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HONG KONG, May 8, 2017 /PRNewswire/ -- Despite the EU's introduction of REACH regulations, many petroleum and chemical companies still do not have a full picture of how these regulations will affect their business. Some companies have adopted a wait-and-see approach, waiting for others to take the lead. This decision may, however, mean that they miss out on the best opportunity to act. In the worst-case scenario they may run into difficulties exporting their products to the EU after 2018, and lose an important international market.
The EU began implementing REACH regulations in 2007, with May 31, 2018 being the final deadline. Under the rules, any companies that manufacture or import more than one ton of chemical substances within EU territory each year must perform REACH registration by an EU importer or non-EU manufacturer to designate their Only Representative (OR).
Chi Mei Corporation (CMC) is one of the best-known plastics and chemical companies in Taiwan. Founded in 1960 by Mr. Wen-Long Shi, Chi Mei was the first Taiwanese company to manufacture acrylic panels and ABS resin. The firm's product focus includes polymers such as plastics and rubber, and Chi Mei now has more than half a century of experience in the production and development of rubber and plastics. It has also expanded into the development and manufacture of key opto-electronics materials in recent years, supplying light guides, electronic chemical products, and fluorescent powders. Chi Mei is now the largest supplier of ABS resin, PMMA resin, and light guides in the world. Chi Mei product exports to Europe mainly consist of raw materials intended for use in commercial machinery, electronic parts, and homeware. Research and compliance with REACH registration requirements was a long and involved process at Chi Mei, with many difficulties encountered and significant coordination required with both up- and downstream vendors.
Catch 22: Direct Registration or Indirect Registration?
REACH regulations require a registered entity for polymers. Due to the number of chemicals requiring registration at Chi Mei, if all were to be registered directly to Chi Mei the costs involved would be extremely high. And if Chi Mei were REACH-compliant while its supply chain was not, this would also lead to many problems with future European exports. The type of registration therefore has a very long-term impact, and any changes in the future will only be more expensive. After giving the issue much thought, Manager Chien-Chung Wu — who was in charge of the project in 2007— secured approval from the top management to begin the planning and preparation process.
When asked how a decision was reached so quickly on such a complex issue involving far-reaching effects, Wu—an expert at problem analysis and solution—revealed that support from the top played a critical role. "At the time, my superiors didn't ask questions such as: 'Will REACH cost the company money? Will this project fail? What if registration fails?' They only wanted to know if going through with this would contribute to social responsibility and protecting the planet." This high level of support gave Wu greater confidence in taking the first step towards REACH compliance. Based on his many years of experience and understanding of RoHS, Wu knew that REACH and RoHS are based on such common values as the safety of planet Earth and social commitment. This was something that had to be done, no matter how difficult.
Sharing the same business culture meant that building consensus and reaching decisions were achieved very quickly within Chi Mei. Doing the same with up- and downstream vendors, however, promised to be an uphill battle. The REACH strategy at Chi Mei was to work with suppliers to achieve REACH compliance together. In other words, it was the responsibility of upstream raw-material suppliers to apply for registration. Upstream suppliers and their OR would issue the tonnage coverage certificate to cover the export of its products to Europe. This would satisfy the expectation of Chi Mei's overseas customers that their sole obligations would be as users.
The Supplier Challenge
Securing the support of the supply chain meant a long battle, with a great deal of communication. Each supplier varied in terms of attitude, structure, and owner units. Stakeholders did not really understand the issue in its entirety, thereby necessitating much back-and-forth. Eventually, Chi Mei decided to get on the same page with the supply chain by starting with communication of the REACH spirit and the collective society concept. "If you treat REACH as a trade barrier, you will then feel you are being pressured, but if you treat it as your social responsibility for human health and environmental protection, it will give you a sense of purpose, and you will then cooperate with REACH because it is your sacred trust." These are the forceful words of Project Manager Cindy Chen from the Intellectual Property Department.
Introduction of Supply Chain Management and Simplified Processes
The complexity of REACH regulations means multiple departments are involved at any one time. This is before taking all the different suppliers into account. It is therefore not easy for everyone to understand every aspect of the process, from purchasing to QC and sales. This led to Chi Mei's decision to introduce TUV Rheinland's REACH supply-chain management service in 2014. Active communication with raw-material suppliers is used to secure tonnage coverage certificates, with TUV Rheinland retained to provide independent auditing of product quantities, composition, and supplier certification. In addition to ensuring product compliance, TUV Rheinland also helps vendors systematically organize and preserve the information required under REACH regulations. TUV Rheinland's Luxcontrol in Luxemburg is a qualified OR that not only assists with the systematic preservation of data for future audits by EU organizations, but also provides Chi Mei customers with the independent certifications they need.
"We once spent a lot of effort on upstream communication, but TUV Rheinland has made it easy to communicate with our supply chain. Now, if any supplier or customer is uncertain about REACH regulations or their tonnage certification, we tell them to talk to TUV Rheinland," says Manager Chen, praising TUV Rheinland's assistance to Chi Mei with REACH supply-chain management.
Some people in the industry mistakenly believe that they can satisfy REACH requirements by buying raw materials with REACH registration from others and getting a free ride on exports to Europe. In reality, registered raw materials from upstream suppliers does not mean the supplier is willing to cover the customer's usage from their registered quantity. This means that registration codes are now often used without authorization, but this unauthorized use may lead to future problems with rights infringement or transactions.
Benefits of REACH Supply Chain Management: The Common Good
Chi Mei still remembers how purchasing personnel went to great lengths to secure tonnage-coverage certification information from upstream suppliers for the first time. It turned out that there were still problems with over 90% of the documents, which was a great blow for the purchasing staff. Nevertheless, they knew that failure was not an option for the REACH program; Chi Mei personnel had no choice but to buckle down and keep going. At this time, they decided to take a two-pronged approach. The first would be improved internal training, and the second would be more aggressive communication when purchasing from upstream suppliers, or finding replacement suppliers. After much effort from everyone involved, 100% compliance was achieved in the second year.
When Chi Mei's largest EU customer came to visit, its representatives had many doubts about Chi Mei's REACH compliance. When Chi Mei provided its certification and briefed the team on the current state of REACH compliance, the customer was able to continue placing orders. At the same time, once Chi Mei found suppliers willing to handle the registration obligations, this made the rest of the program easier to implement as well. The unobstructed sales channels will in turn benefit both the upstream and downstream components of the Chi Mei supply chain in the future.
The Power of Belief: The Mindset for Success
The success of REACH supply-chain management at Chi Mei has been a combination of three factors: 1. Understanding of REACH regulations; 2. Familiarity with the petrochemical industry product chain; 3. Consensus and commitment to REACH among upstream and downstream vendors. Wu says that, "The quantity of Chi Mei exports to Europe wasn't really large enough to require our own local OR in Europe. TUV Rheinland Taiwan is a European company that understands REACH regulations. It also understands the language of our petrochemical industry, and can also engage in localized communication. They are therefore a far better option than training our own European experts, especially if you take language and petrochemical expertise into account."
"Many companies don't really understand REACH regulations, and haven't really analyzed their own situation. They only look for help once a buyer expresses interest," notes TUV Rheinland Taiwan Industrial Services Div. Project Manager Li-fang Su. Looking at Chi Mei's difficulties in the first year and success in the second year, Su offers the following tip for successful REACH implementation: "A business should first establish the scope of impact, such as their product portfolio, sales, and raw-material supply. Internal, supplier, and customer discussions should then take place with thought given to their future entry strategy. A good start is half the battle."
Being able to face a difficult challenge with a positive attitude and remain true to social ideals comes from knowing the exact nature of the problem. Chi Mei knows, as an established name in chemical engineering, that its understanding of chemical impacts and potential hazards means proper management of chemicals is the company's responsibility. Vice President, Research and Development Division Perry Hsueh offers the following experience for the consideration of other vendors: "The decision on whether to adopt REACH should not be based on the size of the market. It should depend on the level of commitment to social responsibility. It is an embodiment of corporate culture and spirit."
About TUV Rheinland's REACH Services
TUV Rheinland provides a comprehensive range of REACH services, including SVHC testing, Only Representative (OR) services, REACH supply-chain management, and safety data sheet (SDS) preparation services. TUV Rheinland can provide Taiwanese companies with localized communications on REACH registration. Luxcontrol, a TUV Rheinland subsidiary located in Luxemburg, serves as the EU OR. It can therefore provide long-term guarantees and assistance on REACH.
Simon Hung
Tel: +852-2192-1948
Email: Simon.Hung@tuv.com
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