Uncertainty still hangs over UK Reach as January looms

Metals market participants continue to seek clarity about key aspects of the incoming UK Reach regulation ahead of the end of the Brexit transition period on 1 January.

UK Reach will replace the EU Reach chemicals regulatory framework in the new year — a system that in itself has generated concerns within the metals sector because of the costs and financial burden it can place on small suppliers.

Transitional provisions have been mapped out for UK Reach, with different registration deadlines set out in 2021-27 depending on an entity's position in the supply chain, whether it is "grandfathered", the type of substances being imported and quantity. Companies can continue to import after 1 January, but will need to inform the Health and Safety Executive (HSE) using a UK downstream user notification.

One of the most challenging aspects is when and how different entities across the supply chain must register, and the co-ordination of those timings, Raminta Dereskeviciute from law firm McDermott Will and Emery said yesterday during a webinar co-hosted by the Minor Metals Trade Association. "This is the most urgent question and has the most unclear answer," she added, encouraging a proactive approach to identify the lead registrant within individual supply chains and to ensure steps are taken sooner rather than later.

Companies caught up in the transition to the UK Reach framework are also calling for a consolidated version of the new legislation from the relevant government bodies, with amendments currently being announced one by one — prolonging the sense of uncertainty.

Goods purchased by a UK-based trader and still held in stocks will already be classed "Reach cleared" if they have been placed on the market by the end of the day on 31 December, with the party attempting to rely on this provision carrying the burden of proof. If goods are held in stock by a manufacturer or importer and have not yet been placed on the market — supplied for distribution, consumption or use — then the material will not be classed as "Reach cleared", Dereskeviciute said. She added that this question of classification at the moment of transition is made particularly complicated because it is intertwined with import and export controls that are still subject to change, depending on whether or not the UK leaves the EU with an overarching trade deal in place.

In terms of VAT, from 1 January the UK will be regarded as a non-EU country by the remaining member states. But the UK is adopting a postponed accounting method on goods from the EU to avoid cash flow problems, allowing importers to treat goods arriving in the UK in a similar way to now on an acquisition basis, by registering the VAT and reporting the import VAT on their VAT returns, rather than having to account for it at the border, and then subsequently reclaiming it as input VAT, according to James Ross, partner at McDermott Will and Emery. The same does not necessarily apply to goods being exported from the UK to Europe, and this will very much be up to how member states apply VAT in their own jurisdictions, so that is "something to watch out for". Northern Ireland will remain in the EU single market with regard to goods, which implies additional regulations on the movement of material between Great Britain and Northern Ireland.

UK-based traders will in theory still be able to use an EU-based fiscal representative for trading activities, but each case will depend on the particular compliance obligations that operate in the relevant member state, and the UK-based trader will be treated the same as any other non-EU based trader. It may be possible to appoint an EU bank representative so customers in the EU do not need to pay VAT on imports from the UK under delivered duty paid (ddp) terms, but again it will depend on how the rules are set out in individual EU member states, Ross said.

By Ellie Saklatvala