The European Parliament passed the law - one of the most complex and far-reaching EU regulations ever - after years of haggling marked by intense lobbying by the European chemicals industry and by protests from environmentalists who sought more restraints on the industry.
The law, a compromise balancing health and environmental concerns against fears that excessive red tape would stifle business, puts the burden of proof on companies to show that industrial chemicals and substances used in everyday products are safe.
It is likely to take effect in mid-2007.
"It is a major step forward for public health, workers' safety and protection of the environment. In the end, we want to get rid of the most dangerous chemicals while boosting research and development in Europe," said Italian Socialist Guido Sacconi, who was charged with steering the legislation through the EU assembly.
Under the rules, producers will have to register the properties of chemicals with an agency to be set up in Helsinki, Finland, that will have powers to ban those presenting significant health threats. Companies will be required to gradually replace the most high-risk chemicals - so-called persistent, bioaccumulative and toxic substances - where safer alternatives exist. If no alternative exists, producers will have to submit a plan to develop one.
Because of fears over potential job losses, the parliament scaled back chemicals-testing requirements in the first reading of the law - known as REACH, for Registration, Evaluation and Authorization of Chemicals - last year. Some 13,000 substances, deemed of high concern, face automatic testing, but almost all tests were waived for little-used chemicals of which only 1 to 10 metric tons are produced or imported into the EU annually.
EU governments further scaled back the law passed Tuesday on second reading in an effort to reduce costs for the EU's chemicals industry, worth about $582.9 billion and employing 1.3 million people in 27,000 companies.
The registration process for all of the 30,000 chemicals should be completed in 11 years. The first stage of the process aims to register substances that are produced in the largest quantities and the most harmful ones, such as carcinogens, mutagens and toxins affecting reproduction.
The direct costs of supplying safety information about a substance range from $26,500 to $530,000, depending on the volume of data requirements, according to the parliament.
REACH replaces some 40 directives currently governing the use of chemicals in the EU. In the past, companies could sell almost any chemical without being required to provide detailed health and safety information.
The compromise has been criticized both by industry, which complains it is too complicated and will burden companies with unnecessary bureaucracy, and environmentalists, who say it will allow dangerous chemicals to enter the market through loopholes.
"This deal is an early Christmas present for the chemicals industry, rewarding it for its intense and underhand lobbying campaign. We are deeply worried that the key goal of this legislation - to offer EU citizens and the environment sufficient protection from dangerous chemicals - appears to have been lost in the haste to agree a compromise," said lawmaker Caroline Lucas of Britain's Green Party.
Environmentalists are also worried that under REACH, many high-concern chemicals will be allowed onto the market if producers can prove they can adequately control them.
The United States has also expressed concern about the law, worried about its effect on U.S. exports. But EU leaders said the legislation would set a global standard and called on the Americans and other nations to adopt similar restrictions.
"From a global perspective, the safety requirements established by REACH will be on a completely new level," said Finnish Trade Minister Mauri Pekkarinen, speaking for the EU presidency.