During this five-part podcast series, sponsored by Assent Compliance Inc. (Assent), I have explored market access for supply chain data. I have visited with several Assent team members to introduce the topic, consider what market access is, provide an overview of trade compliance, Federal Acquisition Register (FAR) flow downs, the value of continuous monitoring and the origins of laws impacting market access. In this fifth and final episode, James Calder, Vice-President of Compliance and Regulatory Programs, and I discuss how chemical and product compliance impacts access to markets and supply chain compliance.
Calder began by explaining that in many ways, modern supply chain compliance was driven by the need for listing of chemicals in products from an environmental safety perspective. He believes that understanding the origin of these laws and regulations can provide a very strong baseline in making better decisions for your business. He related there are a variety of laws which have created compliance requirements on the substances used in products. Many of those laws have come from waste laws. He cited to examples like the European Union (EU), which instituted REACH laws (Registration, Evaluation, Authorisation and Restriction of Chemicals) and the US which has RoHS (Restriction of Hazardous Substances) Directive, which is focused on electronics.
The regulatory goal is the reduce human exposure to toxins and toxic materials. Calder provided the example of “reducing exposure to those electronic products when they’re being recycled or recovery during the waste process. The way to mitigate that exposure is to design them out of the products themselves. Then you have a law like the REACH law, which is probably the most complex and largest chemical laws in the world. There are so many different laws out there and they have been amalgamated into this one law, to provide clarity and lack of complexity for businesses and for enforcement.”
A key challenge for the supply chain compliance professional is that there are different concerns and different maturity levels in chemical regulations. Europe and the EU are seen as very concerned with environmental regulation while countries in Africa and the Far East are seen as more focused on economic growth. Calder agreed this is a challenge and related this brings in the additional complexity of origin. This has led to the need for the supply chain professional to have full visibility into its supplier chain and their manufacturing process.
Essentially, a company must prove that none of those substances are used in the production of those products, regardless of where they are produced. Regulators want that proof at the point of import for aftermarket inspections that banned products, substances and chemicals are not being used in the manufacturing process. Now lay on top of that the regulatory concerns around competition and a level playing field and you can begin to see how complex this entire area can be and why there is a need for a robust compliance system for chemicals and products.
It also means that enforcement will be rigorous yet based on differing standards, with enforcement agencies literally across the world investigating, making an assessment and then levying a fine or penalty if appropriate. This portends that the risk management response must be equally robust. As I posed to Calder, “how does either the compliance practitioner, utilize the compliance programs to mitigate risks?”
Calder began by relating that the laws highlight the goals and expectations from the various actors that involved. He provided that example in customs enforcement might require “a checklist requesting information on certain products before they clear customs? What they’ll expect is certain documentation. The response for you to provide is to demonstrate certain due diligence and documentation that shows you due diligence and ensuring these banned chemicals are not in your product.” He went on to relate, “a lot of the people at customs, they are going through the checklist. This means if you are not able to provide that documentation, they may stop you from entering the market. You have to have some kind of demonstration of due diligence. Otherwise you’re not checking their boxes.”
A next level up in the enforcement regime might be about your process. For instance, do you have an established process in place that ensures these products or these substances are introduced through the product? The next step might be spot testing where regulators will use certain analytical techniques or analytical laboratory techniques to assess the risk of certain substances being in products.
All of this means your program, process and documentation must be robust. Your documentation will be reviewed for its quality and trustworthiness. Calder concluded, “if you have that and you have a consistent process in place which is meeting all the due diligence expectations, then you will be presumed to comply with these laws. You need to prove to them you have done it; you have an adequate risk manage process and that you have evaluated your products do meet the regulatory requirements. It is all designed to show you are “a good actor”.”
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