RoHS clarification: Put on the market and intra-group transactions

The European Union's Restriction of Hazardous Substances (RoHS) substance restrictions only apply to products "put on the market" after the July 1, 2006 deadline, and anything put on the market before that date can legally continue to be sold. Therefore, when a product is considered validly "put on the market" is of key importance to manufacturers.

There has been significant controversy regarding the EU Commission's interpretation of "put on the market". The phrase is not defined in the RoHS directive, nor is there a definition in any EU binding legal instruments. This concept has, however, been explained at some length by the Commission in non-legally binding guidelines.

Problems have arisen because of an EU Commission letter sent at the end of April to the European Trade Association of Domestic Equipment Manufacturers (CECED), giving the Commission's interpretation of this term. It appeared to suggest that a product is only on the market once it is in the hands of a third party unrelated to the manufacturer — either an importer, a distributor or an end user.

Industry was concerned that the interpretation meant that a wholly-owned subsidiary of the manufacturer or another group company may not be regarded as a third party. This would fundamentally change how the term "put on the market" under RoHS has been understood to date, particularly in regard to intra-group transactions.

White & Case LLP has assisted industry in its request for clarification to EU officials. The law firm notes that the Commission has now officially confirmed its views over this controversial issue.

What this means to a manufacturer

Electrical and electronic products should be considered as validly "put on the market" prior to July 1, 2006 provided that the goods are already released for free circulation by EU customs, and that a distributor (which can be a subsidiary or another group company of the manufacturer intended to distribute the equipment in the EU) takes legal title/possession of the goods before that date. In short, provided the products have been transferred from the manufacturer to a distributor in the EU and are available for sale and end use, the legal relationship of the distributor to the manufacturer is irrelevant.

The bottom line is that any products "on the EU market" before July 1, 2006 can legally continue to be sold after the deadline, even if non-compliant. The transfer can be made to an independent distributor (i.e. a distributor with no legal links to the manufacturer), but also to an EU subsidiary of the manufacturer or another group company, providing the distinct function of that other company is to distribute the equipment in the EU.

The products should have left the manufacturing stage and entered the distribution phase, and should therefore be available for sale and end use. Producers should document that they validly put their products on the market prior to the July 1, 2006 deadline. Good documentation is key to justification. Any relevant records such as customs documentation and invoices should be kept on file to prove that your company exercised all due diligence in forming your view on the non-application of the RoHS restrictions.

Author's note: This information is not intended as a substitute for specific legal advice. If you require further information, please contact:

Jacquelyn MacLennan, +32 2 209 8295, jmaclennan@whitecase.com

Manuel Suarez, +32 2 209 8210, msuarez@whitecase.com

Original text is here