Stay one step ahead of chemical regulations

Supply chain management is becoming increasingly complex with new international and local regulation. Joan McGuffey, Senior Regulatory Specialist, The Wercs, discusses how to navigate the rules and manage the essential data

With a rise in global chemical regulation and customer disclosure demands, manufacturers are facing new challenges in supply chain management, extending well beyond shipping and logistics to encompass activities across the entire product lifecycle. To keep up with the latest rules and requirements, today’s manufacturers must be sensitive to how chemicals in their new products, and modifications to existing products, will affect health hazard statements, import/export restrictions or waste disposal requirements.

As a sign of how complex supply chain management has become, consider this: in 2006, the WERCSmart tool – used by Fortune 500 companies for regulatory compliance insights across the supply chain – tracked 23 different data points. Fast track to 2013, and that number has grown to more than 400 (see Figure 1).

If manufacturers are to succeed in this environment, they must understand the scope of these new requirements and potential roadblocks that could interfere with business. To start, it is helpful to identify these specific concerns along the product lifecycle:

  • Point-of-origin and sourcing
  • Transportation and import/export control
  • Handling, storage and disposal

With the right people, processes and tools, it is possible to address these and to evaluate risks quickly. Doing so empowers manufacturers to make profitable decisions and effectively manage data across their increasingly complex supply chains.

Figure 1: Data points required for compliance, illustrating how obligations have risen exponentially

Point-of-origin and sourcing – know the full history: Gone are the days when shipping and logistics were the only primary concerns. Now, manufacturers need to have visibility into all facets of their products, including initial R&D, formulation and sourcing. Thanks in part to the Dodd-Frank Act (Section 1502), the origin of specific conflict minerals is under considerable scrutiny, requiring careful tracking and accountability down to the source for particular minerals.

It is critical that manufacturers are able to identify the entire chain of command, all the way back to where they sourced the minerals. They must also be able to prove that those minerals were not produced or mined in an area flagged for conflict or human rights violations.

Hazard communication, or HazCom, is one of the areas that The Wercs has been closely monitoring, particularly as it relates to the United Nation’s (UN’s) development of the Globally Harmonised System for Classification and Labelling (GHS), as opposed to the jurisdiction’s adoption of the Purple Book (the publication holding the UN’s Globally Harmonised System or GHS guidelines). These UN-recommended guidelines are broad and now affect almost all avenues of the chemical marketplace. Many regions, including the EU and Japan, already have implemented GHS, while countries such as Canada will be implementing it over the next several years.

Transportation and import/export control challenges: While GHS guidelines seek to standardise current hazard communications inconsistencies between countries, jurisdictions’ adaptations introduce major difficulties for buyers and sellers of chemicals. This was exemplified by what happened a few years ago when China began requiring chemicals to be labelled in Chinese prior to reaching customs. As a result, regulators reportedly quarantined billions of dollars’ worth of chemical shipments due to a lack of labelling in Chinese.

Some regions are also adopting more stringent requirements for companies to manufacture or import certain chemicals

Some regions are also adopting more stringent requirements for companies to manufacture or import certain chemicals. In the EU for instance, the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) asks all entities wishing to enter chemicals into commerce in the EU to register their products.

The expense of compiling the registration dossier and filing with the authorities has the potential to reduce the number of suppliers and the catalogue of products they offer. Major suppliers will go to the expense of registering their chemicals, but suppliers with limited EU market share may drop out. Importation of mixtures into the EU can be complex, as a registration dossier for each component may be required if threshold volumes are reached.

Several jurisdictions also have some form of chemical inventory control regulations in place, such as Canada, Japan and the US. For businesses to enter chemicals into commerce into these countries, they simply need to check for the chemical abstract service numbers or chemical categories. If the chemicals are listed in these inventories, businesses are allowed to manufacture or import them.

The safety data sheet (SDS) as we know it was not designed to become a communication tool encompassing all relevant compliance data

To add another layer of complexity, the safety data sheet (SDS) as we know it was not designed to become a communication tool encompassing all relevant compliance data – especially given that requirements vary considerably by jurisdiction and several categories may not be incorporated in the SDS. Take, for example, the US Occupational Safety and Health Administration (OSHA) regulations under Section 14. There is a sense that SDSs need to include transport data under this section, but OSHA does not mandate transportation information to be incorporated, as it falls under the US Department of Transportation’s jurisdiction.

Even when the SDS includes transportation data, many companies will provide one jurisdiction for ground transport. So what happens once it leaves the factory and enters a different ground jurisdiction? Defining the entire delivery route can be a project unto itself.

With rush orders and quick timelines come more challenges, as goods may get to customs quickly initially, only to be held there due to inadequate or missing paperwork. This will result in demurrage charges and can risk future shipments as relationships with customs agencies deteriorate. Next comes the concern over getting chemicals to the plant for processing, while lacking the appropriate SDSs for respective employees. In this frequent scenario, the ‘rush’ objective may be met but business benefits will not, as workers may be unable to handle the chemicals safely.

The case of the falling threshhold
Brazil has been known to permit the use of Safety Data Sheets (SDSs) from the European Union (EU). Yet Brazil’s adoption of Globally Harmonised Standard (GHS) sets disclosure of carcinogenic components at 0.1%, as opposed to higher levels required in the EU.
When the disclosure thresholds drop from 1% or more down to 0.1%, industry becomes more concerned about the ramifications of confidential business information (CBI). While some countries have straightforward CBI processes, others may not permit any form of confidentiality for components they consider to be very hazardous.

Handling, storage and disposal – do the documentation: Product handling is another area of scrutiny, as weight restrictions and other ergonomic factors come into play. Packaging that is collapsible, returnable or recyclable is in increasing demand. Even the origin and environmental credentials of the package are now subject to review and comment by members of the supply chain. Wooden pallets may not be allowed into some countries for fear of foreign organisms hiding within. Other countries will allow wooden pallets but only if accompanied by fumigation certificates, adding yet another document that needs to be obtained and handled. Careful consideration must also go into how a package is disposed of, including whether it can be recycled and whether it must be treated before reaching its final destination at a landfill.

Data management and proactive planning opportunities: These concerns and requirements not only take time, but they can in many instances also become a final deciding factor when considering a potential supplier partnership. For instance, what if one of the impurities in a supplier’s product will be emitted during processing, but the facility’s air permit doesn’t allow for its emission? The product’s pennies-per-pound lower price may be negated by the time and expense spent to secure an air permit modification.

So how does one deal with all these details? Here are some ways to tackle vulnerabilities and make crucial first steps to get a handle on data across your entire chemical supply chain.

Address concerns proactively and standardise checklists: As complex or confusing as these stringent and disparate regulations across the supply chain may be, there are ways smart businesses can deal with this reality. Understanding what needs to be done and when will help to ensure the project is successful.

If your business does not already have a standard list of questions relevant to its products and its customers’ industries and applications, help collaborate across departments to develop one. These lists will need to be developed by a cross-functional team of experienced professionals to incorporate all business needs and regulatory considerations.

Team leadership should discuss their organisation’s needs with respect to data collection at all stages of the supply chain (including recurring frequency if applicable), how specific materials need to be handled and stored (including retention requirements), and how information must be displayed or disseminated.

Have a checklist
Extensive up-front analysis and planning, while time-consuming, will benefit all parties involved in your project and the business as a whole. As a cross-functional team develops a standardised list, the following considerations should be made upfront when dealing with suppliers:
1. Can you account for 100% of the Chemical Abstract Services (CAS) number, composition and relevant physical/chemical properties of your product?
2. Do you have visibility into the country of origin and chemical inventory statements, e.g. full chain of command if warranted for the specific chemicals involved?
3. If applicable, can you access dangerous goods classification on a global basis?
4. Can you access the product-level toxicological/eco toxicological data?

After the chemical options decisions are made and orders are placed, your leverage to gather information from the supplier decreases and only becomes more time-consuming. By proactively gathering data and mitigating non-compliance, manufacturers may also help to identify credible suppliers and future partners more accurately.

Be proactive, not reactive: The breadth of data that is now required for every purchase makes clear that the days of manual upkeep and filing are gone. Everyone in the supply chain should adopt an automated system that works as a central repository, providing secure yet easy access for other company staff and external members of the supply chain.

Evolving regulations

As regulations continue to evolve, it is vital to have a flexible, secure system in place that is implemented across the company. With complex regulatory lists being regularly updated, such as the EU Substances of Very High Concern (SVHC) being updated every six months, a computer system that takes nine months to refresh simply does not serve the needs of the business.

Once consolidated and tracked, this information needs to be securely managed and yet sharable to streamline compliance throughout the supply chain and downstream to customers and users. Decisions about what information can be freely shared and what is proprietary must be made up front, ensuring nothing is miscommunicated in the process.

With complex regulatory lists being regularly updated, a computer system that takes nine months to refresh simply does not serve the needs of the business

Upgrading legacy systems to accommodate current and upcoming regulatory requirements should be a company-wide priority. Regardless of the size and complexity of the business, resources need to go towards integrating systems, adding automated data management tools and tracking ongoing regulatory changes.

So get processes and systems organised, and ensure the right teams are managing them. All this will ensure that the necessary information can be obtained from potential suppliers at every point in the supply chain – helping to make more intelligent decisions about the partners and chemicals you use in your products.

As part of their regulatory affairs process, manufacturers must plan for the documentation required every step of the way, from point-of-origin to disposal. Buyers must ask the right questions about the entire product life cycle, moving beyond logistics, price and timelines. And manufacturers should be prepared to respond in a timely manner to keep business moving as smoothly as possible.