ILMA Compoundings - May 2021 - 14

INDUSTRY RUNDOWN

International Insight
Brexit: When Grandfathering Ends, Do We
Stay, or Do We Go?
By James Eggenschwiler
Now that the Brexit deal between the U.K. and the
European Union (EU) is finished, companies around
the world should have the long-awaited details to determine if, and to what extent, they will double-down
to preserve (or grow) their access to what had become
the traditional European market. Some felt all along
that the U.K. lacked sufficient importance in their European revenue stream to warrant the added investment.
Others saw the prospects to be less clear-cut. Now that
the deal is done, both groups are beginning to see the
prospect of a U.K. REACH registration complicating
the decision.
WHO'S MY CUSTOMER?
Over the course of Brexit negotiations, my conversations
with product manufacturers in the U.S. and elsewhere
very often began and eventually ended with the comment,
" We really don't know that our U.K. business is significant
enough to justify registering in the U.K. " Except for those
who considered the U.K. to be a direct primary market, few
considered U.K. registrations as a realistic option. As the
" grandfathering " period continues, however, more conversations include a perspective of deepened evaluation.
The reason for this reexamination is (almost universally) a
redefined perspective on the identity of their customer base.
Now that the U.K. market is segregated from that of the
EU, companies are receiving more insight from their direct
customers about the necessity of U.K. registrations. Faced
with the prospect that a foreign supplier might not register
its product ingredients in the U.K., these EU customers are
becoming more transparent about their own customers and
extended downstream users. In addition, the EU customers
are providing more clarity about the flexibility they need, as
more of their downstream customers reveal their intentions
to ship their own products - including the foreign manufacturer's substance(s) - to the U.K.

MAY 2021

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In addition, U.S. distributors are becoming more informative about the potential for products that they distribute
to eventually be shipped to the U.K. What was previously
thought to be a less convoluted supply chain is now seen by
many to be a dynamic spider web of prospective exposure to
the U.K. market.
THE FLUIDITY FACTOR
Manufacturers have long been cognizant of the variety of
downstream distribution dynamics regarding their products.
The increased transparency is new in many cases, but they
have well understood that product ingredient compliance is
essential to growth in product distribution. The root dynamic
that seems to be at the forefront now is a clearer appreciation
of the fluidity of product distribution between manufacturers
and distributors in the EU and those in the U.K.
Consider the market and regulatory dynamics experienced by supply chain participants in the U.S. U.S.
regulations affecting product distribution primarily reside at
the federal level (U.S. Toxic Substances Control Act [TSCA]
compliance being the EU/U.K. REACH equivalent), with
a handful of state regulations to consider regarding select
chemicals - California Prop 65 perhaps being the most
prominent example. So long as the state regulations and
TSCA requirements are met, the flow of product distribution in the U.S. is unhindered. Product distribution flows
ubiquitously, and very little thought is required for regulatory considerations.
Yet, consider if one or more states were permitted to
impose their own substance registration requirement
(which they are not, due to TSCA preemption). Manufacturers that are largely blind to a meaningful percentage of
their eventual customer base would struggle to gain the
transparency needed to comply. The manufacturer would
know which substances sold directly to end users in those
states would require registration, but that would likely

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ILMA Compoundings - May 2021

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