The framework represents China’s first comprehensive regulation of environmental risks from chemical substances.
The Chinese Ministry of Ecology and Environment’s (MEE’s) draft Regulation on Environmental Risk Assessment and Control of Chemical Substances (Regulation) is likely to have broad implications for companies that manufacture, process, import, or export more than 100kg of any chemical substance in China. The framework represents China’s first comprehensive regulation of environmental risks from chemical substances.
Companies should be aware of MEE’s action plan for enforcing the Regulation, as well as those provisions that will impact their business activities.
MEE invited the public to comment on the new chemical regulation framework in January 2019, when it issued a draft of the Regulation in conjunction with 20 other ministries and agencies. The comment period closed on February 20. (Additional information is available in this Latham & Watkins blog post.) Following the request for comment, Latham joined major industry players in a global consultation initiative on the drafting, composition, and analysis of potential effects of the Regulation.
The Regulation will “assess and control environmental risks of chemical substances, ensure environmental safety, protect public health, and promote high quality economic growth,” in accordance with the Environmental Protection Law of the People’s Republic of China. The Regulation states that it is based on the principles of categorized management, prevention at the source, comprehensive control, and transparency.
The Regulation will prioritize control of chemical substances that:
- Are intrinsically hazardous
- Have long-lasting effects and high biological accumulation
- May persist in the environment for long periods of time
- May pose significant risks to both the ecological environment and human health
“Chemical substances” are defined as “monomers or polymers that are obtained from nature or through artificial processes for commercial purposes.”
To support these priorities, MEE will organize a national environmental risk assessment of chemical substances — a massive undertaking that is likely to cascade down to lower-level government departments that are stakeholders in the process, while local governments above the county level will conduct their own supervision and management of environmental risk control measures and chemical substances. A panel consisting of experts in chemistry, chemical engineering, health, the environment, and analytical testing will be established to review the registration of new chemical substances (NCS) and to undertake technical reviews of the associated environmental risk assessments.
Requirements for Businesses
Enterprises engaging in the production, processing, utilization, import, and export of chemical substances will be required to follow the Regulation, implement effective preventive and control measures, and importantly, be accountable for any damage caused, while entities and individuals who make “distinguished contributions” to environmental risk assessments, risk prevention and control, supervision, and/or management of chemical substances will be issued citations and rewards. Notably, the Regulation includes a specific provision stating that both organizations and individuals have the right to “expose, report or prosecute violations of” the Regulation.
Enterprises producing, processing, using, importing, or exporting chemical substances will be required to file an annual report detailing the name, purpose of usage, and quantity of chemical substances produced, processed, used, imported, or exported during the previous year, and the enterprise will be responsible for the accuracy of the report. There is a small volume exemption for annual production or import quantities of less than 100kg which represents a significant broadening of regulatory scope compared to the previous regime, MEP Order 7, which allowed simpler reporting requirements for substances of less than one tonne per year.
Article 18 Stipulations
Article 18 presents a thorough overview of regulatory triggers for the application of corollary legislation based on the environmental risk assessment process. Depending on the environment into which a chemical substance is released, the substance will be controlled by the Air Pollution Prevention and Control Law, the Water Pollution Prevention and Control Law, or the Marine Environment Protection Law. If a chemical substance may cause soil contamination, it will be added to a catalog of toxic and hazardous soil pollutants and be controlled by the Soil Pollution Prevention and Control Law.
If a chemical substance cannot be effectively controlled under Article 18, it will be restricted and prohibited, with certain exceptions subject to a licensing and an application process.
NCS Registration System
The Regulation will establish a registration system for NCS, which are defined as substances “not listed in the China Catalogue of Chemical Substances.” Importantly, many chemical substances which have been assessed and catalogued in the US and the EU are not listed in China’s catalog. Record filing must be conducted prior to the production or import of NCS, including a testing report as well as physical chemical properties, health toxicology, and ecotoxicology information alongside a risk assessment and control measures. NCS with long-lasting effects, cumulative biological risks, or other hazardous effects will not be registered, and instead will be added to a restricted list. NCS will receive a registration certificate that will list the holder of the certificate, registration number, name of the substance, registered purpose and usage, activity type, and risk control measures. Importantly, the certificate holder must convey to its downstream users the requirements under the certificate, marking a further cascade of information through the usage chain.
Regulatory personnel and experts failing to follow the Regulation will be penalized according to the law, and if their conduct constitutes a crime, they will be subject to criminal prosecution. Testing laboratories will be subject to fines between 100,000 and 500,000 RMB and a moratorium on the ability to submit reports for five years, and could be permanently barred. Enterprises may be ordered to take remedial action within a specified time frame, shut down, fined up to 2,000,000 RMB, subjected to criminal prosecution, or dealt with through any of the related laws noted above. Importantly, any failure to follow the Regulation will be publicized.
Latham & Watkins will continue to monitor and report on developments concerning the Regulation.
This post was prepared with the assistance of Martin Cassidy in the London office of Latham & Watkins.