Interpretation of New Measures on New Chemical Substances

Environmental Protection Series No. 11

An Interpretation of the Revised Measures for the Registration of the Environmental Management of New Chemical Substances and the New Challenges for Corporate Compliance

Foreword

On April 29, 2020, the Ministry of Ecology and Environment ("MEE") issued the revised ‘Measures for the Registration of the Environmental Management of New Chemical Substances’ (Order of the Ministry of Ecology and Environment No.12, hereinafter referred to as "Order No.12"). The measures will come into force on January 1, 2021. This revision, based on the previous ‘Measures for the Environmental Management of New Chemical Substances’ (Order of the Ministry of Environmental Protection No.7, hereinafter referred to as "Order No.7") that were issued in 2010, make significant revisions to some situations and problems that have arisen during the implementation of Order No. 7 over the past 10 years. This circular will highlight some of the key changes in Order No. 12. Based on these key changes, relevant industrial enterprises and trading companies should be reminded of the compliance issues requiring special attention with respect to the environmental management of new chemical substances.

Ⅰ

What Are the Key Changes in Order No.12?

We have summarized some material and/or material changes to Order No.12 from the current Order No. 7 as follows:

1. The application’s scope has been limited. Overall, "one application" and "two non-applications" have been added. The "one application" applies to products that are administered by other laws (such as medicine, pesticide and food additives) and are intended to be used for other industrial purposes; while "two non-applications" refer to those new chemical substances that are (i) stored in customs special supervision areas and are then exported without any processing and are therefore not applicable; and (ii) newly-added fertilizer and radioactive substances in the special substance area that are also not applicable.

2. The original seven types of declarations has been reduced to three types. Order No. 12 has changed the two circumstances of scientific research record filing and simple declaration (where the annual production or import volume is lower than one ton) under Order No. 7 to record filing and simplifies the application materials (such as the cancellation of the test report on eco- toxicological properties). The level one declaration (the annual production or import volume ranges from one ton to 10 ton) in the regular declaration shall be changed to a simple registration with the relevant procedures and requirements simplified (such as the cancellation of the requirement of submitting a risk assessment report and the cancellation of the assessment step by an expert committee). The level two to level four declarations in the regular declaration (the annual production or import volume is more than 10 tons) shall be changed to a normal registration.

3. The methods to report activities related to the production, importation, processing and utilization of new chemicals have been simplified. Firstly, Order No. 12 has deleted the requirement for the reporting of each activity and the reporting of activities with a five year duration, and retained the requirements for the reporting of the first activity and the annual report; secondly, the deadline for the submission of the report of the first activity shall be extended to within 60 days from the date of the first manufacturing or importing and transferring, to the processing user (30 days under Order No. 7 ); finally, it is specified that only the chemical substances required for the submission of annual reports in the normal registration certificate are required to submit a report of the actual activities of the new chemical substance for the preceding year, prior to 30 April each year (before 1 February each year in Order No. 7).

4. It is specified that a recording system for new chemical activity shall be established. Order No. 12 prescribes that researchers, producers, importers, processors and users of new chemicals shall establish a recording system for activities involving the new chemicals. This is to faithfully record the time, quantity and purpose of the activities involving the new chemicals and undertake environmental risk control measures and environmental management requirements, among others.

5. The legal liability of enterprises has been strengthened. This mainly manifests in: (i) the illegal circumstances of enterprises have increased. The Draft for Comment explicitly stipulates that circumstances such as a failure by enterprises to fulfill information disclosures, record filing or the environmental management requirements set out in the Inventory of Existing Chemical Substances of China (the "Inventory"), shall be listed as matters to be punished. Secondly, the consequences for violation are more serious. Order No.12 clarifies that a fine ranging from CNY 10, 000 to CNY 30, 000 will be imposed on an offender in the case of a false declaration or production or import without the registration certificate or record-filing. It further clarifies that an offender will be subject to joint disciplinary actions for dishonesty and will not be allowed to apply for the registration of new chemicals within one year (we note that the Ministry of Ecology and Environment promulgated the Regulations on Environmental Risk Assessment and Control of Chemical Substances (Draft for Comment) (Huan Ban Solids Han [2019] No.18) on January 8, 2019. If such regulations are formally adopted, future legal liabilities may be substantially increased). In addition, Order No. 12 has deleted the requirements for the registration of new chemicals as a condition for the examination and approval of environmental impact assessment documents for construction projects, manufacturing, processing or using such new chemicals.

6. The management requirements for highly-hazardous chemical substances have increased. Order No. 12 adds the definition of "highly-hazardous chemicals" and the related regulatory requirements. Highly-hazardous substances shall be subject to higher requirements in the registration of new chemical substances and the daily management thereof. For example, the analysis material on the social and economic benefits shall be provided at the time of registration, and the environmental management for the new uses shall be conducted after they are included in the inventory. 

Ⅱ

What are the key compliance issues that enterprises should pay special attention to under Order No. 12?

1. Enterprises should strengthen their compliance management. Enterprises should attach great importance to their own responsibility for the environmental risk control of any new chemical substances. They should complete in a timely manner all the types of registration required for new chemical substances, and carry out the manufacture, import, processing and use of new chemical substances pursuant to the provisions on the registration certificates. They need to pay attention to record-filing, strengthen the lifecycle management of new chemical substances, and in particular, establish a recording system for the activities involving the new chemical substances. Enterprises and businesses should implement compliance requirements in aspects such as record and data preservation, information disclosure, targeted environmental risk control measures and environmental management.

2. Enterprises should strengthen supplier reviews. When selecting suppliers, especially testing institutions, an enterprise shall, in addition to understanding the relevant qualifications and capabilities of their institutions and personnel, comprehensively check the compliance situation of the institutions and the  responsible personnel during the most recent  three year time period (in accordance with Order No. 12, where a testing institution issues a false test report that provides test data for the application for new chemical substances, the department of ecology and environment shall not accept any test report issued thereby or by the relevant responsible persons within three years). 

Ⅲ

Conclusion and Suggestions

On the one hand, the revision reflects the legislative trend of "streamlining administration, delegating power, strengthening regulations and improving services", lowering the requirements for new low-level chemicals and simplifying the procedures; on the other hand, the management of enterprises during and after registration has been strengthened. Enterprises should always value and protect their social credit, and strive to do a good job in risk prevention and control and risk management in the whole life cycle of new chemicals, so as to avoid or reduce unnecessary punishment and/or losses. We will also pay close attention to the subsequent supporting regulations (relating to declaration data requirements, hazard assessments, environmental risk assessments, socio-economic benefit analysis and registration of environmental management for new purposes) and the legislative processes related to Order No. 12 and share our observations in a timely manner. If you have any specific questions, please feel free to contact us via email: ecoenvpro @ junhe.com.

The JunHe EHS Team: JunHe, with over 880 professionals, is one of China’s largest comprehensive law firms with an international reputation for providing high-quality legal services. As one of the pioneers in the legal area of  the environment and health and safety production (“EHS”) in China, JunHe’s EHS team provides multinational enterprises with a full range of EHS legal services that cover project development and the incorporation of joint ventures, M&A transactions, daily operations, EHS compliance, government investigations, administrative punishments, reconsiderations and litigations.

ZHU, He

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Practice Area

Corporate and M&A

Infrastructure and Project Finance

Environmental and Work Safety Compliance

NI, Tianling

Partner

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Practice Area

Corporate and M&A

Private Equity/Venture Capital

Environmental and Work Safety Compliance

SUN, Bangjiao

[e-mail]

Environmental Protection

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