Date: Jun 05, 2009
On May 21, 2009, the Chinese Ministry of Environment Protection (MEP) published a draft of revised Provisions on the Environmental Administration New Chemical Substances ("Provisions") for public comments. The new provisions contain 9 chapters and 41 articles. It is planned to be effective on October 15, 2010 to replace the current Provisions (SEPA Decree No. 17) issued by the former SEPA on September 12, 2003. This memo highlights the major changes in the revised Provisions that may be of interest.
1. Changes in Terminology and Addition of Tonnage Band
The new Provisions make quite significant changes in terminology. Most of the previous "exemption applications" are changed to "Simple Notification" (except "R&D exemption") in the concern that "exemption" might be misunderstood as a self-determination process.
"Low Volume Exemption", although not named as such, is added as a type of Simple Notification. But local eco-toxicological testing would be required.
The previous "R&D exemption application" is changed to "R&D filing", meaning it will simply be an administrative reporting process instead of application/approval.
In short, current notifications/reporting are categorized as below:
I. Regular Notification (for quantity more than 1 ton/year)
Data are required based on tonnage bands. There are four tonnage bands assigned (1-10 tons, 10-100 tons, 100-1000 tons and > 1000 tons) instead of three in the current scheme. However, detailed data requirement for each tonnage band is not available yet as they should be published later in the format of technical guidance document. Local eco-toxicological testing will also be required.
II. Simple Notifications
The revised regulations permit five types of Simple Notifications as below:
(1) For quantity below 1 ton/year ("Low Volume Exemption" in nature, more on this later)
(2) For quantity below 1 ton/year and use as intermediate or for export-only
(3) For scientific research with quantity between 0.1 and 1 ton/year.
(4) For polymers with each new monomer below 2% or otherwise of low concern.
(5) For process research with quantity below 10 tons/year (limited to two years).
Generally, we believe that data requirement can be much reduced for filing Simple Notifications. Of course, we will have to wait for the updated technical guidance document.
Local testing is not required for Simple Notifications except Scenario (1), or "LVE".
There will be no explicit time limit for successful Simple Notifications except Scenario (5) which is limited to maximal two years. These Simple Notifications, once approved, do not need to be renewed every year as in the current practice.
III. R&D Filing
For quantity below 0.1 ton/year for scientific research purpose, it should be filed with CRC-MEP but this will simply be a reporting process (more on this later).
2. Addition of "Low Volume Exemption" (although not named so)
As mentioned above, quantities below 1 ton/year are entitled to Simple Notification. But local eco-toxicological testing will be required. It is still unclear what local tests will be required. It is somehow unreasonable to require local test data to support notifications for such small quantity that is apparently of low environmental risk.
However, if the low volume (< 1 ton/year) production or import is for use as intermediate or for export-only, local testing can be waived. The practical problem is how intermediate should be defined. A substance can be intermediate for one company but finished product for its supplier.
3. R&D Filing
According to the draft Provisions, for quantity below 0.1 ton/year for scientific research purpose, it should be filed with CRC-MEP but this will simply be a reporting process. We take this to mean that MEP will not issue explicit approval for such R&D uses unless it opposes such uses. There is also no time limit for such filing. It is not clear what kind of information should be provided in the said filing process, however, we believed the data to support current R&D exemption application should be sufficient for the purpose of filing.
One thing of concern is that the Provisions say "CRC-MEP should collect the scientific research filing forms and send them to MEP every month for publication on the government website." First, this is simply a reporting, not an application/approval process, there is no legal requirement for MEP to publicize these reports. Secondly, substances used for R&D can be good indicators for future developments thus should be considered as Confidential Business Information. We believe the industry may want to file a comment in this regard.
4. Timeline for the Application Procedures
Article 14 specifies the timeline for the administrative procedure within MEP as well as it for external Expert Panel review. Unlike the current regulation, the time for formality check by CRC-MEP is not specified in the Provisions. But the overall timeline does not seem to be changed significantly – in the current practice, it takes maximum 120 working days for "full" notification and 30 working days for "exemption applications". This timeline includes the time for CRC-MEP to conduct formality check. While in the new scheme, it takes, after CRC-MEP finishing formality check, maximum 105 working days for Regular Notification and 60 days for Simple Notification (including review by Expert Panel).
CRC-MEP uses both in-house reviewers and external Expert Panel to review notifications. We understand that Regular Notifications may still be subject to review by external Expert Panel but Simple Notifications most likely (at CRC-MEP's discretion though) will only be reviewed and decided by the in-house reviewers without involving external Expert Panel. In that case, a Simple Notification takes only 30 working days instead of 60.
5. Categorization of New Chemical Substances
Notified new chemical substances will be categorized as "Regular", "Hazardous" or "Environmentally concern". Substances in different categories should be subject to different risk management measures prescribed in the Registration certificate. There may also be mandatory labeling and communication obligations for registration owners for certain substances (more on this later).
6. Import Control
According to the draft Provisions, importers of registered new chemical substances are required to present a registration certificate for customs clearance. Such provision may be problematic as not all chemicals that are cleared for lawful import have registration certificates (at least in the case of R&D filing).
We believe comments should be filed to revise the corresponding language.
7. Labeling, Communication and Reporting Obligations
For substances categorized as "Environmentally concern", besides complying with the risk management measures prescribed in the registration certificates, they should also be labeled on packages as "New Chemical Substance".
For substances categorized as "Hazardous", besides complying with the risk management measures prescribed in the registration certificates, the owners should communicate with their downstream processors/users about (1) risk management measures, (2) MSDS, (3) chemical classification, warning message and labeling as well as other related information.
We think these paragraphs were not very well written. It reads as if the owners of "Environmentally concern" substances do not have the obligation of downstream communication while the owners of "Hazardous" substances (of lower risk level than "Environmentally concern") do, which does not make sense.
The following reporting obligations are also specified (Article 23, 24 and 28):
(a) Registration owners for Regular notification should report the first-time production or import of the new substances to the CRC within 30 days after the occurrence.
(b) Processors of environmentally Concern substances should report the first-time processing activities to CRC within 30 days after the occurrence.
(c) Registration owners of Environmentally concern substances, on top of the reporting obligations above, should also report every transfer (we take this to mean each shipment) to downstream processors to CRC within 30 days after each occurrence.
(d) Before February 1st of each year, registration owners for Hazardous or Environmentally Concern substances should report to CRC the actual quantity of production/importation in the previous year as well as their production/import plan for the coming year.
(e) Registration owners are also required to report newly identified hazard characteristics to CRC after registrations are granted..
8. Update of Chinese Inventory Of Existing Chemicals
According to the draft Provisions, a registered new substance will be listed onto the Chinese Inventory five years after its first-time production/import. However, based on registration owner's request, a new substance may also be listed onto the Inventory three years after its first-time production/import.
This time gap between granting of registration and listing on Inventory has been prolonged from practically an average of two or three years (currently) to at least three years. There are pros and cons to this approach depending on individual company's standpoint.
9. Exclusion of Free Trade Zone and Export Processing Zone
In the technical guidance document for the current regulation, Free Trade Zones and Export Processing Zones are excluded from the jurisdiction of the regulation. Although this may also be reflected in the to-be-revised technical guidance document, we believe that it will be more appropriately to include such exclusion clause in the Provisions itself rather than in the technical document.
10. Other Issues
(1) Article 2 says that pharmaceuticals, pesticides, veterinary drugs, cosmetics, food additives and feed additives are regulated by other specific regulations but the raw materials and intermediates for producing these products would still be subject to the Provisions. We believe the purpose of this paragraph is to provide certain categorical exclusion. However, the definitions of raw materials and intermediates are not provided and the language could be very misleading. In a broad (and not-too-unreasonable) sense, any chemical substances used for producing these products can be considered as "raw materials". Therefore there will be no categorical exclusion to substances at all
(2) Article 10 defines Duplicate Notification and virtually provides a mechanism for data sharing and compensation -- When two or more applicants notify the same chemical substance in succession, "me-too" notifiers may use the data generated by the previous notifier based on its consent. The mechanism for data compensation is not specified. Although the practicality of this mechanism may be questionable, we believe there is no downside of it.
(3) Article 17 says, "MEP should announce the names of the registered new chemical substances and their notifiers every year." We believe that there will be cases that certain notifier may not want their name and/or the substance name to be publicly known. There should be a choice to notifiers to not include the names of their companies/substances in the annual public announcement by MEP.
The Ministry of Environment Protection is now soliciting public comments for this draft proposal. Keller and Heckman will be able to file comments if needed. The deadline for filing comments is June 28, 2009.
For any further information, please contact the Keller and Heckman LLP Shanghai Representative Office.