COMPONENT NEWS | INDUSTRY NEWS | RoHS/WEEE NEWS |
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Electronic Engineering News Digest |
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COMPONENT NEWS | INDUSTRY NEWS | RoHS/WEEE NEWS |
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Over the past three months, Ageus Solutions has been brought in to support companies that are facing two to six months revenue gaps, loss of contracts, qualification of alternative vendors, and return of product from customs in the European Union (EU) due to non-compliance issues discovered by distribution partners or EU government officials.
These enforcement and related actions are going to intensify and companies are going to see the revenue pinch. RoHS enforcement and the impact of non-compliance is more complicated and more diverse that originally expected, but it would be extremely unwise to let down your guard right now. This is particularly true for a North American-based electronics brand owner using distributors or distribution partners in Europe.
To properly describe RoHS enforcement, how it is being implemented, and how companies are being impacted, it is important to explain the implementation process of the RoHS directive. The RoHS directive (2002/96/EC) itself does not directly affect any person or company. It is a directive from the European Union to each member state requiring the creation of national legislation based on the agreed upon tenants and articles contained in the EU directive. The online encyclopedia, Wikipedia, provides an excellent and concise definition of an EU directive that highlights the principle challenges related to government level RoHS enforcement.
"A directive is a collective legislative act of the European Union, which requires member states to achieve a particular result without dictating the means of achieving that result."
The entity that creates the legislation — the EU — is not responsible for its implementation. Instead, the implementation of the directive in each member state is the responsibility of the government of each specific member state. The Government of Germany is responsible for the implementation of the RoHS directive in Germany. The Government of the U.K. is responsible for the implementation of the RoHS directive in the United Kingdom. In short, the entity responsible for creating the directive has very little responsibility in its implementation and enforcement. This includes determining or standardizing the means used to do so.
The individual member states are responsible for the method of enforcement and, as important, budgeting for enforcement activities and personnel. The budgeting and resource allocation activities are particularly critical to the how and when of RoHS enforcement. One of the principle causes of the delay in full and comprehensive government enforcement in each state is the complexity of the steps and approvals required to put the correct resources and equipment in place.
Furthermore, the decision regarding who will receive the budget also affects the form of enforcement. If customs has the enforcement in their budget, the country will conduct most of its enforcement on import. If the ministry of environment has the budget, the country will conduct most of its enforcement via documentation or physical inspections at places of business. As much as companies would like to see one comprehensive, predictable and transparent enforcement system across the EU, the actual enforcement in each member state will differ profoundly based on their particular implementation and resource allocation.
Even with the differences from EU member state to EU member state, the general methods used for RoHS enforcement follow one of the two following models: request for technical documentation or physical inspection.
1) Request for technical documentation
A common form of this approach of RoHS enforcement can be seen in the RoHS enforcement guideline document circulated by the "EU RoHS Enforcement Authorities Informal Network" on May 2006. A letter or other form of request would be delivered to the relevant producer in the EU member state and would detail the required information to be returned. The letter or similar request would be circulated on a case-by-case basis, following a discrepancy upon physical inspection, a third-party complaint (e.g. competitor or environmental group), or by using the national WEEE registration list as a mailing list of all producers of targeted products within the specific EU member state.
Typical information required in a RoHS due diligence request include:
The technical documentation method of enforcement involves significant amounts of documentation. It is also fairly resource intensive, subjective, and not well supported in the EU member states lacking a tradition of due diligence as a legal defense. The first step in enforcement in any member state, is physical inspection using XRF or similar tools.
2) Physical inspection
Many governments, such as the Netherlands and Belgium, are using handheld XRF units for product inspection. These units are not up to the level of detecting precise ppm concentration in homogenous materials, but when combined with visual inspection, provide a basis for detecting significant RoHS non-compliance issues.
Physical inspection using XRF is useful for detecting gross violations such as heavy metals on the surface of the product and in connectors. This method is not very useful in detecting PBB or PBDE, but does provide a hint to the presence of heavy metals such as lead, mercury and cadmium in the product.
XRF inspection for hexavalent chromium, would likely not stand up in court (although very few brand owners would want to publicize non-compliance by going to court), but if used in combination with other techniques including visual cues and analytical testing, physical inspection with XRF can denote areas of high risk for hexavalent chromium. In circumstances where tests are indicative of restricted substances, but not conclusive, producers may be required to provide technical documentation on compliance.
To support consistent testing for manufacturers and enforcement authorities, the International Electrotechnical Commission (IEC) is developing an international standard on test methods for the six RoHS substances (IEC62321).
Risks and penalties
One of the first questions usually asked is: What are the penalties that my company could face if one of our products is found to be non-compliant for RoHS? The focus of the question above usually surrounds the amount or seriousness of fines. Does the fine or other government penalty justify the effort or cost to become RoHS compliant? In the practical world of business, most companies are finding the prospect of government penalties to be the least serious, but not inconsiderable, of their potential risks.
Penalties from EU member states
The penalties — both amount and type — assigned by EU member states will vary from state to state.
One form of penalty is a monetary fine. In the event of a failed physical inspection of a product, a write-up, similar to a speeding ticket, will be created by the inspector and sent to the judiciary for judgment. This judgment could take four to six months, or longer, to be assigned and will generally have methods of appeal or representation. The monetary value of this fine is unclear and expected to vary heavily from case to case and from EU member state to EU member state.
The other form of penalty is denial of importation. For an EU member state enforcing at importation, the common method for dealing with non-compliance is non-entry as opposed to fines. In these cases, the importer is required to pick up and return their product to the source country at their own cost.
With the murky nature of many of the key components of the RoHS legislation, the level or intensity of punishment from EU enforcement agencies is unclear.
Distributors and channel partners
The principle revenue-impacting consequence from RoHS enforcement has been through distribution or channel partners. Companies whose products have been found to be non-compliant for RoHS by distributors or channel partners or have been found to be non-compliant by EU enforcement agencies while in the possession of distributors, have experienced the most significant or tangible impact.
An entity that has offices in a specific EU member state or has a brand name with significant public exposure risks is far more sensitive to non-compliance issues. In particular, brand owning companies (such as Motorola, Fujitsu, or Nokia) are analyzing products that they are distributing for RoHS compliance, and are taking stringent actions when finding non-compliance issues.
If a product is found to be non-compliant, distributors and channel partners are exacting restrictions, cancelled sales, sales bans, and potential loss of sales on their suppliers. For products that have been certified by the manufacturer as RoHS compliant but have been found as non-compliant in the distributor's possession, there has been significant penalizing of suppliers including loss of sales, increased documentation requirements, rapid redesign, and evaluation of alternative suppliers.
In 2007, Ageus Solutions has been brought into support a number of situations where companies are facing a sales ban of two to six months, loss of contracts, and/or returns of large quantities of finished products. These situations are occurring on a regular basis and are expensive for the companies involved.
Being non-compliant does not just refer to a banned material being discovered in your product, it can also occur when a government agency such as the EAR in Germany, determines after WEEE registration that your product is not Category 8 or 9 (and out of scope of RoHS) but is actually Category 2 or 6 (in scope of RoHS). For the distributor or distribution partner, your product needs to be RoHS compliant and they will not sell your product until it is.
If you find a RoHS certified component on your approved vendor list (AVL) to be non-compliant, what would you do with that supplier? Most companies are removing them from their AVL. The old British saying, "A reputation once broken may possibly be repaired, but the world will always keep their eyes on the spot where the crack was." holds as true today as it did centuries ago; more so in the world of global media coverage and the internet.
For many companies, especially global brands, negative media coverage is devastating to their business. The risk of negative press, as seen by Sony in the Netherlands in 2001, strongly factors into the harsh measures described above.
Fortunately or unfortunately, depending on your perspective, most RoHS non-compliance discovered by government agencies is currently being kept quiet. The general consensus is the media exposure experienced by Sony after its cadmium incident was excessive. With the RoHS legislation being as grey as it is, a good portion of enforcement is being handled in a quiet and confidential manner.
That said, no global brand wants to be the first to have its name splashed across the news for non-compliance to RoHS.
Institutional customers
Large customers and institutional buyers such as telecom operators, municipal and federal governments, and hospitals apply more stringent standards and inspection criteria for products. If a product on route or in their possession is found to be non-compliant for RoHS, they are likely to act more aggressively with the offending brand owner. Expected punishment would likely include return of purchased product, loss of contracts, and qualification of alternative suppliers.
With their reputation and, potentially, funding at stake, institutional buyers have significant motivation to maintain environmental compliance. In some countries, due to producer and importation rules, these institutional customers could be seen as the producer and would face penalties and other ramifications from importing non-compliant products.
What does a company do?
The RoHS compliance process has shown clearly that there are severe deficiencies in the component supply and distribution network for electronics. Even though a component or part has been certified by the supplier, there are innumerable cases of that certification not being valid. In many events, the supplier has intentionally or unintentionally misled their customer to make the sale. People want to make a sale and saying that they cannot do something (such as RoHS compliance) will not help the sales process.
W.C. Fields once said, "Trust Everyone...BUT Cut the Cards". This is very true with RoHS compliance. The best safeguard a company can have is a straightforward audit and review process.
In the end, there are many risks in claiming RoHS compliance. Our best advice is to work with people that know what they are doing. Whatever crisis your company has experienced, is experiencing, or will experience has likely been experienced by someone else.
Original text is here
