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China Promulgates Revised Environmental Administration Provisions for New Chemical Substances

Date: Mar 29, 2010

On January 19, 2010, the Chinese Ministry of Environment Protection announced the amended Provisions on the Environmental Administration of New Chemical Substances (MEP Decree No. 7, hereafter referred to as "Provisions") which will enter into force on October 15, 2010. This law will replace the current Provisions (SEPA Decree No. 17), which was issued by the former SEPA on September 12, 2003. Compared with the previous draft published in May 2009, there have been some significant changes which are summarized below.

1. Categorical Exclusion for Substances Regulated by Other Laws and Inclusion of Articles Intended to Release New Chemical Substances

Article 2 stipulates that pharmaceuticals, pesticides, veterinary drugs, cosmetics, food, food additives and feed additives are regulated by other specific regulations but the raw materials and intermediates for producing these products are subject to the Provisions. Although the exclusion was previously contained in the Technical Guidance, new Provisions significantly clarify this exclusion and move it from the implementing regulations to the Provisions themselves. However, if an exempted substance has other industrial uses other than the one exempted, the substance must be registered before it can be produced or imported for such other uses.

The Provisions do not explicitly indicate whether food-related products like packaging materials are excluded from its jurisdiction. However, we understand that the proposed regulation on clearance of new food packaging materials requires the material to be listed in the Inventory of Existing Chemical Substances in China (IECSC). Therefore, food-related products are also subject to the Provisions.

Another significant change in the new Provisions is to subject articles that are designed to intentionally release new chemical substances during their uses to the registration requirement. This would include, but is not limited to, printer toner, ink cartridges or even a disposable pen if its ink contains a new substance. While this new REACH-type stipulation is aggressive, it is not clear how such articles will be listed and whether such articles existing in the market are entitled to any "grandfathering" mechanism. We expect this will be clarified in the coming Guidance document.

2. Deletion of Exclusion of Free Trade Zone and Export Processing Zone

Under the new Provisions, Free Trade Zones (FTZ) and Export Processing Zones (EPZ) are no longer excluded from the jurisdiction of the regulation. This could create problems to companies who rely on the exclusion to manufacture chemicals in China solely for export purpose. Any new substances produced in these FTZs and EPZs currently must now be registered or otherwise cleared for uses before October 15, 2010. Otherwise, production and use of such new substances in FTZs would have to cease or they would be considered unlawful.

3. Changes in Terminology and Addition of Tonnage Band

The new Provisions make quite significant changes in terminology. Most of the previous "Notification Exemptions (免于申报)" are now referred to as "Simplified Notifications (简易申报)" (except for the "R&D exemption") because of the concern that "exemption" might be misunderstood as a self-determination process (the term "Simple Notification" is explicitly used in order to differentiate from the Simplified Notification under the current Provisions).

"Low Volume Exemption," although not named as such, is added as a type of Simple Notification and covers new chemical substances having an annual volume less than 1 ton. But it requires local eco-toxicological testing while other types of Simple Notification do not.

The previous "R&D exemption" is changed to "R&D filing", meaning it will simply be an administrative reporting process instead of application/approval. This filing process also applies to substances that are imported to China for conducting local eco-toxicological testing.

The Provision's notifications/reporting requirements are summarized below:

I. Regular Notification (Article 11)

Data requirements are 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. Local eco-toxicological testing will be required for all tonnage bands. However, details of data requirement and types of local testing are not yet available as they should be published later in the technical guidance document.

II. Simple Notifications (Article 12 and 13)

There are five scenarios under Simple Notification: one basic and four special ones.

(1) Basic Scenario: for annual volume below 1 ton. As mentioned above, local eco-toxicological testing will be required. Although the types of testing are not spelled out, it most likely include acute fish toxicity and ready biodegradability tests.

(2) Special Scenario 1: for annual volume below 1 ton and used as intermediate or for export only. This added provision should be good for the industry, as "Intermediates" are not well defined in the regulation. We originally expected it to cover the intermediates in situ only, but now there seems to be no such restriction at least judging from the face value of the wording. Such vague language may lead to a practical problem as a substance can be an intermediate for one company but a finished product for its supplier. We are not sure if this will be clarified in the technical guidance document, which is to be amended and announced later.

(3) Special Scenario 2: for scientific research, with quantity between 0.1 and 1 ton/year.

(4) Special Scenario 3: for low-concern polymers or polymers with each new monomer below 2%. This represents no change in the data required to obtain a polymer exemption under current rules.

(5) Special Scenario 4: for process research with quantity below 10 tons/year. This type of Simple Notification is limited to two years only.

There will be no explicit time limit for successful Simple Notifications except Special Scenario 4. Once approved, the Simple Notifications do not need to be renewed every year as is in the case of current practices. However, as Article 36 mentions, the certificate holder of Simple Notifications, including all 5 Scenarios with or without time limit, should report the actual production/import activities of each previous year to the Chemical Registration Center, under the Ministry of Environment Protection (CRC-MEP) by February 1st each year.

III. R&D Filing (Article 14)

For those substances with annual volume less than 0.1 ton (100 kg), which are produced/imported for scientific research purposes, only an R&D filing is required. This will simply be a reporting process to CRC-MEP and we take this to mean that MEP will not issue explicit approval and that use may commence unless MEP explicitly objects it. There is also no time limit for such filing. Based on our previous communications with CRC-MEP, the data required to support R&D filing would not be demanding. At least, the data to support current R&D exemption application should be sufficient.

Substances that are imported for the purpose of local eco-toxicological testing are also subject to R&D filing before arriving in China.

4. Only Chinese Entities Entitled to Filing Notification

In contrast to current practice, Article 16 stipulates that applicants, or their agents, who conduct the above notifications or filing must be registered entities in PRC. For instance, a company's local office registered in the PRC could conduct the filing but the company's overseas headquarters could not.

5. Reporting All and New Data

Article 17 stipulates that the applicants must truthfully submit all currently available data concerning hazard characteristics and environmental risks of new substances. This will require reporting unfavorable test data to the authorities as part of the above Notifications and filings, no matter how unreliable or flawed the studies may be. Article 26 further stipulates that any hazard characteristics identified after registrations are granted should also be reported to CRC-MEP.

6. Timeline for the Application Procedures

The timeline for the administrative procedure within MEP as well as for the external Expert Panel review are specified in Article 24. Unlike the current regulation, the time allotted for the formality check by CRC-MEP is not specified in the new Provisions. But the overall timeline does not seem to be changed significantly – in the current practice, it takes a maximum of 120 business days for a "full" notification and 30 business days for "Notification Exemptions". This timeline includes the time for CRC-MEP to conduct formality check. By contrast, under the new scheme, after CRC-MEP finishes its formality check, it takes a maximum five days for CRC-MEP to transfer notifications files to the Expert Panel (for Regular Notifications) or MEP (for Simple Notifications). Regular Notifications should be reviewed within 60 working days upon transfer of documents or within 30 working days for Simple Notifications. In summary, in the new scheme, it takes a maximum of 90 working days for Regular Notification, 60 business days for the Basic Scenario of Simple Notification (including review by Expert Panel), and 30 business days for the 4 special scenarios of Simple Notification.

7. Categorization of New Chemical Substances

According to Article 3, Notified new chemical substances will be categorized as either "Regular" or "Hazardous" based on evaluation by the Expert Panel. "Hazardous Chemicals" will contain a subcategory named "Critical Environmental Administrative Hazardous Substances (CEAHS)". The CEAHS subcategory will include substances that are persistent, bio-accumulative and hazardous to ecological, environmental and human health. This subcategory replaces "substances of environmental concern" in the previous draft.

Substances in all categories will be subject to the risk management measures set forth in their Registration certificate. Hazardous substances must also comply with the Safety Administration Regulations of Hazardous Chemicals (危险化学品安全管理条例) and other applicable regulatory requirements. CEAHSs are subject to more stringent regulatory oversight, including monitoring of environmental emissions during production and application process, additional measures for transportation and waste disposal.

As with Simple Notifications, certificate holders of Hazardous substances are also required by Article 36 to report annual production or import activities to CRC-MEP by February 1 of the subsequent year. In addition, the following information is also required: (i) implementation of risk management measures; (ii) exposure and emissions to the environment; (iii) actual impact on the environment and human health; and (iv) other information related to environmental risk. The following year's import plan and the implementation of risk management measures should also be reported for CEAHSs.

8. Update to Inventory of Existing Chemical Substances in China (IECSC)

According to Article 41, a new substance in the "Regular" category will be listed on IECSC five years after the date of its first-time production/import. For "Hazardous" substances (including CEAHSs), the certificate holder must report all activities in the previous years at least six months prior to the "five-year anniversaries" of their first-time production/import (or within four and half years after their first-time activity). Additional evaluation will be performed by the Expert Panel before "Hazardous" substances are listed onto IECSC. New chemical substances approved via Simple Notification or reported through R&D filing will not be listed in IECSC.

The draft Provisions published last summer contained provisions for some new chemical substances to be listed on the IECSC only three years after registration. There are no such accelerated listing procedures in the revised Provisions as published.

9. Re-Notification

Article 27 stipulates that re-notifications should be filed for substances that are granted registration but not yet listed on IECSC, provided that (1) tonnage is increased to a higher band, or (2) reported applications of CEAHSs are altered. For CEAHSs, any altered applications should also be re-notified even the substance(s) have already been listed on IECSC. This makes the notification obligation apply all through the whole life cycle of CEAHSs.

10. Duplicate Notifications

Article 15 defines "Duplicate Notification" and essentially provides a mechanism for data sharing and compensation. When two or more applicants notify the same chemical substance in succession, any "me-too" notifier may rely on the data generated by the previous notifier provided that it obtains consent. No data compensation mechanism is specified and is fully dependent on negotiation between data owners and users.

11. Other Issues

Lastly, there have been some modifications to the penalty provisions. For example, the amended Provisions provide that if a notification "conceals relevant information", the corresponding registration may be cancelled.

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