Wall Street Journal [Printer-friendly version] December 13, 2006 EUROPEAN UNION APPROVES SWEEPING CHEMICALS CURBS [Rachel's introduction: The Wall Street Journal says, "The tough new law will require manufacturers and importers to document how some 30,000 chemicals are used in products from cleaning liquids and plastics to furniture and electronics. About 1,500 chemicals deemed most dangerous to humans and animals will be at the heart of a new regulatory battleground for manufacturers and chemical producers doing business in or with the EU."] By Mary Jacoby BRUSSELS -- The European Union greatly expanded its campaign against industrial pollutants, with lawmakers approving sweeping restrictions on chemicals that could upend global manufacturing and supply chains and saddle thousands of companies with huge costs. The tough new law will require manufacturers and importers to document how some 30,000 chemicals are used in products from cleaning liquids and plastics to furniture and electronics. About 1,500 chemicals deemed most dangerous to humans and animals will be at the heart of a new regulatory battleground for manufacturers and chemical producers doing business in or with the EU -- the world's second-richest consumer market. Precise rules underpinning the law will be hashed out over the next decade, making it hard to gauge the full cost or identify where supply problems might arise. But the uncertainty alone will complicate business planning and product development. "There's mounds of uncertainty," said Eric Karofsky, a senior analyst with AMR Research in Boston, a manufacturing-consulting firm. Because it is unclear which substances will pass EU muster, "If you're a manufacturer, how do you go ahead and plan your business?" A new agency in Helsinki, Finland, will compile a database of chemicals and their properties from data industry will be required to submit over the next decade, with the first phase of the regime expected to be in place by spring 2007. The most toxic substances could end up banned. The direct costs of supplying safety information about a substance range from 20,000 to 400,000 ($26,528 to $530,560), depending on the volume of data requirements, according to the Parliament. Companies on the front line of the issue -- chemicals, electronics and plastics makers among them -- are bracing for the effect of the landmark legislation, dubbed Reach for "registration, evaluation and authorization of chemicals." Many U.S. manufacturers appear to be counting on being considered so-called downstream users of targeted chemicals, as opposed to the manufacturers or importers that will be responsible for the substances' documentation. But how those roles are defined remains to be seen, and could prove tricky. German chemical company BASF AG has budgeted "hundreds of millions of euros" to comply with the law and help its network of suppliers navigate the new bureaucracy, said Wolfgang Gerhard, BASF senior vice president for corporate and governmental relations. The company began two years ago setting up a database to track how thousands of substances are used in industrial processes, he said. Finnish cellphone maker Nokia Corp. makes 150 products using 30,000 components and 500,000 direct and indirect suppliers, said Markus Terho, the company's director of environmental affairs. Nokia would have to show chemicals are being used safely in each step and switch to less-toxic alternatives. Chris Huntley, a spokesman for Dow Chemical Co. of Midland, Minn., said the latest version of Reach is much improved, but that his company is concerned about how fast regulators will be able to register the 1,500 products. He said companies will have just 3.5 years to complete the process, while Dow understands the EU can register just 20 to 25 substances a year. "If they can't do it within four years, you could end up with a system that doesn't provide the confidence" it will work well, Mr. Huntley said. He couldn't offer specific estimates of the cost of registering Dow products, but said it will be similar to BASF's -- in the hundreds of millions of euros. Dan Turner, a spokesman for DuPont Co., said the Wilmington, Del., company will adopt a "business as usual" attitude for registering products containing perfluorooctanoic acid, used in the company's Teflon nonstick products. Studies show PFOA collects in women's breast milk, and have caused various illnesses in animals, but Mr. Turner said Dow doesn't believe PFOA is toxic. Parker Hannifin Corp. of Cleveland, which makes a wide array of items such as hoses and hydraulic equipment used by thousands of other manufacturers, hopes that in most cases it will be considered a "downstream user" and thus avoid dealing directly with the regulatory hurdles. Rick Taylor, the company's director of environmental compliance, says one change he anticipates is shifting from directly importing chemicals into Europe for Parker's plants there -- in which case Parker would be responsible for certification -- to buying those chemicals from a supplier that already has dealt with the legal hurdles. The big cost for companies like Parker, Mr. Taylor says, is likely to arise when suppliers suddenly stop selling certain chemicals because they don't want to deal with registration. That would require Parker to reformulate a product, which could create a cascade of problems with its customers. Uncertainty is widespread among nonchemical companies about what, if anything, they may have to do. In a survey of 127 global makers of electronics products released this week by Technology Forecasters of Alameda, Calif., just 13% said they believe their products would be affected by Reach, while more than half -- 52% -- said they didn't know. Europe has been a leader in imposing rules to get electronics companies, auto makers and others to clean up their acts. The Reach initiative comes on the heels of an edict called the Restriction of the use of certain Hazardous Substances, or RoHS, which took effect in June. It requires any electronics maker doing business in the EU to eliminate or sharply curtail six toxic substances, including lead, cadmium and mercury. In 2005, the EU put into effect a directive called WEEE -- for Waste Electrical and Electronic Equipment -- that required electronics makers to set up recycling and disposal systems for their gadgets. The three-year debate over the Reach law was at times emotional and personal. Environmentalists warned of babies drinking contaminated breast milk, while a member of the European Commission, the EU's executive arm, tested her blood and discovered 28 chemicals found in furniture, carpets and food that are potentially harmful to hormonal and reproductive systems. Industry groups argued they already make strong efforts to use chemicals safely. A program run by the Organization for Economic Cooperation and Development in Paris already collects much of the data the EU law seeks, and covers industries in North America and most of Europe. But environmentalists convinced European policy makers those programs aren't enough. "Hazardous industrial chemicals are widespread in house dust, rainwater, wildlife, in our own blood and that of unborn infants," said Justin Wilkes of WWF, formerly the World Wildlife Fund. The U.S. has also expressed concern about the law, worried about its effect on U.S. exports. But EU leaders said the legislation would set a global standard and called on the U.S. and other nations to adopt similar restrictions. The scope of Reach is vast: It will apply to any product made in or imported into the 480 million-person EU. Given the global nature of manufacturing and trade, companies large and small around the world will have to grapple with the rules. "The costs of compliance are incalculable," said Adrian Harris, secretary-general of Orgalime, a trade association representing European electronics, metalworking and mechanical industries. Under Reach, manufacturers will be required to substitute safer alternatives to the 1,500 most dangerous chemicals known or suspected to cause cancer, birth defects and other serious illnesses. Most have never been subjected to rigorous testing because they were in use before many countries began passing environmental-protection laws in the 1980s. If an alternative doesn't exist, industry would need to fund research and development to try to find one. But in a compromise reached last month, regulators will be able to make exceptions for chemicals whose use in certain instances is considered more beneficial than detrimental to public health. Environmentalists called that compromise a giant loophole for the 586 billion ($776 billion) European chemicals industry. An additional 140 substances not only considered toxic but that also linger for a particularly long time in the bodies of humans and animals face removal from the market. Such substances include flame retardants and other chemicals used to make carpets and textiles, electronics, paints and wax, and pots and pans. It isn't clear how much the legislation will ultimately cost businesses. "It's huge. Nobody knows," says Steven Russell, a lawyer with the American Chemistry Council trade group in Washington. Some idea can be found in RoHS legislation that went into effect in June. The cost to U.S. electronics makers alone to remove the six substances from their manufacturing chains will be an estimated $30 billion, according to AMR's Mr. Karofsky. -- Timothy Aeppel in Pittsburgh, Jim Carlton in San Francisco, Steve LeVine in Dallas and the Associated Press contributed to this article. Write to Mary Jacoby at email@example.com Copyright 2006 Dow Jones & Company, Inc.