Draft V1.0 Ver 02 November 2016 Guidance Document for the Biotechnology sector

Transcription

1 Draft V1.0 Ver 02 November 2016 Guidance Document for the Biotechnology sector 1. Introduction 1.1. Coverage Sector activities Sources of genetic resources in the biotechnology sector Actors Classification of activities in relation to utilisation Introduction Due diligence declaration and due diligence obligations Specific activities and further examples Collection of genetic resources Observation and initial screening Targeted research Development, regulatory and performance trials Other activities (activities that cannot be allocated to any of the steps above) Multi-component examples Remaining issues Unresolved issues Annexes: Background information This draft will be discussed at the workshop in Brussels on 23 November. Please provide any written comments on this draft by 7 December, to ABS.guidance@milieu.be with Daniel Traon (daniel.traon@arcadia-international.net) in copy.

2 P a g e 1 Introduction All industries creating value by means of biotechnological processes or products are affected either actually or potentially by the implementing provisions of the Convention on Biological Diversity (CBD), the Nagoya Protocol (NP), and its implementation in the EU (Regulation (EU) No 511/2014) (hereafter referred to as EU ABS Regulation or the Regulation ) respectively. There can be no single answer to the question as to how far individual sectors of the industry are affected. In detail, this will depend particularly on the definition of their activities and their position within the industrial value creation chain. Nevertheless, the provisions of the EU ABS Regulation are applicable across value creation chains and throughout value creation networks, if the specific conditions for utilisation are satisfied that are laid down in the EU ABS Regulation. This document is part of a series of seven sectorial guidance documents that aim to complement the EU Commission guidance 1 on Regulation (EU) No 511/2014 and is intended to be used in harmony with this EU Commission Guidance. The EU ABS Regulation implements in the EU those international rules which govern user compliance pursuant to Article of the Nagoya Protocol, the EU is bound to take measures to monitor and enhance transparency by designating one or more checkpoints. As for all sectorial Guidance Documents, the main purpose of the Guidance Document for the Biotechnology sector is to lead to a shared interpretation of the terms utilisation and research and development in relation to the development of biotechnology products. It provides a general description of the types of genetic resources being used within the Biotechnology sector, of the research and development activities being part of the product development process in the Biotechnology sector; and list activities within or outside the scope of the EU ABS Regulation illustrated with concrete cases. Therefore this Guidance Document for the Biotechnology sector is meant to help users to establish whether activities carried out are considered utilisation within the meaning of and fall within the scope of the EU ABS Regulation, and when due diligence, documenting and reporting requirements are triggered. The contributors of this document wish to point the importance of the future jurisprudence to build, with the guidance documents, the effective legal substance of the "Regulation" in time. This document is to prevent as much as possible misunderstanding while jurisprudence is to correct wrongdoing Coverage Biotechnology is defined by Article 2 of the CBD as any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use. This definition is also included in the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity (Article 2). The OECD has defined biotechnology as: The application of science and technology to living organisms, as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services. An organisation that performs activities in one or more categories is defined as a biotechnology organisation. The OECD definition and description is used to define the scope and range of activities covered by the biotechnology sector. It is NOT an alternative or substitute or addition to the definition of biotechnology in the CBD. 1 Available at:

3 P a g e 2 Biotechnological activities share a number of common features that justify treating involved biotechnology organisations as a separate sector within the context of the sectorial guidance documents. They are focused on technical achievements, which result from first understanding the mechanisms of living organisms and thereafter designing ways to influence and use them, accessing innovative technical tools and platforms that can often be applied across different sectors. Examples are DNA sequencing, DNA synthesis, DNA diagnostics methods, DNA engineering techniques, but also biochemistry analytical methods for molecules other than DNA. In contrast to end product-oriented sectors, biotechnology covers tools, services, and intermediate products. Biotechnology makes use of biological systems and processes to manufacture products that reach end-consumers via a diversity of other sectors. Initially, the following sectors were significantly linked with biotechnology: Healthcare and animal health: Healthcare biotechnology refers to a medicinal or diagnostic product or a vaccine that consists of, or has been produced in, living organisms and may be manufactured by combining DNA sequences that would not naturally occur together (recombinant DNA). It encompasses medicines and diagnostics that are manufactured using biotech processes as well as gene and cell therapies and tissue engineered products; Agriculture, livestock and aquaculture: Agricultural biotechnology encompasses i.a. a range of modern plant and animal breeding techniques. It is used in fisheries and forestry, animal feeds and feeding practices. The best-known technique is genetic modification, which means that existing genes are modified or new genes introduced in an organism. The crops may be used for animal feed, food, biomaterials, medicinal use or energy production. Agricultural biotechnology provides opportunities to reduce land use and greenhouse gas emissions since the same harvest can be achieved on a smaller area, more stably and with less applications of plant protection products; and Industrial applications: Industrial biotechnology uses living cells (microorganisms, algae, etc.) and components of cells (e.g. enzymes) to make biobased products in sectors such as chemicals, healthcare, animal health, food and feed, detergents, paper and pulp, textiles, biobased materials and bioenergy (such as biofuels or biogas). In doing so, it uses renewable raw materials and is one of the most promising innovative approaches towards producing biopharmaceuticals, food and feed, but also lowering greenhouse gas emissions. Irrespective, techniques and tools offered by biotechnology are applied in many sectors. They support a broad scale of activities in basic research, applied research, development and production. In contrast to the examples in which applications of biotechnology are organised in relation to the sector to which they contribute, marine biotechnology is defined by the origin of the genetic resource rather than by the final use: exploration of the sea biodiversity could enable development of new products (e.g. pharmaceuticals or industrial enzymes) or can withstand extreme conditions, and which consequently have high economic value. In terms of Access and Benefit-Sharing, this constitutes a fundamental difference. By defining the resource, marine biotechnology potentially sets a specific perimeter, also in legal terms, to access. It does not, however, delimits specific types of utilisation. The type of utilisation is defined in the downstream use of the genetic resource, and can be part of agricultural, industrial and medical biotechnology R&D chain. In terms of access to genetic resources, as long as the resource originates from an area that falls under the jurisdiction of a coastal state, there is no difference between a marine or any other type of genetic resource. Indeed, the text of the Nagoya Protocol does not even contain

4 P a g e 3 the term marine genetic resource. However, marine genetic resources originating from Areas Beyond National Jurisdiction, consisting of the Area and the High Seas and as such, roughly 60% of the global oceans, are not governed by any national access legislation, nor by the Nagoya Protocol or the EU ABS Regulation (EU) No 511/2014. Access for these resources is currently unregulated, though this might change, since marine genetic resources are part of a package deal for an Implementing Agreement to the UN Convention on the Law of the Sea (UNCLOS) currently under negotiation. Since activities with genetic resources from marine origin are subject to the same rules as activities with other genetic resources, marine biotechnology will not be treated separately Sector activities As pointed out before, it is not meaningful to discuss the biotechnology product development chain as such. Rather biotechnology contributes in different steps in the R&D chain of diverse end-product oriented sectors, including: Replacement of raw materials: Biotechnology can open the use of raw materials that so far were not feasible sources for certain end products. The shift to renewable resources is an important global objective and biotechnology is one of the enabling keys; Innovative products: Biological products can show a high complexity, impossible to reach by chemical synthesis. Also delivery mechanisms can be further improved by design. Examples include vaccine development and gene therapy using a diversity of vector systems; New production and process technologies: Biotechnology may improve existing production and processing methods and/or provide alternatives. Applications include fermentation in bioreactors, bioleaching, biopulping, biobleaching, biodesulphurisation, bioremediation, biofiltration, biotransformation, and enzyme immobilisation; and Improved and new analytic and diagnostic tools: Screening tools incorporate innovations in genomics, transcriptomics, proteomics and metabolomics, possibly combined with high throughput screening. Typically, improving analytic tools for highthroughput screening does not always involve utilisation of a genetic resource, since these techniques are often applicable to a number of species rather than a specific genetic resource, may not require any genetic resource in their improvement process and are used for routine analysis and characterisation that is not R&D as defined above. Considering applications of personalised medicine or directing selection of improved crops, molecular tools provide insight in the genetic determinants to an unequalled level of sensitivity. Once established these analytical techniques can be used in R&D projects and become a tool in the utilisation of a genetic resource. Examples of other applications include DNA profiling for tracing population origins, DNA fingerprinting for forensic analyses, disease diagnostics, forest health assessments, possibly predicting health declines from anticipated climate change or development/use of tools to meet regulatory requirements (e.g. toxicity tests, efficacy test). Depending on the application one or more of these biotechnology contributions might be integrated in the specific development process of the relevant sector. Yet, in order to master these applications, activities are required to further elucidate molecular structures and mechanisms, biochemical as well as physiological aspects. These activities might also include essential techniques of cell and tissue culturing and engineering. Such activities might constitute Utilisation under the EU ABS Regulation. As biotechnology contributes to several product development processes, the following R&D process is being considered. This approach allows the allocation of cases to specific stages and/or activities of the R&D process (see Chapter 2).

5 P a g e 4 Figure 1 The Biotechnology R&D process Collection of genetic resources Observation and initial screening Targeted research Developme nt Regulatory and performance trials The value chain in biotechnology can be visualised in a simplified conceptual diagram that pictures the flow of materials. Figure 2 Simplified R&D Process Generic GR Characterization process general purpose GR collect GR 1 purify, deposit, store in collection, 2 research or productoriented activities define research objective, and/or future product profile identify possible GR source 4 5 characterize 3 characterize candidate GR 6 select a subset of GR for further work 7 other GR may be used as a tool 13 optional: modify/generate diversity Characterize and select desired GR 8 9 Final stage of development 11 Marketing and demonstration trials 10b produce, package, ship, distribute, QC test in-house and by authorities testing for registration, and permission to commercialize 12 10a The above flow chart is only indicative, and a final conclusion requires more detailed analysis in each specific case. Step 1,2,3 are part of general characterisation, where genetic resources are not yet part of an integrated process involving research with an aim to development. Step 1, 2 are normally not considered utilisation. The characterisation in Step 3 can use biochemical or genetic methods. However, this is mere description and not yet part of an overall R&D process. The purpose of this characterisation is to enable selection of genetic resources for possible further activities, and does not yet include a development component; Step 4 and 5 do not involve physical access to genetic resources;

6 P a g e 5 Step 6 (cfr step 3) is an initial screening step, with multiple genetic resources. The majority of these genetic resources will not continue to R&D; Step 7 is a decision making process; Step 8 includes crosses, random mutagenesis, transformation, etc. This may in some cases comprise utilisation, depending on the method used; Step 9 can comprise utilisation that brings certain genetic resources into scope, and that can lead to a due diligence declaration in Step 11. In this R&D process, we would envisage that the EU ABS Regulation would apply to genetic resources involved in step 9 and 11, and thus, step 9 and 11 function as a checkpoint for compliance monitoring; Step 10a reproduces observations on plants with known characteristics, and this is typically not utilisation; Step 10b covers regulatory trials and obtaining permits, which is not in scope of the EU Regulation; Step 12 is production, which is not R&D and therefore normally out of scope of the EU ABS Regulation; and In Step 13, the genetic resource not being the object of research itself, but only serving to confirm or to verify the desired features of other products developed or under development. Since the genetic resource is not the subject of R&D when it is used as a testing/reference tool, such activity is NOT considered utilisation. In reality, the value chain in sector biotech is more complex. The activities undertaken during the R&D process take place in a multi-faceted value chain, including not only a multitude of actors in the different activities of the R&D process, but also a broad diversity of actors including the private sector, the public sector and academia, as well as service providers (often with a cross-border nature). Biotechnology has a strong participation from public sector, and a large number of PhD students, also in developing countries. E.g. the Rockefeller foundation international program on rice has educated numerous students from developing countries, and offered them biotechnology training in top Universities. Quite some work is pre-competitive, and quite some work receives research funding. Also often activities start in the public sector or academia and the results are later on transferred or licensed to a spin-off, or a private company. A lot of improvement is incremental: for each discovery, one will further investigate and try to further fine-tune in subsequent discoveries. Also a product can be further fine-tuned to make a next-generation product. Such innovation is enabled and facilitated by the availability of a broad pool of information and by general enabling technologies. Value chain processes regularly have steps with utilisation, followed by activities that are not utilisation, and then again utilisation. Value creation in/with biotech is not linear; it takes place in a value creation network. A single company does not necessarily discover and exploit all value creation potentials on its own. Any multiple value creation for a genetic resource will take place inside and outside the acquiring company, which has a significant influence for the practical handling of genetic resources under the provisions of the EU ABS Regulation and the CBD. Ratifying the bilateral agreement, taking physical possession of the genetic resource and transferring the genetic resource to the utilisation resource defined in the contract, marks the beginning of the industrial value creation process. Figure 3 Value creation in biotechnology

7 P a g e 6 The first step is usually to screen the genetic material to identify the main sought characteristics. The sought characteristics, as also the development and screening targets established for them, may differ completely in both content and procedure, depending on the particular sector of the industry doing the screening. Whereas the pharmaceutical sector, for example, looks for new therapeutic active substances, the main focus of interest in the crop protection industry may be a morphological or metabolism-specific characteristic for transfer into crop plants, or, in plastics research, a more efficient production process for particular substances. Moreover, the same industrial sector can have a great variety of different targets when screening new genetic resources for possible commercial advantages. For instance, the following development targets are conceivable in the pharmaceutical industry alone: as starting point for the development of a new active substance, as component of a vaccine, as inactive component of an end product, as enabler in an R&D process, or as a means of increasing production efficiency. This makes it abundantly clear that a single company is not necessarily in a position to discover and exploit all value creation potentials on its own. It must therefore be assumed that any multiple value creation for a genetic resource will take place inside and outside the acquiring company, and although this may not always be evident to outsiders, it has a significant influence on the implementation regulations for the practical handling of genetic resources under the provisions of the EU ABS Regulation and the CBD. In general, it can be said that the first step towards identifying the essential characteristics is made by the research function, which gives an idea of the possible range of uses and leaves further work on the materials to the appropriate development department. If the company which originally acquired the resource is merely a technology provider, or if the discovered spectrum of effect or one of the main characteristics does not fit in with the company s value creation model, then it is here, at this interface between the research and development functions, that the resource can be transferred for the first time to a legally autonomous company active in a different area and thus bring in a commercial profit. But it also evident that, with every development step, the succeeding companies will get closer to a further value creation, which in turn will be subject to the benefit sharing rules envisaged by the CBD. It is irrelevant in this context whether the development target now being followed was already covered by the PIC obtained by the acquiring company. To secure the benefit sharing for the country of origin in the spirit of the CBD, measures must be taken to ensure that, when a genetic resource is transferred, the original obligation of the acquiring company should be passed on by contract (using the smta) to the next user, who will then enter with complete responsibility into the modalities of the CBD and EU ABS Regulation respectively thus assuming the obligation to notify the new intended use, which had not been recorded in written form in the PIC, to the

8 P a g e 7 country of origin, and to share all resulting material benefits with the country of origin. Genetic material can be transferred in this way to third parties at every step of the value creation chain. In addition to the research/development interface, the transfer could also be made at the end of product development, i.e. prior to approval of the product, followed by large-scale production and marketing or at the end of production to various legally autonomous distribution channels. As soon the administrative conditions for access and transfer under the PIC system have been fulfilled, a bilateral licence agreement should be concluded between the user and the country of origin (or its authorised agency, e.g. the competent national authority), particularly with a view to agreeing on the subsequent benefit sharing. In this connection, attention should be drawn to the application of the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA) and its supplementary Standard Material Transfer Agreement (smta). Any kind of commercialization of the acquired genetic resource in all parts of value creation chain or value creation network should take place exclusively within the framework of a bilateral licence agreement. With a view to the necessary legal security both for the providing and the receiving party, the contents of the bilateral licence agreement should cover the conditions agreed on for the use of the genetic resource, provisions for patents, commercial rights and transfer of the genetic resource to third parties, also the procedure to be observed in the event of a dispute between the country of origin and the receiving party. Some biotech activities are set up as a service to other users, because they are technically sophisticated or highly specialised, e.g. chemical DNA synthesis and large scale DNA sequencing. Such services are provided from early to late phase, to private and public sector, across country borders Sources of genetic resources in the biotechnology sector Genetic resources for the Biotechnology sector can be sourced from: Any species or mixtures of species; Living or dead material; Intact tissue or isolated DNA; An in situ source; An ex situ source in the public sector, or from other private sector entities; Ex situ from a registered collection, from non-registered collection; Single person actors, family owned businesses, SMEs, multinational companies, startups; Material under development, or from commercially available sources (that can again be subject to utilisation); and Previous person who utilised, or from a previous person who did not utilise. In the latter case, the previous person may not have ABS information. While this Guidance Document deals with aspects of the Nagoya Protocol and the EU ABS Regulation, readers are reminded that specific genetic resources may be subject to other legal obligations. Without being exhaustive, we point out to requirements related to organisms noxious to plants and plant production, to restrictions for activities with genetically modified organisms and restrictions on Trade in Endangered Species of Wild Fauna and Flora (CITES) Actors

9 P a g e 8 Although there is a huge diversity in R&D of the biotechnology sector, the following type of actors can be identified: Academic research institutions; Public sector research institutes; Start-up companies; Companies of all sizes, including start-up companies; Service providers; Public Private Partnership collaborators; and Biobanks, biological resource centres and specimen repositories A lot of activities are done by subcontractors, toll manufacturers or service providers (in the following referred to jointly as service providers ). Service providers are not considered users in the sense of the EU ABS Regulation if they hold no rights to the result of their work with the genetic resource or its parts, and perform no sale of a product on the EU market. A service provider acting as the extended workbench is bound by contractual obligations to work with only the genetic resources or its derivatives defined by the service requestor and to deliver the outcome only to the service requestor or an entity defined by the service requestor - e.g. another service provider conducting the next step in a chain of services. All these activities by such service providers are under the control and direction of the service requestor. For this service, the service provider will receive a service fee. Such a service fee by the service requestor is not funding as defined in the EU ABS Regulation. In consequence, the service requestor will carry the burden of complying with the EU ABS Regulation if the activities conducted by the service requestor and the service providers on his behalf constitute utilisation in the meaning of the EU ABS Regulation.

10 P a g e 9 Classification of activities in relation to utilisation 2.1. Introduction An activity only comes under the scope of the EU ABS Regulation if it involves the utilisation of genetic resources acquired from a country that is a Contracting Party to the Nagoya Protocol and the associated geographic, temporal, and material conditions as detailed in the general Guidance Document have been met. Users are referred to the general Guidance Document for a more elaborate explanation of these conditions. The EU ABS Regulation only triggers obligations in case of utilisation. This is i.a. evident from Article 4 which defines the core due diligence obligations of users, and which refers in article 4.1. to genetic resources which they utilise, as well as from Article 7 on monitoring user compliance, which refers in Article 7.1. to recipients of research funding involving the utilisation and in Article 7.2. to at the stage of final development of a product developed via the utilisation. Article 3(5) of the EU ABS Regulation defines utilisation as to conduct research and development on the genetic or biochemical composition of genetic resources, including through the use of biotechnology ( ). From the text of the EU ABS Regulation and the EU Commission Guidance it follows that there can only be utilisation if research activities are carried out in conjunction with development activities. The EU Commission Guidance provides several examples from which it can be deduced that a development component is required for there to be utilisation. The Horizontal Guidance ( Commission Guidance Document) starts off by defining research and development on the basis of the OECD s 2002 Frascati Manual, where a distinction is made between basic research ( experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view ), applied research original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific practical aim or objective ), and experimental development. Defined as systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed. According to this manual, research and experimental development comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. It follows from the emphasised part of this definition that research and development is more than just gathering knowledge, and requires further uses to be developed from that knowledge. This is confirmed by the examples provided in the Horizontal Guidance of types of research activities which are, according to the Commission, not to be considered as utilisation : (i) certain upstream activities related to (or carried out in support of) research, such as the maintenance and management of a collection for conservation purposes (including storage of resources or quality/phytopathology checks, and verification of material upon acceptance); and (ii) the mere description of a genetic resource in phenotype-based research such as morphological analysis. These examples necessarily lead to the conclusion that at least basic, non-applied research activities, such as taxonomic research and pure analytical research, are not covered by the material scope of the EU ABS Regulation. In addition, the self-proclaimed litmus-test, according to which users should ask themselves whether what they are doing with the genetic resources creates new insight into characteristics of the genetic resource which is of (potential) benefit to the further process of product development (i.e. related to the actual or potential value of the genetic resource). If this is the case, the activity goes beyond mere description, should be considered research and therefore

11 P a g e 10 falls under the term "utilisation ", clearly links the utilization to a development aim and implies that applied research only qualifies as utilisation if a link to a further process or product development is established, i.e. a development component is present. It seems obvious that a development component is required for an activity to qualify as utilisation. Any research activity, which is not accompanied by such a development component, should not and cannot amount to utilisation. Conversely, product development without any activity on the genetic and/or biochemical composition of the genetic resource cannot be considered as utilisation either. However, development which can be qualified as experimental development, since it involves such an activity on the genetic and/or biochemical composition of the genetic resource clearly amounts to utilisation. A key example in this regard is the sequencing or screening of biological material for the presence of interesting characteristics which normally involves access to the material, but in principle not its utilisation. A project typically starts off with thousands of samples of different genetic resources, all of which have been accessed and screened for the presence of a characteristic. However, most of these samples will turn out not to be further used for product development. In line with the Frascati definitions and the guidance provided in the EU Commission Guidance, only those product leads that are actually used for further product development, are subject to utilisation within the meaning of the EU ABS Regulation (regardless of any specific obligations in the MAT). Actual utilisation An additional consequence of the fact that the constituting element of the material scope of the EU ABS Regulation is utilisation is that the actual utilisation is a necessary condition to fall within the material scope of the EU ABS Regulation. Therefore an intent to utilise is not sufficient and without all components of utilisation, a use does not qualify as utilisation and would fall outside of the scope of the EU ABS Regulation. Since it is not the intent but the material element of actually utilising the genetic resource which decides whether utilisation falls within or outside of the scope of the EU ABS Regulation, only actual utilisation is within the scope. Pre or non-utilization with the intent (or aspiration) of later utilisation does not constitute utilisation since it does not entail this material element(s) that qualifies a certain use as utilisation, i.e. research & development on the genetic resource. You could state that the purpose of the actual utilisation needs to be research and development on the genetic and/or biochemical composition of the genetic resource, but this does not expand the scope of utilisation beyond actual utilisation. Intent is only a key element in the definition of access under the EU ABS Regulation, precisely because of the constituting element of utilisation to define the material scope of the EU ABS Regulation, i.e. an access needs to be done with the intent of utilisation. Nevertheless, access is a necessary, but not sufficient condition to make a genetic resource fall within the scope of the EU ABS Regulation. You also need to conduct actual utilisation of the genetic resource to fall within the scope. From a practical point of view, you could formulate the following recommendation for a person or entity accessing a genetic resource, and who wants to keep the option of utilising at a later stage: at access you have to comply with access requirements from the provider. In addition for compliance to the EU ABS Regulation, and further you collect (and keep during all subsequent steps use (which does not necessarily qualify as utilisation) following key elements: 1) ABS documents from the provider of the genetic resource (i.a. prior informed consent) 2) which genetic resource is accessed 3) date of access 4) from where/whom it was accessed This enables this person or entity to comply with its obligations under the EU ABS Regulation as soon as there is actual utilisation.

12 P a g e 11 In the R&D process in the biotechnology sector as set out above, this means that in principle activities that fall within targeted research or development might qualify as utilization. Moreover, the Frascati Manual, the standard of conduct for R&D surveys in the OECD and the EU that was recognised in the context of the Commission s Framework for state aid for research and development to be an authoritative document for the classification of activities, identifies both basic research (research without a particular application or use in view ) and applied research (research aimed at the development of new products and technologies exploiting the findings of basic research ) as activities falling within the term R&D. Both types of R&D are covered in this document. Qualifying a certain activity as to constitute R&D is a necessary but not a sufficient condition to determine whether such activity falls within the scope of the EU Regulation. An activity only comes under the scope of the EU ABS Regulation if it involves the utilisation of genetic resources acquired from a country that is a Party to the Nagoya Protocol and the associated geographic, temporal, and material conditions as defined in the EU ABS Regulation and further specified in the EU Commission Guidance have been met. In short, it means that (1) the providing state must exercise sovereign rights over genetic resources, must be a Party to the Nagoya Protocol and have established access measures on genetic resources, (2) the genetic resources were obtained after the entering of application of the EU ABS Regulation (12 October 2014), and (3) accessed genetic resources are utilised in the EU. Users are referred to the EU Commission Guidance 2 for a more elaborate explanation of these conditions, in particular in case preliminary investigations indicate that an intended activity falls within the scope of the EU ABS Regulation. It is possible that ABS legislation or regulatory requirements exist in provider countries which, in some respect, go beyond the scope of the EU ABS Regulation. Such national legislation or requirements remain nonetheless applicable, even if the EU ABS Regulation is not. It is also possible that the EU ABS Regulation imposes requirements which are not imposed by the access conditions from the Provider country. This happens in case the PIC/MAT or access conditions consist of a fixed payment, without a royalty-on-sales component. In this case the EU ABS Regulation exceeds its mandate of compliance checking. Derivatives The EU ABS Regulation defines utilisation as research and development on the genetic and/or biochemical composition of genetic resources, including through the application of biotechnology. Biotechnology is defined in the CBD as any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use. In turn, a derivative is defined in Article 2(e) of the Nagoya Protocol as a naturally occurring biochemical compound resulting from the genetic expression or metabolism of biological or genetic resources, even if it does not contain functional units of heredity. Inclusion of biotechnology in the definition of utilization needs to be read as a further refinement of the element of conducting R&D on the genetic and/or biochemical composition of genetic resources. The definition clearly states including and not and, means that 2 EC, Guidance on the EU Regulation implementing the Nagoya Protocol. Regulation (EU) No 511/2014 of the European Parliament and of the Council of 16 April 2014 on the compliance measures for users from the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization in the Union. Guidance on the scope of application and core obligations.

13 P a g e 12 biotechnology is referred to as a technique to do utilisation, and cannot expand what constitutes utilisation. Since it is a necessary condition for utilisation that one conducts R&D on the genetic and/or biochemical composition of GR, and the EU Commission Guidance explicitly states that access to derivatives is covered when it also includes genetic resources for utilisation, i.e. when access to a derivative is combined with access to a genetic resource from which that derivative was or is obtained, a derivative is only covered by the EU ABS Regulation if it is utilised with the genetic resource from which it is obtained. In addition, since a derivative is defined as a naturally occurring biochemical compound, utilization must be based on the biochemical compounds of genetic resources (i.e. the nonmodified chemical components formed by the organisms metabolic processes that exist in samples of biological materials and that have yet to be modified and used in technological applications). Any derivative which is not naturally occurring and/or is the result of a technological application is not covered by the definition. Furthermore, the EU Commission Guidance clearly states that research and development to be carried out on such derivatives should be addressed in the mutually agreed terms that are concluded when accessing the genetic resources themselves Examples of derivatives cited in the EU Commission Guidance are proteins, lipids, enzymes, RNA and organic compounds such as flavonoids, essential oils or resins from plants. Furthermore, the use of the term naturally occurring indicates that material, such as synthetic gene segments, is not covered. The present analysis builds on the Guidance document on the scope of application and core obligations of the EU ABS Regulation (COMMISSION NOTICE 2016/C 313/01) which has been developed by the EU, and highlights the following important general principles: The use of information 3, for example genetic sequences and chemical structural information, which is frequently stored in publicly available databases or available from scientific publications and free of rights, is out of scope of the EU ABS Regulation. The EU ABS Regulation only covers genetic resources as physical material (for example whole organisms, tissues and extracts, cells) acquired from NP countries, whether by donation or purchase or derivatives in form of molecules isolated therefrom, e.g., proteins, or non-other natural compounds like steroids, etc. if accessed together with the genetic resource. However, as stated above, use of information as such may still be within scope of national ABS legislation and/or bilateral agreements made with providers; Manufacturing, including ongoing sourcing support materials, is not considered as R&D. Sourcing of genetic resources to be used as components/ingredients of a chemical product during manufacturing/production is therefore not considered utilisation (but may require the necessary permits); Materials accessed from a NP country before October 12, 2014 are out of scope, even if activities classified as utilisation are carried out on them after that date. However new materials accessed from a NP country on or after October 12, 2014 and utilised as defined in the Protocol and the EU ABS Regulation are considered to be in scope, even if the same material had been accessed previously before October 12, 2014 and held/used for another purpose at or after October 12, 2014; 3 and not production of information via e.g. sequencing

14 P a g e 13 Materials accessed from a non-np country are not in scope even if they are accessed after their useful properties have been identified through work on NP materials which however would be in the scope; and The use of material of human origin is not covered by the EU ABS Regulation. However if the development of the material involves the use of non-human material, for example the creation of cell hybrids, chimeric gene sequences then such activities may, dependent on the specific scenarios, be classified as utilisation Due diligence declaration and due diligence obligations For a product developed via utilisation a due diligence declaration (DDD) shall be submitted at the stage of final development (Article 7 EU ABS Regulation). The stage of final development is identified with legal certainty as defined in Recital 9 of the Commission Implementing Regulation (CIR) 4, and it shall only be made once and prior to the earliest of the events listed in Paragraph 2 of Article 6 of CIR. In consequence, for a product developed via utilisation the following is to be true: Once such a product is past the first of those events triggering a DDD and hence after any applicable DDD was made, said product may be subject to activities and R&D without triggering any requirement for another DDD - as long as it remains the product that the DDD was already made for. Note: A DDD is only one element of the due diligence system established in the EU ABS Regulation., and is supplemented with due diligence obligations when conducting utilization. Although no second DDD for the same product is necessary, such activities past the first DDD may in some cases be R&D and possibly qualify as utilisation and if so might require the fulfilment of due diligence obligations that can be checked by the national competent authorities in spot checks and require documentation for long periods. Examples of such activities past the events triggering a first DDD and hence not requiring a second DDD for the same product are: Marketing activities, such as demonstration at a trade fair or exhibition, marketing trials, sampling by potential customers; field trials conducted by regulatory authorities or on request by these authorities, additional toxicology studies, safety studies or ecological studies on request of an state authority, Resistance monitoring in agriculture, human and animal health, epidemiological studies; Quality control and quality management activities, product stewardship studies; Activities to detect unwanted contamination of a product or confirm the absence of such, e.g. checks for the presence or absence of genetically modified material in organic produce; and Other such activities during or after the product lifetime. Example: 4 Commission Implementing Regulation (EU) 2015/1866 of 13 October 2015 laying down detailed rules for the implementation of Regulation (EU) No 511/2014 of the European Parliament and of the Council as regards the register of collections, monitoring user compliance and best practices.

15 P a g e 14 A Company ONE in member state X has developed a product by utilising a GR but not brought it to the market yet. Because Company ONE has not enough capacities to market and supply the new product in all of the EU, it sells the technology and material for manufacturing the product to companies TWO and THREE, both located in other member states. As this is the event described under Article 6, paragraph 2, section d (results sold within the Union), Company ONE completes a due diligence declaration to its national competent authority. Company ONE then proceeds with placing the product on the market - including a notification prior to placing on the market if applicable or market approval or authorisation if applicable. Since Company ONE has already submitted a due diligence declaration for selling the results to companies TWO and THREE, it does not have to submit another due diligence declaration for placing this product on the market. Companies TWO and THREE in their respective countries conduct marketing trials of the product bought from Company ONE. The marketing trials serve to demonstrate to customers the performance of the new product compared to those used locally, and include analysis of the genetic and biochemical composition. Company TWO and THREE are not required to submit a due diligence declaration since one was submitted by Company ONE already at the time of selling it to TWO and THREE Specific activities and further examples For convenience, the cases presented below are grouped per R&D stage/subsequent steps (as presented above under Chapter 1: see Figure 1): Collection of genetic resources; Observation and initial analysis, screening or characterisation : e.g. phenotyping, genotyping, biochemical analysis, taxonomy, identification, sequencing; Targeted research aiming at establishing exact genetic and/or biochemical composition of GR; and Development, regulatory, and performance trials. The cases refer to the use of genetic resources only. In some cases, traditional knowledge associated with the genetic resource involved, may be used in the research and development process. If it is TK associated with the GR, which is held by an indigenous or local community (not publicly available knowledge), that is relevant for the utilisation of the genetic resource and that as such is described in the MAT applying to the utilisation of genetic resource, it could trigger obligations in the EU ABS Regulation. Not all cases described below are specific for the biotechnology sector, as some cases may occur in several or/and all sectors for which sector-specific guidance has been developed. We keep these because they help to describe the context of the complete R&D process where biotech activities are embedded. They also help to illustrate how the EU regulation identifies a few checkpoints for compliance monitoring, at a few precise points in the overall R&D process. A few cases involve multiple steps, and they illustrate how the EU ABS Regulation specifies one or more checkpoints for compliance monitoring in an R&D process, as prescribed in the Nagoya Protocol article 17.

16 P a g e 15 In all cases, one has to distinguish the genetic resource that is subject to activities from the activity to assess whether the activity consists of utilisation, the genetic resource can be in scope (if other requirements are fulfilled). In the activities described and classified below, it is assumed that all other conditions (geographic, temporal, and material) have been met. This assumption is not repeated in the discussion of the individual cases Collection of genetic resources No Title Collecting and storing 1 Description This comprises ** Access and collection, purification, depositing storing of live organisms or genetic/breeding/reproductive material from live breeding populations, or of samples of any type of GR without any actual utilisation. The GR may be the product of biotechnology, or not. ** Above activities can be BY any party (private person or legal entity, public sector or private sector) or a gene bank for collection purpose. ** the GR may be accessed FROM private persons, private companies or public entities, or accessed from the wild (from nature), or as commercial commodity or from GR collections. ** Access may be from sources within the country or from other countries. Collecting and storing does not qualify as utilisation and is therefore out of scope of the EU ABS Regulation Observation and initial screening No Title Phenotypical analysis 2 Description Handling/storing of genetic resources by researchers and describing its phenotype is a basic and early step in many programs. Phenotypical analysis of genetic resources does not entail any activity on the genetic or biochemical composition of the genetic resource and is not qualified as utilisation. Commission Guidance Document, Art , p. 9 No Title Characterisation for taxonomic purposes

17 P a g e 16 3 Description The following activities are generally performed for the purpose of taxonomy ** DNA Sequencing or biochemical or phenotype analysis; ** Interpretation of the results obtained by comparing to pre-existing knowledge, including comparison to (sequence of biochemical) databases. Taxonomic characterisation of genetic resources is not considered utilisation, and is therefore out of scope of the EU ABS Regulation. Commission Guidance Document, Art , p 9 No Title Preliminary screening 4 Description A large number of genetic resources may be screened for virusresistant plants in a broad panel), in order to find a small minority that has a useful feature, and undertake targeted research and further development with the selected genetic resources. The screening is a research-only activity. Only after a decision for a follow-up development step for a small subset of genetic resources, these are in scope of the EU ABS Regulation. No Title Phytopathological screening 5 Description An EU University collects potato leaves infected with Phytophtora sp. from farmers in NP Party countries, and it makes DNA analysis to distinguish pathotypes and races of Phytophtora strains present; then produces an EU-wide epidemiology overview that is used to advise farmers on future potato cultivation. Such activities do not involve research and development on the entire set of such accessions, and hence the described screening of all such accessions falls outside the scope of the EU ABS Regulation. Commission Guidance Document top of Page 10. No Title Accessing GR from collections in their country of origin 6 Description The collection EL GRANDE is a collection of GR based in Spain. It holds and maintains GR from the former Spanish Empire, some of them collected centuries ago. In 2016 COMPANY based in the EU is requesting samples from EL GRANDE. In particular, COMPANY is ordering from EL GRANDE a sample from an area that in our days is in Spain and one from an area that now is part of Cuba. COMPANY wants to conduct R&D to isolate interesting gene fragments for use in a medical application.