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Updated: 2007-06-08 11:12

When Xin Yu first heard of REACH, the European Union's new regulation on chemicals, his immediate response was to wonder if it was the same as RoHS, another EU regulation forbidding the use of hazardous substances.

It was a natural reaction for Xin: he doesn't have much time to think about regulatory changes these days. In fact, now is the busiest time of the year for the textile exporter in Ningbo, East China's Zhejiang Province. He will fly to a factory in Nanchang, East China's Jiangxi Province, on Monday, meet an American customer in Shanghai on Wednesday, and then return to Ningbo to check his suppliers' production schedule.

Xin's business, with exports of less than $10 million a year and half of those going to EU nations, is also too small to afford the REACH's registration fee.

The lack of awareness among Chinese companies about REACH concerns Zhang Xiangchen, director general of the WTO department of the Ministry of Commerce (MOFCOM).

"In the past three years, when the EU was drafting the new regulation, the reaction from our companies was very poor, but US and Japanese businesses followed the whole process," said Zhang.

REACH - the Registration, Evaluation, Authorization and Restriction of Chemicals - took effect on June 1. The new EU regulation requires manufacturers or importers of over 1 ton of chemical substances a year to register at European Chemicals Agency (ECHA) in Helsinki, which was also established on June 1.

Companies are urged to pre-register from June 1 to December 2008. Manufacturers or importers with over 1,000 tons must register before December 1, 2010, or they will be banned from the market. Companies that manufacture over 1 ton of chemicals a year should register before June, 1 2018.

"REACH is arguably the most ambitious chemicals legislation in the world. It aims at the highest level of health and environmental protection, while at the same time fostering innovation and competitiveness," said Gunter Verheugen, vice-president of European Commission at the opening of ECHA.

The regulation has been regarded as the largest technical barrier to trade that Chinese companies have ever faced.

"Our estimation is that 5 million kinds of products, almost everything, will be impacted and this is likely to cause a reshuffling of our trade with the EU," said Zhou Chun, director of petroleum and chemicals department with China Chamber of Commerce of Metals, Minerals, and Chemicals Importers and Exporters (CCCMC).

The EU estimates that some 30,000 chemical substances will be covered, as well as products containing the substances, including textiles, automobiles and electronics.

Statistics from the General Administration of Customs show chemical trade between China and the EU was $19.87 billion, including $9.75 billion of exports and $10.12 billion of imports, but the total trade volume between the two economies was $270 billion.

Although ECHA did not specify the costs to meet REACH requirements, it is estimated by some Chinese organizations that the cost of Chinese exports to the EU will increase by 5 percent, while the cost of imports from the EU will rise by 6 percent. Another prediction is that China's petrochemical industry will shrink by 10 percent and 200,000 people will lose their jobs.

Non-EU exporters must register through agencies in Europe, which further adds to the cost of the compliance.

This year alone, MOFCOM has organized six seminars in those import-intensive regions like Zhejiang, Guangdong, Shanghai and Fujian to train local officials and exporters about REACH and will also form a help desk with assistance from the EU to inform Chinese firms about the regulations.

The country will also establish 10 laboratories in those regions to test chemical substances for potential dangers to health and the environment.

"Safety feature evaluations must be supported by data, so in this sense, no data means no market entry in the EU," said MOFCOM's Zhang.

He said his ministry is also talking with EU authorities about setting up registration agencies in Europe to facilitate the process for Chinese exporters.

Companies are advised to check the chemicals in their products, and communicate with suppliers and importers in Europe to find replacement substances.

They should also participate in the pre-registration process starting next June. More importantly, they can join substance information exchange forums and engage in information and cost sharing.