Introduction by Jane Evison, Director of Cosmetics Cluster UK:

“Five years after the UK voted to leave the EU, Brexit finally became a reality in January 2021 with the end of the 12-month Transition Period.  Although the threat of a ‘no-Deal’ was averted at the last-minute, challenges have emerged, particularly affecting small businesses and those marketing perishable goods, who have previously traded quickly and seamlessly across borders. The effects include increased costs, increased customs and regulatory documentation, border disruptions, delays and supply chain interruptions. Larger companies have been able to mitigate this to some extent by virtue of having access to multiple international locations. (1)

Many companies may have adopted a stockpiling approach before the end of 2020 in order to avoid possible complications with trade following the start of Brexit and freight levels are said to be significantly lower than normal. However, this period will soon be coming to an end as businesses need to restock their inventories. On top of this, the UK, like other countries is grappling with the impact of the Coronavirus pandemic. (2)

With only one month post-Brexit, the data on the economic and commercial picture is just emerging and it will be several months before the true impact is known, but there are some distress signals appearing. The UK Office for National Statistics (ONS) reported that ‘currently trading firms that trade internationally, and have reported import or export challenges, around 1 in 4 reported that a change in transportation costs affected their ability to do so’. (3)

The UK cosmetics industry and Brexit

  • Value of cosmetics and toiletries imported into the UK from the EU in 2019 was £2.6 billion
  • Value of cosmetics and toiletries exported to EU countries in 2019 was £3.6 billion (4)
  • Value of the UK cosmetics market in 2019 was £9.35 billion in retail sales (5)

The cosmetics industry is a global industry, highly dependent on movement of goods, such as raw materials, packaging and finished products around the world. Brexit has created a new commercial and regulatory environment in which the industry must interact with the UK and vice versa”.

 

Dr Emma Meredith, Director-General of the CTPA, the Cosmetic, Toiletry and Perfumery Association in the UK, comments:

“As the UK left the single market and EU customs union on 1 January 2021, a new regulatory framework came into force for the manufacture and supply for cosmetics and personal care products to the UK market.  These new UK laws are based on robust scientific principles that have been seen as a gold standard for safe cosmetics for over 40 years and include the continued strict safety of our products and their ingredients and maintain robust animal testing bans.  CTPA has worked closely with UK regulators to ensure the new UK legislation is risk-based and science-led.

Although companies will be familiar with the principles on which the UK laws are based, unfortunately, there will be duplication of some requirements to market in both the UK and EU.  There will also be some new challenges as companies will, for the first time, have to consider the actions needed for trading with the EU as a third country, including customs clearance processes and understanding what Rules of Origin are and how to apply them to qualify for exemption on tariffs when exporting to the EU.  Getting used to such new obligations will take a little time, but CTPA is working with members and the industry at large to ensure the new rules are known and fully understood.”

 

Cosmetics Cluster UK (CCUK) asked three of its member companies to give their assessment of the major impacts of Brexit on the cosmetic industry so far this year, by answering the following questions:

 

Dr Mojgan Moddaresi, Director of Personal Care Regulatory Ltd

What are the major economic and commercial impacts of Brexit so far?

“The requirement of having an additional Responsible Person (RP) in the UK and notification of the products on the portal can be overwhelming for many European brands importing products into the UK. This extra cost is in addition to any tariff or Customs declaration process that can reduce the speed of placing the products on the market. However, by choosing the right partner as the Responsible Person, a brand can reduce the risk of not being delivered to their customers.

At Personal Care Regulatory Ltd, we consider ourselves as an external regulatory arm for companies based in the UK. We don’t see our role just as providing a physical address or uploading the products on the new UK portal. But we would be their partner in post market surveillance. In some cases, we have also provided free landline for customer care support.  We train staff based on a products’ application and our in-house platform can create a life-changing support for European brands without the necessary costs of having the whole set up in the UK.

Is there a timetable for cosmetics legislation in the UK?

From 1 January 2021, access of UK companies to the EU portal for notification for cosmetic products has been disconnected.  The UK Government department, the Office for Product Safety and Standards (OPSS) launched the Submit Cosmetic Products Notification (SCPN) portal, allowing companies to notify cosmetic products made available on the UK market (excluding Northern Ireland, which follows EU regulations) as of 1 January 2021 (6).

If a company places a new product on the GB market from 1st Jan 2021, they must be notified on SCPN prior to being placed on the market. Products available on the GB market before 1 January 2021 and already notified via the EU Cosmetic Products Notification Portal (CPNP) must be notified within 90 days of 1 January 2021. For notifying products on the SCPN, a brand should allocate a new UK Responsible Person (RP).

The OPSS, the Competent Authority for cosmetics in the UK, has published the new UK Serious Undesirable Effects (SUE) reporting form.  This form allows the UK Responsible Person to notify SUEs to them, as required under Article 23 of the UK cosmetic regulation. Under the new system, Responsible Persons and distributors should send serious undesirable effect forms to the OPSS via the email address: seriousundesirableeffects@beis.gov.uk.

For aerosols, the CE mark should be replaced by the UKCA mark. Aerosol products should follow the Aerosol Dispensers Regulations 2009. This includes the requirement to mark the dispenser with the UKCA compliance mark, which is replacing the reversed epsilon mark. Until 31 December 2022, the UKCA marking may be displayed on a label affixed to, or a document accompanying the dispenser.

Are there any changes regarding product safety prior to products being placed on the UK market?

Brands should ensure their product information files are available in English, including Cosmetic Products Safety Reports (CPSRs), GMP, and claims substantiation documents. Based on our experience, translating technical documents like CPSRs can be very costly. We noticed that repeating safety assessment for products would be financially better than translating the reports.

Companies should ensure about the qualification of safety assessors being accepted in the UK and partnered with a reliable company who can defend them if the products’ safety are being challenged on the market. For example, at Personal Care Regulatory Ltd, our assessors have acceptable professional indemnity insurance and trained as expert witness too.

The other important point to have in mind is notification of nanomaterials under the UK Regulation Article 16. The Responsible Person must notify electronically a product containing nanomaterials to the Secretary of State at least 6 months prior to the product being placed on the market. This extra notification would not include nanomaterials which are currently listed in Annexes 3–6.

The other parts of the UK regulation (like Annexes and general guidelines on safety reports) mirror the EU 1223, 2009 regulation.

Do cosmetic products need to be re-labelled for the UK market?

Eventually, yes.  According to the guidance, ‘There will be a 2-year transition period from 1 January 2021 before businesses have to include the UK Responsible Person details on product labels, provided the EU responsible person details are included. This will enable existing stocks to make their way through the supply chain and reflects the typical shelf-life of a cosmetic and business’ labelling cycles; [Article 19]’ (6)

The country of origin must be specified for imported cosmetic products, including products imported from the EU. (Note: ‘Made in the EU’ is not accepted as the country of origin, as the EU is not a country).

How can a French cosmetic company continue to do, or develop business with the UK? How can business strategy best be adapted?  

We noticed that many French brands who already have a distributor in the UK, made a decision to use their distributors’ address as the new UK Responsible Person. This decision can have a short-term benefit on saving the cost and controlling the compliance from their French office. However, the longer-term issues, like dependence on the distributors or sharing IP conformation under the role of the RP to the distributors channel may be risky. Furthermore, post market surveillance (evaluating Undesirable effect and filling the form for serious undesirable effect) is a process which is best to be controlled locally.”

 

Olivia Santoni and Amanda Isom, Directors, Bloom Regulatory Ltd

What has changed if a company wants to import products from or to, the UK?

“If a company imports products from the UK, the importer will have to be in possession of the correct customs documentations and ensuring that the product has a legal entity in the EU. The EU legal entity will have to perform all the relevant notifications and hold the right documentations.

If a company exports its products to the UK, the importer will have to be in possession of the right customs documentations and ensuring that the product has a legal entity in the UK. The UK legal entity will have to perform all the relevant notifications and hold the right documentations.

How does a French cosmetic company continue to do, or develop business with the UK? How can business strategy best be adapted?  

As a third country the UK does not recognise legal entities based within the EU and this had a big impact on companies. It created additional costs to either established legal entities within the UK or to partner with already established UK entities. Companies also had sometimes to assess their supply chain to ensure each operator had the right documentation and prepare all the custom clearance procedure. Companies wishing to continue or to start business with UK have to map their supply chain, ensure that a UK legal entity has been designated or will take on this role to be responsible for the goods and prepare custom declaration. Additional obligations such as notifying UK regulatory portals such as the cosmetic notification or the REACH UK portal will have to be managed as well. Overall businesses need to understand their new roles and obligations to avoid goods being blocked by the authorities as well as monitoring any potential future additional requirements.

As a consultancy company we have seen several challenges not only with regard to choosing the UK entity but in particular regarding sharing data/IP amongst legal entities.  Having a UK entity isn’t just about assigning a name and address on pack – it needs the back up of access to information, as if they are the overseas manufacturer. We are seeing a lot of confusion in this area with regard to allowing access to data but also on identifying which entity will fulfil the main obligations.    Questions can seem very basic but often are being left unaddressed e.g. who will do the UK notification (will they have access to what they need to do it)? Who will receive UK consumer feedback of adverse reactions and who will be monitoring and reporting these? Has the PIF been translated in English and who is maintaining the UK copy versus the EU copy?

From a strategic point of view adding the complexity of two territories reminds us that compliance isn’t about a single snapshot in time and businesses need to ensure that they both ask the right questions but have the ongoing systems in place to continue to keep up the compliance for the future. Once these new procedures are put in place, businesses will be able to continue selling goods to the UK. It is unfortunately not business as usual but with the right organisation and process the UK market is still accessible and attractive for EU companies”.

 

Surfachem

What are the major economic and commercial impacts of Brexit so far from the perspective of an ingredient supplier?

“Surfachem, a 2M Group Company, is a chemical distributor which offers an extensive ingredient portfolio, technical expertise, and global capabilities. As a forward thinking and customer orientated business, we have implemented a number of contingency measures to mitigate against any interruptions to supply caused by Brexit.Our stakeholders remain our priority, and we will continue to communicate directly with our customers and suppliers on the need to place forward orders and provide forecasts to ensure that sufficient product is available within the supply chain. Where and when necessary, we will continue to commit to additional inventory to ensure continuity of supply for products identified as being at high risk of supply chain interruption.

Our experienced, in-house, Logistics, Shipping and Technical teams have a depth of knowledge. With investments in extra technical and regulatory resource, we are committed to supporting our customers where possible, by providing guidance and support as we pass through uncertain times. Whilst we would prefer to avoid regulatory divergence, we will strive to work with our international subsidiaries and global customer base to adapt. In addition to this uncertainty, Surfachem also maintains licenses to export dual-use goods, along with EORI registration and Transitional Simplified Procedures, should this be required.

“With head offices in the UK, Surfachem has a long history of import and export on a global basis. As patrons of the Export Exchange, we retain a considerable degree of expertise in global trade. Since the UK voted to leave in 2016, Surfachem has established subsidiaries in Germany and France which, alongside our existing presence in Belgium, Poland and Norway, enable us to ensure security of supply to our principals, suppliers and customers in all of the 87 countries we trade with. Regardless of the UK political dynamic, Surfachem will continue to offer industry-leading knowledge, insight, innovation and service”.

 

Jane Evison, Director, Cosmetics Cluster UK concludes:

“Only time will tell what the long-term impact of Brexit will be in the UK. Some companies may not survive the crippling rise in costs which are due to the complexities of cross-border trading post-Brexit unless their models adapt and consumers accept higher prices, or they find new ways to overcome the hurdles. However, it may not be in the best interests of the UK if many companies seek to move their bases overseas.

Covid-19 is having its own impact on the economy of every country and the cosmetics industry is not immune to this. However, the industry is creative, versatile and innovative and is forecast to bounce back again. As has already been seen during the pandemic, the industry has responded quickly by pivoting production and moving sales more online, as well as collaborating and supporting the local and wider communities in which they are based. In these times, the role of associations in sharing information and working together to lobby governments, provide clarity on regulations and legislation and moral support for the industry is of great value.

In the short-term, industry is adapting rapidly to the new post-Brexit landscape and there are opportunities for those offering services, such as providing regulatory advice and RP facilities. However, the full economic impact in the long term, possible lack of inward investment into the UK and restrictions to the movement of personnel such as scientists and researchers in companies and academia is difficult to predict.”

 

Cosmetics Cluster UK and the Global Cosmetics Cluster will hold a joint webinar ‘Brexit – now it is the ‘Real Deal’ – what is actually happening? – reviewing the impact so far, on March 11.

Further reading and references:

1.FT https://www.ft.com/content/4d793bc6-f680-44a6-837e-efcbf799ef8d The largely unseen world of Brexit impacts bubbling below the surface

  1. Brexit Delays to EU: How Bad Are Delays For Business With New Rules and Laws? – Bloomberg

3.Business insights and impact on the UK economy – Office for National Statistics (ons.gov.uk)

  1. Brexit and EU trade – Statistics & Facts | Statista ;

Cosmetics market in the United Kingdom (UK) – Statistics & Facts | Statista

  1. The Cosmetic, Toiletry and Perfumery Association “Cosmetics Industry in Figures” Kantar Worldpanel April 2020
  2. https://www.gov.uk/government/publications/cosmetic-products-enforcement-regulations-2013

 

Contributors:

Jane Evison, Director, Cosmetics Cluster UK Ltd, www.cosmeticsclusteruk.com (PIC)

Dr Emma Meredith, Director General, CTPA, www.ctpa.org.uk (PIC)

Dr Mojgan Moddaresi, Director, Personal Care Regulatory Ltd,  www.personalcareregulatory.eu (PIC)

Olivia Santoni and Amanda Isom, Directors, Bloom Regulatory Ltd, www.bloomregulatory.com (PICS)

Surfachem, www.surfachem.com (PIC)

 

February 5, 2021