets of substances are affected by the GHS and the costs applying to these different sets. The assumptions underlying this flowchart have been used to estimate the costs of the different scenarios. As noted in Section 7.1, a full description of the methods and assumptions applied at each stage is provided in Annex 2 and, as such, the description here focuses on the logic of different circumstances and associated cost components. The analysis of costs begins by considering the number of substances that have properties that would be classified for at least one endpoint as ‘dangerous’ under the GHS (and indeed 67/5488//EEC). These are hereafter referred to as ‘dangerous’ substances. One of the objectives (and predicted benefits) of REACH is that it will identify: • additional substances with properties that should be classified as dangerous under

67/548/EEC (and GHS); and • additional endpoints against which a given substance should be classified even

though it is already classified for one or more endpoints.


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Figure 7.1: Identification of Potential Conflicts and Costs for Substances

Initial New GHS Re-classif ication, SDS, Labelling, etc. w as

correct.

Costs of GHS are only cost in year of GHS

compared to cost in year of registration for non-

exporters

Cost elementsCost brought forw ard for:Classif icationRevise SDSDistribute revised SDSPlus full labelling cost in year of GHS.

Substances w ith NO Data Suggesting Dangerous Properties

w here REACH w ill confirm NO dangerous Properties (30% of

Substances)

OptionalityREACH Registration identif ies properties that classif iable as

Category 5 (5% of all substances or 16% of this category)

Substances w ith NO Existing Data Suggesting

Dangerous Properties (but REACH w ill Identify

dangerous Properties)

As there is no data there w ould be no

GHS classif ication until a REACH Registration

No Signif icant

CostsNo Costs

NOYES (5% of all substances or

16% of this category of substances)

Costs of Labelling, etc.

Cost elementsNone

Cost elementsClassif icationLabellingSDSDistribute SDS

Cost elementsNone

All Substances

Substances with Dangerous Properties that are known, suspected, or w ill be known at the end of REACH (70% of Substances)

Substances w ith High Level of Existing Data

on Dangerous Properties (17%-22%)

Substances w here GHS Re-classif ication

Occurs BEFORE REACH Substance

Registration

Substances w here GHS Re-classif ication Occurs AT REACH Substance

Registration

GHS Re-classif ication, SDS, Labelling, etc.

REACH Registration changes

reclassif ication?

YES (20%)NO (80%)

Initial New GHS Re-classif ication, SDS,

Labelling, etc. w as NOT correct.

Re-classif ication required on Registration

w ith new SDS, Labelling, etc.

Cost of GHS is the cost of undertaking the initial re-classif ication in year

of GHS (w hich w as incorrect) for non-

exporters

Substances w ith Some Data for

Classif ied Endpoints

Substances w here GHS Re-classif ication

Occurs BEFORE REACH Substance

Registration

Substances w here GHS Re-classif ication Occurs AT REACH Substance

Registration

GHS Re-classif ication, SDS, Labelling, etc.


reclassif ication?

YES (40%)NO (60%)

Initial New GHS Re-classif ication, SDS, Labelling, etc. w as

correct.

Costs of GHS are only cost in year of GHS

compared to cost in year of registration for non-

exporters

Initial New GHS Re-classif ication, SDS,


Re-classif ication required on Registration w ith new SDS, Labelling,

etc.


of GHS (w hich w as incorrect) for non-

exporters

Cost elementsClassif icationLabellingRevise SDSDistribute revised SDS

Cost elementsCost brought forw ard for:Classif icationRevise SDSDistribute revised SDSPlus full labelling cost in year of GHS


YES (20%)NO (80%)

Costs attributable to

GHS

Re-classif ication, relabelling, etc.

costs attributable to REACH (not

GHS)

Cost elementsLabelling

Cost elementsNone


reclassif ication?

YES (40%)NO (60%)

Costs attributable to

GHS

Re-classif ication, relabelling, etc.

costs attributable to REACH (not

GHS)


Cost elementsNone


reclassif ication?


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Substances with No (Known) Dangerous Properties Clearly, whatever the timing of the implementation, it is only those substances that are known to have dangerous properties that will require classification under GHS. This implies that if the GHS is introduced before the completion of REACH, it will only apply to a subset of dangerous substances. This provides two categories or sets of substances that are effectively eliminated from the costs of GHS implementation: • those substances where there are no known dangerous properties and REACH will

confirm this; and • those substances where there are no known dangerous properties but REACH will

identify some. The first set is eliminated because, as there are no dangerous properties, there is no need to classify under GHS (or the current system). The second set is eliminated because, whilst REACH may identify dangerous properties, this will not happen until the substance has actually undergone registration under REACH. Consequently, there is no reason (or basis) to classify the substance under GHS until after the REACH registration; as a result the costs are attributable to REACH and not the GHS. In both cases though the optionalities under the GHS could result in new classifications being made which would not otherwise have been made (representing costs attributable to the GHS). Substances undergoing GHS before REACH Registration As indicated above, REACH will identify additional classification requirements for some substances even though they are already known to have one or more dangerous properties. The main implication of this is that should a classified dangerous substance be reclassified under GHS before its registration under REACH, it may subsequently require (a second) re-classification under REACH (owing to the identification of additional endpoints of concern). In the scenario analysis (and flowchart in Figure 7.1), this is reflected by considering the number of substances where GHS re-classification occurs before the REACH registration: 1. For a subset of these, new endpoints will be identified by REACH and re-

classification will have to be repeated. In such cases, the cost of the GHS related classification prior to REACH represents a duplication of classification and labelling costs.

2. For the remainder, REACH will not identify any additional endpoints. In such cases,

there will be no need to change the initial GHS classification. The only cost is the difference between carrying out the necessary work (revised SDS, etc.) in the year of GHS compared to the year of the REACH registration (when it would have been carried out otherwise) and the cost of changing the label (as this would otherwise not have to be done in the absence of the GHS).


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In the flowchart (and the analysis) the probability that REACH may find additional endpoints is assumed to be related to the amount of existing data held for a given ‘statistical’ substance. Thus, a division has been made between substances where properties are ‘well known’ (i.e. a high level of test data is available) and substances where they are not well known (i.e. there is little available data). Substances undergoing GHS at REACH Registration Just as substances that undergo GHS before their REACH registration may or may not change classification after registration, so there will be some currently classified substances where REACH does not identify additional endpoints of concern. Where REACH does not require any changes in classification (though does require redrafting of SDS, etc.), there would still be a need to change labelling as a result of the GHS requirements. Such costs would not be incurred in the absence of GHS (because in these cases the classification would not have changed after REACH). When the GHS is applied at the same time as the REACH registration, and new information under REACH has identified changes that need to be made to classification and labelling, there is no cost attributable to the GHS because the SDS, C&L, labels, etc. would have to be changed anyway.

7.4.2 Numbers of Substances of Each Type

The discussion above and the flowchart in Figure 7.1 provide the logical division of substances into different types for the cost analysis. For this assessment, the total number of substances assumed to be affected is based on the figures generated by the ECB for the REACH impact assessment (JRC, 2003). The numbers assumed here are given in Table 7.1 and include Type 4 intermediates and Type 3 intermediates >1000 t/y which are registered under Annex V of REACH.

Table 7.1: Numbers of Substances Subject to REACH Registration <10 10-100 100-1000 >1000 Numbers of Substances 19,200 4,977 2,461 2,704 Deadline for Registration (tear) 11 11 6 3

To these numbers have been applied a range of assumptions to divide the total number of substances into the different types (or streams) set out in the flowchart. These assumptions and their basis are described in detail in Annex 2, with summaries given in Table 7.2 below. Application of the assumptions to the numbers of substances in each tonnage band provides the numbers and categories of substances set out in Table 7.3.


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Table 7.2: Summary of Assumptions and Implications of GHS before a REACH Registration Substance Type Assumption Implications of introducing

earlier GHS Substances with no dangerous properties

30% of substances These would not be subject to classification and labelling under core GHS before or after REACH registration

Substances with dangerous properties

70% of substances Subject to classification and labelling after REACH and some may be subject to it before a REACH registration (see below)

Tonnages 1-1000 t >1000 Already known as dangerous on the basis of good test data

17% of dangerous substances (11.9% of all substances)


These would be subject to classification and labelling under GHS before or after a registration under REACH. REACH Registration unlikely to change classification (but could)

Known as having one or more dangerous properties on the basis of existing (poor) data

50% of dangerous substances (35% of all substances)


Substances that are not known to be dangerous before REACH registration



These would be subject to classification and labelling after a REACH registration but would not be classified before this registration

Table 7.3: Resultant Numbers of Substances by Type Substance Type <10 10-100 100-1000 >1000 Total Not known dangerous that confirmed non- dangerous 5,760 1,493 738 811 8,803

Well known dangerous substances 4,435 1,150 568 530 6,683

Not well known dangerous substances 6,720 1,742 861 946 10,270

Substances not known or identified as dangerous until REACH registration

2,285 592 293 416 3,586

Due to the variations in transition times across the three scenarios, the number of substances fitting into each of the (six) cost categories described in the flowchart and for each of the scenarios are set out in Table 7.4.


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Table 7.4: Numbers of Substances Subject to Different Cost Categories under Scenarios Substance Type/ Cost Category

Scenario 1 Scenario 2 Scenario 3

classification does not change at registration 5,952 7,500 7,500 Substances

undergoing GHS before REACH registration

classification changes at registration 3,194 4,025 4,025


undergoing GHS at REACH registration

classification changes at registration 1,631 800 800

Substances identified at REACH registration with previously unidentified dangerous properties

6,683 6,683 6,683

Substances where no dangerous properties are identified 8,803 8,803 8,803

Total for Re-classification 13,856 13,856 13,856 Total New Classification 6,683 6,683 6,683 Total No Classification 8,803 8,803 8,803 TOTAL 29,342 29,342 29,342

7.4.3 Numbers of Classifications The data in Table 7.4 provides the number of substances undergoing classification/ re-classification at different points in time. The cost of undertaking these early classifications is borne by each manufacturer of the substance. Accordingly, in order to determine the numbers of classifications that would be made for each type of substance, it is necessary to take into account the likely number of manufacturers per substance and aggregate up across this number. Despite work on REACH, reliable data on the average number of manufacturers per statistical substance is still scarce. Work in 2004 on ‘One substance, One Registration’ (OSOR) for the UK Government combined work for the REACH BIA and the assumption from the ECB that, on average, there are three manufacturers per substance subject to REACH (RPA, 2004). This led to the assumptions concerning the average number of manufacturers set out in Table 7.5.

Table 7.5: Average Numbers of Manufacturers per Substance

Average Number of Manufacturers per

Substance

Average Number of Manufacturers who

Export

Average Number of Manufacturers who

Do Not Export >1000 7 1.4 5.6 100-1000 10.4 2.1 8.3 10-100 4 0.8 3.2 <10 1.4 0.3 1.1

Most of the main non-EU trading partners are also planning to adopt the GHS and this will mean that EU exporters are likely to have to apply GHS to their substances (and mixtures) prior to when they would be required to in the EU (i.e. starting from 2006 to 2008). The costs of EU GHS implementation, therefore, apply only to non-exporting manufacturers of substances. It has been assumed here that 20% of EU manufacturers/distributors export. This divides the average number of manufacturers between exporters (who do not incur costs of GHS implementation in the EU) and non-


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exporters (who do). Applying the number of manufacturers of substances who do not export to the numbers quoted in Table 7.4 gives the number of classifications and re-classifications under each scenario which result in EU-related costs. These are provided in Table 7.6; each of these incurs the unit costs set out in the flowcharts and quantified later in this section.

Table 7.6: Numbers of Non-Exported Substances Subject to Different Cost Categories

Substance Type/ Cost Category

Scenario 1 Scenario 2 Scenario 3








16,344 16,344 16,344


Total Re-classifications 34,790 34,790 34,790 Total New Classifications 16,344 16,344 16,344 Total No Classifications 21,914 21,914 21,914

7.4.4 Less than 1 t/y Substances and Type 3 Intermediates The <1 t/y substances and Type 3 intermediates <1000 t/y are not subject to testing under REACH. Accordingly, there is no conflict between the transition times for GHS implementation and information coming from REACH which may change any ‘early’ GHS classification. The costs associated with the adoption of the GHS, therefore, are associated with re-classifying, revising and distributing revised SDS, and re-labelling. These costs, of course, only apply to those substances where a classification already exists. In this respect, there is no a priori reason to assume that the percentage of these substances that are dangerous is any different to the percentage of other intermediates and higher tonnage substances placed on the market that are dangerous. As a result, the same assumptions concerning the percentage of substances with known dangerous properties have been applied as described above in Table 7.2. In terms of the numbers of substances which fall under this heading, estimates have been drawn from the revised BIA (RPA, 2003) and ECB estimates for Type 3 intermediates (JRC, 2003b). These estimates are summarised in Table 7.7 Table 7.7: Numbers of < 1t Substances and Type 3 Intermediates < 1 tonne Substances 25,000 substances

<10t/y 10-100t/y 100-1000t/y Type 3 Intermediates 5,000 2300 1,500


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7.5 Mixtures 7.5.1 Overview

As with substances, the key implication of differences in timing between the introduction of GHS and REACH is the effect of changes in information and, consequently, in the classification of the substances that make up mixtures. Where mixtures must be classified for the purposes of GHS before one or more of the constituents have been registered under REACH, then the costs of the early GHS C&L work essentially represent losses to the mixture manufacturer. In addition to the costs associated with any new information under REACH changing the classification of a given mixture, differences in the method of classifying mixtures under the GHS system may result in changes to a classification. This section provides a brief summary of the analysis and some of the key assumptions, while Annex 2 provides a fuller description of the analysis and underlying assumptions. The overall structure of the analysis and where costs are incurred is provided in Figure 7.2. Here a distinction is made between those mixtures that contain hazardous substances and qualify for an existing classification, and those that do not qualify for an existing classification. For the former, where GHS occurs after all constituent substances are registered under REACH, the only costs are those associated with labelling changes. For the latter, where GHS occurs after all constituent substances are registered under REACH and the mixture also does not qualify for a classification under GHS, there are no costs. For both sets of mixtures (those that have and do not have an existing classification), where GHS is required before all constituent substances have been registered under REACH, there is the potential for any initial re-classification to change. Where the classification does change, the costs of GHS are associated with undertaking all of the work on re-classification, SDS, distribution of SDS and labelling all over again. Where the initial re-classification does not change, the costs are only associated with having to undertake this work earlier than would otherwise be the case, with the additional cost of changing labels to the GHS format, which would otherwise not have been required.

7.5.2 Number of Mixtures of Different Types The starting point for the analysis has been estimates of the total number of mixtures on the EU market. This is taken as being 2 million based on industry guesstimates (Cefic, pers. comm.); however, this figure would appear to correspond well with the data collected from the company and industry association interviews.

Of this 2 million mixtures, it is assumed here that 20% are exported (i.e. the same percentage as substances with this assumption also corresponding reasonably well to the company responses to this study reported in Section 6). In turn, this means that 1.6 million mixtures are assumed to be manufactured and placed on the EU market only.


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Figure 7.2: Identification of Potential Conflicts and Costs for Mixtures

All Mixtures (2 million)

Mixtures containing one or more substances with known dangerous properties (47% based on substances at beginning of REACH) AND not

regularly reformulated annyway (90%)

Mixtures containing only substances w ith NO Data

Suggesting Dangerous Properties (53%)

As there is no data there w ould be no

GHS classification until a REACH Registration

1.6 Million Mixtures NOT also exported (80%)

REACH Registration of substances

subsequently changes classif ication?

YES NO

Initial New GHS classification, SDS, Labelling, etc. w as

correct.

Costs of GHS are only cost in year of GHS compared to cost in

reference year

Initial New GHS classif ication, SDS,


Re-classif ication required on Registration w ith new SDS, Labelling,

etc.

Cost of GHS is the cost of undertaking the initial re-classification in year

of GHS (w hich w as incorrect)

Mixtures with no classification under

existing system (70%)

Mixtures w here GHS Occurs BEFORE

REACH Registration of all substances in

mixture

Mixtures w here GHS Occurs AFTER REACH

Registration of all substances in mixture

New SDS, Labelling, etc.

GHS gives mixture a classif ication?

NOYES

No Cost

REACH Registration of substances

subsequently changes classif ication?

YES NO

Initial New GHS classif ication, SDS, Labelling, etc. w as

correct.

Costs of GHS are only cost in year of GHS compared to cost in

reference year

Initial New GHS classif ication, SDS,


Re-classification required on Registration w ith new SDS, Labelling,

etc.


of GHS (w hich w as incorrect)

Mixtures with existing

classification (30%)

Mixtures w here GHS Occurs BEFORE

REACH Registration of all substances in

mixture

Mixtures w here GHS Occurs AFTER REACH

Registration of all substances in mixture

New SDS, Labelling, etc.

Cost of changing

Label

Cost elementsCost brought forw ard for:Classif icationRevise SDSDistribute revised SDSPlus full labelling cost in year of GHS.



Cost elementsNone

Cost elementsCost brought forw ard for:ClassificationRevise SDSDistribute revised SDSPlus full labelling cost in year of GHS.

Cost elementsClassificationLabellingRevise SDSDistribute revised SDS

No Cost

Cost elementsNone


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As such, based on the same reasoning for exported substances, it is these 1.6 million mixtures that are affected by introduction of the GHS in the EU. The remainder, which are also exported, are assumed to undergo GHS in any event because of GHS requirements in non-EU importing countries. Of these 1.6 million mixtures, a proportion will contain known hazardous substances. In the analysis of substances presented above, of the 29,342 substances that must be registered under REACH, it is predicted that 13,856 (47%) are known to have some dangerous properties based on information available before REACH (where REACH will increase this knowledge to result in 70% of substances having known dangerous properties). Accordingly, it is assumed that 47% of the 1.6 million mixtures are currently known to contain one or more hazardous substances. Not all mixtures that contain hazardous substances require classification, however (as discussed in Section 7.2. above). For the purposes of this assessment, and based on the company responses reported in Section 6, it is assumed that 30% of those mixtures that contain known hazardous substances are currently classified and 10% of these are regularly reformulated and re-labelled (and hence can also be excluded). Applying the above assumptions suggests that the 1.6 million mixtures are divided into three groups: • 225,600 classified mixtures; • 526,400 mixtures containing hazardous substances that are not classified; and • 848,000 mixtures containing no currently known hazardous substances. These assumptions and the corresponding numbers are summarised in Table 7.8. Table 7.8: Assumptions Applied for Numbers of Mixtures by Type Mixtures 2,000,000 Percentage also exported 20% Mixtures not for export 1,600,000 Mixtures containing hazardous substances 47% Percentage of these that are classified mixtures 30% Mixtures with hazardous substances that are currently classified 225,600 Percentage of these that are regularly reformulated and hence can be excluded 10%

Net number of mixtures with hazardous substances that are currently classified and would not be reformulated in any event 203,040

Currently not classified but with hazardous substances 526,400 Mixtures with no known hazardous substances 848,000

7.5.3 Modelling Changes of Mixture Classification

As has been described in Section 4, the calculation method for deriving the classification of a mixture varies between the current (EU) system and the GHS. A number of studies have sought to identify the changes for some endpoints based on a small subset of real mixtures and theoretical mixtures containing only one hazardous substance. None of these is conclusive, although there is a general view that a higher percentage of mixtures


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are likely to be classified under the GHS than under the EU system, with this borne out by testing of the two methods on certain product categories as discussed in Section 6 (i.e. certain types of consumer products). For this analysis, a probabilistic Monte Carlo analysis based model has been developed to predict the likely changes in category that may occur with the introduction of the GHS. In the model, mixtures containing up to eight different ingredients, at least one of which has hazardous properties (but up to eight), and in differing concentrations are examined. A random number generator is used to derive LD50 values for each of the virtual substances in the virtual mixture. For each set of LD50 values, the model classifies the virtual mixture under both the EU and GHS systems. It should be noted that the different mixture rules (EU and GHS) were applied in making these classifications. The model was programmed to find virtual mixtures that match specific EU classifications for acute oral toxicity, with this including mixtures not currently classified (but containing one or more hazardous substances). For each of the EU classifications (T+, T, Xn, and 0), five hundred virtual mixtures matching each of the classifications are generated, recording the appropriate GHS classification. Thus, 2,000 virtual mixtures containing one or more hazardous substances are generated from more than 2 million Monte Carlo runs. The results have been analysed to identify the frequency of category changes for a single classification endpoint for a mixture. Table 7.9 provides the predicted percentage of the mixtures changing classification for the acute oral toxicity classification. It is important to note that the results described here are repeatable and that the model is ‘stable’ in that the distribution which it generates should not change (only become more refined) with more runs of the model.

Table 7.9: Changes in Mixture Category for One Quantitative Endpoint Related to Acute Oral Toxicity GHS Category GHS 1 2 3 4 5 0 EU Equivalent T+ T+ T Xn 0 0 T+ 39% 58% 4% 0% 0% 0% T 0% 32% 48% 19% 0% 0% Xn 0% 7% 13% 60% 14% 6% 0 0% 0% 12% 15% 24% 49%

From this analysis, the probability that a mixture of a given current EU classification based on existing data would change upwards or downwards by more than one EU category equivalent is calculated. As with the analysis of substances, the difference in costs between the scenarios is principally related to the number of mixture classifications that would change under the GHS based on existing data (i.e. before registration of all constituents) and would subsequently change again after registration of constituents under REACH. Using the ECB data on frequencies of the different classifications for substances (reported in Section 4), a weighted probability of a change in classification for a mixture has been derived and, taking account of the fact that a mixture may have more than one


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classification (again based on ECB C&L data), the analysis has identified the number of currently classified mixtures that move up or down a category based on existing data (i.e. prior to the REACH registration of constituent substances). The approach is conservative in that it assumes that the probability of a defined mixture classification is equal to the substance classification, neglecting the effects of dilution and the application of the additivity formula (see Annex 2 for more details). In addition to these re-classifications, it has been estimated above that there are some 473,760 mixtures that contain hazardous substances but which are not currently classified (i.e. they are class ‘0’). From the analysis in Table 7.9, 12% of these may be classified under GHS category 3 (most closely corresponding to T under the EU system) and 15% may be classified under GHS category 4 (most closely corresponding to Xn under the EU system). Further, under the optionality, 24% would be given the new GHS category 5. The resulting total number of new classifications and re-classifications made on the basis of existing information (i.e. before REACH registration of constituent substances) is provided in Table 7.10. Table 7.10: Total Number of Re-classifications and New Classifications before REACH

Numbers of

Mixtures Mixtures Containing Hazardous Substances and with an Existing Classification Mixtures that would be reclassified and change class upwards 17,768 Mixtures that would be reclassified and change class downwards 17,028 Mixtures Containing Hazardous Substances but which DO NOT Meet Criteria for Classification under Current System (i.e. Class ‘0’) Mixtures that would be newly classified as GHS 3 (EU T equivalent) 55,904 Mixtures that would be newly classified as GHS 4 (EU Xn equivalent) 71,064 Mixtures that would be newly classified as GHS 5 (Note only under optionality: no EU equivalent)

112,755

Total New and Re-classifications Carried out before All REACH Registrations of Substances Without Optionality 161,764 With Optionality 274,519

7.5.4 Reliability of Mixture Classification before REACH is Complete In terms of the scenarios, the implications of introducing the GHS before all substances have been registered under REACH are that new information on the properties of the constituent substances will change classifications. As has been described for the analysis of substances, at the beginning of REACH a subset of substances are well known (i.e. have a high level of available data) to have one or more dangerous properties and a subset are not well known. Whilst some of these will change classification under REACH (as has been assessed elsewhere), equally, some will not. Table 7.11 shows the numbers of substances where the classifications do not change after their REACH registration. The table also shows the number of classified substances at the end of REACH. Comparison of the two numbers reveals that, according to the analysis of substances, at the start of REACH some 44% of substances could be classified accurately. At the end


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of REACH, this percentage increases to 100% and, part way through REACH, something between 44% and 100% of substances have good enough data to make a reliable classification that will not change. Using the model for substances, the percentage of reliable classifications at points in time before the end of REACH were calculated for each scenario. Table 7.12 provides these percentages at the intervals corresponding to the transition period for mixture classification. From the table it can be seen that, where mixture classifications are to be done by end Year 11 (Scenario 1), only 85% of substances in the <10t and 10-100t have reliable data for their classification. This is because it is assumed that data from all substance registrations submitted in Year 11 would not be available for classification of mixtures until Year 12 (i.e. after all registrations under REACH are submitted).

Table 7.11: Classifications Prior to and After REACH Substance Types <10 10-100 100-1000 >1000 Total Well known dangerous substances

Substances that might be classified before REACH where classification would not change after registration

1,828 474 234 333 2,869

Not well known dangerous substances


4,032 1,045 516.81 567.84 6,162

Total substances that known well or classification won’t change 5,860 1,519 751 901 9,031

Total number of classified substances at the end of REACH 13,440 3,484 1,723 1,893 20,539

Percentage of classifications known before/after REACH 44% 44% 44% 48% 44%

Table 7.12: Percentage of Dangerous Substances Identified at Time of GHS for Mixtures

Last Transition Year of GHS for

Mixtures <10 10-100 100-1000 >1000 Scenario 1 Year 11 85% 85% 100% 100% Scenario 2 Year 5 49% 49% 70% 100% Scenario 3 Year 8 59% 59% 100% 100%

The percentages in Table 7.12 reflect the probability that there is reliable information for accurate classification for a single substance. Mixtures may contain a few to tens of different substances. As such, in considering the reliability of mixture classifications before the end of REACH, this needs to be accounted. For this analysis it has been assumed that the average mixture contains 10 substances and there is an equal chance that substances can be in any of the tonnage bands. Thus, for Scenario 1, a mixture containing 10 substances in the lowest tonnage band, the


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probability that information is correct for the all substances in the mixture is 0.855 x 0.855 = 0.19 (19%). This cumulative approach has been used to estimate the probability that any classification of a mixture would be the correct classification at the time that GHS on mixtures is carried out. Table 7.13 provides these probabilities for each of the scenarios.

Table 7.13: Re-classifications that Change After REACH Registration of Substances Last Transition

Year of GHS for Mixtures

Percentage Chance that Correct Classification Based on Stage of REACH

Scenario 1 Year 11 53% Scenario 2 Year 5 13% Scenario 3 Year 8 33%

When combined with the number of re-classifications and new classifications in Table 7.10, the number of mixtures that will need to be reclassified at the end of REACH because information has changed are set out in Table 7.14. Table 7.14: Resultant Duplication of Re-classifications for Mixtures

Last Transition Year of GHS for

Mixtures

Mixture GHS Classifications that remain Unchanged at the end of

REACH

Mixture GHS Classifications that

Change at the end of REACH and must

be Reclassified No Optionality

Scenario 1 Year 11 86,297 75,467 Scenario 2 Year 5 20,285 141,479 Scenario 3 Year 8 53,437 108,327

Optionality Scenario 1 Year 11 146,449 128,070 Scenario 2 Year 5 34,424 240,095 Scenario 3 Year 8 90,685 183,834

7.5.5 Numbers of Mixtures Subject to Reformulation As discussed in Section 6, manufacturers of mixtures that are sold as end consumer

products may either decide themselves or be required by their customers (i.e. retailers) to reformulate those mixtures which would be more severely classified under the GHS.

From Table 7.10, the maximum number of mixtures that this may correspond to is approximately 144,700 mixtures (or around 9% of the total). Only a proportion of this 9% of mixtures which would be more severely classified will relate to end consumer products, however. From the information provided by companies responding to the questionnaires, it is clear that many of the currently classified mixtures that are produced by consumer product manufacturers are pre-mixes, which will be further diluted prior to being placed on the market. One would not, therefore, automatically expect the end


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product to also be classified. However, it is also clear that many detergent and cleaning products placed on the market may become more severely classified.

With regard to the paints, inks, pigments and dyes manufacturers, the percentages of mixtures that are currently classified varied considerably across the various producers responding to this study. Some have very low percentages while others have high percentages. One of the producers with the lowest percentage mainly manufactures mixtures for end consumer use. This manufacturer did not expect significant percentages of his formulations to become more severely classified. CEPE on the other hand has expressed concern that numerous decorative paint-related products will become more severely classified. From the above, it is difficult to place a figure on the number of mixtures that would be reformulated due to changes in classification under the core GHS endpoints and then the additional number that may be affected by adoption of the new, optional categories. For the purposes of this assessment, we have assumed the following numbers will require some level of reformulation (which may include changes in chemical composition or increased levels of dilution): • numbers reformulated related to GHS Cat 1 to 4: 5,000; and • numbers reformulated due to optionalities (Cat 5): 15,000.

It should be recognised though that the costs of reformulation reflect indirect costs, rather

than direct costs. Reformulation is not required by the GHS, it is instead a market driven response to the outcomes stemming from adoption of the GHS.

7.5.6 Numbers of Mixtures Associated with Stock Losses Responses to the questionnaire identified the potential for stock loses to arise as a result

of GHS adoption where the transition period for mixtures was inadequate and depending on the way in which ‘placing on the market’ is defined within the legislation. As indicated in Section 6, the key concern here is that manufacturers of mixtures that act as end consumer products may have to withdraw stock from shelves or from warehouses and re-label/re-package that stock. This has occurred under the Dangerous Preparations Directive.

After much consideration, we have not estimated the number of mixtures that may be associated with such stock losses. With regard to adoption of the GHS, it has been argued that if an adequate transition period is not allowed after substance registration, then this may be an issue. However, under all of the scenarios considered here, at least five years in total is allowed for applying the GHS to mixtures. The greatest conflict would arise in relation to Scenario 2, where only a further two years is allowed after substance C&L for mixture C&L. The issue then becomes more one of whether the GHS legislation allows a period of, say, 12 to 18 months for manufacturers to clear their existing stocks and to ensure that all mixtures being sold to end-consumers bear the GHS C&L. We assume that the Commission is aware of such issues and will address these in drafting the legislation.


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7.6 Cost Assumptions 7.6.1 Per Unit Direct Costs

The information collected through the questionnaire and reported in Section 6 has been used in developing the per unit costs arising from adoption of the GHS. Based on the analysis framework set out above, assumptions are required on the following: • costs of classification/re-classification work; • costs of re-designing labels and modifying the IT system accordingly; • costs of revising SDS and distributing these; • the costs of any staff training that can be attributed solely to GHS rather than to

regular, annual C&L related training; • the costs of modifying or purchasing new computer software to assist with C&L

activities; and • the indirect costs associated with reformulation.

The above list does not include costs associated with: producing new labels, changing labels, disposing of old labels, and stock losses. The issue of stock losses was discussed above. Similar reasoning applies to our decision not include costs associated with the production of new labels, changing labels and disposing of old labels. Firstly, most of the respondents indicated that they use their own in-house IT to produce labels and that labels are produced as stock is sold (the exception will be for those products that have labels which are integral to the packaging). Thus, there are no additional costs to such companies under the GHS as stocks of labels are not held for long periods of time. Only should an inadequate period be allowed with regard to the definition of ‘placing on the market’ will costs arise from producing new labels, taking labels off and putting new labels on packaging. The per unit costs that have been assumed for the listed cost items are presented in Table 7.15 for both substances and mixtures. The aim has been to select an average figure from those quoted by respondents, taking into account that some of the responses also appear to be significantly lower or higher than others.

Table 7.15: Cost Assumptions for Scenario Analysis Per Unit Cost Substances Mixtures Classification/Re-classification 400 400 Design and modify label systems 300 300 Revise SDS 500 500 Re-distribute revised SDS 500 500 Indirect Costs Reformulation Not applicable €20,000 Per Company Cost SME Large/Multi-National Training Costs 3,600 43,200 IT Modification/New Module €2,500 €10,000 Trade transaction costs Imputed Imputed


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Classification, SDS and Labelling Costs The figures quoted here for costs of classification/re-classification work include the costs of data review, data entry into the company’s IT system and any review of the resulting classification. These costs are relevant for all re-classifications that have to be undertaken because GHS must be applied before a substance has been registered under REACH. They may relate to either costs of having to classify substances or mixtures earlier than would be required by the REACH registration deadline (i.e. costs brought forward) or to the costs of having to re-do a classification where REACH provides new data that changes the appropriate classification. The costs of labelling activities have been broken into three components for the purposes of the analysis. The first is re-designing and modifying the labels to be attached to a product. These costs apply to all classified substances and mixtures. They are only additional to GHS where such re-design and modification would not be undertaken as part of a REACH registration. Thus, for this analysis they may be: • additional costs for substances and mixtures that are well known to be dangerous

and for which C&L would not change as a result of a registration under REACH; these costs also apply to mixtures, the C&L of which would change as a result of adoption of the GHS;

• costs brought forward with these applying to those substances which would need to

have a GHS C&L prior to their registration under REACH but for which REACH does not change the C&L; and

• re-classification and re-labelling costs which relate to the costs of having to re-do

GHS C&L work because REACH provides new data which changes the C&L that should be applied.

All SDS will need to be revised with the introduction of GHS. Thus, the costs of revising and re-distributing SDS apply to all classified substances and mixtures. As for labelling, they are only additional to GHS when such revisions are not undertaken as part of a REACH registration. Thus, for this analysis they may be additional costs, costs brought forward, or repeat costs of having to re-do this work where REACH provides new data. Theoretically, for exporters there may be some savings from no longer having to produce multiple versions of SDS in order to meet different countries C&L requirements. However, most respondents indicated that their IT systems have been designed to produce SDS in the appropriate formats and that an EU SDS is almost always accepted for import purposes (the one notable exception being varying requirements for the US and Japan – although Japan was not highlighted as an issue by company respondents). Furthermore, companies did not identify this as an aspect of the GHS that would lead to savings in the short to medium term as they do not expect full harmonisation across systems due to the building block nature and optionalities within the GHS. As a result, we have not tried to estimate the potential value of this savings separately. Instead, they are treated together with trade transaction costs.


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The timing of when such costs would arise relates to Figures 7.1 and 7.2 and whether the costs are additional, brought forward or repeat costs. They will also obviously vary by scenario. The above cost elements that apply to the various substance and mixture ‘types’ or streams described in Sections 7.4 and 7.5 are indicated on the flow charts in the bottom row of boxes. Staff Training and IT Costs and Their Timing Staff training currently takes place on an annual (or more frequent) basis across all companies, with this including general, specialist training and IT related training. Although the introduction of the GHS will require some new training, one would expect much of this to be introduced within annual training programmes and provide the focus of regular annual training thereafter (rather than changes in C&L under the existing system). As a result, we have allowed for a one-off additional cost only, with this taking place when companies begin adopting the GHS. Due to the variations in staff numbers across companies, we have assumed that on average 12 staff are trained in large companies and 1 member of staff is trained in SMEs. It is assumed that there are one and a half additional days specific to adopting the GHS at costs of €1,200 per person day; this reflects a one-off training cost of moving to the GHS. Very few estimates of the costs of modifying or adding new IT were provided in the questionnaire responses, although there was also some discussion of these with associations. For the purposes of this assessment, we have assumed that small companies would incur one-off costs of around €2,500 in updating their IT systems, while large companies would incur one-off costs of around €10,000. It should be noted that these costs are aimed at only accounting for the costs of adding a GHS ‘module’ to an IT system, given that REACH will also result in new IT requirements. On this note, it is possible that the necessary IT could be developed alongside the REACH related IT that is to be produced by the Chemicals Agency. In this case, the additional IT costs of moving to the GHS could be minimal17. To reflect this, total costs are provided below with and without IT costs for comparison. It is assumed that all of the companies would require new IT and would undertake GHS specific training. Based on the Cefic data presented in Section 2, it is assumed here that 90% of large companies are substance manufacturers (with this borne out to some degree by the responses to the questionnaires) and that only 10% are mixtures only manufacturers. It is also assumed that 25% of SMEs manufacture substances, while the remaining 75% are mixture manufacturers only. The timing of when these large and SME companies are assumed to purchase/modify their IT systems and undertake GHS specific training is given in Table 7.16. Note that it is assumed that companies would act relatively early within the transition periods allowed under each scenario, but not that all companies would act at once.

17 Note that discussions with an IT manufacturer confirmed that the additional costs would be minimal as the

database underlying any C&L software would be developed so that it could be used to produce both GHS and EU information during the transition period. Similarly, this manufacturer who also provided C&L training services indicated that there would be one-off GHS training, but after that any additional training requirements should be minimal.


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Table 7.16: Timing and Duration of IT and Training Substances Mixtures

IT Training IT Training Scenario 1 Years 1 to 3 Years 1 to 3 Years 5 to 7 Years 5 to 7 Scenario 2 Years 1 to 2 Years 1 to 2 Years 1 to 3 Years 1 to 3 Scenario 3 Years 1 to 2 Years 1 to 2 Years 1 to 3 Years 1 to 3

Reformulation Costs and Their Timing

Finally, the costs of reformulation as given in Table 7.15 are assumed at €10,000. This figure is significantly lower than the figures quoted by two respondents (€20,000 and €500,000), but also much higher than that quoted by another respondent at €1,000. The figure has been developed to reflect the fact that for some mixtures in the consumer products sector, reformulation will involve dilution rather than changes in chemical composition. Note that these indirect costs are assumed to be spread over the transition period for mixtures for each of the scenarios.

7.7 The Estimated Costs of GHS Implementation 7.7.1 Introduction

As discussed in Sections 7.4 and 7.5, we have separated out those substances that are manufactured and distributed within the EU only from those that are exported from the EU. This has been done to enable calculation of the increase in costs to those who are not involved in export activities for comparison against the change in costs for those who are involved in exports. The total estimated costs of GHS adoption related to non-exported substances and mixtures are the sum of: • the costs applied to the different types or categories of substances and mixtures under

the various scenarios (as described in Sections 7.4 and 7.5 and associated flowcharts);

• the costs of IT and training across all companies; and • the costs for <1t substances and Type 2 and 3 intermediates.

7.7.2 Change in Costs to Manufacturers and Distributors

Table 7.17, overleaf, presents the estimated costs of the EU adopting the core GHS requirements for each of the three scenarios with and without IT costs. As can be seen from this table, the total predicted costs for each of the scenarios are (discounted at 4% over each scenario time horizon): • Scenario 1 (6 years for substances and a further 5 for mixtures): €276 million (€211

million excluding IT costs) ; • Scenario 2 (3 years for substances and a further 2 years for mixtures): €391 million

(€319 million excluding IT costs); and


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• Scenario 3 (3 years for substances and a further 5 years for mixtures): €342 million (€269 million excluding IT costs).

Scenario 1 is the lowest cost scenario as it allows companies to maximise the degree to which GHS requirements are undertaken at the same time as substances are registered under REACH. This also minimises the degree to which mixtures may need to be re-classified due to new information coming available from REACH. In contrast, Scenario 2 is predicted to give rise to the highest costs due to it requiring the greatest level of GHS C&L prior to REACH delivering new information. In all cases where mixtures are reclassified before the completion of REACH registrations, the costs of C&L administrative work to mixture manufacturers and distributors far outweigh those to substance manufacturers and distributors. Scenario 3 falls in between the extremes of Scenarios 1 and 2. It is important to note the large share of total costs comprised by the costs associated with new IT systems and the one-off training of staff. These account for €128 million and €140 million respectively for Scenario 1 and then Scenarios 2 and 3 (which have the same IT and training costs).

In order to understand more clearly the differences between the scenarios, Table 7.18 indicates the percentage which each cost type accounts for out of the total costs. For example, Table 7.18 highlights the high percentages that are accounted for by IT and training costs, varying from 36% to 47% of the total costs. Also of note from this Table are the low percentages of total administrative costs (C&L activities excluding IT and training) that are predicted as accruing to substance manufacturers, with these ranging from only 10% to 12%. Mixture manufacturers, therefore, are expected to bear the majority of the total administrative costs when required to apply GHS before the end of REACH, with these costs estimated as accounting from 42% to 54% of the total costs for the three scenarios.


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Table 7.17: Present Value Costs of Core GHS Requirements by Scenario (discounted at 4% over Scenario time horizon)* Substances Mixtures Total

Scenario 1 IT € 65,139,610 Training € 62,582,120 Classification € 7,891,460 € 24,310,500 € 32,201,960 Labelling € 11,353,930 € 31,523,650 € 42,877,580 Revise SDS € 9,864,320 € 30,388,130 € 40,252,450 Distribute revised SDS

€ 2,818,050 € 30,388,130 € 33,206,180

Ex. IT Inc. IT Total € 31,927,760 € 116,610,420 € 211,120,300 € 276,259,910


€ 5,116,350 € 61,272,320 € 66,388,670

Ex. IT Inc. IT Total € 39,743,250 € 211,449,960 € 318,797,900 € 391,241,360


€ 5,116,350 € 45,383,090 € 50,499,440

Ex. IT Inc. IT Total € 39,743,240 € 162,532,470 € 269,879,590 € 342,323,870

Notes: * Numbers may not add to totals due to rounding


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Table 7.18: Percentage Total Present Value Costs by Cost Type and Scenario

% of Costs to Substance

Manufacturers & Distributors

% of Costs to Mixture

Manufacturers & Distributors

% of Total Costs

Scenario 1 IT 24% Training 23% Classification 25% 21% 12% Labelling 36% 27% 16% Revise SDS 31% 26% 15% Distribute revised SDS 9% 26% 12% Total 12% 42% 100%



7.7.3 Costs to SME versus Large Companies

A key concern in the adoption of new legislation such as the GHS is the share of costs that will fall on SMEs as opposed to larger companies. Given that there is a lack of information on the number of substances and mixtures that are produced/traded by SMEs compared to larger companies, apportioning the above costs across these two types of companies is difficult. For the purposes of this assessment, we have assumed that 75% of all substances (i.e. of the 29,342) and mixtures (i.e. of the 2 million) are produced by large companies, with SMEs only producing 25% of the total numbers. These assumptions are based on two pieces for information. The first is the Cefic data that indicate that only 25% of SMEs produce substances, with the remaining 75% being involved in mixture manufacture. The second is the information collected from distributors for this study which indicates that they trade in a larger number of substances than mixtures. The questionnaire responses also indicate that large companies may produce high numbers of mixtures, so even though SMEs may be mainly involved in mixture manufacture, this does not mean that they will account for the majority of mixtures.


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Table 7.19 presents a breakdown of the costs that would fall on SMEs versus large companies based on the above assumptions. As can be seen from the Table, SMEs’ share of the administrative costs of implementing the GHS vary from 13% to 16% across the three scenarios. In considering these figures, it should be recognised that the underlying assumptions on the percentages of substances and mixtures produced by each type of company are highly uncertain.

Table 7.19: Breakdown of Administrative Costs between Large and SME Companies (€ 000)

Large Companies (75% of Products) SMEs (25% of Products) Substances Mixtures % Substances Mixtures %

Scenario 1 € 23,945,820 € 87,457,810 40% € 7,981,940 € 29,152,600 13% Scenario 2 € 29,807,430 € 158,587,470 48% € 9,935,810 € 52,862,490 16% Scenario 3 € 29,807,430 € 121,899,350 44% € 9,935,810 € 40,633,120 15%

However, the picture changes to a degree when the costs of new or modified IT systems and training are also considered. These costs are given in Table 7.20, and highlight the fact that because 96% of companies are SMEs, they will bear the majority of these costs. This is important since, as will be recalled from Table 7.18, IT and training account from between 36% and 68% of total predicted costs18.

Table 7.20: Breakdown of IT and Training Costs between Large and SME Companies Size IT Training IT Training

Large € 10,890,000 € 47,044,800 19% 42% Small € 45,087,571 € 64,926,102 81% 58%

Scenario 1 Total € 55,977,571 € 111,970,902

Large € 11,550,000 € 47,520,000 16% 35% Small € 60,894,277 € 87,687,759 84% 65%

Scenario 2 Total € 72,444,277 € 135,207,759

Large € 11,550,000 € 47,520,000 16% 35% Small € 60,894,277 € 87,687,759 84% 65%

Scenario 3 Total € 72,444,277 € 135,207,759

7.7.4 Costs to Exporters The figures presented in Tables 7.17 and 7.19 exclude the administrative costs that would

be incurred in relation to substances and mixtures exported from the EU to other countries adopting the GHS. As argued earlier, this is due to the fact that these exports would have to adhere to the C&L requirements of the importing countries, which are assumed here to correspond to the GHS based on its likely global adoption.

However, for completeness, the costs to exporters of applying the GHS to exported

substances and mixtures have been estimated. These costs range from between €32 million to €59 million for the three scenarios. It should be noted that these figures relate to administrative activities only, as the one-off costs of IT and training costs to all

18 Note that IT and training costs vary across the Scenarios due to variations in the timing of when they are

assumed to take place. The earlier they are required, the higher the discounted value of the costs, as illustrated by Scenario 2 having the highest costs and shortest transition periods.


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companies (whether exporters or not) are included in the estimates provided in Table 7.17.

7.7.5 Additional Costs of the Optional New Category 5 Criteria

The increased costs associated with adoption of the optional new classification criteria under the GHS (i.e. the Cat 5 criteria) are presented in Table 7.21. Table 7.21: Present Value Costs of Core plus Optional GHS Requirements by Scenario (discounted at 4% over Scenario time horizon)* Substances Mixtures Total


€ 2,982,510 € 51,569,660 € 54,552,170

Ex. IT Inc. IT Total € 32,486,940 € 197,891,730 € 292,960,790 € 358,100,400


€ 5,280,810 € 103,981,150 € 109,261,961

Ex. IT Inc. IT Total € 40,302,425 € 358,837,570 € 466,743,880 € 539,188,150


€ 5,280,810 € 77,016,600 € 82,297,420

Ex. IT Inc. IT Total € 40,302,420 € 275,822,970 € 383,729,280 € 456,173,550

Notes: * Numbers may not add to totals due to rounding

These costs assume that 5% of substances would change classification and that additional mixtures would be affected by the need to be classified under these new categories. As can be seen from the Table, inclusion of these options would result in an increase in the costs of Scenario 1 to around €358 million and those of Scenario 2 to around €539 million. This represents increases in costs of 30%, 38% and 33% respectively for Scenarios 1 to 3. Not included in these increases are the additional costs of testing to


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these new criteria. If one assumes that such testing costs around the same as the current tests required under REACH, then the additional test costs are estimated at around €346 million, if such testing is required across all substances. The costs to exporters of other countries adopting the optional categories are estimated at between around €20 million and €37 million.

7.7.6 Reformulation

As will be recalled from Section 7.5, it is difficult to place a figure on the number of mixtures that would be reformulated due to changes in classification under the core GHS endpoints and then the additional number that may be affected by adoption of the new, optional categories. As a result, we have assumed that out of the 60,000 mixtures that may change classification, the following numbers will be reformulated due to their being associated with consumer end products: • Numbers reformulated related to GHS Cat 1 to 4: 5,000 • Numbers reformulated due to optionalities (Cat 5): 15,000

Based on these numbers and the average costs of reformulation per mixture quoted in Table 7.15 of €10,000, the indirect costs of reformulation resulting from GHS adoption can be calculated. These are presented in Table 7.22; it should be noted that these vary only due to variations in timing across the four Scenarios. In all cases, reformulation is assumed to be spread evenly across the transition period for mixtures. As can be seen from the table, the potential indirect costs of reformulation are of the same order of magnitude as the costs of the core administrative requirements of adopting the GHS.

Table 7.22: Present Value Indirect Costs of Reformulation (discounted at 4% over transition period for mixtures)

No. years over which mixtures

reformulated

Year in which reformulation

starts

Core GHS – 5000 mixtures reformulated

GHS Optionalities –

15,000 mixtures reformulated

Scenario 1 6 5 € 141,883,000 € 425,649,000 Scenario 2 3 3 € 179,527,300 € 538,581,800 Scenario 3 6 3 € 197,882,700 € 593,648,100


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8. THE BENEFITS OF ADOPTING THE GHS 8.1 Overview The reason for the development of the GHS relates to a number of different objectives at

the global level. In particular, and of relevance to the EU, it is anticipated that the GHS will (UN, 2005):

• enhance the protection of human health and the environment by providing an

internationally comprehensible system for hazard communication; • provide a recognised framework for those countries without an existing system; • reduce the need for testing and evaluation of chemicals; and • facilitate the international trade in chemicals whose hazards have been properly

assessed and identified on an international basis.

The questionnaire used in this study explicitly addressed the first and fourth objectives, and are tied to the achievement of the second objective. The third objective is also related to the second objective and was addressed by the questionnaire, although as noted in Section 6 the responses were less detailed than initially hoped.

The benefits arising from achievement of the above objectives at the global and EU levels are discussed further below. These benefits will be realised over time as the GHS is implemented in an increasing number of countries, and as the information that it provides increases the awareness of the hazards associated with particular chemicals. The benefits will be maximized if the GHS is adopted across all major chemical producing and consuming countries and forms the basis of their regulatory schemes for classification and labelling (Sullivan, 2002).

8.2 Global Benefits 8.2.1 Enhance Protection of Human Health and the Environment Although the EU already has rigorous systems in place for the classification and labelling

of substances and mixtures, such systems do not exist in many other countries. As a result, in those countries where such systems are lacking, users of chemicals may either not receive the information they need to take the appropriate protective measures or the information transmitted to them may be inconsistent. While the systems that are in place globally may be similar in many respects, their differences are significant enough to result in different labels or SDS for the same product in different countries.

This is illustrated in Table 8.1, which provides a description of the way in which the toxicity hazard of a substance with LD50 = 257 mg/kg (oral) in different jurisdictions is classified and labelled. The UN (2005) also notes that due to variations in definitions of hazards, a chemical may be considered flammable in one country, but not another; it may be classified as a carcinogen in one country, but not in another.


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Table 8.1: C&L Across Different Global Jurisdictions for Oral Toxicity* Jurisdiction / System Hazard Classification / Communication

GHS signal word: “Danger”; pictogram: Skull & Crossbones

Transport “Slightly Toxic” (liquid) for solids not classified

EU indication of danger: “Harmful” pictogram: St. Andrew’s cross

US Toxic CAN Toxic

Australia Harmful India Non-toxic Japan Toxic

Malaysia Harmful Thailand Harmful

New Zealand Hazardous China Not Dangerous Korea Toxic

Notes: * Description of the classification for a toxicity hazard of a substance with LD50 = 257 mg/kg (oral) Source: European Commission, personal communication

This lack of harmonisation, together with lower regulatory capacities in many developing economies, has been linked to the increase in work-related accidents and illnesses globally (WHO, 2005). The International Labour Office’s (ILOs) latest estimates indicate that there are an estimated 160 million new cases of work-related illnesses worldwide. The most common workplace illnesses are from exposure to hazardous substances (chemical and non-chemical), with this leading to the WHO emphasising the need for policies and programmes that are aimed at primary prevention. Introduction of the GHS is obviously one such policy that can assist in ensuring that there is improved information on chemical risks through the use of standard symbols and phrases. This should result in improved safety through the chemicals supply chain and, hence, improvements in the safe handling and use of chemicals. It is of note that most of the respondents to the questionnaire used in this study indicated that they believe there will be health benefits (small to moderate) at the global level from the introduction of the GHS. Furthermore, two of the respondents (one national trade association and one company) also indicated that they believe there may be small benefits to EU workers from adoption of the GHS if it results in clearer hazard communication and thus better exposure management of chemicals.

8.2.2 Provision of a Recognised Framework and Reduced Testing and Evaluation

The goal of the GHS is to identify the intrinsic hazards of the various substances and mixtures placed on the market domestically and internationally and to convey information about these hazards. As discussed in Section 4, the criteria for hazard classification are harmonised, and standard hazard statements, symbols and signal words have been developed to form an integrated hazard communication system. It is expected that the core elements of the GHS will be adopted by individual countries, including labelling and the provision of safety data sheets. It is also expected that this will be


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supplemented by training programmes, hence, some of the work underway at capacity building in developing countries (as highlighted in Section 5). In developing the system, consideration was given to three key parameters, which can be summarised as relating to (UN, 2005): 1) the scope of the GHS in terms of the chemicals considered and the target audiences; 2) the degree to which the GHS requires uniform test methods or additional testing; and 3) the type of information that can be used in classifying chemicals. As noted by some respondents to our questionnaire, the EU system already has established requirements for the testing of chemicals and concerning the information that can be used in classifying substances and mixtures, and these will be carried forward under REACH. Rather than assuming that the lack of uniform test methods within the GHS will impact negatively on their business activities in the future, it is our view that they should view this test method neutrality as a benefit. As EU test methods are already based on internationally accepted principles, the results of tests carried out to these standards under REACH will be acceptable globally under GHS. In other words, classifications cannot be rejected because the recommended test method for a particular country was not applied, as long as the test method follows internationally recognised principles (e.g. OECD test guidelines). Furthermore, adoption of the GHS for the C&L of physicochemical properties will reduce the need for EU companies to carry out two sets of tests in order to meet the varying requirements of the current EU and UN International Transport classification systems.

In addition, one of the other general principles underlying the GHS is that test data already generated for the classification of chemicals under existing systems should be accepted in order to avoid duplicate testing and the unnecessary use of test animals. Classification is to be based on available data, so compliance with the GHS will not require the retesting of chemicals for which accepted test data already exists. The GHS explicitly acknowledges the existence and use of all appropriate and relevant information concerning hazards or risks (UN, 2005).

8.2.4 Facilitation of International Trade As noted in Section 5, agreement of the GHS at the international level has forestalled the development of national systems in countries that currently lack C&L systems of their own. The discussion highlighted the fact that many countries are likely to have developed their own systems in the absence of the GHS. Differences in the classification and labelling of substances and mixtures across the existing systems have already increased the costs of the international trade in chemicals. Companies involved in global trade have had to recruit experts to follow and respond to variations in requirements around the world (as indicated by responses to the questionnaire). Such costs could only be expected to increase further in the absence of a global system. The UN notes that there should be significant benefits for companies involved in the international trade in chemicals, based on consultation with the regulatory agencies of individual countries, industry representatives and experts from chemical companies. These benefits are expected to arise post-implementation and to include (Sullivan, 2006):


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• the reduced potential for legal liability claims due to inconsistent hazard data being provided on SDSs and labels;

• an improved corporate image and credibility with both customers and the public more generally;

• reduced costs in complying with global hazard communication regulations, where this includes: the reduced need for testing against multiple classification systems; a reduced need for evaluation against multiple classification systems; and a better use of expert resources;



8.3 EU Trade and Other Benefits 8.3.1 Anticipated Benefits to EU companies

The above listed benefits to companies participating in international trade are expected to accrue across all countries that implement the GHS, not only to companies in those countries with no current system. As discussed in Section 6, companies responding to the questionnaire gave somewhat conflicting answers in terms of the anticipated benefits of the GHS. They supported the GHS and believed that it was important for it to go ahead, but did not expect to benefit significantly from its introduction. In our view, this is due to their adopting a short-term perspective when answering the questionnaire, rather than considering the benefits that may arise in the medium to longer term. A number of the companies did identify the potential for savings to be realised through reduced costs in complying with communication requirements and the standardisation of the data provided as part of hazard communication. Interestingly, none of the companies referred to the potential benefits of reduced reputation risks and possible legal liabilities, as identified at the wider international level. This is surprising given the increasing importance placed by the financial markets on reputation issues and the current implementation of the Environmental Liability Directive (2004/35/EC). They also did not identify the harmonisation of transport labelling with the labelling of substances and mixtures for worker and public safety purposes as being a benefit although it undoubtedly will reduce the need for separate testing, the need to maintain separate classification systems and the potential for confusion by downstream users and emergency responders.

Instead some companies argued that there would be no benefits, based on the view that the EU SDS and labels are currently accepted in all but a few countries and (in their view) are essentially treated as the de facto global standard. Such arguments may properly reflect the current situation but fail to recognise that this will change in the future as the GHS becomes the real global standard. Once the GHS is implemented in other countries, EU SDS and labels are unlikely to be acceptable. Thus, EU exporters


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will need to adhere to the GHS and run a dual system – one for the EU and one for the rest of the world. Companies outside the EU may also be less inclined to import into the EU should it cost more to do so than to trade with non-EU countries. In other words, retention of a separate EU system could increase the non-tariff barriers to trading with EU companies. Where such trade continues, it may be at a cost penalty to the EU importer or user of the substance/mixture. Three other potential benefits could be lost should the EU not adopt the GHS: • The ability of the European Commission to use the introduction of the GHS as an

opportunity to simplify, harmonise and align downstream user legislation. Several of those consulted during this study highlighted their concern that there could be significant consequences of GHS adoption in terms of the costs of complying with downstream legislation. One company indicated that they believed there were as many as 50 pieces of EU, national and regional downstream legislation that would be affected. As reported in Section 3, the Commission is undertaking its own review of the implications of the GHS for downstream legislation. It has identified roughly 20 pieces of legislation that may depend either directly or indirectly on C&L and views this as an opportunity to simplify and align existing and future requirements.

• The second is that many small and medium sized EU companies may currently have

difficulty in competing with the larger companies for international trade. For example, they may not be able to support the additional expertise required to monitor, understand and comply with the various C&L requirements of different countries globally. Adoption of the GHS may help create a more level playing field for these companies, by reducing the need for such specialist expertise.

• The third reason relates to the potential for increased levels of imports to the EU,

which may benefit not only producers of mixtures but also downstream users of substances and mixtures and, thus, consumers. These benefits would stem from reduced costs of importation due to reduced non-tariff barriers, with the result being the potential for reduced prices along the supply chain.

Finally, it is also important to recognise that Member States, the European Commission, several EU industry associations and numerous individual EU company representatives have participated in the Expert meetings which have developed the current basis for the GHS. As noted in Section 7, should the EU decide not to adopt the GHS, the credibility of all of these organisations at the international level will be badly damaged. Member States and the Commission would lose much of its current influence in international negotiations concerning chemical risk management. Furthermore, the failure to adopt such a global system following active participation in its involvement may also be viewed as creating barriers to trade and, thus, raise WTO considerations.


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8.3.2 Value of Reduced C&L Costs for a Breakeven Outcome

As will be recalled from Section 6.7, the potential savings in trade related costs that were highlighted by different companies were associated with the expenditure they currently incur due to the non-harmonisation of C&L requirements; these costs range from €400 up to €80,000 per country. At an annual level, the lack of harmonisation for one company was associated with costs of around €100,000, and equivalent to one person year for another company and country combination. Such costs relate to both exports (monitoring, understanding and complying with C&L requirements) and imports (correcting and adding to data supplied by importers so that it meets EU requirements for substances placed on the market). The modelling of impacts on trade flows into and out of the EU has been carried out as part of Work Package 2 to provide an indication of the expected net trade impacts of the GHS. For comparison purposes, we provide an analysis here of the reduction in C&L costs to importers and exporters that would have to be realised at the company level for the benefits of harmonisation at the EU level to equate to the predicted costs of GHS implementation at the EU level, as presented in Section 7. In estimating the costs of implementing the GHS, we assumed that 20% of EU companies are involved in the export of chemicals, with this then equating to around 25% of total value of production of around €245 billion in 2005 (see Section 2). As will be recalled from Section 2, if 20% of EU companies are involved in the export of chemicals, this is equivalent to around 5,520 companies. This figure would appear to be reasonable when considering both the number of companies in each of these sectors, the split of these between SME and larger companies and the trade surplus in chemicals by sector (see Section 2). According to 2004 data from Eurostat, the value of chemical imports to the EU is lower than for exports, at around €164 billion in 2004, resulting in a trade surplus of around €54 billion in the same year. As for exports, there is no good data on the number of companies importing chemicals into the EU, although most of the companies responding to the questionnaire for this study indicated some level of import. More broadly, if we assume the ratio of the number of companies exporting to those importing is consistent with the value of exports versus imports, then an estimated 4,180 companies would be involved in chemical importation. Adding the two figures together would give a possible total of 9,700 companies in the EU being involved in international trade. This figure however does not take into account the overlap that is likely to exist between importers and exporters. For example, it is likely that the majority of distributors operating in the EU import and export substances and/or mixtures, with this corresponding to around 850 companies. Similarly, responses to the questionnaire indicate a high level of overlap between import and export, although this does not apply across all respondents. For these reasons, we have assumed that there is a 30% overlap and that around 6,800 individual companies are involved in international trade and thus may benefit from reduced C&L related costs with the introduction of the GHS.


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Dividing the total costs of each Scenario by this number of companies indicates what the total reduction in C&L costs would have to be per annum and per company involved in international trade for the benefits of harmonisation to equal the costs to the EU as a whole; i.e. for their to be a breakeven outcome between the costs of GHS introduction in the EU and the savings stemming from this to EU companies. The results are presented in Table 8.2 in terms of the required reduction (or savings) in the C&L costs faced by EU importers and exporters and the equivalent annual value (EAV) of this required savings in costs (calculated over 30 years using a discount rate of 4%). Table 8.2: Cost Reduction (Savings) Necessary for a Breakeven Outcome per Importer/Exporter and for Different Country Assumptions Total Savings

per Company (Present Value)

Annualised Savings per Company








Scenario 1 € 40,626 € 2,348 € 335 € 157 Scenario 2 € 57,535 € 3,326 € 475 € 222 Scenario 3 € 50,342 € 2,910 € 416 € 194

As can be seen from Table 8.2, the savings in C&L costs to importers and exporters only have to be small for the proposals to be justified in cost-benefit terms (i.e. for a breakeven outcome to occur). The total annual savings in C&L costs that would have to be realised vary from around €2,350 to €3,330; these equate to savings of just a few person-days per company and would appear to be far below the savings that are likely to be realised by companies based on the responses received for this study. In terms of all 27,000 companies operating in the EU, the total present value savings per company would have to be between €6,000 and €14,000 depending on scenario. Expressed as an equivalent annual value (EAV) as in Table 8.2, this equates to breakeven savings of €350 and €840 per year on average.


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9. SUMMARY AND CONCLUSIONS FOR WORK PACKAGE 1 9.1 Aims and Approach The aim of this study has been to support the Commission by developing the information

that it requires to prepare an impact assessment of its forthcoming proposals for introducing the GHS in the EU. This Report addresses one aspect of this support work - providing empirical and factual evidence on the likely impacts (costs and benefits) of GHS implementation on chemical companies in the EU.

The work involved has included a survey of a small sample of companies in the key sectors likely to be affected by introduction of the GHS, a wider literature review and the development of a spreadsheet based model for estimating the likely costs of the GHS. This has taken into account the interplay between the timing of the GHS implementation and the timing of REACH. Although the original intention was to also estimate the benefits of the GHS, the approach adopted here has instead be to calculate the breakeven value of benefits and to compare these to company responses on the costs of the current lack of harmonisation in C&L systems globally. The amount of information available to compile this Report has been limited. This is due to the fact that most companies in the EU are currently focused on understanding the implications of REACH for their activities; they have not yet turned their attention to understanding the implications of the GHS for their activities. As a result, company respondents and national experts have been reluctant or are unable to attach quantitative figures to what they believe might change under the GHS, given the uncertainty surrounding such outcomes. In addition, company responses suggest that they are also focusing on the short-term impacts of GHS implementation rather than also looking to the medium to longer-term benefits that may arise.

9.2 Responses to the Questionnaires

Responses were collected from 14 companies and five trade associations (16 responses in total when taking into account national associations). Responses reported by the key sub-sectors can be summarised as follows. • Basic Chemicals: this grouping focuses on those companies producing mainly

substances for supply to other parts of the chemicals industry and other sectors; they may also produce mixtures as part of their overall portfolio. The costs of labelling and revisions to SDS are minimal due to the automation of IT and computer systems, the international sales base of producers and the bulk nature in which the products are transported (requiring minimal labelling by volume manufactured). They do not expect significant adverse impacts resulting from changes in classification under the GHS, with only 10% of substances predicted as being affected by changes in classification criteria. The preference of this group was for a GHS transition concurrent with REACH. Positive trade impacts from the GHS were expected to be small and to arise only in the medium- to longer- term. This group also raised


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concern over how the C&L of complex substances would be dealt with under the GHS, compared to the current system.

• Consumer Products: this grouping covers household and personal care products,

with companies largely producing mixtures, with numbers ranging as high as 50,000 per company. The group’s exposure to GHS and consequent costs are determined by the large amount of packaging and labelling used, the automation of computer systems for C&L and the proximity to customers at the bottom of supply chains. Changing labels on stocks, disposing of labels, reformulation and stock loss were all identified as potential impacts in this sector should there be an inadequate period allowed for stock replacement/withdrawal. Classification related impacts due to changes in criteria and the calculation method for mixtures were expected to be severe; adoption of the optional new Cat. 5 classifications was a particular concern as this is expected to result in the labelling of significant numbers of consumer end products. Transition periods that allow greater time for mixtures classification are generally preferred. Shorter periods could have considerable adverse impacts on SMEs and resources in general. Trade impacts were thought to be small, given that markets tend to be EU- or nationally-based (although one company did acknowledge that they export a significant proportion of their production).

• Non-consumer Products: this group covers paints, pigments, dyes and inks and

produces the largest number of products as a sector and by company on average, compared to the rest of the EU chemicals industry. SMEs and multinationals are both prevalent, as are mixtures and substances. Specialisation and skills within the EU make it one of the largest export sectors. Companies within this sector expect the costs to be high due to the amount of packaging and labelling required for often small volumes of products, combined with the large number of product lines and SMEs involved in this sector. A mixed view emerges from the responses with regard to the impacts of changes in classification criteria and the mixtures calculation method. Some minor benefits of harmonisation were also identified.

• Traders/Distributors: this group deals in both substances and mixtures, usually

importing products for the EU market but also exporting to companies outside the EU. Costs are expected to arise in relation to both labelling and preparing and distributing revised SDS. For these companies, a short transition period is beneficial, as they believe that they can implement most of the GHS measures within the first couple of years. As business is conducted globally, a worldwide ‘big bang’ would benefit the sector and, as such, respondents indicated that the GHS could yield some trade benefits (although some indicated that any such benefits would be small given that the level of effort that they put into monitoring and complying with other countries’ requirements would not necessarily change significantly with the GHS).


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9.3 The Scenarios for GHS Implementation

The implementation of the GHS in the EU is expected to result in a series of direct and indirect impacts: • direct impacts: changes in costs stemming from the need to undertake C&L activities

specific to the GHS for both substances and mixtures, where this may result in the need to invest in new IT and staff training, as well as any additional classification work, revisions of SDS, redistribution of SDS and labelling; and

• indirect impacts: changes in costs (for example, demands for product reformulation)

that will arise due to retailers or customer responses to changes in classification under GHS; and impacts associated with the more rapid adoption of GHS in other countries.

Estimation of the direct impacts takes into account the potential for the GHS to result in higher classifications, lower classifications or new classifications of both substances and mixtures, for adoption of the core GHS classifications only or the core plus optional hazard classifications. The magnitude of the impacts that can be attributed to GHS implementation will depend on the interplay of its timing in relation to the introduction of the REACH Regulation. The questionnaire used to elicit information from companies and associations asked respondents to indicate their preferences for different transition periods. This included transition periods based on the REACH timeline for the registration of substances, extending beyond the REACH registration timeline and shorter than the timeline allowed for under REACH. The responses indicated that preferences vary greatly from a long period to a short period, depending on the nature of a company’s activities. After discussions with the Commission, it was decided that this Work Package would consider three scenarios in detail. A fourth scenario based on an eleven year transition period for substances (in line with the timeline for the registration of substances under REACH) followed by a further six years for mixtures was considered and excluded for economic, legal and political reasons. The economic argument against such a long transition period relates to the need to run and maintain dual C&L systems for a lengthy period of time. Discussions with one of the main EU C&L software manufacturers (Safeware, pers comm., 2006) suggested that if the EU system was to be maintained over a lengthy transition period, requiring on-going updating after GHS is introduced, then this would be likely to present major problems. Not only would it cost users a lot to continually review products in response to up-dates, but more importantly the costs associated with the confusion that this would cause are inestimable. The only practicable way to proceed would be to move to the GHS system over a reasonable transition period and build in the capability to produce data sheets, etc. according to both systems and read across between the two. A lengthy transition period would also be likely to increase confusion for industrial and professional users and consumers. This is due to the differences in the timing of when


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substances in different tonnage bands would have to meet the GHS requirements; adopting the same assumptions as for the REACH BIA, most low volume substances would not have a GHS C&L until towards the end of the 11 years. In addition, if mixture manufacturers want to minimise costs, they will not undertake the C&L of their mixtures until after the end of year 11. Thus, until the end of year 17, this scenario cannot guarantee to result in the consistent provision of information across both substances and mixtures, and does not adhere to ‘good regulation’ requirements for legal certainty. As a result, the level of effort that Competent Authorities would have to put into enforcing the GHS would be higher, particularly in relation to mixtures. The long transition period may also result in an uneven playing field within the EU, as some customers (i.e. retailers) may demand the earlier adoption of the GHS by their mixture manufacturers than required by the GHS Regulation; similarly, those companies that export substances and mixtures will be incurring the costs of the GHS in very different timeframes than those EU companies that do not. This could give rise to inequities within the EU market itself. It is also expected to result in trade with the EU being less attractive for those countries that have moved to the GHS more quickly, negating some of the overall trade benefits of adopting the GHS (see also Working Package 2 which highlights the significant losses in trade that are predicted to result under such an extended transition time scenario). In addition, given the political and technical involvement of Member States and the Commission, EU trade associations (including Cefic, CEPE, AISE, EIGA, Concawe, Eurometaux, etc.), and EU companies in the various UN meetings, adoption of such a long time period would result in a lack of political credibility. Adopting a 17 year period would put Member States and the Commission in a difficult position in terms of further negotiating the technical detail of the GHS. It is also likely to reduce the overall credibility of the GHS, at least in the short term, which could result in its adoption becoming fragmented globally. Such fragmentation could also have significant costs to EU chemical companies and the EU more generally, increasing the costs of international trade and possibly reducing the attractiveness of trade with the EU vis a vis other countries (see also Working Package 2 which examines this type of scenario). Given the above, it was decided to predict the cost implications of three different scenarios for the timing of GHS implementation. These scenarios were developed so as to link with REACH registration or C&L notification dates for substances, and to provide a long enough transition period for mixtures so as to ensure the workability of the move to the GHS. In general, it is assumed that mixture manufacturers will require a longer transition period than substance manufacturers due to the increased complexity and length of the mixture supply chain (e.g. there may be fourth or higher generation mixtures), the reduced (or more periodic) frequency of supply and the longer retention time of mixtures by both professional users and on consumer shelves. The three scenarios can be summarised as follows (with these all assessed against a baseline of the EU not adopting the GHS): • Scenario 1: this scenario has the greatest overlap with registration obligations

under REACH, allowing six years for application of GHS C&L to substances. A


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further five years is then allowed for the C&L of mixtures, with this corresponding to a total transition period of 11 years;





9.4 The Estimated Costs of the GHS

Table 9.1 presents the estimated costs of the EU adopting the core GHS requirements for each of the three scenarios with and without IT costs.

Table 9.1: Present Value Costs of Core GHS Requirements by Scenario (discounted at 4% over Scenario time horizon)

Total Substances Mixtures Excluding IT Including IT

Scenario 1 € 31,927,760 € 116,610,420 € 211,120,300 € 276,259,910 Scenario 2 € 39,743,250 € 211,449,960 € 318,797,900 € 391,241,360 Scenario 3 € 39,743,240 € 162,532,470 € 269,879,590 € 342,323,870

As can be seen from this table, the total predicted costs for each of the scenarios are (discounted at 4% over each scenario time horizon): • Scenario 1 (6 years for substances and a further 5 for mixtures): €276 million (€211

million excluding IT costs) ; • Scenario 2 (3 years for substances and a further 2 years for mixtures): €391 million

(€319 million excluding IT costs); and • Scenario 3 (3 years for substances and a further 5 years for mixtures): €342 million

(€270 million excluding IT costs). As expected, Scenario 1 is the lowest cost scenario as it allows companies to maximise the degree to which GHS requirements are undertaken at the same time as substances are registered under REACH. This also minimises the degree to which mixtures may need to be re-classified due to new information coming available from REACH. In contrast, Scenario 2 is predicted to give rise to the highest costs due to it requiring the greatest level of GHS C&L prior to REACH delivering new information. In all cases where mixtures are reclassified before the completion of REACH registrations, the costs of C&L administrative work to mixture manufacturers and distributors far outweigh those to


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substance manufacturers and distributors. As would be expected, Scenario 3 falls in between the extremes of Scenarios 1 and 3. It is important to note the large share of total costs comprised by the costs associated with new IT systems. These account for €65 million and €72 million respectively for Scenario 1 and then Scenarios 2 and 3 (which have the same IT costs).

A key concern in the adoption of new legislation such as the GHS is the share of costs that will fall on SMEs as opposed to larger companies. Given that there is a lack of information on the number of substances and mixtures that are produced/traded by SMEs compared to larger companies, apportioning the above costs across these two types of companies is difficult. For the purposes of this assessment, we have assumed that 75% of all substances (i.e. of the 29,342) and mixtures (i.e. of the 2 million) are produced by large companies, with SMEs only producing 25% of the total numbers. Based on these highly uncertain assumptions, SMEs’ share of the administrative costs of implementing the GHS vary from 13% to 16% across the three scenarios. However, the picture changes to a degree when the costs of new or modified IT systems and training are also considered. Because 95% of companies are SMEs, they will bear the majority of these costs.

The increased costs associated with adoption of the optional new classification criteria under the GHS (i.e. the Cat 5 criteria) are estimated at around €358 million for Scenario 1, rising to around €539 million for Scenario 3. This represents increases in costs of 30%, 38% and 33% respectively for Scenarios 1 to 3. Not included in these increases are the additional costs of testing to these new criteria.

9.5 The Benefits of GHS Implementation

The total value of production for the EU chemicals industry for 2005 is estimated at €586 billion, accounting for approximately 33% of €1,776 billion in world sales in 2005 (Cefic, 2005). Around 25% of EU sales are accounted for by extra-EU exports, with an analysis of the international trade in chemicals indicating that the EU is the largest market for chemicals, ahead of Asia and the United States. The EU has a large trade surplus in chemicals, estimated at over €50 billion based on Eurostat data. The UN notes that there should be significant benefits for companies involved in the international trade in chemicals, based on consultation with the regulatory agencies of individual countries, industry representatives and experts from chemical companies. These benefits are expected to arise post-implementation and to include (Sullivan, 2002): • reduced potential for legal liability claims due to inconsistent hazard data being

provided on SDSs and labels; • an improved corporate image and credibility with both customers and the public

more generally; • reduced costs in complying with global hazard communication regulations, where

this includes: a reduced the need for testing against multiple classification systems; a


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reduced need for evaluation against multiple classification systems; and a better use of expert resources;



The above listed benefits to companies participating in international trade are expected to accrue to companies within all countries that implement the GHS, not only to those with no current system. The responses of companies to this study ranged from those that did identify the potential for savings to be realised (in relation to either their own import or export activities) to those that did not anticipate significant benefits. However, many of these responses failed to recognise the increase in costs that could arise should the rest of the world move to the GHS but the EU did not. There are three other potential benefits that could be lost should the EU not adopt the GHS: • the ability of the European Commission to use the introduction of the GHS as an

opportunity to simplify, harmonise and align downstream user legislation; • the creation of a more level playing field in international trade for SME companies,

by reducing the need for expertise on differences in C&L systems worldwide; and

• the potential for increased levels of imports to the EU, which may benefit not only producers of mixtures but also downstream users of substances and mixtures and, thus, consumers.

It has not been possible to quantify the benefits of the GHS in terms of reduced costs due to the removal of non-tariff trade barriers through the harmonisation of C&L systems worldwide. As a result, the approach taken here has been to calculate what the breakeven value of these benefits would need to be for them to be equivalent to the estimated costs. The results of this analysis are presented in Table 9.2. Table 9.2: Breakeven Trade Benefits per Company and for Different Country Assumptions Total

Benefits per Company (Present Value)

Annualised Benefits per Company

(EAV over 30 years @ 4%)*

Annualised Benefits per



Annualised Benefits per



Scenario 1 € 40,626 € 2,348 € 335 € 157 Scenario 2 € 57,535 € 3,326 € 475 € 222 Scenario 3 € 50,342 € 2,910 € 416 € 194 Note: EAV stands for equivalent annual value

The potential savings in trade related costs that were highlighted by different companies related to the expenditure that they incurred from the non-harmonisation of C&L requirements; this ranged from €400 up to €80,000 per country. At an annual level, the


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lack of harmonisation for one company was associated with costs of around €100,000 for just one of the countries it exported to and equivalent to one person year for another company and country combination. Such costs related to both exports (monitoring, understanding and complying with C&L requirements) and imports (correcting and adding to data supplied by importers so that it meets EU requirements for substances placed on the market). As can be seen from Table 9.2, the reduction in such costs required to offset the costs of the proposals only have to be very small for the proposals to be justified in cost-benefit terms. The total annual savings that would have to be realised vary from around €2,350 to €3,330 per company; this equates to savings of just a few person-days per company and would appear to be far below the savings that are likely to be realised by companies based on the responses received for this study.


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10. REFERENCES

AISE (2004): Industry Data, information downloaded from the AISE website at http://www.aise-net.org.

AISE (2005): Industry Data, provided in personnel communication with AISE for GHS

study.

Allanou R et al (1999): Public Availability of Data on EU High Production Volume Chemicals, European Commission, Brussels.

Cefic (2004): Facts & Figures 2004, presentation downloaded from Cefic website at

http://www.cefic.org/factsandfigures.

Cefic (2004): SME Profile, study provided by Cefic through personal communication.

Cefic (2005): Facts & Figures 2005, presentation downloaded from the Cefic website at http://www.cefic.org/factsandfigures.

CEPE (2000): personnel communication with CEPE from an earlier study on REACH.

CEPE (2003): Statistics, obtained from website at: http://www.cepe.org/homepage.htm.

CEPE (2005): Personnel communication containing revised facts and figures

information for 2005.

Chemical Insight & Cefic (2003): ITC (International Trade & Competitiveness) Analysis, available from http://www.cefic.org/files/publications/.

DETIC (2005): Information pour F Adhesives –Product Families pdf, available from

http://www.detic.be/FR/library.asp.

Europa (2006): Overview: Chemicals Regulation in the EU, downloaded from http://europa.eu.int/comm/environment/dansub/home_en.htm

European Commission (2004): Personnel communication of Royal Haskoning study,

unpublished. Eurostat (2003): Eurostat Databases, Luxembourg, Statistics Office of the European

Communities. Eurostat (2005): Eurostat COMEXT database, available from

http://www.eu.int/eurostat. EIGA (2005): Industry Overview, downloaded from EIGA website at

http://www.eiga.org

ETAD (2005): personal communication.


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FECC (2005): personal communication.

FEICA (2003): Statistic/Market Data, downloaded from the FEICA website at http://www.feica.com

Förster RU & Wiertulla M (2005): Classification of Substances and Preparations:

Comparison of the EU and the Globally Harmonised Systems, prepared for the VCI, dated December 2005.

Hilgers G (2005): Impact of GHS on Consumer Ingredients and Products

presentation given to Cefic.

Ignatowski (1997): Review of the Hazard Classification System for Chemical Mixtures, produced by HAZCOM Consulting for the Chemical Manufacturers Association.

Industrieverband Klebstoffe e.V. (2004): Statistics & Market Data, obtained from

website at http://www.klebstoffe.com.

JRC (2003): Assessment of Additional Testing Needs under REACH, European Commission, Directorate General Joint Research Centre, Ispra.

JRC (2003b): Report of JRC Expert Group on chemical Intermediates, European

Commission, Directorate General Joint Research Centre, Ispra. Lide DR (1992): Handbook of Chemistry and Physics, CRC Press. NIOSH (2004): Registry of Toxic Effects of Chemical Substances (RTECs)

Database, available from http://www.cdc.gov/niosh/rtecs/default.html

OSHA (2006): GHS – OSHA HCS Comparison of Hazard Communication Requirements, report prepare by Occupational Safety & Health Administration, US Department of Labour, Washington DC. at http://www.osha.gov.dsg/ hazcom/GHSOSHAComparision.html.

RPA (2003): Revised Business Impact Assessment for the Consultation Document,

Working Paper 4, prepared for the European Commission, Enterprise Directorate General.

RPA (2004): REACH – One Substances, One Registration, Final Report to UK

Defra, at www.defra.gov.uk/Environment/chemicals/index.htm.

Royal Haskoning (2004): unpublished material provided by the Commission.

Sullivan, M (2006): Putting it All Together - Globally Harmonized System of Classification and Labelling of Chemicals, power point presentation, OSHA, US Department of Labour, Washington, DC.


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UN (2005): Globally Harmonised System of Classification and Labelling of Chemicals (GHS): First Revised Edition, available from http://unece.org/trans/danger/publi/ghs/ghs_rev01/01filese.html

VOK Osterreich (2004): Statistics & Market Data, obtained from

http://www.klebstoffindustrie.at

WHO (2005): Number of Work-related Accidents and Illnesses Continue to Increase, joint WHO/ International Labour Organization news release, available from http://www.who.int/mediacentre/news/releases/2005/pr18/en/index.html.


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ANNEX 1:

INDUSTRY QUESTIONNAIRE


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Questionnaire for Companies Manufacturing or Trading Substances and Mixtures

The aim of the Business Impacts study is to assess the changes in the classification and labelling related costs that may arise from adoption of the GHS and the potential impacts of the GHS on costs related to the trade in substances and mixtures/preparations both within the EU and with countries outside the EU. In order to assess the potential changes in costs that will arise from GHS implementation, we need to gather as much quantitative information as possible on numbers of substances and preparations/mixtures affected, and the costs of the relevant activities (including IT and human resource costs). The questions set out below are aimed at gathering such information. They have been developed by considering the potential impacts (costs and savings) of the GHS, taking into account the options that are available to regulators when adopting the GHS and different transition periods for its implementation. Impacts in relation to substances and mixtures/preparations are examined separately. You may not be able to provide answers to all of the questions set out below or not all of the questions may be relevant to your activities. Where a question is relevant but you can’t provide an estimate, a qualitative response would be of value. If you believe we have missed an important point, please feel free to provide additional information to us. For further information, please refer to DG Enterprise’s Website devoted to GHS at: http://europa.eu.int/comm/enterprise/reach/ghs_en.htm where documents and current studies can be downloaded. For your information also please find attached to this questionnaire draft comparison tables provided by the Commission that may prove useful to substance manufacturers, formulators and traders / distributors. Manufacturers may wish to test a sample of their substances against these comparison tables to generate information on the likely need to number that will need re-classification and that may change in classification. Please note that all responses to this Questionnaire will be treated as confidential. Your company's name will not be linked to the information provided in any way.

Risk & Policy Analysts Ltd will contact you to arrange a time to discuss your responses to this questionnaire, unless you would rather provide it to us in a completed form either electronically or on paper. Contact details are provided at the end.

Thank you very much for your assistance.


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Part A: Contact Details Company name: Name of contact person: Address: Telephone number: Fax number: E-mail address: Number of employees: <50 <250 >250 Annual turnover: ≤€10m ≤€50m >€50m

Part B: General Information 1. Please tick the box which best describes your company’s activities:

A producer of substances? A producer of mixtures? A producer of both substances and mixtures? A trader/distributor of substances? A trader/distributor of mixtures? A trader/distributor of both substances and mixtures? If you deal in both substances and mixtures, could you please indicate what percentage of your turnover is accounted for by each: % % of turnover involving substances by value % of turnover involving mixtures by value % of turnover involving substances by tonnage % of turnover involving mixtures by tonnage

2. Please provide an approximate figure for the total tonnage of chemical substances and

preparations that your company produces/formulates and/or trades in the EU and worldwide.

EU Worldwide Tonnage Produced Tonnage Formulated Tonnage Traded (please indicate whether imported or exported)


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3. In relation to the volumes of chemicals traded as quoted in Question 2, what percentage are traded internally (within your company) and externally (sold to other companies)?

Percentage Traded Externally Internally EU Worldwide

4. In terms of the volume produced/formulated in the EU, how many facilities are involved in

production activities and how many in the administrative activities relevant to classification and labelling (e.g. manufacture labels, prepare SDS, etc.)? Please also indicate the location of various activities where possible?

Number of Facilities

Production Administrative Trading (Import/Export)

Total

Location of Activities

5. Could you please provide an estimate of the number of substances and / or mixtures that your

company produces and/or trades (imports & exports) in an average year and the number of stock-keeping units that this relates to?

Number of substances? Number of mixtures? Number of stock–keeping units Do these numbers vary considerably on an annual basis? Yes (please indicate by how much) No

6. On average, what percentage of your annual turnover (by tonnage or value) is related to the

export of substances or mixtures to external companies outside and inside the EU?

% Outside by tonnage/value

% Inside by tonnage/value

% of turnover related to export of substances? % of turnover related to export of mixtures? Is this by tonnage or value? Do these percentages vary considerably on an annual basis? Yes (please indicate by how much) No

7. What percentage of the number of substances and preparations/mixtures that your company

produces are exported to other (external) companies in other EU countries or exported to countries outside the EU in a typical year? (See the table overleaf)


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% by Number % of chemicals exported to outside the EU % of chemicals supplied to companies in other EU countries? Do these percentages vary considerably on an annual basis? Yes (please indicate by how much) No

8. What percentage of the number of chemical inputs (substances and preparations/mixtures)

used in your manufacturing/trading activities in a typical year are imported from other companies outside the EU and what percentage are supplied by other companies located in other EU countries? (see the table

% by Number % of chemical inputs imported from outside the EU % of chemical inputs supplied by other companies in other EU countries? Do these percentages vary considerably on an annual basis? Yes (please indicate by how much) No

9. What are the main sectors that you provide substances or mixtures for?

List Sectors:

10. How would you describe your current level of understanding with regard to GHS?

None or very little understanding Basic understanding Competent understanding High level of understanding but would like more information Expert understanding

11. What if any external assistance does your company employ to understand the current as well

as the new GHS system? Please give details.


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Part C: Current Costs Related to Substance Classification and Labelling Activities This section is only relevant to those companies that manufacture substances for supply to other EU countries or for export outside the EU. 12. How many substances does your company classify or re-classify on an annual basis?

Activity Number of Substances

Classified Number of Substances

Re-Classified Imported for sale or trade in the EU For export

13. How often does re-classification occur over a product’s lifecycle? What is the average product lifecycle for the substances you supply?

14. When re-classification takes place, is this due to changes in the properties of the substance

itself resulting in the need for re-classification, or due to changes in classification requirements in the countries you supply (e.g. because you are supplying to new markets/customers in new countries)?

15. How many different versions of the Safety Data Sheet (SDS) and accompanying labels do

you produce/send on for the average substance in order to meet the varying requirements of the countries that you supply to? What proportion of these relate to substances supplied internally (e.g. by other branches of your company)?

Produce Average Number

per Substance Average Number

per Language Average Number

of Languages Safety Data Sheet Label % Related to internal supply

Send On Average Number

per Substance Average Number




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16. Can you please indicate how the various activities listed below are carried out? Please highlight any differences that may exist, for example, if language or other requirements mean that some percentage of the work is undertaken externally.

In-house Externally Classification and re-classification work? Production of SDS? Production of labels? If the above are undertaken in-house, how often do you up-date or modify your IT system? Do you have any data on the costs of making changes to the IT system?

17. How much does it cost your company to undertake the following activities in relation to a

single substance and then across your portfolio of substances in an average year? You can provide either an estimate of the human resources (i.e. number of person hours and grade) or of the costs in Euros. You can provide either an average figure or a range. If costs vary considerably across substances, it would be of value to us if you could provide a range.

Single

Substance Portfolio of Substances

Average costs of re-classification Average costs of labelling Average costs of revising a SDS Average costs of a new label Average costs of disposing of old labels Average costs of changing labels on stocks Average costs of distributing revised SDS

18. What percentage of the SDS and labelling activities relate to products that you manufacture /

(re)formulate compared to products that you import and re-label? If you are responding on behalf of more than one facility, please describe any replication of labelling that may take place and the workload across different facilities.

19. a) How many staff in your organisation fall into each of the following categories and what

are the grades of such staff?

Grade Approx. Number of Staff

Staff Grades Frequency of Training

Undergone basic training in the classification and labelling of substances

Undergone specialist training in Classification and Labelling

Maintain and operate computer systems used to record substance information (SDS, labelling, etc.)


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b) Under the following activities, please indicate your reliance on consultants or outsourcing to administrative firms, including the average wage or hourly rate it costs your company.

Activity Approx. Number of Staff Approx. Average/Hourly

Wage (€) Training of Staff Maintain and operate IT equipment Undertake labelling Under take testing and classification

20. Do you hold data on the percentages of your substances that are classified against different

risk phrases? Are you able to provide data on the percentage by R-phrase for the following categories?

EU Classification EU Criteria Number or % of

Substances Acute Oral Toxicity R22 200-2000 mg/kg bodyweight Acute Oral Toxicity R25 25-200 mg/kg bodyweight Acute Oral Toxicity R28 0-25 mg/kg bodyweight Acute Dermal Toxicity R21 400-2000 mg/kg bodyweight Acute Dermal Toxicity R24 50-400 mg/kg bodyweight Acute Dermal Toxicity R27 ≤50 mg/kg bodyweight Acute Toxicity (Aerosols & particulates/Dusts/Mists) R23

0.25-1 mg/l 4hr

Acute Toxicity (Aerosols & particulates/Dusts & Mists) R26

0-0.25 mg/l 4hr

Aspiration Hazard R65 ≤33mm²/s viscosity Skin Corrosion R34 3 minutes – 4 hours exposure Skin Corrosion R35 Less than 3 minutes exposure Skin Irritation R 38/R36/R37 Irritation/Mild Irritancy Carcinogenicity R45/R49 * 0.1% Cut off value triggering

classification due to impurity

Carcinogenicity R40 * 1 % cut off value triggering classification due to impurity

Reprotoxicity R60/R61 * Cut off value of 0.5% triggering classification due to impurity

Reprotoxicity R62/R63 * Cut off concentration value of 5% triggering classification due to impurity

Note: * For these substances, concentration limits/cut-offs refer to the concentration of impurities, additives or individual constituents which shall be taken into account (DSD Annex VI 1.7.2.1).

21. Have you considered how many substances are likely to be re-classified under the changes

in the criteria proposed under the GHS? If so, can you indicate either the percentage of substances that you expect to be affected by the change in classification, or indicate whether you believe that the effect: can be ignored, will be minor (< 5% of substances), will be moderate (<30% of substances), or will be severe (>30% of substances).

(See table overleaf. You may need to test a sample of your substances against the criteria in

order to provide estimates.)


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Note: 1) Regarding carcinogenicity category 2 the GHS includes two options for the cut-

off/concentration limits triggering classification of a mixture: Option 1 at 0.1%; Option 2 at 1.0%.

2) Regarding reprotoxicity, the GHS includes the options as follows: Option 1: cat 1A/B

at 0.3 % and cat 2 at 3%; Option 2: category 1A/B at 0.1% and category 2 at 0.1%.

GHS Classification Criteria EU Category

% Substances or Significance of effect

in switching from EU to GHS

Acute Oral Toxicity Cat.2 5-50 mg/kg bodyweight R28, R25 Acute Oral Toxicity Cat.3 50-300 mg/kg bodyweight R25, R22 Acute Dermal Toxicity Cat.2 50-200 mg/kg bodyweight R27, R24 Acute Dermal Toxicity Cat.3 200-1000 mg/kg

bodyweight R24, R21

Acute Toxicity (Dusts/ Mists) Cat. 2

0.005-0.5 mg/l R26, R23

Aspiration Hazard Cat.1 20.5 mm²/s viscosity R65 Aspiration Hazard Cat.2 14 mm²/s viscosity R65 Skin Irritation/Corrosion Cat.1 (3 Categories)

R35, R34

Skin Irritation/Corrosion Cat.2 R38 Skin Irritation/Corrosion Cat. 3

R38

Carcinogenicity Cat.2* cut off value 1% triggering classification due to impurity option to lower to 0.1%

R40

Reprotoxicity Cat.1 A/B* ≥0.3% Cut off concentration /value triggering classification due to impurity option to lower to 0.1%

R60, R61

Reprotoxicity Cat.2* ≥3 Cut off concentration/ value triggering classification due to impurity option to lower to 0.1%

R62, R63

* Note: The GHS includes a similar paragraph as in the DSD Annex VI 1.7.2.1; 1.3.3.1.3 …. Note also that where impurities, additives or individual constituents of a substance or mixture have been identified and are themselves classified, they should be taken into account during classification if they exceed the cut-off value/concentration limit for a given hazard class.


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22. Under GHS, a number of new classifications may be introduced in the areas illustrated below. Please indicate by number or percentage of substances you supply, how many substances might fall into each classification.

New Classification GHS Criteria Number or % of

substances covered Acute Oral Toxicity (GHS Cat 5) 2000-5000 mg/kg bodyweight Acute Dermal Toxicity (GHS Cat 5) 2000-5000 mg/kg bodyweight Skin Irritation (Addition to GHS Cat 3) Substances <1.5

(Mild Irritation)

Eye Irritation (GHS Cat 2.b) Mild Irritation 23. Please indicate if there are other GHS classifications, hazard classes and/or categories, which

might lead to significant re-classification?

24. If possible, please indicate to the best of your knowledge how many substances out of your

portfolio you expect to be re-classified under GHS? (please give as a % or whole number based on portfolio or individually)

Scope Approx. Number to Re-classify

% to Re-Classify

Substance Portfolio Individual Substances

25. Where a “new classification” is introduced, would it make a difference to you (for your

business), if this would lead to additional classification and labelling requirements or to only additional labelling requirements? Please can you illustrate the likely effect with (an) documented example(s) of past experience?

26. What labelling and re-classification costs do you expect to incur on your substance portfolio

and if possible per substance from the introduction of the GHS? How would these costs vary over the different implementation timescales given below?

Transition Period Per Portfolio

Cost (€) Per Substance

Cost (€) Concurrent GHS introduction with REACH Partial introduction with REACH for substances with a further 6 years for mixtures (17 years total)

3-6 years for substances, plus a further 3-6 years for mixtures


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27. In your view, are there any significant advantages or disadvantages to an early introduction of the GHS versus a longer transition period for your company/industry sector (e.g. coinciding with REACH)? Please give details.

28. Please indicate whether you believe there will be any health and or environmental benefits

from adopting the GHS; if so please indicate their likely nature and significance?

Benefit Environment Health None Small Medium Large

29. Please describe what the most significant benefits to the environment and or health might be?

30. Overall what do you believe to be the most significant advantages from the GHS? What will

be the most significant disadvantages?

Part D: Current Costs Related to Classification and Labelling of Mixtures This section is only relevant to those companies that manufacture mixtures supply to other EU countries or for export outside the EU. 31. How many of the mixtures that you sell are classified and non-classified?

Number Classified Number Not Classified


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32. How many mixtures does your company classify or re-classify on an annual basis?

Activity Number of Substances Classified

Number of Substances Re-Classified

Imported for sale or trade in the EU For export

33. How often does re-classification occur over a mixture’s life? What is the average life for the

mixtures you supply?

34. When re-classification takes place, is this due to changes in the components of the mixtures

resulting in the need for re-classification, or due to changes in classification requirements in the countries you supply (e.g. because you are supplying to new markets in new countries), or change of suppliers, or changes in the relative concentrations of different components of the mixture? Please describe.

35. How many different versions of the Safety Data Sheet (SDS) and accompanying labels do

you produce/send on for the average mixture in order to meet the varying requirements of the countries that you supply to? What proportion of these relate to mixtures supplied internally (e.g. by other branches of your company)?

Produce Average Number

per Mixture Average Number



Send on Average Number

per Mixture Average Number



36. Can you please indicate how the various activities are carried out? Please highlight any

differences that may exist, for example, if language or other requirements mean that some percentage of the work is undertaken externally.


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In-house Externally Classification and re-classification work? Preparation of the SDS? Production of labels? If the above are undertaken in-house, how often do you up-date or modify your IT system? Do you hve any data on the costs of making changes to the IT system?

37. How much does it cost your company to undertake the following activities in relation to a

single mixture and then across your portfolio of mixtures in an average year? You can provide either an estimate of the human resources (i.e. number of person hours and grade) or of the costs in Euros. You can provide either an average figure or a range. If costs vary considerably across mixtures, it would be of value to us if you could provide a range.

Single

Mixture Portfolio of Mixtures

Average costs of re-classification Average costs of labelling Average costs of revising a SDS Average costs of a new label Average costs of disposing of old labels Average costs of changing labels on stocks Average costs of distributing revised SDS Average cost of reformulation due to stricter classification

38. What percentage of the SDS and labelling activities relate to mixtures that you manufacture

compared to mixtures that you import and re-label? If you are responding on behalf of more than one facility, please describe any replication of labelling that may take place and the workload across different facilities?

39. a) How many staff in your organisation fall into each of the following categories and what

are the grades of such staff?

Grade Approx. Number of Staff

Staff Grades Frequency of Training

Undergone basic training in the classification and labelling of substances

Undergone specialist training in Classification and Labelling

Maintain and operate computer systems used to record substance information (SDS, labelling, etc.)


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b) Under the following activities, please indicate your reliance on consultants or outsourcing to administrative firms, including the average wage or hourly rate it costs your company.

Activity Approx. Number of Staff Approx. Average/Hourly

Wage (€) Training of Staff Maintain and operate IT equipment Undertake labelling Under take testing and classification

40. Do you hold data on the percentages of your mixtures that are classified against different risk

phrases? Are you able to provide data on the percentage by class for the following categories?

EU Classification EU Criteria Number or% of

Mixtures Acute Oral Toxicity R22 Acute Oral Toxicity R25 Acute Oral Toxicity R28 Acute Dermal Toxicity R21 Acute Dermal Toxicity R24 Acute Dermal Toxicity R27 Acute Toxicity (Dusts/Mists) R23 Acute Toxicity (Dusts & Mists) R26 Aspiration Hazard R65 Skin Irritation/Corrosion R34 Skin Irritation/Corrosion R35 Carcinogenicity R45/R49 0.1% Cut off value triggering

classification

Carcinogenicity R40 1% cut off value triggering classification

Reprotoxicity R60/R61 Cut off value of 0.5% triggering classification

Reprotoxicity R62/R63 Cut off value of 5% triggering classification

41. Have you considered how many mixtures are likely to be re-classified under the changes in

the classification criteria proposed under GHS. If so, can you indicate either the percentage of mixtures that you expect to be affected by the change in classification, or indicate whether you believe that the effect: can be ignored, will be minor (< 5% of mixtures), will be moderate (<30% of mixtures), or will be severe (>30% of mixtures).

GHS Classification Criteria EU

Class % Mixtures or

Significance of effect in switching from

EU to GHS Acute Oral Toxicity Cat.2** R28, R25 Acute Oral Toxicity Cat.3 R25, R22 Acute Dermal Toxicity Cat.2 R27, R24 Acute Dermal Toxicity Cat.3 R24, R21 Acute Toxicity (Dusts/ Mists) Cat.2

R26, R23


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GHS Classification Criteria EU Class

% Mixtures or Significance of effect

in switching from EU to GHS

Aspiration Hazard Cat.1 R65 Aspiration Hazard Cat.2 R65 Skin Irritation/Corrosion Cat.1 (3 Categories)

R35, R34

Skin Irritation/Corrosion Cat.2 R38 Skin Irritation/Corrosion Cat.3 R38 Carcinogenicity Cat.2 Option: Cut off value of

0.1% opposed to 1.0% R40

Reprotoxicity Cat1A/B ≥0.3% Cut off concentration value instead of 0.5% Option: to lower to 0.1%

R60, R61

Reprotoxicity Cat.2 ≥3% Cut off concentration value instead of 5% Option: to lower to 0.1%

R62, R63

42. Under GHS, a number of new classifications may be introduced in the areas illustrated

below. Please indicate by number or percentage of mixtures you supply, how many mixtures might fall into each classification. Note that for mixtures, if no test data are available then the calculation methods laid down in the GHS are to be applied.

New Classification GHS Criteria Number or % of

mixtures covered Acute Oral Toxicity (New Cat 5) 2000-5000 mg/kg bodyweight Acute Dermal Toxicity (New Cat 5) 2000-5000 mg/kg bodyweight Skin Irritation (Addition to Cat 3) Substances <1.5

(Mild Irritation)

Eye Irritation (GHS Cat 2.b) Mild Irritation 43. If possible please indicate to the best of your knowledge how many mixtures do you expect

to re-classify under GHS? (please give as a % or whole number based on portfolio or individually)

Scope Approx. Number to Re-classify

% to Re-Classify

Mixture Portfolio Individual Mixtures

44. Where a “new classification” is introduced, would it make a difference to you (for your

business), if this would lead to additional classification and labelling requirements or to only additional labelling requirements? Please can you illustrate the likely effect with (an) documented example(s) of past experience?


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45. What labelling and re-classification costs do you expect to incur on your substance portfolio and if possible per substance from the introduction of the GHS? How would these costs vary over the different implementation timescales given below?

Transition Period Per Portfolio Cost (€) Per Mixture Cost

(€) Concurrent GHS introduction with REACH Partial introduction with REACH for substances with a further 6 years for mixtures (17 years total)

3-6 years for substances, plus a further 3-6 years for mixtures

9-year long transition period (3 years substances and 6 years mixtures) before full adoption of GHS, during which more than one C&L system co-exist

46. In your view, are there any significant advantages or disadvantages to an early introduction

versus a longer transition period for your company/industry sector (e.g. coinciding with REACH)? Please give details.

47. Please indicate whether you believe there will be any health and or environmental benefits

from adopting the GHS; if so please indicate their likely nature and significance?

Benefit Environment Health None Small Medium Large

48. Please describe what the most significant benefits to the environment and or health might be?

49. Overall what do you believe to be the most significant advantages from the GHS? What will

be the most significant disadvantages?


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Part E: Trade Impacts 50. Please list the countries outside the EU that you export to and the number of substances and

mixtures exported to each. Please give an indication of the relative share that each country accounts for in your total export business (where possible, both by tonnage and by value). Please rate, on a scale of 1 to 5 (5 being highest), the above trading partners in terms of how onerous/demanding their classification and labelling (C&L) and related requirements are in comparison to two alternative benchmarks: the current EU system and the proposed GHS.

% relative to total exports

Rating (1 to 5) Country

Number of substances exported

Number of mixtures exported in vol. in € EU GHS

51. a) Could you please consider the share of your total export costs that is accounted for by

each of the following cost components? (please fill also a row including relevant similar costs when selling for your home market)

Percentage Of which:

Cou

ntry

Cos

t of s

ales

Prod

uctio

n/m

anuf

actu

ring

cos

ts

Tra

nspo

rt c

osts

Mar

ketin

g co

sts

Tar

iff c

osts

Non

-Tar

iff T

rade

C

osts

Oth

er P

leas

e Sp

ecify

HOME MARKET

b) Could you please consider the share of your total Non-Tariff export costs that is accounted for by each of the following cost components? (please fill also a row including relevant similar costs when selling for your home market)


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Non-tariff trade costs, Percentage of which:

Cou

ntry

Cos

t of s

ales

Lic

ence

s and

au

thor

isat

ions

Cos

t of d

elay

du

e to

test

ing,

et

c

C&

L a

nd

rela

ted

requ

irem

ents

Leg

al o

r ad

min

istr

ativ

e co

sts

Oth

er, p

leas

e sp

ecify

--

----

----

----

--

HOME MARKET

52. Please pick one of the lowest rated countries from the above list and provide the following

information on your estimates of C&L-related costs (on an average yearly basis):

Country:_____________________________

Estimated cost

Understanding C&L requirements Complying to C&L requirements Monitoring and complying to changes in C&L requirements

53. Please pick one of the highest rated countries from the above list and provide the following

information on your estimates of C&L-related costs (on an average yearly basis):

Country:_____________________________

Estimated cost

Understanding C&L requirements Complying to C&L requirements Monitoring and complying to changes in C&L requirements

54. What level of resources do you believe your company currently expends due to the non-

harmonisation of classification and labelling systems at the international level?

Imports… Exports…


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55. To what extent would the harmonization of C&L brought about by GHS implementation reduce your C&L and related costs? Please provide an estimate of the percentage by which such costs may be reduced in the table below.

Country Estimated percentage reduction of L&C and related costs

56. Do you expect any other trade-related benefits to your company/ industry sector because of

an eventual GHS implementation? Please give details.

57. Do you expect any negative trade-related impacts on your company/ industry sector as a

result of an eventual GHS implementation? Please give details.

58. Consider a scenario of a 9-year long transition period (3 years substances and 6 years

mixtures) before full adoption of GHS, during which more than one C&L system co-exist. Does this scenario have any significant trade-related costs/benefits for your company or industry sector? Please give details.

Part F: Other Comments 59. Would you be happy for us to contact you if we have any further questions concerning GHS

or the answers you have provided above? Yes / No 60. Do you have any other comments that you would like to make concerning the GHS

proposals? Please add any other information you would like us to consider here.


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ANNEX 2:

CALCULATIONS UNDERLYING NUMBERS OF SUBSTANCES AND MIXTURES AFFECTED BY GHS


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A2. MODELLING OF SUBSTANCES AND MIXTURES SUBJECT TO GHS COSTS

A2.1 Overview

This Annex describes the analysis and assumptions used to calculate the numbers of substances and mixtures that are subject to GHS. As noted in Section 7, in considering the assumptions and results, it is important to recognise that the predominant factor in the calculations is the timing for the introduction of GHS classification requirements compared to the data outputs from registrations under REACH. Thus, where GHS is introduced before the registration of a substance under REACH, there is the potential that the classification of a substance may change and, where the substance is present in mixtures, this may have an impact on the classification given to a mixture. The three scenarios analysed in detail in this Working Package are as follows (with these all assessed against a baseline of no adoption of the GHS): • Scenario 1: this scenario has the greatest overlap with registration obligations

under REACH, allowing six years for application of GHS C&L to substances. A further five years is then allowed for the C&L of mixtures, with this corresponding to a total transition period of 11 years;






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A2.2 Substances

A2.2.1 Starting Numbers of Substances of Different Type Owing to the interaction between GHS and REACH, the numbers of substances that are subject to GHS classification and labelling are the same as those that must be registered under REACH. In the analysis, the starting numbers substances used have taken from the ECB assessment and include Type 4 intermediates and Type 3 intermediates >1000t which are registered under Annex V of REACH. These are provided in Table A2.1.

Table A2.1: Numbers of Substances Subject to REACH Registration <10 10-100 100-1000 >1000 Numbers of Substances 19,200 4,977 2,461 2,704 Deadline for Registration (tear) 11 11 6 3

A2.2.2 Dangerous Substances for Classification and Labelling One of the key objectives of REACH is to identify substances with dangerous properties and to obtain further information on substances with known dangerous properties. In considering the benefits (and costs) of REACH, it has been assumed from data for the notification of new substances that 70% of all substances will be identified as having one or more dangerous properties for which they will need to be classified. Prior to any new information coming available from REACH, only those substances that are currently known to have dangerous properties would automatically be classified (or reclassified) under GHS; although there may need to be some review of other substances for which data exist to check changes in classification. As a result of REACH, some substances will only be subject to GHS as a result of the new information coming from REACH. In addition, any substances that go through GHS C&L prior to their registration under REACH may change classification at the time of their REACH registration. Accordingly, in order to identify which substances may need to be classified twice because of information changes after registration under REACH, the total number of substances at the beginning of REACH has been partitioned into different groups. Substances with Dangerous and Non-Dangerous Properties Clearly, substances which have no dangerous properties will not be subjected to classification and labelling. This means that it is possible to exclude those substances that are not considered dangerous at present and for which registration under REACH will confirm that they are not dangerous. On the basis that 70% of substances will be found to be dangerous at the end of REACH (and assuming core GHS requirements only), 30% will be found (or confirmed) to be non-dangerous. This means that GHS will only ever apply to 70% of the substances in Table A2.1.


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Known Dangerous Substances versus Not Known Dangerous Substances Having identified that, at the end of REACH, classification and labelling will apply to 70% of substances, the next subdivision is the number of substances that are definitely known to have dangerous properties. In the business impact assessments for REACH, it was assumed that 17% of substances manufactured in quantities of 1-1,000 t/y, and 22% of substances of >1,000 t/y already have a complete set of base set test data. As this base set data includes the endpoints for classification and labelling, this implies that, depending on tonnage band, between 17% and 22% of substances that are known to be dangerous are also known with a high degree of certainty/reliability. For these substances, even if GHS were applied before registration, the classification is less likely to change than for those substances where data are absent or incomplete. This means that, depending on the tonnage band, between 83% and 78% of substances that are found to have dangerous properties after REACH have some or no data on which to base self-classification at present (i.e. at the start of REACH). Of this 83% to 78%, some substances will have some data that would lead to a classification and the remainder will have some or no data that has led to no classification at present. Both categories of substances are important for this analysis. For those substances where there are no known dangerous properties at present (because of poor/absent test data), there is no existing classification that would change under GHS before registration under REACH. Thus, for these, there are no costs of introducing GHS before registration of a substance under REACH because, in this circumstance, no classification and labelling would occur under the GHS before a registration. However, for those substances where there exist some data that would lead to a classification under GHS before registration under REACH, there is the potential that this classification would change after registration. For this analysis, a partition has been made in these percentages to reflect this difference. The partitions, assumptions and implications of implementing GHS before substances are registered under REACH are given in Table A2.2. The resultant numbers of substances allocated to each of the different types are provided in Table A2.3.


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Table A2.2: Summary of Assumptions and Implications of GHS before a REACH Registration Substance Type Assumption Implications of introducing

earlier GHS Substances with no dangerous properties

30 % of substances These would not be subject to classification and labelling under core GHS before or after REACH registration

Substances with dangerous properties

70% of substances Subject to classification and labelling after REACH and some may be subject to it before a REACH registration (see below)

Tonnages 1-1000 t >1000 Already known as dangerous on the basis of good test data




Known as having one or more dangerous properties on the basis of existing (poor) data

50% of dangerous substances (35% of all substances)


Substances that are not known to be dangerous before REACH registration.



These would be subject to classification and labelling after a REACH registration but would not be classified before this registration

Table A2.3: Resultant Numbers of Substances by Type Substance Type <10 10-100 100-1000 >1000 Total Not known dangerous that confirmed non- dangerous 5,760 1,493 738 811 8,803

Well known dangerous substances 4,435 1,150 568 530 6,683

Not well known dangerous substances 6,720 1,742 861 946 10,270

Substances not known or identified as dangerous until REACH registration

2,285 592 293 416 3,586

A2.2.3 Information from REACH Registration that May Change any Classification As highlighted above, where a substance has information (fairly complete or incomplete) that suggests it is classifiable and the timetable is such that the GHS classification takes place before the substance has been registered under REACH, there is a chance that the classification will change on registration. Thus, where a GHS classification has been made before registration and this classification changes on registration, then the process revising labels, revising SDS and distributing these would be duplicated; in other words, because the initial classification was wrong, then the resulting GHS work must be repeated as part of the REACH registration.


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To estimate the numbers of substances that would change classification on registration under REACH, it has been assumed that the probability of a change in initial classification following registration is 40% for substances with poor information and 20% for substances with good information. Applying these percentages to the substances of different types in Table A2.3 provides the numbers of substances that are likely to (and are unlikely to) change classification after a REACH registration in Table A2.4.

A2.2.4 Interplay between Timing of REACH Registrations and GHS Classifications As described in Section 7, the three Scenarios for the introduction of GHS requirements differ in terms of the transition periods allowed for the GHS C&L of substances. All of the scenarios, however, require classification under GHS of some substances before the registration deadlines set out in REACH. The analysis, therefore, has modelled the timing of registrations under the various tonnages bands under REACH and their interaction with the GHS deadlines. This has been achieved by modelling the registrations submitted for each tonnage band in each year for the numbers of substances given in Table A2.4 and, similarly, the number of GHS classifications. Comparison of the two for a given scenario gives the number of substances where a GHS classification would be made before the registration would be submitted under REACH. This, in turn, enables calculation of the number of substances where classification would and would not change after a subsequent REACH registration. In modelling registrations under REACH, as with the various REACH Business Impacts Assessments, it has been assumed that there will be some registration of substances before the deadlines set out in REACH. For this analysis, it has been assumed that the registration rate increases as the deadline approaches. The cumulative rate of registration of substances assumed is set out in Figure A2.1. The same assumptions have been applied to the rate of classification under the GHS. The resulting numbers of substances classified before registration and the numbers of these classifications that subsequently do/do not change under the different scenarios are provided in Table A2.5.


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Table A2.4: Differences between a Classification made Prior to and After REACH Registration Substance Types <10 10-100 100-1000 >1000 Total

Not known dangerous that confirmed non- dangerous 5,760 1,493 738 811 8,803


1,828 474 234 333 2,869

Well known dangerous substances

Substances that might be classified before REACH where classification would change on registration

457 118 59 83 717


4,032 1,045 517 568 6,162


Substances that might be classified before REACH where classification would change on registration

2,688 697 345 379 4,108

Substances that might be classified before REACH

- - - - - Substances not known or identified as dangerous until REACH registration

Substances that would be classified after REACH registration

4,435 1,150 568 530 6,683


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Figure A2.1: Registrations Submitted under REACH by Year

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 1 2 3 4 5 6 7 8 9 10 11

Years after REACH Starts

Reis

trat

ions

Sub

mitt

ed (%

)

1-100 t 100-1000 t >1000 t

Table A2.5: Substances Classified under GHS

Substance Types Scenario 1 Scenario 2 Scenario 3 classification does not change at registration 5,952 7,500 7,500 Substances





classification changes at registration 1,631 800 800


6,683 6,683 6,683


Total for Re-classification 13,856 13,856 13,856 Total New Classification 6,683 6,683 6,683 Total No. Classification 8,803 8,803 8,803 TOTAL 29,342 29,342 29,342

A2.2.5 Numbers of Classifications The analysis described thus far provides information concerning the number of early GHS classifications for substances that do and do not change for each of the scenarios. The cost of undertaking these early classifications is borne by each manufacturer of the substance. For those substances that are classified under GHS early and the classification does not change after REACH, the cost is only associated with the difference in cost between the year the GHS classification is undertaken and the year that it would have been required under REACH; in other words, it reflects a cost brought forward.


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For those substances that are classified under GHS early and the classification changes after REACH, the cost is equal to the cost of undertaking this earlier for the GHS (as this was, effectively, a misclassification that needs correcting). In order to determine the numbers of classifications that would be made for each type of substance, it is necessary to multiply the substances by the number of manufacturers. Despite work on REACH, reliable data on the number of manufacturers of each substance is still scarce. In the revised BIA, the number of manufacturers of each substance was not explicitly calculated; rather, assumptions were made concerning the percentage of substances manufactured by one, two, and more than two manufacturers as a means to identify those that would be individual versus consortium registrations. The assumptions applied in the revised BIA are provided in Table A2.6.

Table A2.6: Numbers of Substances with One , Two, or More than Two Manufacturers 1 Manufacturer 2 Manufacturers >2 Manufacturers >1000 60% 20% 20% 100-1000 60% 20% 20% 10-100 60% 20% 20% <10 80% 10% 10%

Subsequent 2004 work on ‘One substance, One Registration’ (OSOR) for the UK Competent Authority (Defra) introduced assumptions on how many manufacturers on average constituted the ‘>2 Manufacturers’ category. This was guided by the general assumption from ECB that, on average, there are three manufacturers of each substance subject to REACH. This led to the assumptions for the average number of manufacturers (this figure is assumed to also account for the activities of distributors) for each substance under each tonnage band presented in Table A2.7 where, once weighted by the number of substances in each category, this is consistent with a statistical three manufacturers per substance on average.

Table A2.7: Average Numbers of Manufacturers

1

Manufacturer 2

Manufacturers ‘X’

Manufacturers Where ‘X’=

Average Number of

Manufacturers >1000 60% 20% 20% 30 7 100-1000 60% 20% 20% 47 10.4 10-100 60% 20% 20% 15 4 <10 80% 10% 10% 4 1.4

A2.2.6 Non-Exporters versus Exporters

Non-Exporters As discussed in Section 5, most of the main non-EU trading partners are also planning to adopt the GHS. The transition times that will be adopted by these trading partners are not currently known. However, if the transition period adopted by these countries is shorter than the EU transition period, then EU exporters may need to apply GHS to their substances (and mixtures) prior to when they would be required to under the EU system.


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The costs of the C&L of these exported substances are not costs attributable to the EU adoption of the GHS (as also discussed in Section 7). Thus, they should be excluded from an assessment of the costs of the EU adopting the GHS. It is important, therefore, to differentiate between the number of manufacturers who export and the number that do not. We assume for this analysis that other countries adopt a transition period of six years. Thus, all exported substances would need to have GHS C&L before the end of year six to comply with the requirements of importing countries. If it is further assumed that 20% of EU manufacturers/distributors export (based on the data reported in Sections 2 and 6), then the statistical number of manufacturers (including distributors) who do not export are as given in Table A2.8. It is these numbers that incur costs due to the EU introduction of the GHS. Applying these numbers to the numbers of substances submitted early (Table A2.5) provides the number of early classifications that subsequently do/do not change under each scenario. These are given in Table A2.9, overleaf.

Table A2.8: Average Numbers of Manufacturers who do not Export

1

Manufacturer 2

Manufacturers ‘X’

Manufacturers Where ‘X’=

Average Number of Manufacturers who do not export

>1000 60% 20% 20% 30 5.6 100-1000 60% 20% 20% 47 8.3 10-100 60% 20% 20% 15 3.2 <10 80% 10% 10% 4 1.1

Exporters Knowledge of the number of exporters is important, as these manufacturers and distributors will benefit from any reductions in the costs of understanding, monitoring and complying with C&L requirements in other countries. From the above assumptions and those discussed in Section A2.3 1 below, the number of exporters is assumed to be 20% of the companies that manufacture or distribute substances and mixtures in the EU. Table A2.10 sets out the total number of companies within the EU chemicals industry (excluding pharmaceuticals and agrochemicals) broken down into the key sub-sectors and large versus SME companies. It is assumed that 20% of this total number, or roughly 5,520 companies, would benefit from reduced trade transaction costs associated with C&L activities.


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Table A2.9: Classifications under Core GHS Requirements Substance Types Scenario 1 Scenario 2 Scenario 3








16,344 16,344 16,344


Total Re-classifications 34,790 34,790 34,790 Total New Classifications 16,344 16,344 16,344 Total No. Classifications 21,914 21,914 21,914

Table A2.10: Number and Distribution of Enterprises by Sector

Sector Number of Enterprises % SME Number SMEs

Number of Larger

Enterprises Basic Chemicals 7743 94 7309 434 Paints & Inks 4298 97 4148 150 Other Chemicals 6649 98 6497 152 Man-made Fibres 347 80 278 69 Consumer (minus Cosmetics) 7711 60 7503 208 Distributors 850 90** 765 85 All Sectors* 27,598 26,500 1098 Note: *All sectors within the scope of the study, therefore, omitting pharmaceuticals, agro-chemicals and cosmetics. **Guesstimate based on survey responses and FECC data Source: CEFIC (2005) and FECC (2005)

A2.3 Mixtures

A2.3.1 Number of Mixtures of Different Types

As with substances, the key implication of differences in timing between the introduction of GHS and REACH is the effect of changes in information and, consequently, in the classification of the substances that make up mixtures. Where mixtures must be classified for the purposes of GHS before one or more of the constituents have been registered under REACH, then the costs of the early GHS C&L work essentially represent losses to the mixture manufacturer. In addition to the costs associated with the new information under REACH changing the classification of a given mixture, differences in the method of classifying mixtures under the GHS system may result in changes to a classification.


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The starting point for this analysis is estimates of the total number of mixtures on the EU market. This is taken as being 2 million based on industry guesstimates (Cefic, pers. comm.); however, this figure would appear to correspond well with the data collected from the company and industry association interviews. Of this 2 million mixtures, it is assumed here that 20% are also exported. This assumption is based on consideration of the data collected from the company interviews. As will be recalled from Section 6, the levels of exports associated with some basic chemicals producers and with consumer products producers are low (or very low) compared to the total numbers of mixtures that they are assumed to produce. For example, the consumer products sector is likely to account for hundreds of thousands of mixtures. However, most of these are produced for EU or even domestic markets. In contrast, some segments of the paints, inks, dyes and pigments manufacture will correspond to much higher levels of export. Finally, this figure of 20% of mixtures produced being exported should also correspond to 25% of the EU industry’s turnover coming from exports; one would expect exports to relate to higher rather than lower value mixtures. In turn, this means that 1.6 million mixtures are assumed to be manufactured and placed on the EU market only. As such, based on the same reasoning for exported substances, it is these 1.6 million mixtures that are affected by the EU’s proposals. The remainder, which are also exported, are assumed to undergo GHS in any event because of the GHS requirements in importing countries outside the EU. Of these 1,600,000 mixtures, a proportion will contain known hazardous substances. In the analysis of substances presented above, of the 29,342 substances that must be registered under REACH, it is predicted that 13,856 (47%) are known to have some dangerous properties based on information available before REACH (where REACH will increase this knowledge to result in 70% of substances having known dangerous properties). Accordingly, it is assumed that 47% of the 1,600,000 mixtures are currently known to contain one or more hazardous substances. Not all mixtures that contain hazardous substances require classification, however (see also Sections 3 and 4). For the purposes of this assessment, it is assumed that 30% of those mixtures that contain known hazardous substances are currently classified and 10% of these are regularly reformulated and re-labelled (and hence can also be excluded). Applying the above assumptions suggests that the 1.6 million mixtures are divided into three groups: • 225,600 classified mixtures, with 22,560 of these excluded from the assessment as

they are regularly reformulated, leaving a net figure of 203,040; • 526,400 mixtures containing hazardous substances that are not classified; and • 848,00 mixtures containing no currently known hazardous substances. These assumptions and the corresponding numbers are summarised in Table A2.11.


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Table A2.11: Assumptions Applied for Numbers of Mixtures by Type Mixtures 2,000,000 Percentage also exported 20% Mixtures not for export 1,600,000 Mixtures containing hazardous substances 47% Percentage of these that are classified mixtures 30% Number of mixtures that are classified 225,600 Percentage of these that are regularly reformulated and thus excluded from the analysis 10%

Net number of mixtures that are currently classified, excluding those regularly reformulated 203,040

Currently not classified but with hazardous substances 526,400 Mixtures with no known hazardous substances 848,000

A2.3.2 Modelling Changes of Mixture Classification

As has been described in Section 4, the calculation method for deriving the classification of a mixture varies between the current (EU) system and the GHS. A number of studies have sought to identify the changes for some endpoints based on a small subset of real mixtures and theoretical mixtures containing only one hazardous substance. None of these is conclusive, although there is a general view that a higher percentage of mixtures are likely to be classified under the GHS than under the EU system, with this borne out by testing of the two methods on certain product categories as discussed in Section 6 (i.e. certain types of consumer products). For this analysis, a probabilistic Monte Carlo model has been developed to predict the likely changes in category that may occur with the introduction of the GHS. In the model, mixtures containing up to eight different substances in different concentrations, at least one of which had hazardous properties (but up to eight), were examined. A random number generator was then used to derive LD50 values for each of the virtual substances in the virtual mixture. For each set of LD50 values, the model classifies the virtual mixture under both the EU and GHS systems. It should be noted that the different mixture rules (EU and GHS) were applied. The model was programmed to find virtual mixtures that matched specific EU classifications for acute oral toxicity, with this including mixtures not currently classified (but containing one or more hazardous substances). For each of the EU classifications (T+,T, Xn, and 0), five hundred virtual mixtures matching each of the classifications were generated, recording the appropriate GHS classification. Thus, 2,000 virtual mixtures containing one or more hazardous substances were generated from more than 2 million Monte Carlo runs. The data were then analysed to identify the frequency of category changes for a single classification endpoint for a mixture. Table A2.12 provides a summary of the percentage of the mixtures changing classification for the acute oral toxicity classification.


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Table A2.12: Changes in Mixture Category for One Quantitative Endpoint Related to Acute Oral Toxicity GHS Category GHS 1 2 3 4 5 0 EU Equivalent T+ T+ T Xn 0 0 T+ 39% 58% 4% 0% 0% 0% T 0% 32% 48% 19% 0% 0% Xn 0% 7% 13% 60% 14% 6% 0 0% 0% 12% 15% 24% 49%

From this analysis, the probability that a mixture of a given current EU classification based on existing data would change upwards or downwards by more than one EU class equivalent was calculated. This is provided in Table A2.13. Note from the table that some 20% of currently Xn classified substances would no longer be classified in the absence of the GHS Category 5 optionality. At the same time, some 27% of currently unclassified mixtures would have to be assigned GHS classifications 3 and 4, with this translating to EU Harmful or Even Toxic. It has been assumed, therefore, that these cancel each other out from the perspective of the net benefits of declassification versus cost of new classification.

Table A2.13: Probability that a Mixture is Classed Higher or Lower Compared to Most Closely Corresponding GHS Category (based on acute toxicity endpoint)

EU Class P Change Up 1 or More Categories

P Change Down 1 or More

Categories P New

Classification P Change in

Classification T+ 0% 4% 0% 4% T 32% 19% 0% 52% Xn 20% 21% 0% 40% 0 27% 0% 24% 51%

Derivation of Overall Probability of Category Change Based on Existing Data As with the analysis of substances, the difference in costs between the scenarios is principally related to the number of mixture classifications that would change for GHS based on existing data (i.e. before registration of all constituents) and would subsequently change again after registration of constituents under REACH. As can be seen from Table A2.13, the probability of a category change varies significantly depending on whether the mixture is T+, T or Xn. At present, there is little information on the number of mixtures that have one or more classifications of each type. To overcome this, an overall probability of a change in category for an endpoint has been derived based on ECB data concerning the frequency of substances with different R phases reflecting the different toxicity endpoints for the oral route of uptake. This approach reflects a conservative scenario for mixture classification as it is assumed that the probability of a defined mixture classification is equal to the substance classification, neglecting the effects of dilution and of the application of the additivity formula. An analysis of ECB data suggests the frequencies of the different classifications set out in Table A2.14.


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Table A2.14: Frequency of Classifications EU equivalent Number with R-phrases (oral) Percent Frequency T+ 585 20% T 467 16% Xn 1926 65%

These frequencies have been used to weight the probabilities of a change in class (from Table A2.13). Thus, Table A2.15 provides the weight and aggregated probability of a change in class upwards or downwards for an endpoint that may change under GHS. From the table, this suggests that, for an endpoint that is different between the EU and GHS systems, there is an 18% chance on average that a currently classified mixture would move upwards one or more classes and a 17% chance that it would move down.

Table A2.15: Combined Probability of a Change in Category under GHS

EU Equivalent Frequency P change up 1 or more P change down 1 or

more T+ 20% 0% 1% T 16% 5% 3% Xn 65% 13% 13% Aggregate P of Change 18% 17%

Numbers of Mixtures Changing Classification before REACH Registration The next stage of the analysis is to identify the number of currently classified mixtures that move up or down a category based on existing data (i.e. before a REACH registration). This analysis must first account for the fact that a mixture may be classified for more than one endpoint that may change. As such, where a mixture has, for example, two endpoints, the likelihood that the classification may change under GHS is higher than for a mixture with only one endpoint. To account for this, and to identify the number of mixtures with one, two, or more endpoints, C&L data from ECB on substances with more than one classification has been applied to the estimates of the number of currently classified mixtures described earlier. Table A2.16 provides the percentages of substances with one, two, three, etc. endpoints and how this equates to the number of mixture classifications with multiple endpoints. The next stage is to account for the probability that a given endpoint is one that does not significantly vary between the current classification system and the GHS. Here, for a single endpoint, it is assumed that there is a 30% chance that the single endpoint for a mixture is one of those that may change, i.e. there is a 70% chance that the endpoint is one that will not change. Thus, for a mixture with two endpoints, there is a 70% x 70% = 49% chance that the mixture has at least one endpoint that won’t change (i.e. there is a 51% chance that the endpoint is one that may).


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Table A2.16: Numbers of Mixtures Changing Classification before Constituents Have been registered under REACH

Number of Endpoints (Ex: 'R 21/22-48/20')

Percentage of Substances

Classified in Annex 1

Number of

Classified Mixtures

Cumulative Probability that Non-Changing

Endpoint

Resultant Cumulative Probability that

Mixture has at Least One Changing

Endpoint

Resultant Probability that

Mixture Classification

Changes Upwards

Resultant Probability that

Mixture Classification

Changes Downwards

Number of Mixtures Changing category Upwards

Number of Mixtures Changing category

Down

1 37% 75,970 70.0% 30.0% 5.4% 5.1% 4,069 3,900 2 32% 65,478 49.0% 51.0% 9.1% 8.7% 5,962 5,714 3 20% 40,219 34.3% 65.7% 11.7% 11.2% 4,718 4,522 4 7% 13,989 24.0% 76.0% 13.6% 13.0% 1,898 1,819 5 2% 5,052 16.8% 83.2% 14.9% 14.2% 750 719 6 1% 1,943 11.8% 88.2% 15.8% 15.1% 306 293 7 0% 389 8.2% 91.8% 16.4% 15.7% 64 61 Total 17,768 17,028


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Having identified the probabilities that different mixtures have an endpoint that is subject to change, the combined probability that the endpoint will change upwards or downwards (from Table A2.15) can be applied to derive the numbers of mixtures that change classification upwards or downwards for at least one endpoint based on existing data (i.e. pre REACH registration of constituent substances). This is also provided in Table A2.16 showing the number of mixtures that would change classification (upwards and downwards) if GHS were applied before the end of REACH. New Classifications for Mixtures not Currently Classified The discussion on re-classification above relates to those substances that contain hazardous substances and are currently classified. In addition to these re-classifications, it has been estimated above that there are some 526,400 mixtures that contain hazardous substances but are not currently classified (i.e. they are class ‘0’). From the analysis in Table A2.12, 12% of these may be classified under GHS category 3 (most closely corresponding to T under the EU system) and 15% may be classified under GHS category 4 (most closely corresponding to Xn under the EU system). Further, under the optionality, 24% would be given the new GHS category 5. Accordingly, if GHS is implemented in the EU before REACH is complete, this equates to the following number of mixtures that would be newly classified: • GHS 3: 55,904 new mixture classifications; • GHS 4: 71,064 new mixture classifications; and • GHS 5: 112,755 new mixture classifications under the optionality. Total Number of Re-classifications and New Classifications The resulting total number of new classifications and re-classifications made on the basis of existing information (i.e. before REACH registration of constituent substances) is provided in Table A2.17. Table A2.17: Total Number of Re-classifications and New Classifications before REACH

Numbers of

Mixtures Mixtures Containing Hazardous Substances and with an Existing Classification

Mixtures that would be reclassified and change class upwards 17,768 Mixtures that would be reclassified and change class downwards 17,028 Mixtures Containing Hazardous Substances but which DO NOT Meet Criteria for Classification

under Current System (i.e. Class ‘0’) Mixtures that would be newly classified as GHS 3 (EU T equivalent) 55,904 Mixtures that would be newly classified as GHS 4 (EU Xn equivalent) 71,064 Mixtures that would be newly classified as GHS 5 (Note only under optionality: no EU equivalent)

112,755

Total New and Re-classifications Carried out before All REACH Registrations of Substances Without Optionality 161,764 With Optionality 274,519


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From the table, in the absence of the optionality, 164,764 mixtures with new classifications or re-classifications would result from introducing GHS before REACH is complete (i.e. on the basis of existing data). For the optionality, there would be an additional 112,755 new category 5 classifications for mixtures that do not meet the criteria for classification at present (making 274,519 in total). Reliability of Mixture Classification before REACH is Complete In terms of the scenarios, the implications of introducing GHS before REACH is concluded are that new data on constituent substances from REACH will change these classifications (again). As has been described for the analysis of substances, at the beginning of REACH a subset of substances are well known to have one or more dangerous properties and a subset are not well known. Whilst some of these will change classification under REACH (as has been assessed elsewhere), equally, some will not. Table A2.18 shows the numbers of substances where the classifications do not change in REACH. The table also shows the number of classified substances at the end of REACH. Comparison of the two reveals that, according to the analysis of substances, at the start of REACH some 44% of substances could be classified accurately. At the end of REACH, this percentage increases to 100% and, part way through REACH, something between 44% and 100% of substances have good enough data to make an accurate classification that will not change.

Table A2.18: Classifications Prior to and After REACH Substance Types <10 10-100 100-1000 >1000 Total Well known dangerous substances


1,828 474 234 333 2,869



4,032 1,045 516.81 567.84 6,162

Total substances that known well or classification won’t change 5,860 1,519 751 901 9,031

Total number of classified substances at the end of REACH 13,440 3,484 1,723 1,893 20,539

Percentage of classifications known before/after REACH 44% 44% 44% 48% 44%

Using the model for substances, the percentage of accurate classifications at points in time before the end of REACH were calculated for each scenario. Table A2.19 provides these percentages at the intervals corresponding to the time for mixture classification. From the table it can be seen that, where mixture classifications are to be done in Year 11 (Scenario 1), only 85% of substances in the <10t and 10-100t have reliable data for


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classification of mixtures. This is because it is assumed that data from all substance registrations submitted in Year 11 would not be available for classification of mixtures until Year 12 (i.e. after all registrations under REACH are submitted). Table A2.19: Percentage of Dangerous Substances Identified at Time of GHS for Mixtures

Final Year of GHS Transition Period

for Mixtures <10 10-100 100-1000 >1000 Scenario 1 Year 11 85% 85% 100% 100% Scenario 2 Year 5 49% 49% 70% 100% Scenario 3 Year 8 59% 59% 100% 100%

The percentages in Table A2.19 reflect the probability that there is reliable information for accurate classification for a single substance. Mixtures may contain a few to tens of different substances. As such, in considering the reliability of mixture classifications before the end of REACH, this needs to be accounted. Using Scenario 2 as an example, where a mixture contains two substances that will be registered in the 10-100 t/y band under REACH, the combined probability of an accurate classification for the mixture is 49% x 49% = 24%. For this analysis it has been assumed that the average mixture contains 10 substances and there is an equal chance that substances can be in any of the tonnage bands. Thus, for Scenario 1, a mixture containing 10 substances in the lowest tonnage band, the probability that information is correct for the all substances in the mixture is 0.855 x 0.855 = 0.19 (19%). Table A2.20 provides a half matrix of probabilities for each combination of mixtures containing 10 substances in each tonnage band for Scenario 1. The average probability (53%) has been taken as being the average probability that an initial re-classification is correct for a mixture under Scenario 1.

Table A2.20: Calculation of Average Probability of Correct Classification for Mixture of 10 Substances for Scenario 1

<10 10-100 100-1000 >1000

% Dangerous Substances Registered

85% 85% 100% 100%

<10 85% 19% 10-100 85% 19% 19%

100-1000 100% 44% 44% 100% >1000 100% 44% 44% 100% 100%

Average 53% This cumulative approach has been used to estimate the probability that any classification of a mixture would be the correct classification at the time that GHS on mixtures is carried out. Table A2.21 provides these probabilities for each of the scenarios.


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Table A2.21: Re-classifications that Change After REACH Registration of Substances Final Year of GHS

Transition Period for Mixtures

Percentage Chance that Correct Classification Based on Stage of REACH

Scenario 1 Year 11 53% Scenario 2 Year 5 13% Scenario 3 Year 8 33%

When combined with the number of re-classifications and new classifications in Table A2.18, the number of re-classifications for mixtures that will need to be reclassified at the end of REACH because information has changed are set out in Table A2.22. Table A2.22: Resultant Duplication of Re-classifications for Mixtures

Final Year of GHS Transition Period

for Mixtures

Mixture GHS Classifications that remain Unchanged at the end of

REACH

Mixture GHS Classifications that

Change at the end of REACH and must

be Reclassified No Optionality

Scenario 1 Year 11 86,297 75,467 Scenario 2 Year 5 20,285 141,479 Scenario 3 Year 8 53,437 108,327

Optionality Scenario 1 Year 11 146,449 128,070 Scenario 2 Year 5 34,424 240,095 Scenario 3 Year 8 90,685 183,834

impact assessment of implementing the ghs

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