Companies doing business in international markets face a bewildering array of local regulatory requirements governing their business and marketing activities. These can range from local environmental, safety and health restrictions to protect workers in foreign manufacturing operations, to standards governing the use of hazardous materials in products and product packaging.

In the past, many companies tried to meet these requirements by gearing their multinational compliance programs to U.S. regulatory standards. The assumption was that U.S. standards were considered the most stringent in the world, so that compliance with U.S. standards as a general matter would almost certainly ensure compliance with other, less stringent standards in effect elsewhere. Increasingly, this assumption is no longer correct. Regulatory programs in jurisdictions outside the United States are becoming increasingly sophisticated and complex. In some cases, they also are taking different approaches to risk and hazard management that differ in significant ways from what has been accepted in the United States. The result is that existing corporate compliance programs based on U.S. standards alone may be inadequate to assure regulatory compliance in global markets going forward.

Perhaps the most ambitious regulatory program currently under development outside the United States is the so-called REACH (Registration, Evaluation and Authorisation of Chemicals) proposal currently being considered in the European Union. Under this proposal, substances manufactured or imported (on their own or in preparations) in the European Union in volumes greater than one tonne per year would have to be registered in a central database managed by a new European Chemicals Agency. The proposal also contemplates pre-market authorization of the use of chemicals of "very high concern," placing a high burden of proof on businesses seeking to put these chemicals to new use not previously approved. Additionally, downstream users must consider the safety of their uses of substances, take appropriate risk management measures and report required information.

Criticisms of the REACH proposal outside the European Union have been manifold. They include complaints that the proposal shifts the burden of regulation from government to industry, that it lacks legal certainty, and that it is excessively bureaucratic and uncoordinated with existing legislation. There also are concerns that the proposal does not adequately protect confidential business information and will stifle innovation.

Since chemicals are used in some manner in the manufacture or use of most products, the U.S. government has predicted that REACH could affect the majority of US goods exported to the European Union.

The REACH proposal in the European Union is not the only new international regulatory regime confronting U.S. businesses operating in global markets. Japan recently amended its Law Concerning Examination and Control of Manufacture and Handling of Chemical Substances (or CSL), which has its own requirements for pre-authorization, notification and reporting in the use of designated chemicals and substances. In 2003, China also adopted new rules on the administration of new chemical substances, with detailed declaration procedures, exemptions and restrictions on importation and manufacture. On top of these and other national and regional programs, the United Nations Environment Programme (UNEP) has approved a new Globally Harmonized System of Classification and Labelling of Chemicals (GHS), part of a broader effort to harmonize chemicals and materials management programs in the context of global initiatives on sustainable development.

The time for U.S. businesses to adjust their global compliance programs to accommodate these new regulatory developments is now.

For many smaller and medium-sized businesses, the scope of the compliance challenge may exceed the capacity of internal resources to effectively manage it. In such cases, firms should consider bringing in external help in the form of regulatory monitoring services and competent international counsel. While increased costs will be associated with reliance on external support, the costs of mishandling international compliance will undoubtedly be greater.