When did SME verification become an optional extra? A question the REACH industry needs to ask.
When a non-EU manufacturer appoints an Only Representative (OR), there is a natural assumption that every aspect of the REACH submission will be handled with the appropriate level of expertise.
In many cases, that assumption is justified.
However, one area deserves far more attention than it currently receives: SME classification.
The statistics should make every company ask questions
According to the European Court of Auditors, approximately 26% of REACH registrants declared themselves as SMEs. Of the SME declarations verified by ECHA, around 50% were found to be incorrect, resulting in €32.2 million in additional fees and administrative charges recovered by ECHA by the end of 2019.
Those figures raise an important question.
If enterprise-size determination is simply another administrative step in preparing a REACH dossier, why are so many SME declarations subsequently found to be incorrect?
The purpose of asking that question is not to criticise Only Representatives. Many provide an excellent service to their clients.
Rather, the statistics suggest that enterprise-size determination should not be treated as a routine administrative exercise.
REACH expertise and SME expertise are not necessarily the same
Preparing a technically compliant REACH registration requires specialist regulatory knowledge.
Determining enterprise size under Commission Recommendation 2003/361/EC requires a different specialist skill set.
It may involve analysing:
complex ownership structures;
indirect shareholdings;
holding companies;
investment funds;
voting rights;
partner enterprises; and
linked enterprises.
These assessments often extend well beyond the preparation of a registration dossier.
Don't assume it is included
One of the biggest misconceptions we encounter is that companies assume an SME assessment is automatically included within the OR's scope of work.
Sometimes it is.
Sometimes it is only partially addressed.
Sometimes responsibility for providing accurate information or determining enterprise size is transferred back to the manufacturer through the contractual terms.
Unless the agreement clearly defines:
who is responsible for determining enterprise size;
how that determination will be performed; and
who accepts responsibility for the assessment,
companies may be making assumptions that are not reflected in the contract they sign.
Make SME determination part of the discussion—not an afterthought
Instead of assuming enterprise-size determination is covered, companies should discuss it explicitly before appointing an OR.
Questions worth asking include:
Is a full enterprise-size assessment included?
Will our ownership structure be analysed against the EU SME Recommendation?
Will linked and partner enterprises be assessed?
Who is responsible for the final SME determination?
What evidence supports that determination?
If the answers are unclear, companies should consider obtaining an independent enterprise-size assessment before the REACH submission.
An independent assessment provides confidence not only for the manufacturer, but also for the OR, who can rely on a documented analysis prepared specifically for SME classification.
Why this becomes even more important in 2027
From 5 February 2027, companies wishing to benefit from SME fee reductions must first obtain SME recognition from ECHA before submitting a REACH registration or application for authorisation.
ECHA recommends submitting the recognition request at least two months before the intended submission date.
If the enterprise-size assessment is incomplete or additional information is required, the recognition process may take longer, potentially affecting the planned submission timeline.
This makes getting the SME assessment right before submission more important than ever.
Independent verification creates confidence
At MSME Compliance, we believe enterprise-size determination deserves the same level of specialist attention as any other critical aspect of regulatory compliance.
Our role is not to replace the Only Representative.
Our role is to provide an independent, evidence-based enterprise-size assessment that manufacturers and Only Representatives alike can rely upon.
By separating enterprise-size determination from the registration process, companies gain:
an independent assessment focused solely on SME classification;
documented reasoning based on the EU SME Recommendation;
greater confidence in the declared fee category; and
stronger preparation for ECHA's ex-ante SME recognition process.
Given the statistics published by ECHA and the European Court of Auditors, perhaps the question is no longer whether enterprise-size determination is important.
Perhaps the better question is:
Should one of the most financially significant declarations in a REACH submission be treated as a specialist assessment in its own right?
Sources
European Court of Auditors, Annual Report on the EU Agencies (2019).
European Chemicals Agency (ECHA), SME Verification.
European Chemicals Agency (ECHA), Upcoming changes to SME verification in 2027.
Commission Recommendation 2003/361/EC concerning the definition of micro, small and medium-sized enterprises.
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