By Peggy Smedley
Start Magazine
September, 2005

Creating environmentally friendly products that are developed in an environmentally compliant manner is key to meeting the standards of the European Union (EU). Government mandates and regulations being set forth by the EU are quickly influencing your product portfolio with respect to your ability to be a global vendor. The new regulations will dramatically influence the way U.S. manufacturers, component suppliers, and distributors who supply a broad range of products go to market and the products they are able to deliver from country to country.

U.S. companies who sell products or even supply components for these products sold in the EU market are required to ensure that they comply with the directives established by the European Union or risk costly fines and penalties.

Complying with the EU directives can be a challenge if you are not making the right moves, which could alter the brand awareness and identity of your company. While compliance with the European Union’s new environmental safety directives, Waste Electrical and Electronic Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) may seem overwhelming and cumbersome, they only pave the way for safer products.

The WEEE and RoHS Directive, which began Aug. 13, 2005 and July 1, 2006 respectively, are designed to set the environmental standards for electrical and electric products, something that affects many vertical industries. RoHS is designed to restrict the amount of hazardous materials used in products and their component parts: lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB), or polybrominated diphenyl ethers (PBDE). WEEE aims to raise the level of reuse and recycling of electrical and electronic equipment (EEE) and encourage designers to create products with that in mind. These products would then use less material and energy and produce fewer toxic emissions.

Many vendors are taking the time to make sure their clients stay abreast of these new regulations for designing and delivering environmentally compliant products. According to the WEEE directives, all manufacturers of electric and electronic components are responsible for recycling all components, subassemblies, and consumables, such as household appliances, telecommunications equipment, consumer equipment, lighting equipment, tools, toys, leisure and sports equipment, medical devices, personal computers, monitoring and control instruments, and even ATMs.

Siemens AG, www.siemens.com, Munich, Germany, for instance, has established the “Greendesign” initiative to comply with international standards. According to Siemens, all of its products are below the discharge limits set for the relevant hazardous substances.

From a survey conducted by the Alliance of Service Providers & Manufacturers (ASPMFG), www.aspmfg.com, San Mateo, Calif., more than 40% of American manufacturers still do not understand the consequences of RoHS and WEEE. “Many manufacturers do not understand that the RoHS and WEEE Directives, if not properly managed, can impact their margins, cause revenue shortfalls, create excess inventory, affect product reliability, generate bad publicity, and damage their brand,” explains John Donovan, president, ASPMFG. “We’re especially concerned with the small and medium enterprises (SME) market,” adds Donovan.

California law firm Wilson Sonsini Goodrich & Rosati, www.wsgr.com, Palo Alto, Calif., concurs. The law firm stresses that immediate attention to RoHS and WEEE is critical to avoiding fines, revenue shortfalls, product returns, and injury to brand identity. For this reason, companies of all sizes need to be fully prepared in order to avoid product returns, design changes, and additional costs.

“The WEEE Directive subjects producers to a number of obligations, including: registering with the appropriate governmental agency; reporting on the quantities and categories of electrical and electronic equipment put on the market and the amount of related waste collected, reused, recycled and recovered; labeling all products with their brand; and assuming financial responsibility for collection and recycling of WEEE,” says Kimberly McMorrow, attorney at Wilson Sonsini Goodrich & Rosati.

According to the Environmental Protection Agency, www.epa.gov, Washington, D.C., even the smallest amount of lead can lead to contamination and can be easily inhaled or ingested without knowing it. As a result, even the smallest lead amounts can cause serious health problems especially in children and unborn babies.

Many manufacturers realize that components inside electronics likely contain toxic chemicals such as lead that could contaminate soil and water if discarded in a landfill. These concerns have many vendors and suppliers working hard to achieve green goals even sooner than the directives’ deadlines.

While lead is a very common metal that has been used for many years, it still carries serious health consequences. Consequently, today’s metal manufacturers are concerned with finding a more suitable replacement for lead.

The new RoHS and WEEE Directives will impact many contract manufacturers that make products on-demand to meet the varying needs of their customers. Those companies will be required to maintain constant monitoring of product design and lifecycles as an essential part of product creation and development.

So why is RoHS important to electronics manufacturing services (EMS) providers? According to George Courtney, vice president of sales, Paramit Corp., www.paramit.com, Morgan Hill, Calif., “RoHS fundamentally changes the printed circuit assembly manufacturing process. It drives the elimination of lead from soldering processes, which in turn impacts material logistics processes and may require a significant capital equipment investment to accommodate the higher processing temperatures. In addition, a significant broad-based training program must be developed and implemented. An EMS provider that is not capable of producing RoHS compliant products will soon find large segments of the market inaccessible.”

Another challenge will be the shift to new compliant parts. It is for this reason that inventory levels and consumption rates need to be monitored closely to prevent noncompliant products from sitting on shelves, and even more importantly, inadvertently entering or reentering the marketplace.

“Just as the disasters that might have resulted from Y2K were avoided because IT (information technology) suppliers partnered with manufacturers and planned ahead, in today’s market it’s essential that technology providers such as New Momentum and industry organizations such as the Electronics Supply Chain Assn. (ESCA), Start magazine, and ASPMFG work together to help manufacturers understand the challenges of RoHS and WEEE and assist them in avoiding the problems that could result from noncompliance,” explains Stu Clifton, CEO, New Momentum, www.newmo.com, San Clemente, Calif.

In an effort to help manufacturers with their more pressing concerns, the ASPMFG has created a private community of RoHS and WEEE compliant companies to help promote ongoing communications. This new community can be found at www.eu-rohs-weee.com. “We are eager to help manufacturers and have partnered with companies that are working to help manufacturers mitigate the risks associated with RoHS – WEEE,” says Donovan.

What’s more, RoHS is more than just a compliance issue. Experts insist manufacturers can encounter serious reliability issues to their products if the RoHS implementation is not performed correctly.

“The lead-free solders are more brittle and melt at a higher temperature, and these are just two of the many factors that can affect the long term reliability of products. And companies that delay the transition and apply for exemptions are faced with the possibility of mixing lead-free components with leaded solder, another source of reliability risk,” explains Mike Silverman, managing partner, Ops A La Carte, www.opsalacarte.com, Saratoga, Calif., reliability consultants committed to helping customers understand and mitigate risks before and during the RoHS transition.

Many industry observers believe these two EU directives are setting product design standards that all U.S. companies will be obligated to meet. What’s more, even products that are not sold in the EU are required to meet these green standards.

While many large U.S. manufacturers and parts suppliers have already begun the conversion of their manufacturing processes to meet the European design standards, there are still many manufacturers who have yet to really embrace the regulations.

As more and more companies invest in converting their manufacturing processes, the European design standards will become the de facto international design standards that will be embraced by companies throughout the world.

Now is the time for manufacturers to review and revise their product designs and manufacturing processes to ensure that they are heading toward creating compliant components, while phasing out noncompliant components. In the end, manufacturers will be creating environmentally friendly products that can be used safely for years to come.

Successful Compliance Requires Executive Support (Contributed by:Omnify Software)

As the CEO, have you determined the impact of Restriction of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) compliance on your company’s bottomline? The financial and technological requirements of these directives will alter the entire business strategy for electronic manufacturers. Transitioning to RoHS compliance requires investments of people, time, and resources. It is a complex task that must be fully supported by the organization’s executive team in order to be carried out effectively.

RoHS and WEEE can impact a company’s enterprise systems, business processes, product design, vendor selection, inventory and production, quality control, and revenues. From A to Z your supply chain will have to be reviewed to assure you, the manufacturer, have eliminated the hazardous substances to acceptable levels and that a waste and recycling plan is in place for your products, wherever they are sold. In essence, it’s a fundamental change in the way products are designed, manufactured, and distributed around the world.

The pending impact on the corporation is perhaps the most understated and under budgeted for companies today. Organizations must consider factors such as the amount of product redesign efforts and resulting effect on the global electronic supply chain. For example, competition is just beginning among several thousand manufacturers, all vying for replacement materials, parts, and assemblies. How will this affect your company’s ability to design, build, and deliver products profitably?

If you haven’t already done so, now is the time to assemble the internal SWAT team and identify your company plan to ensure a smooth transition to compliance. The financial impact on your business requires immediate attention from the executive management team.

RoHs And WEEE Impact the Supply Chain

By now you have probably seen numerous references to the term "lead-free." But where does this term come from and why is it generating so much attention? Lead-free is a short-hand way of referring to just one aspect of the far-reaching European Union (EU) Directive 2002/95/EC, entitled Restriction of the Use of Certain Hazardous Substances (RoHS). You may not have heard as much about its counterpart, EU Directive 2002/96/EC, entitled Waste Electrical and Electronic Equipment (WEEE), but both address the frontend manufacturing process (RoHS) and the backend treatment and disposal process (WEEE). Each EU member state was required to transpose the directives into their own national legislation by Aug. 13, 2004, and most have either done so or are well along in the process.

These two EU directives affect U.S. manufacturers, component suppliers, and distributors who supply a broad range of products, including: large and small household appliances, IT and telecommunications equipment, consumer equipment, lighting equipment, tools, toys, leisure and sports equipment, medical devices, monitoring and control instruments, and automatic dispensers. U.S. companies who sell these products in the EU market or who supply components for these products sold in the EU need to ensure that they comply with the directives' requirements or risk fines, penalties, revenue shortfalls, and injury to their company's brand identity.

The WEEE Directive aims to reduce the impact of electrical and electronic equipment on the environment by requiring producers to finance the collection, treatment, and recycling of waste products beginning Aug. 13, 2005. A producer includes any person who 1) manufactures and sells covered equipment under his or her own brand; 2) resells equipment produced by other suppliers under his or her own brand; or 3) imports or exports such equipment into an EU member state.

The WEEE Directive subjects producers to a number of obligations, including: registering with the appropriate governmental agency; reporting on the quantities and categories of electrical and electronic equipment put on the market and the amount of related waste collected, reused, recycled, and recovered; labeling all products with their brand and with a symbol that consists of a crossed-out wheeled bin that is printed visibly, legibly, and indelibly; and assuming financial responsibility for collection and recycling of WEEE.

To determine who the producer is, it is necessary to review the specific laws of each member state. Generally, U.S. manufacturers that export products to an importer/distributor in the EU will not be required to register as the producer. However, they still will need to work with their EU distributors and resellers to ensure that these EU-based companies are registered and will comply with all WEEE requirements. Otherwise, U.S. companies may find that their products cannot be sold on the EU market.

The RoHS Directive bans, after July 1, 2006, the sale of certain new electrical and electronic equipment that contains more than specified levels of cadmium, mercury, hexavalent chromium, polybrominated biphenyl (PBB), and polybrominated diphenyl ether (PBDE) flame-retardants-and the lead that has received all the attention. The European Commission has proposed maximum concentration values of 0.10% by weight in homogeneous materials for lead, mercury, hexavalent chromium, PBB, and PBDE and 0.01% by weight in homogeneous materials for cadmium. The RoHS Directive applies to only a subset of the categories identified in the WEEE Directive and currently excludes medical devices and monitoring and control instruments.

These two EU directives are setting product design standards that all U.S. companies will have to meet-even those whose products are not sold in the EU. Many U.S. manufacturers and parts suppliers already have begun converting their manufacturing processes to meet the European design standards, and it is unlikely that these companies will continue to offer two different product lines-one for the European market and one for the nonEuropean market. As a result, these European design standards will become the de facto international design standards. Manufacturers should review their product designs and manufacturing processes to ensure that introduction of the new compliant components, and the phase-out of noncompliant components, will not disrupt sales.

Kimberly McMorrow and Marc Gottschalk are attorneys in the Wilson Sonsini Goodrich & Rosati, www.wsgr.com, Palo Alto, Calif., real estate and environmental practice. They can be reached at kmcmorrow@wsgr.com and mgottschalk@wsgr.com respectively.

Are You Ready for the EU Regulations?

Not sure what the impact of the Restriction of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) Directive is on your company? If you make, use, sell or are part of a supply chain involved in electronic components, meeting these environment compliance regulations is a challenge that requires your attention now. Let's face it, the image of product lines "stuck in docks," unable to be distributed due to noncompliance with RoHS regulations-potentially costing millions every day-is a situation we all want to avoid. Like the major problems that could have occurred with Y2K, but were avoided because of careful planning by manufacturers and their technology partners, the electronics industry can also avoid future revenue shortfalls, lost marketshare, and bad publicity due to noncompliance with RoHS and WEEE with the right planning.

Electronics companies have a lot to think about and research to understand how RoHS and WEEE affects them. Do you fall within the scope of RoHS and WEEE? Are you exempt? What do you do with noncompliant parts? Original-equipment manufacturers and electronics manufacturing services (EMS) providers will find that their entire product lifecycle from design to concept to end of life may be impacted by this directive.

Because of the complexity of the legislation and its impact on the entire supply chain, your technology partners (working together), are well suited to helping you understand the most pressing issues and bringing forward solutions to meet your needs.

Any organization that makes or relies on electronic components needs to work together with their technology partners to develop a product transition strategy. You need to find ways to ensure product availability and understand the legal obligations in validating their EMS and suppliers' compliance. You also need to address documentation requirements regarding supplier compliance validation or exempting, develop an inventory transition plan for production, end-of-life and spare parts at the product, sub-assembly, and component level.

Looking at the challenges RoHS and WEEE presents, to help manufacturers be more competitive, New Momentum is working closely with other organizations such as the Electronics Supply Chain Association (ESCA), Start magazine, and the Alliance of Service Providers & Manufacturers (ASPMFG) to bring companies information, resources, and solutions that will help them avoid unforeseen, costly situations such as end-of-life.

For example, could the upcoming RoHS Directive, which places strict limits on six hazardous substances with lead being the major offender, cause havoc in the supply chain? It certainly could happen if your material managers don't get a handle on managing their lead and lead-free component inventories at this time.

When it comes to inventory, we know you want yours to be lean. But this upcoming environmental directive could bloat inventory levels to significant proportions and no one can afford this inflationary effect in a price-competitive world. In an ideal world, all noncompliant material would be exhausted during the transition to RoHS compliant manufacturing. In reality, this is highly unlikely and surplus nonconforming components will almost certainly remain in the supply chain impacting your market opportunities. Clearly, the value of noncompliant components will continue to diminish as 2005-2006 progresses, ultimately reaching a point where they may have little or no commercial value in traditional channels. Overall, it's likely that a bubble of increased inventory will work its way through the entire supply chain as we move closer to the July 2006 European deadline for RoHS compliance.

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