Three key messages on COVID-19 supply chain disruption and product regulation

As COVID-19 disrupts supply chains, product regulation and compliance cannot be ignored

23 April 2020

Market access rules for chemicals and products might not be high up the list of priorities as manufacturers and importers struggle to ensure continuity of supply following the devastation wreaked by COVID-19 on global supply chains. However, it is prudent to ensure product stewards and compliance managers are integrated into emergency responses, so that safeguards are in place to avoid liability risks and reputational damage down the line.

The immediate problem is well understood: the havoc caused to global supply chains by COVID-19 has revealed bottlenecks or over-reliance on individual suppliers, and as a result, many are sourcing new suppliers, just as supplier due diligence becomes more challenging. There are dangers, however, with taking short-cuts on supply chain due diligence or ignoring product regulations altogether.

Here are our top three messages:

1. For essential supplies, UK regulators and governmental authorities are making significant adjustments

It is absolutely right that the focus is on saving lives and beating COVID-19. For this reason, we are seeing significant leniency and tolerance around rules. Perhaps the most prominent example of this phenomenon relates to the manufacture and supply of biocidal hand sanitiser products. Responding to the significant increase in global demand for raw materials, the Health & Safety Executive is providing short-term derogations from the requirement for product authorisations under the Biocidal Products Regulation for those using specific formulations and ingredients – a move supported by the European Chemicals Agency (ECHA), and that appears to have been well-received by industry. Similarly, the Medicines and Healthcare products Regulatory Agency is providing derogations from CE-marking requirements for surgical (medical) face masks and examination or surgical gloves.

2. Don’t expect the same tolerance for non-essential supplies

Businesses should not confuse a softening of the rules for essential items with a relaxation of the rules more generally. While ECHA may have conceded that 'companies may be lacking human or financial resources or facing technical difficulties in meeting the deadlines set in ECHA’s decisions' and that ECHA is 'working on special arrangements to allow flexibility for companies', this should not be interpreted as a declaration that ECHA, or indeed other regulators, do not intend to maintain established enforcement positions.

It is true that regulatory resources will be stretched and the enforcement activities constrained by the current crisis, but we can still expect a tough line for those who fail to maintain standards or who, without due consideration of the consequences, move away from previously compliant procedures or suppliers. Don’t forget that, in the UK, these regimes are enforced through the criminal law. Even if a lighter approach to supply chain due diligence is all that is feasible in the circumstances, it is better to do something – and at least be seen to be asking the right questions – than to ignore the issue altogether.

3. Don’t underestimate the impact of reputational damage

Even if regulators show greater sympathy than usual, don’t expect the same from customers and consumers if banned or restricted products end up on their shelves or in their homes. This is especially true for longer-life products that might well be in circulation for months (and in use by consumers for years) after the COVID-19 crisis abates. If product withdrawals, public notices or product recalls are required, the reputational impact can be significant.

We regularly support businesses that have been caught out by changes to component specifications up the supply chain. These issues normally involve suppliers who are simply unaware that a substance or chemical used in production is controlled on the EU market. For example, a Chinese manufacturer may simply not know that cadmium is only permitted up to a certain level in an electronic component or that certain plasticisers are restricted under the REACH Regulation. This is a common issue during business as usual. During a period of unprecedented supply chain stress, the risk that something slips through the net increases dramatically. While regulators may well recognise the unique challenges faced by businesses and react accordingly, business leaders need to be aware that these issues can have long tails. The effects of any mistakes made now may continue to cause reputational damage long after the current COVID-19 crisis has abated.

How can Burges Salmon help?

Our market leading REACH, chemicals and product stewardship team has significant experience in the UK and EU on chemicals and product regulation. We advise clients on bespoke compliance and regulatory engagement strategies, and are well placed to assist businesses at this challenging time. If you would like to discuss these issues further, please contact Simon Tilling, partner and head of our environment and product stewardship team

This article was written by Simon Tilling and Tom Gillett, solicitor.

Key contact

Simon-Tilling--250px x 250px 72dpi - web

Simon Tilling Partner

  • Head of Environment
  • REACH, Chemicals and Product Stewardship
  • Energy, Power and Utilities

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