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ANALYSIS OF ALTERNATIVES & SOCIO-ECONOMIC ANALYSIS Public version Legal name of Applicant(s): FN Herstal Manroy Submitted by: FN Herstal Substance: Chromium trioxide (EC 215-607-8, CAS 1333-82-0) Use title: Use-1 Industrial use of chromium trioxide in the hard chromium coating of military small- and medium-caliber firearms barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses, in order to provide hardness, heat resistance and thermal barrier properties, as well as corrosion resistance, adhesion and low friction properties. Use number: 1

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ANALYSIS OF ALTERNATIVES

&

SOCIO-ECONOMIC ANALYSIS

Public version

Legal name of Applicant(s): FN Herstal

Manroy

Submitted by: FN Herstal

Substance: Chromium trioxide (EC 215-607-8, CAS 1333-82-0)

Use title: Use-1

Industrial use of chromium trioxide in the hard chromium

coating of military small- and medium-caliber firearms barrel

bores and auxiliary parts subject to thermal, mechanical and

chemical stresses, in order to provide hardness, heat

resistance and thermal barrier properties, as well as

corrosion resistance, adhesion and low friction properties.

Use number: 1

Analysis of Alternatives – Socio-Economic Analysis

Use-1, public version FN Herstal - Manroy 2

C ON T E NT S

LIST OF ABBREVIATIONS ................................................................................................................................... 6

1. SUMMARY ............................................................................................................................................... 7

2. AIMS AND SCOPE OF THE ANALYSIS ......................................................................................................... 9 2.1. Applicants ..................................................................................................................................................... 10

2.1.1. FN Herstal ......................................................................................................................................................... 10 2.1.2. Manroy ............................................................................................................................................................. 11

2.2. Scope of the AfA ........................................................................................................................................... 11 2.2.1. FN Herstal’s hard chromium plating process .................................................................................................... 12 2.2.2. Manroy’s hard chromium plating process ........................................................................................................ 12

2.3. Products concerned...................................................................................................................................... 13 2.4. Supply chain ................................................................................................................................................. 14 2.5. Elements of context ..................................................................................................................................... 14

2.5.1. Market and business model ............................................................................................................................. 14 2.5.2. Focus on the defence market ........................................................................................................................... 15 2.5.3. Importance of the defence industry and FN Herstal for the Belgian territory .................................................. 15 2.5.4. Synthesis: general context of the AfA ............................................................................................................... 16

2.6. General methodology ................................................................................................................................... 16 2.6.1. Scope of the AfA ............................................................................................................................................... 17 2.6.2. Actualisation .................................................................................................................................................... 19 2.6.3. Confidentiality .................................................................................................................................................. 20 2.6.4. Focus: Technology Readiness Levels ................................................................................................................. 21

2.7. Substitution strategy .................................................................................................................................... 21 2.8. Presentation of the “applied for use” and “non-use” scenarios .................................................................. 22

2.8.1. “Applied for use” scenario ................................................................................................................................ 22 2.8.2. “Non-use” scenario .......................................................................................................................................... 22

3. “APPLIED FOR USE” SCENARIO ............................................................................................................... 23 3.1. Elements of context ..................................................................................................................................... 23

3.1.1. Hard chromium plating .................................................................................................................................... 23 3.1.2. Historical background ...................................................................................................................................... 24 3.1.3. Lifespan of firearm barrels ............................................................................................................................... 24 3.1.4. Standards requirements and customer requirements ...................................................................................... 26 3.1.5. Barrel life characteristics and failure criteria ................................................................................................... 28

3.2. Analysis of substance function ..................................................................................................................... 29 3.2.1. Scope of Use-1 .................................................................................................................................................. 30 3.2.2. Functional properties of hard chromium in the context of armament manufacturing .................................... 31 3.2.3. Complementary requirements for the research of alternatives to hard chromium plating ............................. 33

3.3. Parts concerned............................................................................................................................................ 33 3.4. Market and business trends including the use of the substance ................................................................. 36

3.4.1. Use of chromium trioxide ................................................................................................................................. 36 3.5. Remaining risk of the “applied for use” scenario ......................................................................................... 36 3.6. Human health impacts and monetised damage of the “applied for use” scenario ..................................... 37

3.6.1. Number of people exposed ............................................................................................................................... 37 3.6.2. Medical treatment ........................................................................................................................................... 37 3.6.3. Mortality and morbidity ................................................................................................................................... 40 3.6.4. Synthesis of the monetised damage of the “applied for use” scenario ............................................................ 46 3.6.5. Complementary elements of analysis: values taking into account a 4% discount rate .................................... 46

3.7. Environment, man-via-environment impacts and monetised damage of the “applied for use” scenario ... 46 3.7.1. Environment impacts and monetised damage ................................................................................................. 46 3.7.2. Man-via-environment impacts and monetised damage .................................................................................. 47

4. SELECTION OF THE “NON-USE” SCENARIO ............................................................................................. 48 4.1. Efforts made to identify alternatives ............................................................................................................ 48

4.1.1. Data searches and Research & Development ................................................................................................... 48 4.2. Potential alternatives already abandoned ................................................................................................... 49

4.2.1. Thermal spraying with HVOF (High Velocity Oxygen Fuel) ............................................................................... 49 4.2.2. Thermochemical surface modification ............................................................................................................. 50 4.2.3. Nickel and Nickel alloy coatings ....................................................................................................................... 50

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4.3. Research and development works in order to reduce the exposure to Cr(VI) for hard chrome plating (FNH1) 52 4.4. Assessment of shortlisted alternatives......................................................................................................... 54

4.4.1. Alternative 1: Chromium deposition from Cr(III) electrolyte ............................................................................ 54 4.4.2. Alternative 2: Vacuum process with PVD/CVD ................................................................................................. 55

4.5. Substitution timeline .................................................................................................................................... 57 4.6. Synthesis: summary of the potential substitution processes considered .................................................... 59 4.7. The most likely “non-use” scenario .............................................................................................................. 61

4.7.1. Potential “non-use” scenarios .......................................................................................................................... 61 4.7.1. Synergy between uses ...................................................................................................................................... 61

5. IMPACTS OF GRANTING AN AUTHORISATION ........................................................................................ 64 5.1. Economic impacts......................................................................................................................................... 64

5.1.1. Loss of revenues and profits ............................................................................................................................. 64 5.1.2. Loss of markets ................................................................................................................................................ 68 5.1.3. Lost investments............................................................................................................................................... 69 5.1.4. Relocation costs for FN Herstal ........................................................................................................................ 70 5.1.5. Increase of operating costs .............................................................................................................................. 70 5.1.6. Regulatory issues.............................................................................................................................................. 71 5.1.7. Potential financial opportunities ...................................................................................................................... 72

5.2. Human health or Environmental impact ...................................................................................................... 73 5.2.1. Impacts on human health ................................................................................................................................ 73 5.2.2. Greenhouse gas emissions ............................................................................................................................... 73

5.3. Social impact ................................................................................................................................................ 75 5.3.1. Direct impact on employment .......................................................................................................................... 75 5.3.2. Indirect impact on employment ....................................................................................................................... 77 5.3.3. Complementary element of analysis: total cost of the loss of employment for the AfA................................... 78

5.4. Wider economic impact ............................................................................................................................... 78 5.4.1. Impact on operational capabilities and sovereignty of States.......................................................................... 78

5.5. Distributional impacts .................................................................................................................................. 79 5.6. Uncertainty analysis for both the “applied for use” and the “non-use” scenario ........................................ 79

5.6.1. “Applied for use” scenario ................................................................................................................................ 79 5.6.2. “Non-use” scenario .......................................................................................................................................... 80 5.6.3. Conclusion ........................................................................................................................................................ 82

5.7. General conclusion on the impacts of granting an authorisation ................................................................ 83

6. CONCLUSIONS........................................................................................................................................ 85 6.1. Comparison of the benefits and risks ........................................................................................................... 85 6.2. AoA-SEA in a nutshell ................................................................................................................................... 85 6.3. Information for the length of the review period .......................................................................................... 87 6.4. Substitution effort taken by the Applicants if an authorisation is granted .................................................. 87

7. References ............................................................................................................................................. 88

8. Annex – Justifications for Confidentiality Claims.................................................................................... 91

9. Appendixes ............................................................................................................................................ 92 9.1. Main competitors of FN Herstal ................................................................................................................... 92 9.2. Focus on barrel failure modes ...................................................................................................................... 93 9.3. DGA’s position for the maintained use of hexavalent chromium for barrel bore hard chromium plating of small-calibre firearms ................................................................................................................................................. 96 9.4. Framework for the export of armament ...................................................................................................... 99

9.4.1. Belgian and European legal framework ........................................................................................................... 99 9.4.2. European Code of Conduct on Arms Export .................................................................................................... 100

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T A B L E S

Table 1. Uses of the Application for Authorisation ........................................................................ 9 Table 2. FN Herstal key figures, 2014 .......................................................................................... 10 Table 3. Manroy key figures, 2014 .............................................................................................. 11 Table 4. Manroy products and status in the context of the AfA .................................................... 13 Table 5. Scope of the AfA ........................................................................................................... 18 Table 6. Impact period of the AfA ............................................................................................... 18 Table 7. Inflation values taken into account in this dossier .......................................................... 19 Table 8. European Commission’s definition of Technology Readiness Levels ................................ 21 Table 9. Tonnages of CrO3 over the 2013-2015 period (tons), for Use-1 and Use-2 ....................... 36 Table 10. Lung cancer costs for Belgium (average of data for France, Germany and the United

Kingdom) for the first two years after the diagnosis .................................................................... 38 Table 11. Lung cancer costs in the United Kingdom for the first two years after the diagnosis ...... 39 Table 12. Net year survival rate after lung cancer diagnosis in France

,, ........................................ 39

Table 13. Individual lung cancer costs during the review period, not taking into account the excess

of risk for workers ..................................................................................................................... 40 Table 14. Total lung cancer costs during the review period, considering the total excess of risk for

workers and the respiratory equipments .................................................................................... 40 Table 15. Years of Life Lost (YLL) for Use-1 .................................................................................. 42 Table 16. Years of Life lived with Disability (YLD) for Use-1 .......................................................... 43 Table 17. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the

excess cancer risk associated with lung cancer, Use-1 ................................................................. 44 Table 18. Value of statistical life and willingness to pay to avoid cancer ...................................... 45 Table 19. Incidence and mortality associated with lung cancer in Europe, in 2012 ....................... 45 Table 20. Mortality and morbidity costs for Use-1, complementary assessment ........................... 46 Table 21. Overall impacts of the "applied for use" scenario, Use-1 .............................................. 46 Table 22. Overall impacts of the “applied for use” scenario, Use -1. Complementary analysis taking

into account a 4% discount rate ................................................................................................. 46 Table 23. Substitution timelines for Alternative 1 and Alternative 2 ............................................ 58 Table 24. Summary of potential substitution processes considered (on grey background, the two

shortlisted alternatives) ............................................................................................................. 60 Table 25. Different "non-use” scenarios depending on the outcome of the application for

authorisation for Use-1 and Use-2 .............................................................................................. 62 Table 26. Loss of revenues for FN Herstal related to the “non-use” scenario ................................ 66 Table 27. Loss of revenues for Manroy related to the “non -use” scenario .................................... 67 Table 28. Total loss of revenues for Use-1 .................................................................................. 67 Table 29. Total loss of profits for Use-1 ...................................................................................... 67 Table 30. Detail of investments in amortisation, by year of last annuity ....................................... 69 Table 31. Relocation costs for FN Herstal, for Use-1 and Use-2 .................................................... 70 Table 32. Conversion factors for transportation modes. Source: Bilan Carbone v7.1.021 .............. 73 Table 33. Characterisation of the outward trip of the transportation journey associated with the

“non-use” scenario. ................................................................................................................... 74 Table 34. Greenhouse gas emissions associated with the “non -use” scenario for Use-1 ................ 74 Table 35. Loss of employment in the context of the “non -use” scenario for Use-1 ....................... 75 Table 36. Average individual social cost of an unemployed person in Belgium and the United

Kingdom, 2010 .......................................................................................................................... 76 Table 37.Total cost of the loss of employment for Use-1 ............................................................. 76 Table 38. Detail of the assessment of indirect job losses foreseen for Herstal and Erith in the

context of the “non-use” scenario .............................................................................................. 77

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Table 39. Global direct loss of employment and associated costs for the AfA (i.e. cumulated for

Use-1 and Use-2 ........................................................................................................................ 78 Table 40. Uncertainty analysis for mortality and morbidity, Use-1 ............................................... 80 Table 41. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario

................................................................................................................................................. 80 Table 42. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario

................................................................................................................................................. 82 Table 43. Synthesis of the monetised impacts of the “non -use” scenario ..................................... 83 Table 44. Other impacts of the “non-use” scenario ..................................................................... 84 Table 45. Justifications for confidentiality claims ........................................................................ 91 Table 46. Main competitors of FN Herstal, by country and product categories ............................. 92 Table 47. Belgian legal framework related to the export of armament ......................................... 99 Table 48. Criteria of the European Code of Conduct on Arms Export .......................................... 100

F IG U R E S

Figure 1. FN Herstal ................................................................................................................... 10 Figure 2. Barrel manufacturing, machining and packing activities on the site of Herstal ............... 10 Figure 3. Manroy Engineering ..................................................................................................... 11 Figure 4. Main FN Herstal products concerned by Use-1 .............................................................. 13 Figure 5. Supply chain of FN Herstal firearms. ............................................................................. 14 Figure 6. FN M2® machine gun ................................................................................................... 24 Figure 7. Barrel fatigue failure modes ......................................................................................... 29 Figure 8. Cross section of barrel bore, magnified (top) and general (bottom) ............................... 30 Figure 9. FN MINIMI® machine gun exploded view. In red, parts concerned by Use -1. .................. 35 Figure 10. Share of FN Herstal revenues related and not related to hard chromium plating (Use -1

and Use-2), on the basis of cumulated revenues over the 2000-2015 period. ............................... 64 Figure 11. FN Herstal revenues for the 2004-2014 period, in M€ ................................................. 65 Figure 12. Barrel fatigue failure modes ....................................................................................... 93 Figure 13. Barrel wear as a function of barrel length, for new and end -of-life barrels ................... 94 Figure 14. Barrel bore pictures, for new barrel (left) and end-of life-barrel (right) ........................ 94 Figure 15. Copper deposit (blue part of the picture) .................................................................... 95

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LIST OF ABBREVIATION S

AfA Application for Authorisation

B Billion (€)

Cr(III) Trivalent chromium

Cr(VI) Hexavalent chromium

DALY Disability-Adjusted Life Years

DAS Delivery and Acceptance Specification

DGA Direction Générale de l’Armement

French Armament Procurement Agency - French Ministry of Defence

GHG Greenhouse Gas

k Thousands (€)

kgCO2e Equivalent carbon dioxide kilogram

M Million (€)

PV Present value

QAI Quality Assurance Instruction

QST Quality Standard

STANAG Standardised Agreement

tCO2e Equivalent carbon dioxide ton

WHO World Health Organisation

WTO World Trade Organisation

YLD Years lived with disability

YLL Years of Life Lost due to premature mortality

Analysis of Alternatives – Socio-Economic Analysis

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1. SUMMARY

C ON T E XT

FN Herstal (Herstal, Belgium) and Manroy (Erith, United Kingdom) are two

subsidiaries of the Herstal Group, a manufacturer of small- and medium-caliber

firearms.

Under Use-1, FN Herstal and Manroy are downstream users of chromium trioxide in

the hard chromium coating of military small- and medium-calibre firearm barrel

bores and auxiliary parts subject to thermal, mechanical and chemical stresses.

Hard chromium coating constitutes a key element in the performance of FN Herstal

and Manroy products, notably in terms of service lifespan of firearms and therefore

of ownership costs for their customers. Hard chromium coating therefore constitutes

an essential condition for the competitiveness of FN Herstal and Manroy; the

economic impacts of its banning from the market would strongly affect both

companies.

S U B S T A NC E F U N CT IO N

The main functional properties sough-after by FN Herstal and Manroy with

chromium trioxide include: hardness, heat resistance and thermal barrier properties,

corrosion resistance, efficient coverage of complex or inner shapes, preservation of

tolerances, as well as chemical barrier properties, adhesion properties and friction

properties.

I DE NT IF I CAT IO N O F AL T E R NAT I V E S

A significant work of research carried out internally and through partnerships with

external research centres led to identify two potential alternative processes to hard

chromium plating for the surface treatment of firearm barrel bores and auxiliary

parts.

As a result of testing and analysis over the last decade, two potential alternatives

appear promising: deposition of chromium from a Cr(III) electrolyte (Alternative 1)

and vacuum process with Physical/Chemical Vapour Deposition process

(Alternative 2).

These processes, however, have yet to be further investigated, implemented and

qualified and will therefore not be available before the sunset date of chromium

trioxide.

“ A P P L IE D FO R U SE ” AN D “ NO N- U SE ” SC E NA RIO S

Under the “applied for use” scenario, FN Herstal and Manroy will pursue the use of

chromium trioxide for the surface treatment of parts concerned by Use-1 for the

period of time necessary to develop, implement and qualify an alternative process,

thereby securing both their industrial activity in the European Union and the supply

of firearms to armed forces of sovereign States.

In conjunction with research works for alternatives, and subject to the granting of an

authorisation, FN Herstal will implement an optimised hard chromium plating

process allowing to reduce the use of the substance and the exposure of workers to

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Cr(VI) during the period of time necessary to develop and implement a sustainable

substitution process.

The most likely “non-use” scenario is the following: with the ban on the use of Cr(VI)

compounds and therefore the cessation of hard chromium treatment, FN Herstal and

Manroy will have to relocate their hard chromium plating operations outside the

European Union.

Since Use-1 concerns the very core of FN Herstal’s and Manroy’s current and future

portfolios, this scenario will have strong economic, environmental, social and wider

impacts on both companies.

I M P ACT S OF G RA NT I NG A UT HO RI S AT ION

The main impacts of the “applied for use” scenario include costs related to the

medical treatment, morbidity and mortality associated with the excess of risk of

cancer arising from the exposure to chromium trioxide of workers over the review

period.

The total monetised impacts of the “applied for use” scenario amount to € 1,106.

Main monetised impacts of the “non-use” scenario include the loss of revenues,

profits, employment and investments, as well as relocation costs

The total monetised impacts of the “non-use” scenario amount to € [100-

1,000M](#1a).

Based upon the present assessment, the socio-economic benefits outweigh the risks

arising from the use of the substance by a factor of approximately [100,000-

1,000,000](#1b).

In addition to monetised impacts, the “non-use” scenario involves the loss of

markets that will be closed to FN Herstal and Manroy due to the relocation outside

the EU, an increase of operating costs, stringent regulatory issues and safety of

supply issues, impacts on human health, greenhouse gas emissions as well as a loss

of sovereignty and loss of investments for States that are customers of FN Herstal

and Manroy.

C ON C L U SI ON

Based on the argument put forward, and in order to develop, implement and

qualify an alternative solution for Use-1, FN Herstal and Manroy apply for a

twelve-year review period.

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2. AIMS AND SCOPE OF THE ANALYSIS

The aim of the present document is to provide a comprehensive analysis of both

the Analysis of Alternatives and Socio-Economic Analysis parts of FN Herstal’s and

Manroy’s Use-1 Application for Authorisation (AfA), i.e:

- to provide a comprehensive understanding of the context of the AfA;

- to describe FN Herstal’s and Manroy’s research works for alternatives,

potential alternatives and substitution strategy ;

- to provide a comparative assessment of the monetised impacts of the

pursued use of the substances (“applied for use” scenario) and the impacts

of the denial of an authorisation (“non-use” scenario).

For the sake of clarity, it is reminded that this document is part of a broader AfA.

FN Herstal’s, Manroy’s and Browning’s authorisation dossier is indeed composed of

two uses:

Use-1

Industrial use of chromium trioxide in the hard chromium coating of military small- and medium-caliber firearms barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses, in order to provide hardness, heat resistance and thermal barrier properties, as well as corrosion resistance, adhesion and low friction properties.

Use-2

Industrial use of chromium trioxide in the hard chromium coating of civilian firearms barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses, in order to provide a low friction coefficient as well as heat, corrosion and wear resistance properties.

Table 1. Uses of the Application for Authorisation

Under the brands FN Herstal, Manroy and Browning, the Herstal Group designs,

manufactures and distributes a full range of firearms and associated products for

FN Herstal (Herstal, Belgium) and Manroy (Erith, United Kingdom) are two

subsidiaries of the Herstal Group, manufacturing small- and medium-caliber

firearms. From the point of view of the REACh regulation, FN Herstal and

Manroy are considered as downstream users of chromium trioxide in the

hard chromium coating of military firearm barrel bores and auxiliary parts

subject to thermal, mechanical and chemical stresses.

Hard chromium plating is a key criterion for the performance of FN Herstal’s

and Manroy’s products, notably in terms of service lifespan of firearms and

ownership cost for customers. Hard chromium coating therefore constitutes

an essential element for the competitiveness of the two companies; the

economic impacts of its banning from the market would strongly affect the

activities of the Herstal Group as well as endanger FN Herstal’s and Manroy’s

overall survival.

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defence, law enforcement, hunting and shooting. Since 1997, Herstal Group has

been 100% owned by the Walloon Region of Belgium. With manufacturing locations

in Belgium, US, UK, Portugal, Japan and Finland, the global Herstal Group provides

employment to a workforce of about 2,400 people.

2.1. Applicants

Use-1 of the present AfA concerns two subsidiaries of the Herstal Group:

FN Herstal and Manroy.

2.1.1. FN Herstal

Figure 1. FN Herstal

FN Herstal is a leading manufacturer of small- and medium-caliber firearms for

both military (Use-1) and civilian (Use-2) markets located in Herstal, Belgium.

The history of FN Herstal, formerly known as “Fabrique Nationale d'Armes de

Guerre1” or “Fabrique Nationale”, dates back to 1889. The site of Herstal comprises

all firearm manufacturing activities: machining, surface treatment, assembly, testing,

packaging and dispatching.

Figure 2. Barrel manufacturing, machining and packing activities on the site of Herstal

Main figures of FN Herstal’s activity in 2014 are summarised below:

PROPRIETE REVENUES EMPLOYEES

FN Herstal € 306M 1,314

Table 2. FN Herstal key figures, 2014

1 French for: “National Factory of War Weapons”

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2.1.2. Manroy

Figure 3. Manroy Engineering

Manroy Engineering (referred to as “Manroy” in what follows) provides

solutions for weapon design, production and mounting requirements for Infantry,

AFV2 and Naval platforms.

Manroy manufactures the .50 cal M2HB machine gun with Quick Change Barrel, the

7.62mm GPMG, tools, gauges and provides a full and comprehensive spares service

along with the associated training for both weapons. Manroy also designs and

manufactures weapon systems, one man turrets and weapon mounts.

All Manroy equipment is on active service with worldwide and NATO forces and are

registered with NATO Codifications in the UK.

Manroy was originally formed in 1975 to support the spares requirements of the

British Army, and has been a wholly-owned subsidiary of Belgium-based small arms

manufacturer FN Herstal, S.A. since July 2014.

Main figures of Manroy’s activity in 2013 are summarised below:

PROPRIETE REVENUES EMPLOYEES

Manroy £ 18.5M 80

Table 3. Manroy key figures, 2014

2.2. Scope of the AfA

Chromium trioxide is classified under REACh as a Substance of Very High

Concern due to its carcinogen category 1B and mutagen 1B properties, according to

Art. 57(a) and 57(b). It was included in the Annex XIV of REACh during ECHA’s third

recommendation. Sunset date for the use of CrO3 is 21/09/2017; latest application

date was set to 21/03/2016.

Under Use-1, FN Herstal and Manroy use chromium trioxide for high

performance hard chromium plating of military gun barrel bore and auxiliary parts of

military firearms.

Functional properties sought-after with hard chromium include:

- corrosion resistance,

- hardness,

- low friction coefficient,

- thermal barrier,

- thickness,

2 Armoured Fighting Vehicles

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- expansion coefficient,

- resistance to corrosive combustion gases,

- no detrimental interaction associated with the firing of ammunitions.

2.2.1. FN Herstal’s hard chromium plating process

The hard chromium process is performed by FN Herstal:

- in a single facility on the site of Herstal (Wallonia, Belgium),

- on three hard chromium plating treatment lines,

- by 21 employees directly involved in the operation of the hard chromium

lines (i.e. concerned by both Use-1 and Use-2),

- working two 7hr-shifts per day,

- for 200 days per year.

FN Herstal overall use of chromium trioxide amounts to 5.5 tons for 2015; this

tonnage includes both Use-1 and Use-2 of the present AfA at the site of Herstal.

General risk management measures at the site of Herstal notably comprise:

- A fully automated treatment excluding manual work for the operators

nearby the chromium tanks. The only manual operations consist in the

instalment and removal of parts on the processing carts. These operations

are carried out meters away from the chromium tanks, and do not involve

contact with Cr(VI) ;

- An efficient general ventilation of the overall facility, (a) involving the

overpressurisation of the room and (b) ensuring an air renewal rate of 5 to 6

air changes per hour with 100% new air (no recycling) ;

- A good level of containment for the chromium-containing baths, with an

automatic closure system relying on movable shutters at the surface of baths

and enclosing hoods fitted on the automated treatment carts carrier ;

- Specific local exhaust systems fitted on all the baths’ surfaces, connected to

a high performance air treatment system;

- Comprehensive pollution prevention from unplanned releases, with all the

treatment lines being localised above retention ponds;

- An on-site wastewater treatment plant.

2.2.2. Manroy’s hard chromium plating process

At Manroy’s site of Erith, hard chromium plating is carried out:

- in a single facility on the site of Erith (London, United Kingdom),

- on one hard chromium plating treatment line,

- by 1 employee,

- working on average 65 eight-hour days per year for the hard chromium line

operation.

Manroy overall use of chromium trioxide amounts to 117 kg for 2015.

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2.3. Products concerned

The whole FN Herstal’s firearms portfolio is concerned by this AfA:

Figure 4. Main FN Herstal products concerned by Use-1

In addition to mounting solutions, vehicle recovery systems and turret systems,

three main firearms constitute the Manroy portfolio. Among them, Heavy Machine

Gun (HMG) and General Purpose Machine Gun (GPMG) constitute the historic core

business of Manroy and still generate the vast majority of the revenues of Manroy.

PRODUCTS STATUS

20 mm cannon

- Not concerned by the AfA

.50 cal M2 Heavy Machine Gun

(HMG)

- Represents around one

third of Manroy revenues.

- Concerned by Use-1 (hard

chromium plated by FN

Herstal in Herstal)

7.62mm General Purpose Machine Gun

(GPMG)

- Represents around two

thirds of Manroy revenues.

- Concerned by Use-1 (hard

chromium plated by

Manroy in Erith)

Table 4. Manroy products and status in the context of the AfA

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The site of Herstal carries out chromium plating operations of parts that are

intended to be implemented on Manroy’s Heavy Machine Gun (HMG); even though

only GPMG parts are hard chromium plated at the site of Erith, HMG is also

concerned by Use-1 of the present AfA.

Given the criticality of the parts concerned by Use-1 for the proper functioning

of firearms, hard chromium treatment of gun barrels and associated auxiliary parts is

at the very core of FN Herstal’s and Manroy’s activity. Not only the surface treatment

activity but also parts manufacturing as well as firearms assembly, packaging and

dispatch activities directly depend on the hard chromium plating process.

All firearms manufactured in Herstal and the majority of firearms

manufactured in Erith use parts treated with hard chromium.

2.4. Supply chain

The global supply chain of FN Herstal firearms can be described as follows:

Figure 5. Supply chain of FN Herstal firearms.

2.5. Elements of context

2.5.1. Market and business model

FN Herstal and Manroy serve a worldwide market. In the context of military

firearms, the two companies are dedicated to serving States and are thereby not

supplying individuals or non-sovereign groups.

FN Herstal is subject to a strong legal framework within which export operations can

be carried out. The complexity of this framework, governed by Belgian and European

legal rules as well as the European Code of Conduct on Arms is outlined in section

5.1.6 and Appendix 9.2.

The business model of FN Herstal and Manroy is built upon decades of experience

(FN Herstal history goes back to 1889) and is dedicated to high-end firearms, offering

both extremely high levels of performances (rate of fire, accuracy), quality and

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lifespan. As of today, and given (a) the market elasticity (see section 2.5.2.1) and (b)

the stringent legal framework regulating import-export operations for firearms, this

business model is the only one driving forward to a price level that is compliant with

the maintenance of FN Herstal’s activity within the European Union.

Hard chromium coating is a key criterion for the performance of FN Herstal’s

products, since it is a direct driver of the service lifespan of firearms and therefore of

the overall ownership costs of firearms for an army.

The level of performance provided by the use of CrO3, notably in terms of

lifespan of cannon barrels, directly conditions the competitiveness of FN

Herstal’s and Manroy’s firearms vis-à-vis its competitors. It also represents a

key factor in the maintenance of FN Herstal’s and Manroy’s manufacturing

activities in the European Union.

2.5.2. Focus on the defence market

2.5.2.1. A relatively elastic market...

From a market point of view, FN Herstal is one of the few players able to

manufacture the three main small- and medium-caliber firearms categories:

handguns, rifles and machine guns.

There are, however, several competing companies serving this market, leading to a

somewhat strong market elasticity, as illustrated in Table 46 (Appendix 9.1).

2.5.2.2. ... for which manufacturing in the European Union constitutes a

strong condition for several customers

In the context of defence applications, manufacturing within the European

Union usually constitutes a prerequisite to serve many of the European States.

Manufacturing within the European Union constitutes, for example, a

mandatory criterion for the tender procedure launched by the French Ministry of

Defence in order to replace FAMAS, the current assault rifle of the French army. In

this context, “manufacturing” refers to both production means and assemble means,

as well as source of supply of the main components such as cannons barrels3.

2.5.3. Importance of the defence industry and FN Herstal for the Belgian

territory

The armament sector constitutes a significant player in the economic life in

Belgium. In 2008, it generated a gross added value of € 417M, about 0.12 % of the

Belgian GDP4.

3 Bulletin officiel des annonces des marchés publics, Avis n°14-70321 publié le 14/05/2014,

May 16th, 2014. 4 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Note d’Analyse –

Radiographie de l’Industrie de l’Armement en Belgique : mise à jour 2010, 2010.

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A specific analysis of employment for the armament sector in Belgium estimates

to 9,760 the number of jobs directly related to defence applications in Belgium. This

report also outlines the dependency of other sectors and other companies to the

defence sector: of these 9,760 jobs, 5,341 are initial jobs (i.e. in the defence industry

companies) and 4,419 are direct or indirect jobs (i.e. in other companies of the

defence industry or subcontractors). In other terms, it can be estimated that, on

average, one job in the armament industry triggers 0.83 indirect jobs. For the

Walloon region alone, it is estimated that the overall employment related to the

armament industry amounts to 6,123 jobs5.

With around € 106M of gross added value and 1,173 employees in 2012,

FN Herstal was both the second company in terms of financial size and the first

employer of the armament industry in the Walloon region6. FN Herstal is also one of

the few Belgian armament companies to be 100% dedicated to defence applications.

2.5.4. Synthesis: general context of the AfA

Based on the argument put forward in the foregoing sections, three main

characteristics place FN Herstal’s and Manroy’s AfA in a particular context:

1

FN Herstal is one of the largest defence companies of the Walloon region

in Belgium and Manroy is a very dynamic player in the defence industry

sector in the United Kingdom.

2

The business models of FN Herstal and Manroy are dedicated to high-

end, high performance firearms. This market positioning directly

conditions the sustainability and the maintenance of FN Herstal’s and

Manroy’s activities over the European Union.

3

The level of performance provided by hard chromium plating is a

condition to the achievement of customer requirements and is therefore

a key condition to the competitiveness of FN Herstal and Manroy in a

globalised and relatively elastic market regarding prices.

2.6. General methodology

On the basis of the carcinogenic properties of Cr(VI) compounds for which it is

not possible to determine a threshold, and since it cannot be demonstrated that the

risk to human health or the environment from the use of the substance is adequately

controlled, the “socio-economic route” applies for the present application. The socio-

economic route applies where it can be demonstrated that the risk to human health

or the environment from the use of the substance is outweighed by the socio-

5 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP

– Répertoire des entreprises du secteur de l’armement en Belgique, 2014. 6 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP

– Répertoire des entreprises du secteur de l’armement en Belgique, 2014.

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economic benefits and there are no suitable alternative substances or techniques

(Art. 60(4)).

As per ECHA’s guidance, the assessment of the socioeconomic component of the

present AfA will be based upon a Cost-Benefit Analysis approach. A comparative

assessment will therefore be carried out, between the monetised impacts related to

the “applied for use” and the “non-use” scenarios.

In order to best reflect the consequences of both these scenarios, an effort has

been undertaken to place this AfA in the context of the realistic worst-case scenario.

Whenever possible:

- Over-estimating hypothesis have been used to assess the impacts of the

“applied for use” scenario and, conversely, underestimating hypotheses have

been used to assess the impacts of the “non-use” scenario;

- Representative examples have been provided and structuring hypothesis or

assertions have been justified either based on literature or institutional

sources.

Where appropriate, complementary elements of analysis have been provided,

notably concerning:

- An alternative methodology of assessment of costs related to mortality and

morbidity;

- An alternative assessment of the costs of the “applied for use” scenario,

considering a 4% discount rate.

Furthermore, and so as to provide a comprehensive understanding of the limits

of the proposed assessment, an uncertainty analysis was carried out for both the

results of the “applied for use” and “non-use” scenarios. This analysis, carried out

both quantitatively and qualitatively, is provided in section 5.6.

2.6.1. Scope of the AfA

Key elements of the scope of the AfA are provided in Table 5 below:

SCOPE COMMENT

Temporal

boundary

12 years post sunset date: 2018-2029. See Table 6 for a description of

the triggering period for each impact.

Geographic

boundaries

Direct impacts concern Belgium and United Kingdom.

Indirect impacts for FN Herstal’s and Manroy’s supply chain customers

cover a worldwide scope.

Economic

boundaries

Monetised damage of the impacts on human health of the “applied for

use” scenario includes:

- Medical treatment;

- Mortality and morbidity.

Main impacts of the “non-use” scenario include:

- Economic impacts on FN Herstal’s and Manroy’s activity include loss

of revenues, loss of markets, relocation investments as well as

regulatory issues and an increase of operating costs;

- Human health and environmental impacts;

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- Social impacts related to the loss of employment;

- Wider economic impacts related to the unavailability of the

concerned equipments for armed forces. The “non-use” scenario

also impacts FN Herstal’s and Manroy’s industrial partners involved

in the development, production and support of the equipments

concerned by Use-1.

Tonnages - Quantities used: 5.0 tons per year

- Quantities on the final product: none

Table 5. Scope of the AfA

Focus on the temporal boundaries and the impact period:

SCENARIO IMPACT IMPACT PERIOD DISCOUNTING PERIOD

“Applied for use”

scenario

Medical treatment 12 yrs: 2018 - 2029 14 yrs: 2016 - 2029

Mortality and morbidity 12 yrs: 2018 - 2029 14 yrs: 2016 - 2029

“Non-use”

scenario

Loss of profits 12 yrs: 2018 - 2029 14 yrs: 2016 - 2029

Relocation investments 3 yrs: 2018-2020 5 yrs: 2016 - 2029

Loss of employment 1 yr: 2018(*) 3 yrs: 2016 - 2018

Table 6. Impact period of the AfA (*) Average unemployment period is considered to be 460 days, but was rounded here to 1 yr

Present value is set in 2015, at the date of drafting of this document.

Considering that the sunset date for chromium trioxide takes place at the end of the

year 2017, an assumption is made that impacts will take place in 2018. Similarly, the

discounting period is set to begin in 2016.

In order to ensure consistency of analysis between impacts of both scenarios,

and as recommended by ECHA’s guidance, it was chosen to consider a common

impact and discounting period for both the “applied for use” and “non-use”

scenarios. In order to remain as close as possible to the temporal scope of the AfA, it

was chosen to assume that the impact period and discounting period of both

scenarios correspond to the review period of each use of the AfA.

This assumption can be justified as follows:

- The period of time covered by the review period of the uses of the AfA

comprises the period of time with the highest mortality rates after diagnosis,

thereby encompassing the majority of the impacts;

- By assuming that the discount period is in line with the review period, and

therefore assuming that the impacts will take place in a closer future than

what is realistically foreseeable, it is deliberately chosen to discount the

impacts of the “applied for use” scenario by a lower factor than if a more

realistic period of time was chosen, for example 20 or 30 years.

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2.6.2. Actualisation

All final monetised results of this document are expressed in present value (PV).

In this context, the following factors are used for the actualisation of past values

(correction for inflation) or future values (discounting).

2.6.2.1. Inflation

Given the type of values considered (health expenditures, social benefits), it was

chosen to rely on the Consumer Price Index to carry out actualisation according to

inflation. The choice of this statistical estimate is in line with

ILO/IMF/OECD/UNECE/Eurostat/The World Bank recommendations, stating7: “CPIs

are widely used for the index linking of social benefits such as pensions,

unemployment benefits and other government payments, and also as escalators for

adjusting prices in long-term contracts.”

The following values will be used in the present document:

2 BELGIUM UNITED

KINGDOM PORTUGAL

EUROPEAN

UNION

2003-2015 26.0% 32.4% 22.2% 28.0%

2008-2015 11.0% 18% 7.7% 11.3%

2010-2015 8.6% 11.8% 7.0% 8.0%

2012-2015 2.0% 4.1% 0.5% 1.7%

Table 7. Inflation values taken into account in this dossier8

2.6.2.2. Discounting

Comparing costs and benefits during different periods of time to present values

requires the use of discounting technique to translate future costs and benefits into

present-days values to account for the time value of money

The choice of discount rate is important since it can affect the cost-benefit results of

the analysis. The higher the discount rate, the lower the future benefits and costs

values will be, as compared to present values.

In our methodology, we deliberately chose to use two different discount rates

depending on the type of future impacts evaluated.

Thus, future human health costs described in the “applied for use” scenario of this

dossier will be evaluated using a lower discount rate that the one used to consider

economic impacts in the “non-use” scenario. This difference is related to the

different “nature” of these impacts and aims to reflect the society’s rate of time

preference with respect to health risks.

7 ILO/IMF/OECD/UNECE/Eurostat/The World Bank, Consumer price index manual: Theory and

practice Geneva, International Labour Office, 2004 8 OECD, Main economic indicators, Consumer Price Index – data and methods

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As per ECHA’s guidelines, the calculation of discounted values is performed on

an annualised basis, with the following formula:

Considering:

- = present value

- = future costs at year

- = annual discount rate

- = last annuity of the discount period

Discounting of health impacts

A 3% discount rate is used in this dossier for health impacts. This choice is in line

with WHO9, stating: “For many years, a discount rate of 5% per annum has been

standard in many economic analyses of health and in other social policy analyses, but

recently environmentalists and renewable energy analysts have argued for lower

discount rates for social decisions. The World Bank Disease Control Priorities study

and the GBD project both used a 3% discount rate, and the US Panel on Cost-

Effectiveness in Health and Medicine recently recommended that economic analyses

of health also use a 3% real discount rate to adjust both costs and health outcomes.”

Please note that, in order to ensure a complete consistency of the values with

ECHA’s requirements, a complementary assessment is provided for the “applied for

use” scenario in section 3.6.5, considering a 4% discount rate.

General discounting

Based on ECHA’s recommendation10, a 4% discounting rate is used to assess the

future cost/benefits values for impacts not related to health matters.

2.6.3. Confidentiality

In order to preserve the confidentiality of strategic data of the present AfA,

confidential business information has been blanked out in this public version of the

AoA-SEA document.

In what follows, such figures will be indicated as follows: [€ 10-100M](#1a).

Please refer to section 8 for a justification of confidentiality claims.

9 World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction

and methods, Assessing the environmental burden of disease at national and local levels, 2003 10

ECHA, Guidance on the preparation of socio-economic analysis as part of an application for

Authorisation, 2011

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2.6.4. Focus: Technology Readiness Levels

Technology Readiness Levels (TRL) are a method of estimating maturity of

technology elements.

According to the European Commission’s definition, TRL can be defined as

follows:

TRL DEFINITION

TRL 1 Basic principles observed

TRL 2 Technology concept formulated

TRL 3 Experimental proof-of-concept

TRL 4 Technology validated at laboratory scale

TRL 5 Technology validated in relevant environment

TRL 6 Technology demonstrated in relevant environment

TRL 7 System prototype demonstration in operational conditions

TRL 8 System complete and qualified

TRL 9 Actual system proven in industrial environment

Table 8. European Commission’s definition of Technology Readiness Levels11

2.7. Substitution strategy

A significant work of research carried out internally and through partnerships with

external research centres led to identify several potential alternative processes to

hard chromium plating for the surface treatment of firearm barrel bores and

auxiliary parts.

As a result of testing and analysis over the last decade, two potential alternatives

appear promising: deposition of chromium from a Cr(III) electrolyte (Alternative 1)

and vacuum process with Physical/Chemical Vapour Deposition process

(Alternative 2).

These processes, however, have yet to be further investigated, implemented and

qualified and will therefore not be available before the sunset date of chromium

trioxide.

11

European Commission, G. Technology readiness levels (TRL), Horizon 2020 – WORK Programme 2014-2015 General Annexes, Extract from Part 19 - Commission Decision C(2014)4995.

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2.8. Presentation of the “applied for use” and “non-use”

scenarios

2.8.1. “Applied for use” scenario

Under the “applied for use” scenario, FN Herstal and Manroy will pursue the use

of chromium trioxide for the surface treatment of parts concerned by Use-1 during

the period of time necessary to develop, implement and qualify an alternative

process, thereby securing both its activity and the supply of firearms to its

customers.

In conjunction with research works for alternatives, and subject to the granting of an

authorisation, FN Herstal will implement an optimised hard chrome plating process

allowing to reduce the exposure of workers to Cr(VI) during the period of time

necessary to develop and implement a sustainable substitution process.

Main impacts of the “applied for use” scenario concern operator’s health and

monetized damage includes costs associated with medical treatment, mortality and

morbidity.

Risks and impacts of the “applied for use” scenario are respectively detailed in

sections 3.5 and 3.6.

2.8.2. “Non-use” scenario

The most likely “non-use” scenario is the following: with the ban on the use of

Cr(VI) compounds and therefore the cessation of hard chromium treatment,

FN Herstal and Manroy will have to relocate hard chromium plating activities for the

manufacture and the maintenance in operational conditions of their small- and

medium-calibre firearms.

Since such products constitute the very core of FN Herstal’s and Manroy’s

current and future portfolio, this scenario entails a temporary cease of production

for the period of time necessary to relocate the activity, thereby disrupting both

their activity and the supply of their customers.

Impacts of the denial of an authorisation would involve economic, social and

distributional dimensions:

- Economic impacts on FN Herstal’s and Manroy’s activity include loss of

revenues, relocation investments and increased operating costs, as well as

contractual penalties;

- Human health and Environmental impacts, include impacts on human

health as well as greenhouse gas emissions.

- Social impacts mainly consists of impacts on employment;

- Wider economic impacts include the unavailability of the concerned

equipments for armed forces.

Impacts of the “non-use” scenario are detailed in section 5.

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3. “APPLIED FOR USE” SCE NARIO

3.1. Elements of context

3.1.1. Hard chromium plating

Functional hard chromium plating is characterised by the following features12,13:

- High hardness up to 1200 HV,

- High resistance to wear,

- Low friction and tribologically advantageous,

- Anti-adhesive,

- Machinability,

- Resistant to chemicals,

- Resistant to temperature.

This technique is still widely industrially used (hard chromium plating is extensively

used in mechanical engineering on parts like jacks, rolling mill cylinders, drawing

dies, printing plates and cylinders, etc), despite major disadvantages:

- Concentration of the electrolyte (a conventional plating bath, temperature

around 60°C, contains 300 g/L of chromic acid, and one or more catalysts

such as H2SO414,15) causing significant losses in the rinsing baths and high

costs for reprocessing waste water.

- Emission of harmful mists above the bathroom (vesicles).

12

Morisset, Chromage dur et décoratif, publication CETIM, 1993 13

Benaben, Chrome et chromage, Techniques de l’ingénieur, Référence M1615 14

Ibid. 12 15

Ibid. 13

Under Use-1, FN Herstal and Manroy use chromium trioxide for the hard

chromium plating of small- and medium-caliber military firearm barrel bores

and auxiliary parts subject to thermal, mechanical and chemical stresses.

The main functional properties sough-after by FN Herstal and Manroy with

Cr(VI) notably include : hardness, heat resistance, erosion resistance and

resistance to hot oxidising gases.

Impacts of the “applied for use” scenario are related to the carcinogen

properties of Cr(VI) compounds and include medical treatment costs as well

as costs associated with morbidity and mortality.

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3.1.2. Historical background

Rifling of firearms bores imparts spin, thereby stabilising firearms projectiles and

providing an increased accuracy as opposed to smoothbores (i.e. non-rifled

firearms).

Rifling, however, generates several constraints for gun bores and notably

decreases muzzle velocity, increases waste heat in the barrel and helps retain highly

corrosive combustion by-products in the bore, thereby damaging the rifling and

weakening the barrel’s material.

In order to counteract those detrimental effects, one approach has been to use

corrosion-resistant materials for barrels, notably using electrodeposited chromium

which was commercially developed as a commercial process as early as 192416. The

first implementation of chromium plating in small arms was patented by Olin’s and

Schuricht in 193217.

Hard chromium of firearms bores was consequently worldwide adopted in

the 1950s. It still constitutes today the standard in military small- and

medium-calibre firearms.

3.1.3. Lifespan of firearm barrels

Firearm barrels have a finite lifespan, which is defined by the maximum number

of rounds that a gun can fire, based on the type of round used and its muzzle

velocity.

A comparative assessment was carried out by FN Herstal regarding hard

chromium plated and non-plated barrels, in the case of the M2 machine gun .50

caliber barrels. In order to ensure representativeness and reproducibility, these tests

were performed during a long period of time between 1982 and 199418.

Figure 6. FN M2® machine gun

16

Dubpernell. Plating, 47, 35. 1960 17

US Patent 1,886,218 18

Amongst other data available from FN Herstal testing centre reports 1992-244 and 1993-108

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The main result of this study is the following: the average barrel lifespan19 was

increased by a factor two for hard chromium plated as compared with non-plated

barrel bores20. These internal findings are confirmed by bibliographical

references21,22.

In the context of military armament, lifespan requirements for such firearm are

defined in the DAS366.811.00023 standard. According to the aforementioned results,

gun barrels that did not undergo hard chromium plating cannot achieve such level of

performance and as a consequence, firearms relying on these barrels cannot be

qualified, let alone be put on the market.

As a complement, it has to be noted that hard chromium does constitute an

extremely efficient process thanks to its low operational cost: hard chromium plating

only accounts for around 10% of the cost of the firearm while doubling its lifespan24.

Focus: Cost of ownership

The lifespan of an FN Herstal’s machine guns is approximately (#2a)

rounds with a cannon lifecycle of (#2b) rounds, meaning the rifle’s cannon is

expected to be replaced once during the rifle’s overall lifespan. Given that the rifle’s

cannon represents approx. 20% of the firearm cost, a withdrawal of the hard

chromium plating would generate a 40% increase of the overall cost of ownership

of the rifle.

Current trend for customers is to minimise the need for spare parts, so as to

optimise maintenance and logistics requirements. In this context, such an increase

does not comply with the requirements of FN Herstal’s customers and does not

allow FN Herstal products to compete with its competitors. As mentioned above,

thanks to its relatively low operating costs, hard chromium plating therefore

directly contributes to the competitiveness of FN Herstal’s and Manroy’s firearms.

The example based on M2 machine gun is representative of FN Herstal’s and

Manroy’s whole military firearms range25: depending on the calibre and the

ammunition type, the barrel life varies accordingly to barrel bore temperature

19

Assessed with the following methodology: firing schedule of 300 rounds in 3 minutes and maintenance every 1,800 rounds 20

Barrel chromed according to QST87093 and controlled by QAI226.010, minimum barrel life guaranteed in DAS366.811.000 21

Derek Allsop and al (1997), Brassey’s essential guide to military small arms - Design principles and operating methods, p89. Londres: Brassey’s 22

Hypervelocity guns and the control of gun erosion, Washington: National Defense Research Committee, 1946. 23

DAS stands for " Delivery and Acceptance Specification” 24

Excerpt from Baan 21st august 2015 P/N: 3662000616 and P/N : 3662008361 25

Given (a) the specific calibres manufactured by FN Herstal, (b)the high stress levels induced by the firing of ammunitions and (c) the criticality of a potential incident, the factor 2 increase in lifespan provided by hard chromium is also relevant for handguns.

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(external barrel temperature may reach 350°C to 550°C) but the overall issue is the

same for all military firearms manufactured by FN Herstal and Manroy.

The lifespan of FN Herstal’s and Manroy’s small- and medium-caliber

firearms is directly related to the use of hard chromium for the surface

treatment of gun bores and auxiliary parts. Without this treatment, FN

Herstal firearms do not meet standard requirements in terms of lifespan and

therefore cannot be put on the market.

3.1.4. Standards requirements and customer requirements

3.1.4.1. Standard requirements

FN Herstal customers are located worldwide. In order to meet customer

requirements, FN Herstal’s internal chroming procedure (QST87093) is in line with US

military and aeronautical standards:

- MIL-STD-17126 standard describes the appropriate coatings for military use,

and hard chromium plating is recommended for all surfaces subject to wear

or abrasion according to MIL-DTL-5002E;

- Chromium plating shall be in accordance with requirements of the SAE

AMS246027 standard, Class 2 (engineering coating), type 1 "bright finish"

with a minimum hardness level of 850HV.

These standards describe both the properties to be achieved and the procedures

to be applied in order to reach the requirements in terms of lifespan of FN Herstal’s

and Manroy’s customers. Specifically, AMS2460 states that “parts should be plated

by electrodeposition of chromium from a chromic acid solution” (page 12 of 14).

These standards are translated into the product technical definition by the

technical drawings. For some NATO customers, when the weapon is selected in the

army inventory, the product technical definition and configuration comes under

customer control. This means that the product manufacturing based on the technical

drawing cannot be modified unless the customer agrees so.

3.1.4.2. Customer requirements: DGA’s position for the pursued use of

hexavalent chromium for hard chromium plating of small-calibre

firearms’ barrel bores

The DGA (Direction Générale de l’Armement – French Ministry of Defence’s

Procurement Agency) was consulted in the context of the present AfA with a

contribution that is provided in Appendix 9.3. A translation of the content of this

contribution is provided in what follows.

26

Department of defense manufacturing process standard – Finishing of metal and wood surfaces (TABLE II. Inorganic finishes, metallic coatings; 1.2.2 Engineering plating, AMS-QQ-C-320, class 2) 27

(replacing AMS-QQ-C-320): Aerospace material specification – Plating Chromium (Class 2 Engineering plating)

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“The REACh (CE) 1907/2006 regulation aims at improving the knowledge of chemical

substances’ properties manufactured or put on the market in the European Union, at

ensuring the management of risks related to their uses and, if needed, at reducing or

prohibiting their use. On August 14th 2016 was published the (EU) 895/2014

regulation modifying the Annex XIV of the REACh regulation so as to include salts of

hexavalent chromium. Without an authorisation, the use of hexavalent chromium will

be banned as of 2017/09/21 (whatever the quantities produced, imported or used).

In the context of its commitments in terms of operational and training capacities, the

French army uses firearms manufacturer by the Belgian company FN Herstal, which

require the use of hexavalent chromium during their production (hard chromium), as

detailed below:

Fireams currently in operation using hard chromium plating:

- Minimi Para 5.56mm x 45 machine gun: used unmounted

- 7.62mm x 51 (MAG58) machine gun: used unmounted and mounted on

several carriers (air, sea, land)

- 12.7mm x 99 (M2 HB/QCB) machine gun: integrated on the Leclerc main

battle tank

- 12.7mm x 99 (M3M): integrated on Cougar and Puma helicopters

Firearms being currently acquired and which will use hard chromium plating:

- Minimi Para 5.56mm x 45 machine gun: market recently modified in

December 2015 for the acquisition of several hundreds of firearms for the

land army and navy

- 7.62mm x 51 (MAG58) machine gun: pursued delivery of the market notified

in December 2010 (approx. thousands of firearms are remaining to be

shipped in their qualified definition)

For all these cases, the barrel is a replacement part that has to be supplied

throughout the duration of use of firearms.

The DGA has furthermore launched a consultation for the future individual armament

system (“Arme Individuelle du Futur”) intended to replace the FAMAS28. This

consultation, for which an AAPC (notice of a competitive public tender) was published

at the Official Journal in May 2014, refers to 90,000 firearms. It specifies that the

barrel is manufacturer within the European Union because it a critical part for which

the safety of supply is required.

In any case, hexavalent chromium is used for hard chromium plating of barrels,

guaranteeing the resistance of the barrel to aggressive environments encountered

during the shooting of ammunitions (high temperatures, active chemical substances).

This constitutes an essential element to the lifespan of barrels, and therefore to the

operational performances of firearms. The downgrade of this coating may impact the

safety of servicemen using firearms, be it indirectly, due to their inability to defend

themselves in case of failure of the firearm, or directly, due to the risk of bursting

28

Fusil d'Assaut de la Manufacture d'Amies de Saint-Etienne

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induced by the degradation of the internal coating of the barrel. For this reason, the

modification of the coating process constitutes a major change, which induces at the

minimum the need for the complete re-qualification of the firearm and is a lengthy

(several months to a year for the most complex cases) and costly.

A ban on the use of hexavalent chromium plating would call into question the

implementation of the markets obtained by FN Herstal, thereby probably generating

penalties for the company, but would also delay the supply of said firearms, which

would impact the operational capabilities of armed forces.

Substitution studies have been conducted by industrial companies, with or without

State support, and no substitution solution was identified: substitution solutions are

far from being mature and offer the required military requirements.

Furthermore, the French defence exemption regime cannot be used in his case, as FN

Herstal does not manufacture in France.

Due to this ban on the use of hexavalent chromium, the FN Herstal Company may be

unable to fulfil its contractual agreements and would be disadvantaged toward

competitors that would carry out hard chromium plating operations outside the EU.

The ban on the use of hexavalent chromium would also have direct consequences on

the availability of several equipments, and therefore on the operational capacities of

armed forces. This is obviously not acceptable, as France is engaged on several

external field operations.

The DGA therefore supports FN Herstal’s Application for Authorisation aiming at

having an additional delay to identify and qualify technically, operationally and

economically viable alternatives.”

3.1.5. Barrel life characteristics and failure criteria

The functional need for hard chromium plating of small- and medium-calibre

firearms barrel bores and associated parts subject to thermal, mechanical and

chemical stresses is directly related to failure modes of such firearms. In order to

provide a comprehensive understanding of the issues at stake with Use-1’s AfA,

these failure modes are covered in what follows.

Apart from brutal barrel failure (caused for example by barrel obstruction and

overpressure), barrels are decommissioned because of fatigue i.e. when the hit

probability is degraded.

A degraded hit probability is usually associated with a decreased projectile initial

velocity at barrel muzzle, oscillating or obliquely striking projectiles at 50m from the

muzzle as well as an increased dispersion at 50m from the muzzle.

In order to ensure their maintenance in operational conditions, the main

functional parameters that are monitored during servicing and maintenance of

firearm include barrel forcing cone wear, barrel straightness and barrel minimum

bore diameter.

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The decreased hit probability may arise from three types of barrel fatigue failure

modes29,30,31:

- forcing cone wear, inducing a decreased projectile velocity and a loss in hit

probability. It is the most frequent failure mode;

- copper deposit, resulting from the interaction of the barrel metal with the

projectile jacket, degrades the stabilisation of projectiles;

- muzzle wear, also resulting in a loss stabilisation of projectiles.

These three failure modes are illustrated in Figure 7 below:

Figure 7. Barrel fatigue failure modes

Please note that these failure modes are further described in Appendix 9.2

Forcing cone wear and muzzle wear are directly related to the wear of barrel

bores induced by the firing of ammunitions. Hard chromium plating of such

parts and of auxiliary parts subjects to similar stresses allows for the

reduction of their wear and therefore the extension of the firearm lifespan in

order to meet standard requirements.

3.2. Analysis of substance function

During their operational service-life, firearms barrels and auxiliary parts have to

sustain three closely interconnected types of stress: mechanical, thermal and

chemical. Operational conditions and working environment related to these types of

stresses are the following:

- Mechanical stresses: ammunition peak pressure is around 450MPa.

- Thermal stresses: maximal flame temperature of propulsive powder is

greater than 1,500°C.

- Chemical stresses: high temperature corrosive gases emitted during the

combustion of propellant, including CO2, CO, H2O, H2, N2 and radicals H,

OH, NO.

29

Allsop and al, Brassey’s essential guide to military small arms - Design principles and operating methods, p89. Londres: Brassey’s, 1997 30

Hypervelocity guns and the control of gun erosion, Washington: National Defense Research Committee, 1946 31

Handbook on Weaponry, Rheinmetall Gmbh, 1982

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In order to withstand such stresses, hard chromium plating of steel armament

parts is necessary to compensate for the weaknesses of steel as a substrate,

notably concerning high temperature characteristics and corrosion resistance.

The bonding of the chromium layer with the steel substrate is illustrated on

Figure 8 below.

Figure 8. Cross section of barrel bore, magnified (top) and general (bottom)

3.2.1. Scope of Use-1

The use of chromium compounds under Use-1 includes both surface preparation

operations (electrolytic polishing and chromium pickling) and surface treatment

operations (hard chrome plating) for the site of Herstal.

The choice of regrouping these operations under a single use in the present AfA

can be justified as follows:

- Strong links and interdependencies characterise surface preparation and

surface treatment operations. Each step of the hard chromium plating

process as specifically developed for FN Herstal’s processes: removing or

modifying one step of the process would compromise the overall outcome of

Use-1. For instance, electrolytic polishing is a fundamental step of the

manufacturing process; in the absence of such surface preparation,

chromium adhesion to the substrate does not appear sufficient to provide all

the functional requirements for military firearms.

- Electrolytic polishing constitutes a military requirement for firearm barrel

bores and therefore conditions the placement on the market of FN Herstal’s

and firearms.

- Both operations being indistinctly carried out on the treatment lines, the

exact distinction of the CSR and SEA aspects could represent an issue and

generate unnecessary uncertainties.

As hard chromium operations carried out at the site of Erith concern auxiliary

parts and not barrel bores, and since their compliance with FN Herstal’s processes is

still ongoing, no surface preparation operations are carried out at the site of Erith.

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3.2.2. Functional properties of hard chromium in the context of

armament manufacturing

Given the high level of thermal, mechanical and chemical stresses involved in

their operation, production of firearms involves several technical challenges. Among

them, it can be said that the coating constitutes the most difficult part32. In the case

of FN Herstal and Manroy, the main sought-after coating characteristics in the

context of surface treatment of firearms’ barrels bores and auxiliary parts include:

Hardness

Hardness of the hard chromium layer provides wear resistance and impact

resistance properties allowing withstanding impacts associated with the shooting of

small- and medium-calibre firearms at high rates of fire. Specific mechanical

properties that constitute the “hardness” parameter include: hardness (up to

1,000HV33) in atmospheric conditions and in high temperature conditions, erosion

resistance and Young’s modulus34 in line with that of steel and high elastic limit.

The coating must be resistant enough at the service temperature of firearms to

withstand stresses related to the firing of projectiles and the propellant gas wash. In

the case of rifled barrel bores, the coating has to possess a sufficient strength to

withstand the rifling torque.

Heat resistance and thermal barrier properties

Heat resistance of the hard chromium layer allows preserving the mechanical

properties of the steel substrate exposed to high temperatures.

The coating also has to offer thermal barrier properties, insulating the substrate from

the damaging effects of the heat input from high temperature propellant gases.

The coating is also expected to provide both thermal stability and "heat resistance"

properties. This term encompasses a number of properties, including: a high melting

point, a high hot hardness, thermal shock resistance, and a lack of phase

transformations throughout the service temperature range.

Thermal properties of the coating, along with its thickness, should prevent phase

transformation or reaction of the substrate. This is achieved by damping out the high

temperature pulse. In the case of a steel substrate, the martensite-austenite phase

transformation occurs at about 727°C. When this temperature is exceeded, the

transformation causes a discontinuity in the thermal expansion coefficient, resulting

in large local strains. Since steel is also soft at this temperature, the strain is taken up

plastically rather than elastically. On rapid cooldown, the plastically deformed

austenite transforms back to martensite. This martensite, however, is hard and

32

Defense - Technical Information Center, Compilation Part Notice ADP012479 33

Vickers hardness number 34

The Young's modulus, which is also known as the elastic modulus, is a mechanical property of linear elastic solid materials. It defines the relationship between stress (force per unit area) and strain (proportional deformation) in a material.

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brittle, and so cracks instead of plastically deforming to accommodate thermal

stresses on further cooling. This is called heat checking. Obviously, this phase

transformation really wreaks havoc the integrity of the coating. It will tend to

thermal fatigue and crack the coating, as well as promote de-adhesion.

Corrosion resistance

In order to preserve a high level of performances all along the firearms lifespan,

a good level of corrosion resistance is necessary, both in atmospheric conditions and

in the presence of hot oxidising gases.

The presence of high temperature gases, in addition to the high pressures generated,

heats the barrel to the extent that chemical interaction with the metal itself occurs.

No chemical reaction can be tolerated.

Efficient coverage of complex or inner shapes

The geometrical complexity of parts to be coated (small inner tubes, blind holes,

inside corners, etc.) generates the need for coating process that can provide an

homogeneous treatment of the parts.

Preserve components tolerance

Complementarily, the treatment has to ensure dimensional compliance with firearm

parts, i.e. provide a deposit thickness of 10 to 80μm, according to their specific

functional requirements.

Chemical barrier

The coating must act as a chemical barrier for the substrate against the erosive

effects of the hot propellant gases. It must therefore be free from cracks, both as-

produced and in service. Any cracks will be exploited by the very aggressive

environment of propellant gases during firing, and the substrate will be attacked.

These cracks will also be wedged and ratcheted open by microscopic fragments

during firing, and after firing, the substrate can be attacked by simple corrosion.

There should be a low solubility of chemical elements such as hydrogen, carbon,

nitrogen and oxygen since these will degrade the substrate.

The coating also has to ensure a low level of reactivity with these elements:

there should not be a large negative free energy of reaction at the temperatures,

pressures and chemistry environment encountered during firing.

Adhesion properties

A good level of adhesion on steel substrates is required so that no delamination

results from the high level of thermal, mechanical and chemical stresses associated

with the firing of ammunitions. The process therefore results in a coating with

extremely good adhesion, to the point where it is considered as metallurgically

bonded. In welding terms, it must have 100% joint efficiency

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Friction coefficient

In order to ensure the proper functioning of parts in relative movement, such

parts have to possess both a good abrasive wear resistance and a low frictional

resistance.

3.2.3. Complementary requirements for the research of alternatives to

hard chromium plating

Price

Both investments and running costs have to be taken into consideration in the

process of research for alternatives to hard chromium plating.

Compliance with the current FN Herstal’s and Manroy’s

industrial facilities

FN Herstal’ surface treatment capabilities are not limited to hard chromium

treatment. Compliance of the alternative process with the currently used workshop

does therefore represent a potential for both economic and technical synergies in

terms of know-how, facilities and collective protection equipments.

Risks for health and environment

Any potential alternative is expected to ensure a lower level of risk for both

human health and the environment, as compared to hard chromium plating.

Compliance with military standards

Given the market for firearms concerned by Use-1, compliance with military

standards constitutes a critical criterion for selecting an alternative.

3.3. Parts concerned

In the armament industry, hard chromium plating is a critical process since it

improves the firearms characteristics in terms of performances, reliability and

lifespan.

As presented in section 3.1.1, firearm barrel bores are hard chromium plated

(with a minimum thickness of coating of {#2c} µm in MI.50 barrels and of

{#2d} µm in other calibre barrels) in order to ensure a satisfactory service

life35,36. Hard chromium is also used on auxiliary parts (gas cylinder, piston, gas block,

etc.) subject to the same level of thermal, chemical and mechanical stresses, for

which the coating thickness ranges from 10 to 80 µm.

As an illustration, parts concerned by Use-1 for a FN MINIMI® light machine gun

are identified on the firearm exploded diagram below. In the case of the FN

35

FNH R&D note réf: 0000031630 36

MIL-M-45590A

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MINIMI®, such parts include: barrel assembly, plug and gas regulator, gas cylinder

assembly and piston, as illustrated in Figure 9 below.

Figure 9. FN MINIMI® machine gun exploded view. In red, parts concerned by Use-1.

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The above figure shows that the number of parts subject to hard chromium

plating is relatively low, as compared to the overall number of parts constituting the

firearm: Use-1 was precisely defined on the basis of specific levels of thermal,

mechanical and chemical stresses to which parts are subject.

3.4. Market and business trends including the use of the

substance

3.4.1. Use of chromium trioxide

3.4.1.1. Herstal

The tonnage of chromium trioxide for both Use-1 and Use-2 over the last three

years is provided in Table 9 below:

In tons 2013 2014 2015

CrO3 flakes (electrolytic polishing)(*)

1.5 0.5 1.0

Concentrated CrO3 (chroming)(**)

6.5 5.5 4.5

Total 8.0 6.0 5.5

Table 9. Tonnages of CrO3 over the 2013-2015 period (tons), for Use-1 and Use-2 (*) = Used only for Use-1; (**) = Used for Use-1 and Use-2

An estimate of the breakout of concentrated CrO3 consumption between Use-1

and Use-2 at the site of Herstal was carried out and is as follows: 87% for Use-1 and

13% for Use-2.

Based upon this allocation basis, the CrO3 tonnage associated to Use-1 amounts

to 5.0 tons.

3.4.1.2. Erith

The consumption of CrO3 at the site of Erith in 2015 amounts to 117 kg. As

stated in the CSR, this tonnage is expected to decrease over the review period, as

hard chromium plating activities are foreseen to be carried out at the site of Herstal.

3.4.1.3. Total CrO3 tonnage

The total annual consumption of chromium trioxide associated with Use-1

for the sites of Herstal and Erith amounts to 5.0 tons for 2015. This tonnage is

considered as representative of the CrO3 consumption over the review period

for Use-1.

3.5. Remaining risk of the “applied for use” scenario

As described in the CSR, the “applied for use” scenario only presents a risk for

workers dedicated to the surface treatment operators, for quality control operators

as well as for laboratory workers; risks for general population have been shown to be

negligible and have therefore not been monetised. The handling of the mixture

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containing the substance is well managed with general and personal protection

equipments and safety procedures.

3.6. Human health impacts and monetised damage of the

“applied for use” scenario

Monetised damage of the impacts on human health of the “applied for use”

scenario includes medical treatment, mortality and morbidity.

When relevant, and in order to offer a comprehensive understanding of the

amounts at stake, it was chosen to supplement values taking into account the total

excess risk of cancer with values based on the individual excess of risk of cancer.

In what follows:

- Individual values refer to values based on the individual excess risk of

cancer, thereby related to one worker;

- Total values refer to values based on the total excess risk of cancer, thereby

related to all the workers concerned by the use.

3.6.1. Number of people exposed

3.6.1.1. Herstal

Long-term exposures

A total of 21 persons work on a daily basis at the site of Herstal over the three

hard chromium plating lines for both Use-1 and Use-2; four persons are in charge of

quality control operations.

Punctual potential exposures

Punctual exposures are encountered for one operator of the laboratory staff, in

charge of the sampling and the analysis of the baths composition.

3.6.1.2. Manroy

One worker is in charge of the operation of the hard chromium plating line at

the site of Erith.

3.6.2. Medical treatment

Different studies evaluate the global cost of lung cancer treatment including,

depending on the study: hospitalisation costs, medicine costs but also other

associated costs such as in-house care37,38,39,40.

37

Mc Guire, Treatment cost of non-small cell lung cancer in three European countries: comparisons across France, Germany, and England using administrative databases, Journal of Medical Economics Vol. 18, No. 7, 2015, 525–532 38

Simrova et al, The costs and reimbursements for lung cancer treatment among selected health care providers in the Czech Republic, 2014

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For the following analysis, it was chosen to rely on data provided in a recent

study41 which compares the cost of medical treatments associated with lung cancer

in France, UK and Germany based on regional or national administrative databases.

This study is only based on NSCLC (Non Small-Cell Lung cancer) which represents

approximately 80% of lung cancers without considering the other forms such as SCLC

(Small-Cell Lung cancer). Nevertheless, a previous study in France42 shows that the

costs associated with other forms are 50% lower than those of NSCLCs and that the

combined cost is nearly the cost associated with the NSCLC only. In order to remain

in the context of the realistic worst-case scenario, it was therefore considered that

100% of lung cancers are NSCLC form.

Due to the lack of specific data, and in order to maintain the same level of detail

over all sites of the AfA, it was chosen to use average figures of medical costs

associated with NSCLC in France, Germany and the United Kingdom to characterise

cancer costs in Belgium.

In a 2-year follow-up after diagnosis approach, the different costs associated to

lung cancer are listed in the tables below:

YEAR 1 YEAR 2

Hospital in-patient € 9,672 € 4,547

Hospital out-patient € 1,816 € 1,092

Medicines € 5,541 € 2,063

Other € 966 € 641

Total € 17,672 € 7,441

2-year total € 25,113

Table 10. Lung cancer costs for Belgium (average of data for France, Germany and the United Kingdom) for the first two years after the diagnosis

39 Chouaïd et al, Economics of the clinical management of lung cancer in France: an analysis

using a Markov model, British Journal of Cancer (2004) 90, 397–402. doi:10.1038/sj.bjc.6601547 40

Braud et al, Direct treatment costs for patients with lung cancer from first recurrence to death in France, Pharmacoeconomics. 2003;21(9):671-9. 41

Mc Guire, Treatment cost of non-small cell lung cancer in three European countries: comparisons across France, Germany, and England using administrative databases, Journal of Medical Economics Vol. 18, No. 7, 2015, 525–532 42

Allemani, Global surveillance of cancer survival 1995–2009: analysis of individual data for 25 676 887 patients from 279 population-based registries in 67 countries (CONCORD-2), Lancet, 385: 977–1010, 2015

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YEAR 1 YEAR 2

Hospital in-patient € 5,985 € 1,156

Hospital out-patient € 1,209 € 834

Medicines € 8,593 -

Other - -

Total € 15,787 € 1,990

2-year total € 17,777

Table 11. Lung cancer costs in the United Kingdom for the first two years after the diagnosis

Regarding this information, to monetise the health impact, we will also consider the

net survival rate by country at 1 year, 5 years and 10 years after diagnosis, with the

following values:

YEARS AFTER DIAGNOSIS SURVIVAL RATE, BELGIUM SURVIVAL RATE, UK

1 year 36,9% 32.1 %

5 years 14,7% 9.6 %

10 years 8,7% 4.9%

Table 12. Net year survival rate after lung cancer diagnosis in France43,44,45

To monetise the damage on human health, we will consider the probability of

appearance of lung cancer on workers. The probability, in this case, corresponds to

the excess of risk to have a lung cancer. Data at five years after diagnosis are based

on Allemani 2015 and data at 1 to 10 years after diagnosis are based on European

data for Belgium and on specific data for UK.

The individual lung cancer costs are synthesised and listed in Table 13 below,

taking into account the cost of lung cancer treatment by year after diagnosis (we

consider that the cost per year after year 2 is the same as for year 2), the net survival

rates at 1 year, 5 years and 10 years and the requested review period of 12 years but

not considering the excess of risk.

In order to conform to the realistic worst-case scenario, it was chosen to apply

the survival rate of the upper bound of each year after diagnosis range, i.e. for UK:

- Survival rate during the first year after diagnosis is supposed to be 100% ;

- Survival rate between year 2 and year 5 after diagnosis is supposed to be

32.1% ;

- Survival rate between year 5 and year 10 after diagnosis is supposed to be

9.6% ;

43

Institut National du Cancer, Prévalence et survie nationales du cancer du poumon, 2015 44

Allemani, Global surveillance of cancer survival 1995–2009: analysis of individual data for 25 676 887 patients from 279 population-based registries in 67 countries (CONCORD-2), Lancet, 385: 977–1010, 2015 45

Extrapolation from European values

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- Survival rate for more than 10 years after diagnosis is supposed to be 4.9%.

A 3% discount rate was applied to the costs in order to take into account time

preference and express the cost in current value.

YEARS AFTER DIAGNOSIS HERSTAL (BELGIUM) ERITH (UK)

0 to 1 year € 17,672 € 15,787

1 to 5 years € 10,983 € 2,555

5 to 10 years € 5,469 € 955

10 to 12 years € 1,295 € 195

Individual lung cancer costs € 35,420 € 19,492

Individual lung cancer costs,

discounted(*)

€ 30,455 € 17,463

Table 13. Individual lung cancer costs during the review period, not taking into account the excess of risk for workers

(*) Taking into account a 3% discount rate until the end of the review period

The following table synthesises the lung cancer costs per worker, taking into

account the total excess of risk for Use-1 (1.2x10-3 for Herstal and 1.6x10-4 for Erith):

YEARS AFTER DIAGNOSIS HERSTAL ERITH TOTAL

0 to 1 year € 20.4 € 2.5 € 22.9

1 to 5 years € 12.7 € 0.4 € 13.1

5 to 10 years € 6.3 € 0.2 € 6.5

10 to 12 years € 1.5 € 0.0 € 1.5

Total of lung cancer costs € 40.9 € 3.1 € 44.0

Total of lung cancer costs, discounted(*)

€ 35.2 € 2.7 € 38.0

Table 14. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments

(*) Taking into account a 3% discount rate until the end of the review period

3.6.3. Mortality and morbidity

Several summary measures of population health have been devised, including

the Quality-Adjusted Life Year (QALY), the Disability-Adjusted Life Expectancy and the

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Healthy Life Year46,47,48,49. The benefits and challenges of these measures have been

examined in several publications50,51,52,53.

According to the WHO recommendations54 and since it has been widely used, it

was chosen to assess the impacts of both mortality and morbidity associated with an

excess risk of cancer through one combined measure: the Disability-Adjusted Life

Years or DALY.

The DALY method is recommended by ECHA for the assessment of mortality and

morbidity impacts55,56.

3.6.3.1. General methodology

The following methodology is based on the general WHO methodology for the

calculation of DALYs57.

DALY is a combined measure of the period of time lived with disability and the

period of time lost due to premature mortality:

Where: = years of life lost due to premature mortality and = years lived with

disability.

In such an approach, time is used as a common currency for non-fatal health states

and years of life lost. Disability weights are thus used to formalize and quantify social

preferences for different states of health, measured as number on a 0-1 scale,

46

Weinstein, Stason, Foundations of cost effective analysis for health and medical practices. New England Journal of Medicine, 296:716-721, 1977 47

Murray, Rethinking DALYs. In: Murray, Lopez, eds. The global burden of disease. Geneva, World Health Organization, Harvard School of Public Health, World Bank, 1996 48

Hyder, Rotllant, Morrow, Measuring the burden of disease: healthy life years. American Journal of Public Health, 88:196-202, 1998 49

Murray, Salomon, Mathers, A critical examination of summary measures of population health. Bulletin of the World Health Organization, 8(8):981-994, 2000 50

Anand, Hanson, Disability-adjusted life years: a critical review. Journal of Health Economics, 16:695-702, 1997 51

Williams, Calculating the global burden of disease: time for a strategic reappraisal? Health Economics, 8:1-8, 1999 52

Murray, Lopez, Progress and directions in refining the global burden of disease approach. Geneva, World Health Organization (GPE Discussion Paper No 1), 1999b 53

Murray, Salomon, Mathers, Lopez, Summary measures of population health: concepts, ethics, measurement and applications. Geneva, World Health Organization, 2002 54

World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and methods, Assessing the environmental burden of disease at national and local levels, 2003 55

ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 56

ECHA, Applying socio-economic analysis as part of restriction proposals under REACH - Workshop proceedings, Helsinki, 21-22 October 2008 57

Mathers, Stein, Fat et al, Global Burden of Disease 2000: Version 2 methods and results, Global Programme on Evidence for Health Policy Discussion Paper No. 50: World Health Organization, 2002

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where: “0” is assigned to a state of ideal health and “1” to a state comparable to

death.

3.6.3.2. Years of Life Lost due to premature mortality

The basic formula for calculating the years of life lost (YLL) metric is the following:

Where: = number of deaths and = standard life expectancy at age of death (in

years).

The number of deaths ( ) is supposed to be the total excess risk of cancer. Life

expectancy at age of death ( ) is calculated by subtracting the standard life

expectancy (81 years on average in Europe58,59) and the average age of death by lung

cancer in France (68 years in France60,61). Due to the lack of specific data for Belgium

and the UK and in order to ensure calculation homogeneousness, data regarding

France have been used to characterise both sites of Herstal and Erith

A 3% discount rate was applied to YLL in order to take into account time

preference and express the cost in current value.

YLL and intermediate data are detailed in Table 15 below.

PARAMETERS VALUES

Standard life expectancy 81 years

Mean age of lung cancer death 68 years

Number of years lost 13 years

Site Herstal Erith

Total excess risk of lung cancer, per site 1.2x10-3

1.6x10-4

Total YLL, per site, discounted(*)

1.2x10-2

1.6x10-3

Total excess risk of lung cancer, for Use-1 1.3x10-3

Total YLL for Use-1, discounted(*)

1.3x10-2

Table 15. Years of Life Lost (YLL) for Use-1 (*)

: considering a 3% discount rate until the end of the review period

58

Eurostat, Mortality and life expectancy statistics, June 2015 59

This value is furthermore in line with the WHO recommendations for calculation of DALYs and corresponds to the upper end of the life expectancy range to be considered. 60

INSERM, INVS/CépiDC, 2012. In: Institut National du Cancer, Mortalité nationale des cancers, 2015 61

Due to the lack of representative data, the value for France has been used.

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3.6.3.3. Years Lived with Disability

The calculation of the years of life with disability (YLD) is based on the following

formula:

Where: = disability weight, = number of incident cases and = average

duration of disability.

In the case of lung cancer, the value of 0.772 was used for 62. The number of

incident cases ( ) was estimated by multiplying the number of workers exposed and

the excess of risk of cancer. The average duration of disability ( ) was obtained by

subtracting the mean age of death (68 years63) and the mean age of diagnosis (66

years64,65) associated with lung cancer.

A 3% discount rate was applied to YLD in order to take into account time

preference and express the cost in current value.

YLD and intermediate data are detailed in Table 16 below.

PARAMETERS VALUES

Mean age of lung cancer death 68 years

Mean age of lung cancer diagnosis 66 years

Number of years with disability 2 years

Disability weight 0.772

Site Herstal Erith

Total excess risk of lung cancer, per site 1.2x10-3

1.6x10-4

Total YLD, per site, discounted(*)

1.4x10-3

1.9x10-4

Total excess risk of lung cancer, for Use-1 1.3x10-3

Total YLD for Use-1, discounted(*)

1.6x10-3

Table 16. Years of Life lived with Disability (YLD) for Use-1 (*)

: considering a 3% discount rate until the end of the review period

62

Migrin, A Review and Meta-Analysis of Utility Values for Lung Cancer, U.S. EPA 63

Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en 2014 64

Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en 2014 65

Due to the lack of representative data, the value for France has been used.

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3.6.3.4. Synthesis of the monetised damage related to mortality and

morbidity

Monetised damage related to YLLs and YLDs was calculated using the central

value of a statistical life-year recommended by ECHA66 and based on the NewExt

study67: € 55,800 (in 2003 price levels). This value is in line with Desaigues68, which

estimated the central value of life year to € 50k, based on a survey of French

residents and with EurovaQ study69, proposing a value per life year of € 45,064.

Please note that an uncertainty analysis of the costs associated to mortality and

morbidity using the lower and upper bounds of Value of a Statistical Life-Year is

provided in section 5.6.

Correction for inflation was applied based on the change in consumer price

index on average in Europe: 28.0% over the 2003-2015 period70.

Final YLLs, YLDs and monetised damage are synthesised in the following table:

PARAMETERS VALUES

YLL 1.3x10-2

YLD 1.6x10-3

DALY = YLL + YLD 1.5x10-2

Value of life year lost(*)

€ 71,403

Total cost for mortality and morbidity (PV) € 1,068

Table 17. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer, Use-1

(*): considering a 28.0% average inflation rate in Europe over the 2003-2015 period

3.6.3.5. Complementary assessment

Since the costs associated with mortality and morbidity constitute the main

monetised damage of the “applied for use” scenario, and in order to validate the

previous calculation, another estimate methodology was used, based on the value of

a statistical life and the willingness to pay to avoid a cancer case as provided in

ECHA’s SEA guidance:

66

ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 67

NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003 68

Desaigues, Rabl, Ami, Boun My Kene, Masson, Salomon, Santoni, 2007a. Monetary Value of a Life Expectancy Gain due to Reduced Air Pollution: Lessons from a Contingent Valuation in France. Revue d’Economie Politique 117 (5), 675–698, 2007 69

EurovaQ, European Value of a Quality Adjusted Life Year, Final Publishable Report, 2010 70

OECD, Main economic indicators, Consumer Price Index – data and methods

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VALUE OF A STATISTICAL LIFE

WILLINGNESS TO PAY

TO AVOID A CANCER CASE

Initial value € 1,052,000

(2003 price levels)

€ 400,000 per non-fatal case

(supposed 2008 price levels)

Inflation 28.0%

over the 2003-2015 period(*)

11.3%

over the 2008-2015 period(*)

Present value € 1,346,161 € 445,361

Table 18. Value of statistical life and willingness to pay to avoid cancer71

(*) = On average in the European Union

Please note that the value of € 400,000 per non-fatal case for the willingness to

pay to avoid a cancer case is not referenced in ECHA’s guidelines. It was nevertheless

used in this complementary analysis since it is in line with the value of € 395,656

calculated by Alberini and Ščasný72.

Mortality rate was derived from incidence and mortality data in Europe:

PARAMETERS VALUES

Lung cancer incidence 313,000

Lung cancer fatal cases 268,000

Mortality rate 86%

Survival rate 14%

Table 19. Incidence and mortality associated with lung cancer in Europe, in 201273

Based on the parameters previously put forward, the overall impacts of cancer,

as calculated with this methodology are synthesised below:

PARAMETER VALUE COMMENT

Mortality

Number of fatal cancer

cases over the review

period

1.1x10-3

Taking into account: the total

excess risk of cancer and the

average mortality rate of lung

cancer in France

Subtotal:

costs of mortality € 1,185

Discounted until the end of the

review period

Morbidity

Number of non-fatal

cancer cases over the

review period

1.9x10-4

Taking into account: the total

excess risk of cancer and the

average survival rate of lung

71

ECHA, Guidance on the preparation of socio-economic analysis as part of an application for authorisation, Version 1, January 2011 72

Alberini and Ščasný, Stated-preference study to examine the economic value of benefits of avoiding selected adverse human health outcomes due to exposure to chemicals in the European Union, FD7. Final Report - Part III: Carcinogens, Charles University in Prague (Environment Center), September 2014. 73

GLOBOCAN 2012 (WHO), Lung Cancer Estimated Incidence, Mortality and Prevalence Worldwide in 2012

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cancer in France

Subtotal:

costs of morbidity € 66

Discounted until the end of the

review period

Total € 1,251 Present value

Table 20. Mortality and morbidity costs for Use-1, complementary assessment

The results of this complementary assessment (€ 1,251) validate the order of

magnitude of the results obtained with the DALY approach (€ 1,068).

3.6.4. Synthesis of the monetised damage of the “applied for use”

scenario

The overall monetised impacts of the “applied for use” scenario can be

summarised as follows:

IMPACTS COSTS

Medical treatment € 38

Mortality and morbidity € 1,068

Total € 1,106

Table 21. Overall impacts of the "applied for use" scenario, Use-1

3.6.5. Complementary elements of analysis: values taking into account a

4% discount rate

In order to ensure a complete consistency of the values with ECHA’s guidelines,

monetised impacts of the “applied for use” scenario are also provided considering a

4% discount rate:

IMPACTS COSTS

Medical treatment € 36

Mortality and morbidity € 987

Total € 1,024

Table 22. Overall impacts of the “applied for use” scenario, Use-1. Complementary analysis taking into account a 4% discount rate

3.7. Environment, man-via-environment impacts and

monetised damage of the “applied for use” scenario

3.7.1. Environment impacts and monetised damage

Environment impacts have been shown to be negligible and have therefore not

been subject to a monetised quantification.

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3.7.2. Man-via-environment impacts and monetised damage

Man-via-environment impacts have been shown to be negligible and have

therefore not been subject to a monetised quantification.

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4. SELECTION OF THE “NON-USE” SCENARIO

4.1. Efforts made to identify alternatives

4.1.1. Data searches and Research & Development

Research and development works for the substitution of Cr(VI) in the surface

treatment of firearms barrels and auxiliary components date back to 2003.

Taking into account both the expenditures already carried over the last decade and

those planned in the coming years, a total of € 180k will have been spent annually on

the 2010-2018 period. This amount can be divided between internal and external

resources as follows: 44% for external resources (research centres or supply of

equipment) and 56% for internal resources.

As outlined above, data searches initiatives have been based on both internal

and external resources:

- Internal resources involve working hours of FN Herstal Research and

Development department.

- External resources mainly involve partnerships with Belgian research centres,

consisting of two public-private R&D centres dedicated among others to

surface treatment specialties and one university department focusing on

PVD74.

74

Due to confidentiality agreements, the name of these research centres cannot be disclosed in this document.

A significant work of research and testing of potential alternatives to hard

chromium plating for the functional requirements of Use-1 was carried out

over the last decade by FN Herstal, notably through partnerships with

external research centres and Manroy, through internal research works.

As a result of this work, two potential alternatives to Cr(VI) compounds have

been identified: deposition of chromium from a Cr(III) electrolyte

(Alternative 1) and vacuum process with Physical/Chemical Vapour

Deposition process (Alternative 2).

These processes, however, are currently at a low level of maturity and have

yet to be further investigated, implemented and qualified; neither

Alternative 1 nor Alternative 2 will therefore be available before the sunset

date of chromium trioxide.

In conjunction with research works for alternatives, and in order to minimise

the consumption and the exposure of workers to Cr(VI) compounds, FN

Herstal is furthermore involved in the development of an innovative surface

chromium process for the duration of the review period, still Cr(VI)-based

but that would be carried out in a closed environment.

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4.2. Potential alternatives already abandoned

Several potential alternative processes are mentioned in the literature75,76,77.

Among these, very few processes appear to comply with FN Herstal and Manroy

requirements for Use-1 in terms of (a) functional properties (hardness, heat

resistance, corrosion resistance, etc.), (b) meeting of standard requirements and (c)

ability to be implemented on complex shape parts.

The potential substitution processes that have been considered are developed in

what follows.

4.2.1. Thermal spraying with HVOF (High Velocity Oxygen Fuel)

In the HVOF process, powdered material is accelerated at high speed and

temperature and sprayed on the component in a plastic state. The coating is

deposited droplet by droplet.

WC-Co (tungsten carbide - cobalt) and Cr3C2-NiCr (chromium carbide - Nickel

chromium) powders are particularly used as substitutes for hard chromium. From a

technical point of view in the context of Use-1, these processes show significant

limits, such as:

- Inability to coat small and intricate parts, or parts with a small internal

diameter (about 100 mm)78. This last part is particularly critical for

FN Herstal, since small- and medium-caliber firearms that are produced in

Herstal have internal barrel diameters comprised between 6 and 13mm.

- The bond between the sprayed-on coating and the substrate is purely

mechanical; by contrast, chromium plating adheres to the substrate

according to the laws of solid-state physics. The mechanical bond of the

HVOF coatings is potentially subject to poorer adhesion of the coating.

- Coatings applied are porous and, in case the coating thickness is too low (i.e.

<80μm) and not fully sealed, increased corrosion may be encountered. As a

consequence, HVOF cannot be accepted as a potential alternative to hard

chromium plating for parts whose dimensional requirements imply low

coating thicknesses (requirements for FN Herstal’ and Manroy’ small- and

medium-calibre firearms are comprised between 10 and 40 µm). Conversely,

small or complex components with undercuts are particularly difficult to coat

with this process if they can be coated at all.

75

Holeczek, Kölle, Metzner, Report on inclusion of chromium trioxide (CrO3) in Annex XIV - Fraunhofer IPA-Institut für Produktionstechnik und Automatisierung, 2011 76

Bielewski, Replacing Cadmium and Chromium, Institute for Aerospace Research National Research Council Canada Ottawa, Ontario CANADA- RTO-AG-AVT-140, NATO Science and Technology Organization, 2011 77

Audino, Use of Electroplated Chromium in Gun Barrels - US Army RDECOM-ARDEC-Benet Laboratories, DoD Metal Finishing Workshop Washington, DC 22-23 May 2006 78

Bielewski, Replacing Cadmium and Chromium, Institute for Aerospace Research National Research Council Canada Ottawa, Ontario CANADA- RTO-AG-AVT-140, NATO Science and Technology Organization, 2011

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- HVOF processes result in rough coating surfaces. Depending on the

application, such surfaces may require subsequent machining, which can be

very costly when hard ceramic coatings such as WC-Co are used. Large

quantities of hard metal dust are produced during both the spraying (up to

60% overspray can be expected) and the grinding processes, thereby posing

potential hazards for the health of operators.

- HVOF coatings have a very low factor for elongation at fracture and are

brittle.

Taking into account the abovementioned considerations, HVOC was rejected

by FN Herstal as a potential alternative solution to hard chromium.

4.2.2. Thermochemical surface modification

Nitriding can be accomplished using the plasma process or heat treatment,

whereby components are immersed in molten salt or gas nitriding is used.

During the nitriding operation, process temperatures of 520°C to 580°C occur

upon immersion in molten salt, while temperatures of 450°C to approx. 550 °C are

common for plasma nitriding.

For small thickness parts, nitriding can generate parts warping. For other

applications, parts tolerances should be monitored. Steel mechanical properties will

also be modified and should be taken into account.

Deposited layers are very brittle and may lead to flaking, cavitation and even

failure in the context of dynamic stress and surface pressure experienced during

firing of firearms.

Thermochemical surface modification processes do not effectively protect

weapon hot parts such as barrels against corrosion by combustion gases and

therefore have to be implemented in conjunction with other complementary

processes and notably hard chromium plating.

Attempts of nitriding gun barrels before chromium plating treatment have

been performed between 2003 and 2005 by FN Herstal. Further research

concerning this process have been abandoned, due to the remaining need to

use Cr(VI) compounds during the hard chromium plating step.

4.2.3. Nickel and Nickel alloy coatings

Deposition can be accomplished either electro-chemically or without the use of

electric current.

Nickel-based coatings such as electroless nickel are increasingly used in the industry

as safer and more environmentally-friendly alternatives to hard chromium plating. In

the context of requirements in terms of high temperature wear resistance, Nickel-

based coatings have a low melting point (1,455°C against 1,907°C for chromium).

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For gun bore applications, nickel has a significant potential drawback related to

the interaction with nickel and copper from projectiles. Due to its low melting point,

copper melts during the firing of ammunition and the travel of projectiles in the

barrel bore. In case of extended firing, molten copper may build up on the bore

surface and then interact with the nickel coating to form low-melting, easily eroded

surface layers79.

Electroless nickel-phosphorus (Ni-P) are hardenable, corrosion resistant coatings

consisting of nickel alloyed with a varying percentage of phosphorous, comprised

between 8% for harder coating layers to 10% for better corrosion resistance

properties.

Such processes offer good thickness uniformity and control but the use of nickel

and nickel alloys as potential alternatives is subject to a few technical limitations:

- Unhardened nickel and nickel alloy coatings have a lower hardness

(500-750 HV) than functional chromium plating. This value is not sufficient

for FN Herstal applications and does not comply with the requirements of

the SAE AMS2460 standard.

- Heat treatment is required to increase the hardness of Ni-P alloys deposited

without the use of electric current: temperatures of approximately 400°C are

required. For small thickness parts, Nickel plating heat treatment can

generate parts warping. For other applications, parts tolerances should be

monitored. Also steel substrates characteristics should be checked.

- Electroless Ni-P composite coatings are available with addition of

nanoparticles such as silicon carbide (SiC) for an improved wear resistance.

The use of such nanoparticles is increasingly mentioned in the scientific

literature in order to modify the properties of nickel coatings, so as to tend

toward the functional properties of hard chrome plating. This process is

nevertheless reported to be very hazardous for the health and safety of

workers.

- Electroless nickel-boron (Ni-B) coatings exhibit better wear resistance

properties, a lower friction coefficient and higher hardness but lower

corrosion resistance properties as compared to hard chromium plating. In

addition, Ni-B coatings are expensive to produce, have limited availability

and plating baths contain toxic substances, such as lead or thallium.

Tests with Ni-B as an alternative coating have been conducted by the Herstal

Group between years 2005 and 2006. Qualification tests on weapons did not

appear conclusive.

This alternative has therefore not been further considered since it does not

match FN Herstal’s and Manroy’s technical requirements, notably in terms of

79

Montgomery, Watervliet, Interaction of copper-containing rotating band metal with gun bores at the environment present in a gun tube - Weapons. Laboratory, Watervliet Arsenal, WVT-TR-74026, 1974

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hardness. In addition, boron compounds could be further regulated in the

near future.

4.3. Research and development works in order to reduce the

exposure to Cr(VI) for hard chrome plating (FNH1)

In conjunction with research works for alternatives, FN Herstal has undertaken

works for the optimisation of hard chromium plating in order to reduce the exposure

of workers to Cr(VI) compounds.

Confronted with the difficulty of identifying an alternative technology meeting

FN Herstal’s and Manroy’s technical requirements for Use-1, it was decided in 2011

to redesign the hard chromium plating process in such a way as to greatly reduce the

exposure of workers to Cr(VI). This project will be referred to as “FNH1” in what

follows.

The principle of this innovative chromium plating process is based on ---------- ----

----- ------------- --------- ------------- --------- ------------- --------- ------------- --------- -------------

--------- ------------- --------- ------------- --------- ------------- --------- ------------- --------- ---------

---- --------- ------------- --------- ------------- --------- ------------- --------- ---(#3a).

FNH1’s expected benefits include:

- The use of much smaller baths volumes than for immersion and removing of

the soaking step in the baths, thereby reducing chemical hazards for

workers’ health; workers will be separated of hard chromium plating

installations by two floors and there will be no contact between the

operators’ position and chemical substances during the surface treatment

operations.

- The possibility to obtain a chromium surface offering improved

performances as compared to the immersion process. It is also known that

this kind of process process helps limiting hydrogen embrittlement80 as well

as the overvoltage effects related to the stagnation of gas bubbles in the

barrel.

- The increase in productivity made possible by the use of high current

densities during electroplating, which are made possible thanks to ---------- ---

------ ------------- --------- ------------- --------- ------------- --------- ------------- --------- -

------------ --------- ------------- --------- ------------- --------- ------------- --------- ---------

---- --------- ------------- --------- ------------- --------- ------------- --------- ------------- ---

------ ---(#3b).

The general timeline of research works can be outlined as follows:

- First exploratory phases were conducted between 2011 and 2013 under

contract in an electrochemistry lab and a pilot plant of a research centre.

- In the second step (2012-2013), a pilot (laboratory-scale) line for this

experimental chromium plating process and tooling was designed and

80

Yin, Wang, Surface and Coatings Technology 114, 213–223, 1999

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manufactured with the research centre, on the basis of results of laboratory

research works. The start of FNH1 and the development of plating

parameters were performed in 2013.

- The first qualification testing on barrels produced on this experimental

treatment line took place in 2014. FNH1 is currently at TRL 7 (Technology

demonstrated in relevant environment) and is expected to attain TRL 8

(System complete and qualified) or 9 (Actual system proven in industrial

environment) within 2022.

- The third implementation step consists in the development and the

installation of an industrial-scale prototype, requiring a significant

engineering work notably in terms of scaling and safety. The budget for the

third step is foreseen to amount to at least € 300k and up to € 1M.

- The fourth implementation step is the replacement of current lines with

FNH1-inspired lines. Estimated implementation costs of this process are

comprised between € 4.5M and € 7.5M (considering a unit cost of € 1.5M to

€ 2.5M per chroming line and the need for three chroming lines).

The implementation timeline of FNH1 is provided in section 4.5, along with that

of Alternative 1 and Alternative 2.

The future industrialized version of the processing line, will allow separating the

positions of workers and baths by two floors. There will be no contact between the

operators’ position and chemical substances during the surface treatment

operations.

Given its nature and level maturity, FNH1 will not require the re-qualification of

firearms, which makes its implementation possible in the early phase of the review

period and thereby relevant in the context of the substitution process.

From an economic standpoint, aside from investments, operation costs are

foreseen to be similar than those of the current hard chromium coating process.

In case Alternative 1 is deemed compliant with the functional requirements of

Use-1, it is also likely to be compliant with the FNH1 process, making the overall new

process even more economically relevant to FN Herstal.

FNH1 will constitute an improvement of the hard chromium plating process and

will be carried out in a separate room (away from workers), thereby reducing the

exposure of workers for all the steps related to the operation of the plating line

(notably for the installation and removal of parts to be treated on jigs).

The improvement of this new process, the development of plating tools and

endurance shooting tests will be pursued on a set schedule until the end of 2016.

The choice to industrialise or abandon this process will be conditioned by the

favourable or unfavourable opinion of ECHA toward the present AfA.

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4.4. Assessment of shortlisted alternatives

Research works have resulted in the identification of two potential alternatives

for the functional requirements of Use-1: deposition of chromium from a Cr(III)

electrolyte (Alternative 1) and vacuum process with Physical/Chemical Vapour

Deposition process (Alternative 2).

4.4.1. Alternative 1: Chromium deposition from Cr(III) electrolyte

4.4.1.1. Substance ID and properties

Under Alternative 1, chromium deposition is investigated with the use of a

Cr(III) electrolyte instead of a Cr(VI)-based electrolyte.

4.4.1.2. Technical feasibility of Alternative 1

Research works have been focused for some time on deposition of trivalent

chromium electrolytes in the context of chromium plating. In the area of decorative

chromium plating, trivalent chromium electrolytes are already being used as a

substitute for Cr(VI) electrolytes-based chromium plating for some applications.

However, processes for the deposition of functional chromium coatings using

trivalent chromium electrolytes are still in development phase.

Even after conclusion of development works, deposition of hard chromium

coatings from trivalent electrolytes will only be possible for special applications and

for very simple component geometries due to the electro-chemical limits, low

hardness and low coatings thickness.

FN Herstal initiated in 2014 a literature search on the subject in collaboration

with a Belgian research centre. The most promising approaches are actually

laboratory tested.

As of today, Alternative 1 is at TRL 3, meaning that active R&D works are in

progress but that technical feasibility and compliance with FN Herstal’s and Manroy’s

functional requirements have yet to be demonstrated.

From an industrial point of view, Alternative 1 does not constitute a major

change as compared to the current process since it consists of a replacement of the

electrolytes of the current baths. As a consequence, it would certainly be compliant

with current facilities and surface treatment lines and its implementation would

incur much lower costs than for Alternative 2, both in terms of investments and

operating costs (personnel).

4.4.1.3. Economic feasibility and economic impacts of Alternative 1

Alternative 1 will certainly be compliant with the current hard chromium plating

lines and will therefore not imply heavy investments for its implementation. It will,

however, imply a strong increase in the cost of electrolytes.

Cr(III)-based surface treatment processes furthermore require a more frequent

chemical monitoring (several analysis on a daily basis as opposed to one analysis per

week with the current process) and therefore require hiring a dedicated laboratory

technician.

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Alternative 1 is also expected to require increased maintenance works and

therefore increased wastewater treatment capacity, with related costs of the order

of magnitude of € 100k per line.

4.4.1.4. Availability of Alternative 1

No commercially available solution exists that meets the requirements of FN

Herstal and Manroy for the presents AfA’s Use-1.

4.4.1.5. Hazard and risk of Alternative 1

Cr(III)-based surface treatment solutions may involve the use of boric acid. Since

hazard and risk constitutes a key parameter in the selection and development of an

alternative, the Applicants focuses on boric acid-free solutions.

4.4.1.6. Conclusions on Alternative 1

Given its compatibility with the current surface treatment facilities at the sites of

Herstal and Manroy, Alternative 1 constitutes the most hoped-for alternative to

Cr(VI)-based processes. As of today, however, Alternative 1 is at a too low level of

maturity to prejudge of its final compliance with the requirements of Use-1.

4.4.2. Alternative 2: Vacuum process with PVD/CVD

4.4.2.1. Substance ID and properties

PVD and CVD processes are relatively well-known alternatives to hard chromium

plating. Included in this category are sputtering and cathodic arc deposition that

produce thin coatings (below 10 μm) and Electron Beam-PVD (EB-PVD) techniques

which can produce coatings up to hundreds of micrometers in thickness. Two of the

most important features of PVD coatings, relevant to hard chromium applications,

are high deposition rates and compressive residual stresses in the coatings after

deposition.

Among PVD coatings considered as hard chromium alternative are CrN, TiN and

Metal containing Diamond-Like Carbon (Me-DLC) coatings that can be deposited by

magnetron sputtering or cathodic arc evaporation.

4.4.2.2. Technical feasibility of Alternative 2

Vacuum technologies are constantly evolving. As of today, these processes have

limitations in the context of Use-1.

FN Herstal is supporting, since 2014, projects of two Belgian research centres,

with the aim of developing new high performance coatings and above all, new

deposition tools, able to overcome limitations associated to the complex geometry

of weapon parts.

PVD processes offer high quality coatings but due to the process technology,

coating capabilities of inner surfaces parts and blind holes of parts with complex

geometry, are highly limited.

Alternative 2 is at TRL 3, meaning that active R&D works are in progress but that

technical feasibility and compliance with FN Herstal’s and Manroy’s functional

requirements have yet to be demonstrated.

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From an industrial point of view, Alternative 2 constitutes a complete disruption

of the industrial facilities at the sites of Herstal and Erith. Its implementation would

therefore require a complete modification of the workshop as well the employment

of a qualified and trained personnel.

4.4.2.3. Economic feasibility and economic impacts of Alternative 2

Capital costs as well as operation costs for PVD equipments are expected to be

high but, due to its low level of maturity, a precise estimate of the costs associated

with Alternative 2 cannot be carried out.

4.4.2.4. Availability of Alternative 2

Vacuum processes are relatively well-known from an industrial point of view,

and are notably implemented for the surface treatment of simple-shaped parts and

external surfaces. These solutions, however, do not comply with the requirements of

FN Herstal’s and Manroy’s products in terms of geometrical shape (notably: long and

thin tubes that constitute gun barrels) and potential magnetisation of parts that are

used.

As of today, no vacuum solution is available that can be implemented in thin

tubes such as those used by FN Herstal and Manroy and even experimental devices

still have to be miniaturised by around one order of magnitude. Such a

miniaturisation does involve very strong technical challenges that ongoing research

works aim at overcoming.

4.4.2.5. Hazard and risk of Alternative 2

A preliminary assessment does not seem to show that Alternative 2 involves

hazard and risks.

4.4.2.6. Conclusions on Alternative 2

Alternative 2 is investigated for the substitution of CrO3 for the surface

treatment of firearms parts concerned by Use-1. Its development still require major

technical improvements in terms of the size of device and its implementation would

constitute a major change in terms of equipment and staff as compared to the

current hard chromium process. As it constitutes a completely different process from

hard chromium, comprehensive long and costly requalification procedures of FN

Herstal’s and Manroy’s products will be required to permit their commercialisation.

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4.5. Substitution timeline

The substitution timeline for FNH1, Alternative 1 and Alternative 2 is outlined

below.

On the basis of this timeline, and considering both uncertainties on the technical

steps and research results, as well as the period of time needed to submit a new

dossier should the need arise, either Alternative 1 or Alternative 2 is expected to be

fully developed, implemented and qualified in 2029.

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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

FNH1

Industrial-scale research works

Industrialisation

Internal qualification

Alternative 1:

Chromium deposition

from Cr(III)

electrolyte

Laboratory-scale research works

Industrial-scale research works

Industrialisation

Internal qualification

Alternative 2:

Vacuum process with

PVD/CVD

Laboratory-scale research works

Industrial-scale research works

Industrialisation

Internal qualification

Table 23. Substitution timelines for Alternative 1 and Alternative 2 Key milestones:

❶ = Launch of industrial scale R&D works on FNH1 will be conditioned by the granting of an authorisation for a twelve-year review period for Use-1

❷ = The industrialisation of FNH1 will not be required if Alternative 2 is deemed appropriate

❸ = Continuation of works on Alternative 1 will be conditioned by the results obtained between 2016 and 2021 at laboratory-scale

❹ = Investments for industrial-scale processes for Alternative 2 will be conditioned on the failure of research works on Alternative 1

❺ = Investments for industrial facility dedicated to Alternative 2 (new facility) will depend on the issue of the industrial-scale research works

3

4

5

1 2

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4.6. Synthesis: summary of the potential substitution

processes considered

As a summary of the aforementioned description of the potential technologies

investigated by FN Herstal over the last decade as potential alternatives to CrO3 in

the surface treatment of firearms inner barrels and auxiliary parts is provided in

Table 24 below.

CATEGORY POTENTIAL ALTERNATIVES

PERIOD OF TEST AT FN

HERSTAL HA

RD

NES

S

HEA

T

RES

ISTA

NC

E

CO

RR

OSI

ON

EFFICIENT COVERAGE ON COMPLEX OR

INNER SHAPES

PRESERVE COMPONENT TOLERANCES

FIT WITH EXISTING

PLANT FACILITIES

HEALTH AND ENVIRONNEMENT

HAZARDS

MEET MILITARY

STANDARDS

STATUS IN 2015

PERSPECTIVES WITHIN 5

YEARS

Po

ten

tial

alt

ern

ativ

es

alre

ady

aban

do

ne

d

HVOF

(High Velocity Oxygen Fuel) - - - - F F F

High

(overspray) -

Rejected

None

Thermochemical surface modification

2003-2004 - F P F F - - Not all

- Rejected None

Ni and Ni alloy coatings

(Ni-B, Ni-P; Ni-W) 2005-2006

P if hardened

F if not F P P

F if hardened

P if not P

High

(if boron compounds or

nanoparticles are used)

F

- Rejected None

Alt

ern

ativ

es

Alternative 1: deposition of chromium from Cr(III)

electrolyte 2014-2017 PF P PF PF P P ? ?

TRL3

Considered alternative

Alternative 2: vacuum process with PVD/CVD

2014-2017 ? ? ? PF P F - ?

TRL3

Considered alternative

Pro

viso

ry p

roce

ss d

uri

ng

revi

ew

pe

rio

d t

he

tim

e

ne

ed

ed

to

su

bst

itu

te

FNH1: new industrial hard chromium plating process

reducing the risks associated with the use of

hexavalent chromium

2011-2017 P P P

P for inner coating of

barrels

PF for other complex shapes

P F - Lower than the

current plating process

P

TRL7

TRL8-9 if authorisation

granted by ECHA

Table 24. Summary of potential substitution processes considered (on grey background, the two shortlisted alternatives) P = Pass (same as current electrolytic hard chromium plating or better); F = Fail; PF = Perfectible;? = Insufficient data; − = Not applicable or no data

= Pursued investigation; = Further works abandoned

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4.7. The most likely “non-use” scenario

Hard chromium plating plays a central role in the activity and the

competitiveness of the firearms manufactured by FN Herstal and Manroy. As

described above, due to the high level of requirement for the hard chromium plating

of parts identified in the scope of Use-1, no satisfactory alternative will be available

for FN Herstal and Manroy by 2017.

The most likely potential “non-use” scenarios are explored in what follows.

4.7.1. Potential “non-use” scenarios

It will be shown that neither the downgrade of performances (putting non-hard

chromium plated firearms on the market) nor the subcontracting of hard chromium

plating activities outside the EU is deemed realistic; the most likely “non-use”

scenario is the relocation of hard chromium plating activities outside the EU.

4.7.1.1. The downgrade of performances hypothesis

As demonstrated in section 3.1, untreated firearm barrel bores have a lifespan

that does not comply with both standard requirements and customer requirements.

Since no alternative process to hard chromium is available, a downgrade of FN

Herstal’s and Manroy’s firearms performances by the cease of hard chromium

plating of parts subject to thermal, mechanical and chemical stresses is not deemed

realistic.

In addition, no alternative surface treatment process exists that provide a

lifespan to firearms meeting both customer and Standard requirements.

4.7.1.2. The subcontracting outside EU hypothesis

Subcontracting of the surface treatment activities outside the European Union is

not further investigated for the following reasons:

- Hard chromium coating constitutes a very specific and complex process.

Potential subcontractors for such operations have not yet been identified;

- Subcontracting would imply a loss of know-how for FN Herstal and Manroy,

thereby potentially impeding the companies’ research and development

potential in the future;

- The impact on employment would be greater than in the case of relocation,

since industrial support and control functions would be impacted in addition

to production teams.

4.7.1. Synergy between uses

Given that FN Herstal is concerned by both Use-1 and Use-2 of the present AfA,

“non-use” scenarios for each use to some point depend on the outcome of the

application for each use, as illustrated in Table 25 below.

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AUTHORISATION FOR USE-1

AU

TH

OR

ISA

TIO

N F

OR

USE

-2

- “Applied for use” scenario: pursued

activity for FN Herstal, Browning

and Manroy for the period of time

necessary to implement an

alternative process

- FN Herstal (Use-2) and Manroy:

relocation of hard chromium

operations outside the EU

- Browning: pursued activity for the

period of time necessary to

implement an alternative process

- FN Herstal (Use-1) and Manroy:

pursued activity for the period of

time necessary to implement an

alternative process

- Browning: relocation of hard

chromium activity outside the EU

- “Non-use” scenario: relocation of

hard chromium plating activities of

FN Herstal, Browning and Manroy

outside the EU

Table 25. Different "non-use” scenarios depending on the outcome of the application for authorisation for Use-1 and Use-2

= Authorisation granted; = Authorisation not granted

As can be seen, and in order to ensure a good understanding of the dossier, the

“non-use” scenario for Use-2 of the present AfA is based on the assumption that

neither Use-1 nor Use-2 is granted. In this context, relocation of hard chromium

plating activities does appear as the most-likely “non-use” scenario.

4.7.1.1. The most likely “non-use” scenario

Given (a) the dependence of FN Herstal and Manroy on products concerned by

Use-1, (b) the economic and support functions capabilities of FN Herstal and Manroy

and (c) the regulatory context of the Belgian and British territory, the relocation of

hard chromium plating operations outside the EU is considered as the most realistic

“non-use” scenario.

The regulatory and economics burden of the relocation of the hard chromium

plating operations outside the EU is nevertheless expected to bear strong impacts for

the activity of FN Herstal and Manroy, e.g.

- Economic impacts on FN Herstal’s and Manroy’s activity include the loss of

revenues and profits, the loss of markets, lost investments, as well as

relocation costs, the increase of operating costs and regulatory issues.

- Human health and Environmental impacts, include impacts on human

health as well as greenhouse gas emissions.

- Social impacts mainly consists of impacts on employment;

- Wider impacts include the unavailability of the concerned equipments for

the armies, as well as loss of sovereignty and loss of investments for

sovereign States.

The relocation process is expected to require a three-year period in order to

purchase the land, to build the plant and to install the hard chromium plating lines as

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well as the ventilation and wastewater treatment plants. Such a disruption in

production will significantly jeopardise the very activity of both FN Herstal and

Manroy. In what follows, it was chosen to consider a three-year loss of revenues for

the economic impacts generated by the “non-use” scenario instead of a bankruptcy

of FN Herstal and Manroy. This assumption, if not realistic per se, provides

underestimated amounts as compared to the bankruptcy hypothesis and was chosen

for this reason.

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5. IMPACTS OF GRANTING AN AUTHORISATION

5.1. Economic impacts

5.1.1. Loss of revenues and profits

FN Herstal

As already stated, all firearms manufactured in Herstal contain hard chromium

plated parts. The activity of FN Herstal therefore strongly depends on Use-1, as

illustrated in Figure 10 showing the share of the cumulated revenues over the

2000-2015 period that are related and not related to hard chromium plating (Use-1

and Use-2):

Figure 10. Share of FN Herstal revenues related and not related to hard chromium plating (Use-1 and Use-2), on the basis of cumulated revenues over the 2000-2015 period.

From a global point of view over the 2000-2015 period, an average of [10-

100%](#1d) of FN Herstal’s revenues is shown to directly depend on hard chromium

plating.

The evolution of the global revenues of FN Herstal over the 2004-2014 period is

provided on Figure 11 below:

(#1c)

The “non-use” scenario will generate significant economic impacts (and

notably a loss of revenues, relocation costs and loss of investments), social

impacts (loss of employment), as well as environmental impacts (greenhouse

gas emissions) and other impacts (increase of operating costs, regulatory

issues, impacts on the operational capabilities of sovereign armies).

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Figure 11. FN Herstal revenues for the 2004-2014 period, in M€

Given the restructuring of the company during the last years, the average of FN

Herstal revenues for the 2011-2014 period, i.e. € 243M, is considered as

representative of the future revenues of the company during the review period that

is applied for Use-1 (12 years post-2017).

Hard chromium plating concerns both Use-1 and Use-2, with the following

breakdown in terms of revenues [10-100%](#1d-1)} for Use-1 and [1-10%](#1d-2)} for

Use-2.

It is estimated that the relocation of hard chromium plating activities will entail a

three-year loss of revenues for FN Herstal, corresponding to the period of time

needed to plan, build and render operational the relocated surface treatment

workshop. The calculation of the loss of revenues associated with the “non-use”

scenario will therefore be based on the assumption of a 3-year loss of revenues for

FN Herstal. This hypothesis, although not considered as realistic per se (it does not,

for example, take into account the fact that the very survival of the FN Herstal would

be jeopardised in case of a 3-year cease of activity), was elected since it provides

underestimated figures for the present assessment. An uncertainty analysis

regarding the loss of revenues and the impact on employment is provided in section

5.6.

In order to remain in the context of the realistic worst-case scenario, the

estimate of the loss of revenues generated by the “non-use” scenario is based on a

zero-growth hypothesis for the revenues of FN Herstal over the 2018-2021 period.

For uncertainty analysis purpose, an alternative estimate, taking into account the

growth of revenues of FN Herstal over the review period on the basis of the past

years trends is provided in section 5.6.

Based on the above assumptions, the calculation of the loss of revenues is

synthesised in Table 26 below:

114 118 136

201 214

224 203

179

237 249

306

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

M€

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VALUE

Average annual revenues for FN Herstal over the 2011-2014 period € 243M

Share of revenues directly related to hard chromium plating [10-100%](#1d-6)

Share of revenues related to hard chromium plating that are related to Use-1

[10-100%](#1d-3)

Relocation period considered for the loss of revenues 3 years

Total loss of revenues for FN Herstal [100-1,000M](#1d-4)

Total loss of revenues for FN Herstal, discounted(*) [100-1,000M](#1d-5)

Table 26. Loss of revenues for FN Herstal related to the “non-use” scenario (*)

: considering a 4% discount rate over the 2018-2020 period

Taking into account an average gross margin rate of [10-100%](#1e), the total

loss of profits associated with the “non-use” scenario amount to € [100-

1,000M](#1f).

With a loss of profits of € [100-1,000M](#1g) over the 2018-2020 period, the

“non-use” scenario will generate significant impacts on the economic activity of FN

Herstal. Such impacts would jeopardise the recovery of the financial situation of FN

Herstal that was achieved over the last years.

Manroy

The average of Manroy’s forecasted revenues over the 2016-2018 period is

£ 19,6M (€ 24,9M). This figure is considered as representative of the company’s

revenues for the 2018-2021 period.

In addition, the two products concerned by Use-1 (GPMG in Erith and HMG in

Herstal) represent [10-100%](#1g-1) of the total revenues of Manroy.

As for FN Herstal, a 3-year loss of revenues is considered in the context of the

“non-use” scenario. This hypothesis, although not considered as realistic per se (it

does not, for example, take into account the fact that the very survival of the FN

Herstal would be jeopardised in case of a 3-year cease of activity), was elected since

it provides under-estimated figures for the present assessment. An uncertainty

analysis regarding the loss of revenues and the impact on employment is provided in

section 5.6.

In order to remain in the context of the realistic worst-case scenario, the

estimate of the loss of revenues generated by the “non-use” scenario is based on a

zero-growth hypothesis for the revenues of Manroy over the 2018-2021 period. For

uncertainty analysis purpose, an alternative estimate, taking into account the growth

of revenues of Manroy over the review period on the basis of the past years trends is

provided in section 5.6.

Based on the above assumptions, the calculation of the loss of revenues is

synthesised in Table 28 below:

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VALUE

Average annual revenues for Manroy € 24.9M

Share of revenues directly related to hard chromium plating [10-100%](#1g-2)

Relocation period considered for the loss of revenues 3 years

Total loss of revenues for Manroy [10-100M](#1g-3)

Total loss of revenues for Manroy, discounted(*) [10-100M](#1g-3)

Table 27. Loss of revenues for Manroy related to the “non-use” scenario (*)

: considering a 4% discount rate over the 2018-2020 period

Taking into account an average gross margin rate of [10-100%](#1h), the total

loss of profits associated with the “non-use” scenario amounts to € [10-100M](#1i).

With a loss of profits of € [10-100M](#1j) over the 2018-2020 period, the “non-

use” scenario will generate significant impacts on the economic activity of Manroy.

Total loss of revenues and profits

The cumulated loss of revenues and profits in the context of the “non-use”

scenario for Use-1 amounts to:

VALUE

Loss of revenues for FN Herstal discounted [100-1,000M](#1j-1)

Loss of revenues for Manroy, discounted [10-100M](#1j-2)

Total loss of revenues [100-1,000M](#1j-3)

Table 28. Total loss of revenues for Use-1

VALUE

Loss of profits for FN Herstal discounted [100-1,000M](#1k)

Loss of profits for Manroy, discounted [10-100M](#1l)

Total loss of profits [100-1,000M](#1m)

Table 29. Total loss of profits for Use-1

Cumulated for FN Herstal and Manroy, the “non-use” scenario for Use-1 will

generate a loss of revenues of € [100-1,000M](#1n) over the 2018-2020 period.

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5.1.2. Loss of markets

5.1.2.1. Loss of markets requiring the manufacture of firearms to be carried

out in the European Union

A significant part of FN Herstal and Manroy customers are European States. As

illustrated in section 3.1.4.2, and in order to ensure their security of supply for

military equipments, such States generally require that all the manufacturing and

assembly operations are carried out over the European Union.

In the context of the “non-use” scenario, such criteria will not be met and such

markets will therefore be closed for FN Herstal and Manroy, thereby involving a

significant loss of mid-term and long-term revenues for the company.

The loss of markets requiring the manufacture of firearms over the European

Union will generate a significant loss of revenues for FN Herstal and Manroy, for a

duration that would exceed the period of time needed to implement the relocation

itself

5.1.2.2. Loss of markets due to the increase of lead-time related to the

relocation-related logistics delays

The fact that FN Herstal and Manroy manufacturing capabilities are located in

the European Union constitutes a key commercial asset for the company’s activity.

Manufacturing in Europe allows FN Herstal and Manroy to be extremely reactive for

the processing of orders, which often constitutes a key criterion for customers.

Customer requirements in terms of supply time vary between four to six months for

spare parts and four to twelve months for firearms and systems.

In these conditions, a one to two months delay in the production cycle, as would be

generated by relocation in the context of the “non-use” scenario, would represent a

significant increase in lead-time for FN Herstal and Manroy.

As the Walloon and British legislations strictly govern arms trade, FN Herstal and

Manroy can only produce firearms or firearms parts after a firm order is provided

and a licence is granted. As a consequence, neither FN Herstal nor Manroy can stock-

pile firearms parts in order to anticipate future orders.

The increase in lead-time foreseen in the context of the “non-use” scenario

will close significant markets for FN Herstal and Manroy, for which the company’s

reactivity currently constitutes a strong commercial asset that would be lost in case

of relocation of the hard chromium plating activities.

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5.1.3. Lost investments

The inventory of all the investments made in favour of the hard chromium

plating lines at the site of Herstal has been carried out by FN Herstal’s accounting

department.

The assessment of the lost investments foreseen in the context of the “non-use”

scenario is based:

- On the identification of the investments still due for amortisation in 2017

and after, as well as the precise number of amortising years remaining;

- On the annualised costs method;

- On a 4% discount rate.

A synthesis of the investments amounts concerned by the assessment is

provided below:

LAST ANNUITY TOTAL AMOUNT IN AMORTISATION(*)

2017 € 100,616

2018 € 222,035

2019 € 12,793

2020 € 4,850

2021 € 4,850

2023 € 61,281

2024 € 78,768

2025 € 13,917

TOTAL € 494,260

Table 30. Detail of investments in amortisation, by year of last annuity (*) = Considering a 4% discount rate over the amortisation period

The total lost investments foreseen for the site of Herstal in the context of the

“non-use” scenario amounts to € 494,260.

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5.1.4. Relocation costs for FN Herstal

Cumulated relocation costs for Use-1 and Use-2 of the hard chromium plating

activities have been estimated by FN Herstal:

COST AMOUNT DEPRECIATION

PERIOD JUSTIFICATION

Land purchase and building construction

€ 3 to 6M 30 years Estimation based on the costs in Belgium

Chromium plating lines € 4 to 5M 15 years Estimation based on the costs of hard chromium plating lines in Herstal

Auxiliary equipments € 6M 15 years Ventilation system, wastewater treatment plant, ...

Other € 3M 3 years Creation of the legal entity, follow-up costs, industrialisation costs

Total, discounted € 16 to 20M - -

Table 31. Relocation costs for FN Herstal, for Use-1 and Use-2

On the basis of the annualised costs method and taking into account (a) the

lower bound of relocation costs (€ 16M) in order to remain in the context of the

realistic worst-case scenario as well as (b) a 4% discount rate, the total monetary

value of the investments made for relocation over the twelve-year review period

amount to € 12.1M.

Considering the land purchase, building construction, installation of chromium

plating lines as well as expenses for auxiliary equipments and other costs,

relocation costs are estimated to € 12M.

5.1.5. Increase of operating costs

5.1.5.1. Transportation costs

The “non-use” scenario will mechanically induce an increase in transportation

and logistics-related costs.

5.1.5.2. Packaging costs

Given the safety requirements related to the transportation of firearms, and in

order to adapt to the transportation steps foreseen with the relocation, the

“non-use” scenario will entail a significant increase in packaging needs.

5.1.5.3. Other costs

The “non-use” scenario will generate a significant increase of costs associated

with support functions, such as insurance and licensing fees.

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The “non-use” scenario will directly impact the competitiveness of FN Herstal,

even after the relocation of hard chromium plating activities is completed, due to

an increase of transportation costs, packaging costs as well as insurance and

licensing fees.

5.1.6. Regulatory issues

The “non-use” scenario will entail the need to transfer firearms and firearms

subcomponents to a host country located outside the European Union and back to

the European Union after their surface treatment. In the context of military

equipment, such import and export activities are subject to a stringent regulatory

framework.

In the case of FN Herstal, regulatory requirements related to import and export of

firearms outside the European Union are defined by the Walloon government’s

decree of 12 June 2012.

Export licenses are individual and are granted or rejected after their examination on

the basis of eight criteria81. Export licenses have a period of validity of 18 months and

can be renewed as often as necessary to permit the execution of the order.

Import license are as well delivered by the Walloon government and have the same

period of validity than export licenses.

In this context, the “non-use” scenario will entail strong impacts for FN Herstal,

notably regarding the obligation to export and import defence-related products on

the basis of individual licenses, thereby resulting in a significant increase in lead-time

and consequently in the imposition of contractual penalties.

Transfer of arms can furthermore be subject to the transmission of an end-user

certificate to the host country. In this case, the identity of the end-user country

would have to be disclosed, which would pose stringent confidentiality issues.

Another issue with relocation lies in the potential implementation of arms

control regulation by the host country, as is currently in effect in the United Stated

under ITAR (International Traffic in Arms Regulations) and EAR (Export

Administration Regulations). The following terms constitute criteria for most of

tender procedures, as a qualification of the safety of supply for customers:

- A technical data or service is qualified as “ITAR-controlled” or “ITAR-free”

depending on whether it includes a US-originated component requiring an

export license under ITAR or not.

- Similarly, a technical data or service is qualified as “EAR-controlled” or “EAR-

free” depending on whether it includes a US-originated component requiring

an export licence that amounts to more than 25% of its overall value or not.

81

Defined by the “Position commune 2008/944/PESC du Conseil du 8 décembre 2008 définissant les règles communes régissant le contrôle des exportations de technologie et d’équipements militaires”

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The potential implementation by the host country of ITAR/EAR-like regulation would

thereby endanger the overall security of supply of FN Herstal and therefore of the

company’s customers.

Finally, it has to be mentioned that legal and customs constraints that are very

stringent in the context of arms transfer will entail a supplementary administrative

burden for FN Herstal. In addition, experience has shown that legal and customs

requirements may vary from one country to another, which may constitute an

additional factor of risk.

Due to the regulatory framework on export and import of firearms and

firearms subcomponents, the relocation of hard chromium plating activities

outside the European Union in the context of the “non-use” scenario will generate

a strong administrative burden as well as risks for the safety of supply for FN

Herstal.

5.1.7. Potential financial opportunities

Even though the relocation host country has not yet been determined, it is likely

to be located either in northern America or Eastern Europe. Such countries are likely

to have a lower cost of labour than Belgium or the United Kingdom.

This situation, however, does not represent a potential financial opportunity for

the following reasons:

- Even though local production workers will have to be hired, supervisory and

European management staff will also have to be hired. Altogether, gains in

terms of global labour costs are foreseen to be low or nil.

- Even though the labour cost may be lower in northern America or Eastern

Europe than the current situation for FN Herstal or Manroy, productivity

rates are also known to be lower than in Belgium or the United Kingdom.

Overall competitiveness gains are not foreseen to be significant in the

context of the relocation of hard chromium plating activities.

- Given the significant investments and the increase in operating costs

triggered by the “non-use” scenario, the relocation of the hard chromium

activity will generate much higher detrimental financial impacts than

potential opportunities.

Potential gains in terms of cost of labour will not, by far, compensate the

impacts generated by the relocation of hard chromium plating activities.

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5.2. Human health or Environmental impact

5.2.1. Impacts on human health

It is reminded that, even though the Applicants will implement all necessary risk

management measures at the relocated site dedicated to hard chromium plating

activities, the “non-use” scenario does not involve an overall reduction of risk for

workers since it involves the exposure to Cr(VI) compounds outside the European

Union.

5.2.2. Greenhouse gas emissions

The “non-use” scenario involves an increase of transportation and therefore of

greenhouse gas (GHG) emissions. A rough estimate of such emissions is provided in

what follows, on the basis of the following formula:

With the following units:

- : kgCO2e

- : km

- : ton

- : kgCO2e/(ton.km)

5.2.2.1. Conversion factors

Conversion factors from the Bilan Carbone® database82 have been used for the

assessment of greenhouse gas emissions arising from the diverse transportation

journeys needed for the conveyance of parts from the Herstal and Erith plant to the

relocated hard chromium plating workshop:

TRANSPORTATION MODE CONVERSION FACTOR

21-ton truck 0.23 kgCO2e per ton.km

5,500 twenty-foot equivalent unit container ships 0.01 kgCO2e per ton.km

Table 32. Conversion factors for transportation modes. Source: Bilan Carbone v7.1.021 Nota: kgCO2e = equivalent carbon dioxide kilogram

5.2.2.2. Transportation journeys

Since the exact location of the relocated workshop is not defined at the time of

writing of the present AfA, average distances have been used to characterise the

outward trip of the transportation journeys associated with the “non-use” scenario:

82

The Bilan Carbone® is a tool developed by the ADEME (“Agence de l'environnement et de la maîtrise de l'énergie” or “French Agency for the Environment and the Energy Management”) dedicated to the calculation of greenhouse gas emissions.

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STEP MODE DISTANCE

1. Site to departure harbour Truck 500 km

2. Transportation by container ship Container ship 10,000 km

3. Arrival harbour to treatment plant Truck 500 km

Table 33. Characterisation of the outward trip of the transportation journey associated with the “non-use” scenario.

Nota: it is assumed that the return trip will be identical to the outward trip.

5.2.2.3. Frequencies

It is estimated that the transportation needs in terms of parts to be treated

amount to one 40-feet container per week from Herstal.

It is assumed that containers are to be loaded to their maximum load, i.e. 30.5

tons83.

5.2.2.4. Greenhouse gas emissions

On the basis of the parameters mentioned above, and taking into account the

need for both an outward and return journey as well as the share of activity related

to Use-1 and Use-2 of the present AfA, the total greenhouse gas emissions

associated with the “non-use” scenario for the site of Herstal amount to:

TOTAL GHG EMISSIONS

Annual greenhouse gas emissions 1,017 tCO2e

Total greenhouse gas emissions over the review period 12,200 tCO2e

Table 34. Greenhouse gas emissions associated with the “non-use” scenario for Use-1 Nota: tCO2e = equivalent carbon dioxide ton

Taking into account the increase needs in terms of transportation alone, the

“non-use” scenario will generate the emission of around 12,200 equivalent carbon

dioxide tons. This amount corresponds to the cumulated average annual

greenhouse gas emissions of around 1,400 citizens of Belgium84 or to 110% of the

overall greenhouse gas emissions related to the energy consumption of the site of

Herstal (11,243 tCO2e in 2012).

83

https://www.cma-cgm.fr/produits-services/conteneurs 84

Considering an average carbon footprint of 8.8 tCO2e per capita for Belgium (source : Source: World Bank, CO2 emissions (metric tons per capita), 2015)

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5.3. Social impact

5.3.1. Direct impact on employment

5.3.1.1. Loss of employment

The number of jobs affected by the “non-use” scenario for Use-1 was estimated

by FN Herstal and Manroy, with the following figures:

NUMBER OF JOBS LOST JUSTIFICATION

FN Herstal, Herstal 27

Employees concerned by hard chromium

plating, maintenance and support activities

for Use-1

Manroy, Erith 1 Employee concerned by hard chromium

plating

Overall Use-1 28 -

Table 35. Loss of employment in the context of the “non-use” scenario for Use-1

Please note that, as for the calculation of the loss of revenues and profits,

underestimating hypothesis have been made for assessment of the impacts on

employment, insofar as to only take into account the employees directly concerned

by hard chromium plating activities. Since a 3-year cease of activity is foreseen in the

context of the “non-use” scenario, this assumption does appear conservative. An

uncertainty analysis regarding the loss of revenues and the impact on employment is

provided in section 5.6.

5.3.1.2. Individual cost of unemployment

The individual cost of unemployment was estimated from the point of view of

the loss of revenues for the State related to unemployment benefits, i.e. direct

unemployment benefits but also, guidance and administrative costs as well as

potential loss of revenue for the State related to social contributions and taxes:

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TYPE OF COSTS BELGIUM UNITED

KINGDOM

Public intervention

Unemployment benefits € 9,493 € 3,561

Guidance and administrative costs € 1,683 € 1,746

Subtotal for public intervention € 11,176 € 5,307

Potential loss of

public revenues

Loss in social contribution of employers € 8,474 € 2,955

Loss in social contribution of workers € 4,104 € 2,539

Loss in direct taxation € 8,240 € 4,498

Loss in indirect taxation € 1,177 € 2,710

Subtotal for potential loss of revenue € 22,267 € 12,702

Total average annual cost of an unemployed person € 33,443 € 18,008

Table 36. Average individual social cost of an unemployed person in Belgium and the United Kingdom, 2010

85

In what follows, the values of € 33,443 and € 18,008 will be used to monetise

the costs of unemployment in Belgium and in the UK, with the following

adjustments:

- Adjustment for inflation based on the change in consumer price index: 8.6%

in Belgium and 11.8% in the UK on average over the 2010-2015 period86;

- Correction for the average duration of unemployment in Europe: 15.3

months87.

Taking these corrections into account, the final average individual present

values of unemployment are € 46,264 in Belgium and € 25,665 in the UK.

5.3.1.3. Total cost of unemployment for Use-1

The overall cost of unemployment, in relation with the actual number of job

losses foreseen in the context of the “non-use” scenario and the individual cost of

unemployment are synthesised in the following table:

PARAMETER HERSTAL ERITH TOTAL

Number of jobs lost 27 jobs 1 job 28 jobs

Individual cost of

unemployment € 46,264 € 25,665 -

Total cost of unemployment € 1.2M € 0.03M € 1.3M

Total cost of unemployment,

discounted(*)

€ 1.1M € 0.02M € 1.1M

Table 37.Total cost of the loss of employment for Use-1

85

Idea Consult, on behalf of European Federation for Services to Individuals (EFSI), Why invest in employment? A study on the cost of unemployment, 2012 86

OECD, Main economic indicators, Consumer Price Index – data and methods 87

OECD Stat, Average unemployment duration in Europe

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(*): considering a 4% discount rate over the 2016-2018 period

With a loss of around 28 jobs, the “non-use” scenario for Use-1 will have an

impact on the employment at the sites of Herstal and Erith.

It is reminded that this estimate only takes into account workers that are

directly related to hard chromium plating and therefore constitutes an

underestimated assumption that does not take into account the potential impacts

on employment for the 3-year cease of activity that is foreseen to complete the

relocation process.

5.3.2. Indirect impact on employment

A quantitative assessment of indirect employment impacted by the “non-use”

scenario is complex to achieve. It is however reminded that industrial relationships

involve partners all along the supply chain and are therefore based on a network of

suppliers and subcontractors.

A study88, based on data issued by the Belgian State89 estimates to 1.83 the

multiplicative coefficient for indirect employment in the armament industry sector.

In other words, based on this study, it can be estimated that, on average, one job in

the armament industry triggers 0.83 indirect jobs.

It was furthermore estimated that, since a major share of the GPMG is

manufactured by its supply chain of Manroy, the cease of its production would

impact 15 to 20 companies and result in job losses in the supply chain alone of over

30 people.

An estimate of the costs related to this indirect impact on employment of the

“non-use” scenario is provided in the table below:

PARAMETER HERSTAL ERITH TOTAL

Number of jobs lost 23 jobs 30 jobs 53 jobs

Individual cost of unemployment € 46,264 € 25,665 -

Total cost of unemployment € 1.1M € 0.8M € 1.8M

Total cost of unemployment, discounted(*)

€ 0.9M € 0.7M € 1.6M

Table 38. Detail of the assessment of indirect job losses foreseen for Herstal and Erith in the context of the “non-use” scenario

(*): considering a 4% discount rate over the 2016-2018 period

88

GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP – Répertoire des entreprises du secteur de l’armement en Belgique, 2014. 89

Bureau Fédéral du Plan, Les multiplicateurs de production, de revenu et d’emploi 1995-2005 – Une analyse entrées-sorties à prix constants, September 2013

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The “non-use” scenario will generate indirect job losses in the supply chain of FN

Herstal and Manroy. Since the knock-on effect can hardly be characterised, the

figures obtained for such indirect costs have not been taken into account in the

risks-benefits ratio for the AfA.

5.3.3. Complementary element of analysis: total cost of the loss of

employment for the AfA

As a complement to the values obtained for Use-1, an assessment of the global

loss of employment in the context of the “non-use” scenario for the overall AfA (i.e.

cumulated for Use-1 and Use-2) was also carried out, with the following results:

PARAMETER VALUE

Number of jobs lost 48 jobs

Total cost of unemployment € 2.2M

Total cost of unemployment, discounted(*)

€ 1.9M

Table 39. Global direct loss of employment and associated costs for the AfA (i.e. cumulated for Use-1 and Use-2

(*): considering a 4% discount rate over the 2016-2018 period

5.4. Wider economic impact

5.4.1. Impact on operational capabilities and sovereignty of States

Beyond direct impacts on FN Herstal’s and Manroy’s activity, the “non-use”

scenario involves the cease of supply of new firearms ordered by States and the

cease of maintenance in operational conditions of firearms currently in service

within armed forces.

Given the diversity of customers of FN Herstal, and the intrinsic stringent

confidentiality matters at play, a quantitative assessment of such impacts cannot be

provided. Key elements, however, can be provided to outline the scope of such

impacts:

- FN Herstal serves a worldwide market and FN Herstal firearm are in

operation within several tens of armed forces on all continents;

- Armed forces rely on FN Herstal firearms. The cease of supply or the cease of

maintenance in operational condition of such firearms will greatly impede

operational capabilities and therefore sovereignty of States.

- States will have to order replacement firearms to cover the cease of supply

and/or support of FN Herstal firearms, thereby inducing over-costs and early

investments.

As a complement, the maintenance in operational conditions and the supply of

spare parts constitute key elements of the FN Herstal activity. Customers favour FN

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Herstal for this very capability to support firearms over time and a cease of supply of

such parts, be it for the defined duration needed to relocate the hard chromium

plating operations, will strongly affect customer confidence.

The “non-use” scenario will involve strong impacts on the operational

capabilities of armed forces and the sovereignty of several tens of States on all

continents.

5.5. Distributional impacts

Due to the uncertainty related to the assessment, no distributional impacts

(international trade, competition and economic development) are considered in this

AfA, even though consequences on the overall territory’s dynamism and

attractiveness are to be foreseen.

5.6. Uncertainty analysis for both the “applied for use” and

the “non-use” scenario

5.6.1. “Applied for use” scenario

5.6.1.1. Preliminary observation: uncertainty of exposure and risk values

The assessment of exposure to Cr(VI) is mainly based upon ART modelling. In

order to reduce the uncertainty on these values, it was chosen to rely on values for

the 90th percentile of exposures.

The exposure data and therefore the excess of risk of cancer used all along this

AfA for the monetisation of impacts are considered to reflect the actual exposures of

workers; no further uncertainty analysis was carried out concerning these

parameters.

5.6.1.2. Uncertainty analysis of the Value of a Statistical Life-Year

Uncertainty analysis of the costs associated to mortality and morbidity was

carried out using the lower and upper bounds of Value of a Statistical Life-Year

defined by NewExt90: respectively € 27,240 and € 225,000. Please note that these

two values are considered as less robust than the central value used for the

assessment because they are based upon survey results derived from smaller sample

sizes.

Taking into account the correction for inflation over the 2003-2015 period, the total

costs associated to mortality and morbidity for these two values amount to:

90

NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003

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COSTS ASSOCIATED TO

MORTALITY AND MORBIDITY

Considering the upper bound of

Value of a Statistical Life-Year (€ 225,000) € 4,305

Considering the lower bound of

Value of a Statistical Life-Year (€ 27,240) € 521

Table 40. Uncertainty analysis for mortality and morbidity, Use-1

5.6.1.3. Other parameters: qualitative uncertainty analysis

A qualitative uncertainty analysis of the main hypothesis, assumptions and

parameters used for the assessment of the “applied for use” scenario is provided

below:

APPLICATION PARAMETER UNCERTAINTY ANALYSIS

Mortality and

morbidity

- Standard life expectancy

- Mean age of lung cancer death

- Mean age of lung cancer diagnosis

Medium uncertainty: data used are based on the situation in France as well as on European averages and therefore do not directly relate to the situation in Belgium and the U.K.

- Disability weight Low uncertainty: the value used is specific to lung cancer

Medical

treatment

- Costs of medical treatment Medium uncertainty: the value used is specific for lung cancer but is related to France and is therefore not specific to Belgium or the U.K.

- Survival rate

Herstal - medium uncertainty: the values used are specific to lung cancer but are related to France and therefore not specific to Belgium.

Manroy - low uncertainty: the values used are specific to lung cancer in the U.K.

Table 41. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario

5.6.2. “Non-use” scenario

5.6.2.1. Uncertainty analysis of the loss of profits: growth of profits over the

review period

As stated in section 5.1.1, the assessment of the loss of profits associated with

the “non-use” scenario is based on a zero growth hypothesis over the review period.

In order to carry out uncertainty analysis over this value, a secondary assessment

was carried out taking into account a positive growth rate of revenues for FN Herstal

and Manroy over the review period.

This assessment is based on the average annual growth rate of FN Herstal over

the 2011-2014 period (12%). Considering this hypothesis and 4% discount rate, the

overall loss of profits foreseen over the review period amounts to € [100-

1,000M](#1o-1).

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5.6.2.2. Uncertainty analysis of the loss of profits and the impact on

employment: alternatives assumptions for the “non-use” scenario

As stated in sections 5.1.1 and 5.3.1, the estimate of the loss of revenues and

the impact on employment in the context of the “non-use” scenario is based (a) on

the hypothesis of a 3-year loss of revenues during the relocation process and (b) the

assumption that the loss of employment will only concern workers directly related to

the hard chromium plating line. In the light of the “non-use” scenario and the

criticality of Use-1 for the activity of FN Herstal and Manroy, these two assumptions

appear very conservative.

In order to put into perspective the monetised results obtained on the basis of

these assumptions, two alternatives scenarios are outlined in what follows:

- Alternative scenario 1: 3-year loss of revenues and temporary

unemployment of 30% of FN Herstal and Manroy employees;

- Alternative scenario 2: inability to maintain a financial balance during the

three years required for the relocation and bankruptcy of FN Herstal and

Manroy.

Alternative scenario 1

The alternative scenario 1 is based on the fact that, in order to optimise personal

expenses, a 3-year loss of the majority of FN Herstal’s and Manroy’s revenues and

would be accompanied by temporary unemployment of a significant share of

FN Herstal and Manroy employees. In the context of this uncertainty analysis, the

figure of 30% of workers temporarily unemployed is considered.

On the basis of these hypotheses, the total costs of unemployment would

amount to € 44M. This amount will be added to the economic impacts of the 3-

year loss of revenues already calculated.

Alternative scenario 2

The alternative scenario 2 considers that the “non-use” scenario generates a too

strong discrepancy between the strongly degraded financial incomes and the

maintained operational costs to ensure the overall sustainability of the activity of FN

Herstal and Manroy.

In this scenario, it is estimated that 90% of the activity will be lost and 90% of the

employees will have to be laid off.

Under these assumptions, and considering a 4% discount rate, a loss of

revenues of € [1-10B](#1o-2) over the review period and unemployment costs of €

67M are foreseen.

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5.6.2.3. Other parameters: qualitative uncertainty analysis

A qualitative uncertainty analysis of the main hypothesis, assumptions and

parameters used for the assessment of the “non-use” scenario is provided below:

APPLICATION PARAMETER UNCERTAINTY ANALYSIS

Loss of revenues,

profits and orders

- Revenues impacted by the AfA

FN Herstal - low uncertainty: the values used to estimate the loss of revenues are based on a comprehensive inventory of the categories of products concerned by the AfA, on average over the 2000-2015 period as well as on the average of the revenues of FN Herstal over the 2011-2015 period

Manroy - low uncertainty: the values used to estimate the loss of revenues are based on the revenues for the year 2016 that are considered as representative of the economic situation of Manroy over the 2018-2021 period

- Operating margin

FN Herstal - low uncertainty: the value used is based on the financial data of FN Herstal.

Manroy - medium uncertainty: the value used is the same as FN Herstal’s. Both companies are considered as having the same operating margin.

Loss of

employment

- Average individual cost of an

unemployed person

FN Herstal - low uncertainty: the values used are specific for Belgium

Manroy - low uncertainty: the values used are specific for the United Kingdom

Table 42. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario

5.6.3. Conclusion

The results of both the quantitative and qualitative uncertainty analysis

presented above do not seem to invalidate the overall results of the AfA: (a) the

assessment of the impacts of the “non-use” scenario appears underestimated as

compared to more realistic assumptions and (b) the variability for the parameters

assessed does not call into question the order of magnitude of the risk-benefits

ratio for the AfA.

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5.7. General conclusion on the impacts of granting an

authorisation

A synthesis of the monetised impacts of the “non-use” scenario is provided

below:

MONETISED IMPACTS

Economic impacts

Loss of profits € [100-1,000M](#1p)

Lost investments € 0.5M

Relocation costs € 12.1M

Social impacts Loss of employment € 1.1M

Total monetised impacts of the “non-use” scenario € [100-1,000M](#1q)

Table 43. Synthesis of the monetised impacts of the “non-use” scenario

As a complement, other impacts of the “non-use” scenario are synthesised in

the table below:

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IMPACTS ORDER OF MAGNITUDE

Economic

impacts

Loss of markets requiring the manufacture

of firearms to be carried out in the

European Union

The loss of markets requiring the manufacture of firearms in the European Union

will generate a significant loss of revenues for FN Herstal, for a duration that

would exceed the period of time needed to implement the relocation itself

Millions to tens of

millions of Euros

Loss of markets due to the increase of

lead-time related to the relocation-related

logistics delays

The increase in lead-time foreseen in the context of the “non-use” scenario would

close significant markets for FN Herstal, for which the company’s reactivity

currently constitutes a strong commercial asset that would be lost in case of

relocation of the hard chromium plating activities.

Millions to tens of

millions of Euros

Increase of operating costs The “non-use” scenario will generate a significant increase of transportation costs,

packaging costs as well as other costs related to insurance and licensing fees. Not assessed

Regulatory issues

The potential relocation of hard chromium plating activities outside the European

Union in the context of the “non-use” scenario will generate a strong

administrative burden as well as risks for the sustainability of FN Herstal’s

activities related to the regulatory framework on export and import of firearms

and firearms subcomponents.

Not assessed

Human health or

Environmental

impact

Impacts on human health From a global point of view, the “non-use” does not involve an overall reduction of

risks for workers. -

Greenhouse gas emissions

Taking into account the increase needs in terms of transportation alone, the “non-

use” scenario will generate the emission of around 12,200 equivalent carbon

dioxide tons.

12,200 tCO2e

Social impacts Indirect employment Along with direct loss of employment, indirect job losses (suppliers, sub-

contractors) are foreseen in the context of the “non-use” scenario. Not assessed

Wider impacts

Impact on the operational availability of

firearms for armed forces as well as lost

investments and loss of sovereignty for

States

The “non-use” scenario will generate strong impacts on the operational

capabilities of armed forces and the sovereignty as well as a loss of investments

for several tens of States on all continents.

Not assessed

Table 44. Other impacts of the “non-use” scenario

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6. CONCLUSIONS

6.1. Comparison of the benefits and risks

On the basis of the foregoing assessment, the socio-economic benefits outweigh

the risks arising from the use of the substance by a factor of approximately [100,000-

1,000,000](#1r).

It is reminded that this ratio only covers monetised impacts and is based on

underestimating hypothesis, notably in terms of loss of revenues and loss of

employment.

In addition to these monetised impacts, the “non-use” scenario will generate

significant other impacts, including: the loss of markets that will be closed to FN

Herstal and Manroy due to the relocation outside the EU, an increase of operating

costs, stringent regulatory issues and safety of supply issues, impacts on human

health, greenhouse gas emissions as well as a loss of sovereignty and loss of

investments for sovereign States that are customers of FN Herstal and Manroy.

6.2. AoA-SEA in a nutshell

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APPLICATION FOR AUTHORISATION

APPLICANTS:

SUBSTANCE:

FN Herstal and Manroy

Chromium trioxide

USE: Use-1

Industrial use of chromium trioxide in the hard chromium coating of military small- and medium-caliber

firearms barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses, in order to

provide hardness, heat resistance and thermal barrier properties, as well as corrosion resistance, adhesion

and low friction properties

ANALYSIS OF ALTERNATIVES

The main functional properties sough-after by FN Herstal and Manroy with chromium trioxide include: hardness, heat resistance and thermal barrier properties,corrosion resistance, efficient coverage of complex or inner shapes, preservation of tolerances, as well as chemical barrier properties, adhesion properties andfriction properties.

SOCIO-ECONOMIC ANALYSIS

As per Art. 60(4) concerning the Socio-economic assessment route, evidence

was provided that the socio-economic benefits outweigh the risks arising

from the use of the substance by a factor of approximately

Non-monetised impacts of the “non use” scenario involve include the loss of

markets that will be closed to FN Herstal and Manroy due to the relocation

outside the EU, an increase of operating costs, stringent regulatory issues

and safety of supply issues, impacts on human health, greenhouse gas

emissions as well as a loss of sovereignty and loss of investments for States

that are customers of FN Herstal and Manroy.

AoA – SEA IN A NUTSHELL

Monetised impacts of the "non use" scenario:

€Monetised impacts of the "applied for use" scenario:

€ 1,106

A significant work of research carried out internally and through partnerships with external research centres led to identify two potential alternative processes to

hard chromium plating for the surface treatment of firearm barrel bores and auxiliary parts: deposition of chromium from a Cr(III) electrolyte (Alternative 1) and

vacuum process with Physical/Chemical Vapour Deposition process (Alternative 2).

The level of maturity of Alternative 1 and Alternative 2 is low. No potential alternative will be developed,

industrialised and qualified before the sunset date of chromium trioxide and a twelve-year review

period is needed to achieve substitution.

Loss of profits94%

Loss of investments0.2%

Relocation costs5%Loss of employment

0.5%

Use-1

Medical treatment3%

Mortality and morbidity97%

Use-1

(#1u)

[100,000-1,000,000](#1s)

[100-1,000M](#1t)

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6.3. Information for the length of the review period

On the basis of the arguments put forward, and in order to develop,

implement and qualify a substitution process, FN Herstal and Manroy apply for a

twelve-year review period.

6.4. Substitution effort taken by the Applicants if an

authorisation is granted

If an authorisation is granted, FN Herstal and Manroy will pursue the

substitution process described in section 4.2.

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8. ANNEX – JUSTIFICATIONS FOR CONFIDENTIALITY

CLAIMS

Confidential business information was blanked out in the public version in order

to preserve the confidentiality of strategic data of the present AfA.

The following table provides a justification for confidentiality of the blanked out data

of this document.

BLANKED OUT

ITEM REFERENCE

PAGE

NUMBER JUSTIFICATION FOR CONFIDENTIALITY

#1 8, 62, 64, 65,

79, 81, 83

Strategic data: the blanking of these data is made

necessary by the blanking of data concerning the

profits of the Applicants.

#2 25, 33 Strategic data: the blanked out data are strategic

process parameters.

#3 50, 51 Strategic data: the blanked out data concern future

innovations and cannot be publicly disclosed.

Table 45. Justifications for confidentiality claims

Please note that, wherever possible, and in order to not affect the

understanding of the application, an effort was made to provide range of values for

key confidential data. These data ranges are presented in square brackets, e.g.

[10-100].

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9. APPENDIXES

9.1. Main competitors of FN Herstal

COUNTRY COMPETITOR HANDGUNS RIFLES MACHINE

GUNS

Abu Dhabi Caracal X X

Austria Glock X

Steyr X

Brazil Taurus X

Imbel X

Canada Colt Canada X X

Czech Republic Ceska Zbrojovka X X

Croatia IM Metal Company X

Finland Valmet X

Sako-Beretta X

Germany

Heckler & Koch X X X

Sig Sauer X X

Walther X

India Ordnance Factory Board X X

Italy Beretta X X

Israel IWI X X X

Japan Howa X

Korea Daewoo X X

Malaysia SMEO X

Poland Fabryka Broni Łucznik X

Singapore ST Kinetics X X

South Africa Denel Island X X

Switzerland KRISS Arms AG X

United States

Colt Defense X X

General Dynamics X

Manroy USA X X

Barret X

US Ordnance X

Sig Sauer USA X X

Smith & Wesson X X

Springfield Armory X

ADCOR Defense X

Lewis Machine & Tool X

Ruger X X

Knight’s Armament X

LWRC & Rock Rivers Arms X

Ohio Ordnance Works, Inc. X

Table 46. Main competitors of FN Herstal, by country and product categories

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9.2. Focus on barrel failure modes

The decreased hit probability may arise from three types of barrel fatigue failure

modes91,92,93:

- forcing cone wear,

- copper deposit,

- Muzzle wear.

These three failure modes are illustrated in Figure 7 below and described in

what follows:

Figure 12. Barrel fatigue failure modes

❶ Forcing cone wear

The forcing cone is the beginning of the rifling in the barrel bore and the

interference between the projectile jacket and the barrel (called swaging). The main

purpose for rifling the barrel is to stabilize the projectile by rotation when it exits the

barrel. Before the forcing cone, the projectile has a “free” fly; it is not constrained

and hence it is accelerated without being guided.

In case of wear of the forcing cone, the projectile is not sealed anymore in the barrel.

Combustion gases can escape around the projectile, resulting in a decreased

projectile velocity at the muzzle. Additionally, since the projectile is not constrained

and has a “free” fly, when the rifling eventually starts it is possible that the projectile

is not aligned anymore with the barrel axis. Hence, when exiting the muzzle, the

projectile rotation is not aligned with its symmetry axis and the projectile loses

stability. At short striking distance, it is noticed by an obliquely striking mark. At

longer range, the projectile drag coefficient increases rapidly and the projectile is not

stable anymore.

This phenomenon is best described by barrel diameter measurements and

barrel endoscopic pictures.

Barrel diameter is measured with reference (barrel diameter 0) at muzzle. As

described in Figure 13 below, the barrel wear is progressing from the chamber

towards the barrel muzzle.

91

Allsop and al, Brassey’s essential guide to military small arms - Design principles and operating methods, p89. Londres: Brassey’s, 1997 92

Hypervelocity guns and the control of gun erosion, Washington: National Defense Research Committee, 1946 93

Handbook on Weaponry, Rheinmetall Gmbh, 1982

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Figure 13. Barrel wear as a function of barrel length, for new and end-of-life barrels

The corresponding barrel bore pictures are represented below.

Figure 14. Barrel bore pictures, for new barrel (left) and end-of life-barrel (right)

This failure mode encompasses nearly all barrels fatigue failures encountered.

❷ Copper deposit

Copper deposit is related to the composition of the projectile jacket, made of

brass. Due to the high temperature flame, the brass sublimates from the projectile

jacket and deposits on the barrel. The deposits preferably fill the barrel groove, and

could lead to a reduced bore diameter. Because the copper is filling the grooves, the

rifling is not effective anymore. Projectile stabilisation by rotation is harmed. A

similar phenomenon to the one described in “① Forcing cone wear” occurs,

projectile becomes unstable.

This phenomenon is best described by the following pictures (copper deposit is

the blue part of the picture).

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Figure 15. Copper deposit (blue part of the picture)

Barrel failure due to copper deposit is very rarely encountered. The main

parameter that leads to excessive copper deposits is ammunition characteristics:

brass and powder composition. It can also be avoided by appropriate barrel

maintenance.

❸ Muzzle wear

Muzzle wear occurs when the projectile centrifugal forces become very

important, when the projectile jacket is hard or when the projectile jacket is worn

out and the hard projectile core rubs the barrel. The centrifugal forces are

proportional to the projectile velocity. The projectile velocity is at its maximum at the

muzzle. When the muzzle erodes at a faster rate than the rest of the barrel, the

conical shape of the bore is inversed: the projectile is not guided (swaged) when

exiting the barrel muzzle. Similar phenomenon to the one described in “① Forcing

cone wear” occurs and projectile becomes unstable.

Muzzle wear occurs for hard jacket projectiles with velocities larger than

950m/s. Such conditions are rarely encountered for the ammunition calibers used at

FN Herstal.

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9.3. DGA’s position for the maintained use of hexavalent

chromium for barrel bore hard chromium plating of

small-calibre firearms

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9.4. Framework for the export of armament

9.4.1. Belgian and European legal framework

LAW CONTENT

Loi du 5 août 1991

On the import, export, transit and the fight against the trafficking of arms,

ammunition and equipment intended specifically for military use or law

enforcement and related technology. This law establishes the general

framework of export transactions, import and transit of weapons and

military equipment in Belgium.

Arrêté royal du 25 mars

2003

Amending the law of 5 August 1991 on the import, export, transit and the

fight against the trafficking of arms, ammunition and equipment intended

specifically for military use or law enforcement and the related technology.

This law regulates brokerage operations.

Loi du 26 mars 2033

Amending the law of 5 August 1991 on the import, export, transit and the

fight against the trafficking of arms, ammunition and equipment intended

specifically for military use or law enforcement and the related technology

Arrêté royal du 2 avril

2003

Amending the Royal Decree of 8 March 1993 regulating the import, export

and transit of arms, ammunition and equipment intended specifically for

military use and related technology.

Arrêté royal du 16 mai

2003

Relating to the license under section 10 of the Act of August 5, 1991 on the

import, export, transit and the fight against the trafficking of arms,

ammunition and equipment intended

specifically for military use or law enforcement and related technology.

Loi spéciale du 12 août

2003 Amending the Special Law of 8 August 1980 on institutional reforms.

Décret du 21 juin 2012 On the import, export, transit and transfer of civilian weapons and defense-

related products

Directives européennes

91/477/CEE et

93/15/CEE

On all firearms, ammunition and spare parts with the exception of arms and

ammunition, their parts and military equipment. These guidelines allow the

introduction of simplified procedures in the context of transactions within

the EU, on hunting, sports and defense weapons (including parts,

components and ammunition).

Directive européenne

2008/51/CE

Amending Directive 91/477 / EEC. This Directive establishes a system of

traceability for civilian use weapons.

Directive 2009/43/CE Simplifying terms and conditions of transfers of defense-related products

within the Community

Règlement européen

428/2009

Establishing a Community system of export control of goods and dual-use

technologies

Règlement 1232/2011

Amending Regulation 428/2009.

This Regulation introduces five new General Export Authorisations of the

Union and provides more uniformity regarding the use and control of such

authorization.

Règlement 258/2012

Implementing Article 10 of the UN Protocol against the Illicit Manufacturing

of and Trafficking in Firearms, Their Parts and Components and

Ammunition, supplementing the UN Convention against transnational

organized crime (Protocol on weapons fire), and establishing export

authorization and measures regarding the import and transit of firearms,

their parts and components and ammunition.

Table 47. Belgian legal framework related to the export of armament

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9.4.2. European Code of Conduct on Arms Export

The European Code of Conduct on Arms Export defines eight main criteria for

the arms export:

CRITERION CONTENT

Criterion 1

Respect for the international commitments of EU member states, in particular the

sanctions decreed by the UN Security Council and those decreed by the Community,

agreements on non-proliferation and other subjects, as well as other international

obligations.

Criterion 2 The respect of human rights in the country of final destination

Criterion 3 The internal situation in the country of final destination, as a function of the

existence of tensions or armed conflicts.

Criterion 4 Preservation of regional peace, security and stability.

Criterion 5

The national security of the member states and of territories whose external

relations are the responsibility of a Member State, as well as that of friendly and

allied countries.

Criterion 6

The behaviour of the buyer country with regard to the international community, as

regards in particular to its attitude to terrorism, the nature of its alliances and

respect for international law.

Criterion 7 The existence of a risk that the equipment will be diverted within the buyer country

or re-exported under undesirable conditions.

Criterion 8

The compatibility of the arms exports with the technical and economic capacity of

the recipient country, taking into account the desirability that states should achieve

their legitimate needs of security and defence with the least diversion for

armaments of human and economic resources.

Table 48. Criteria of the European Code of Conduct on Arms Export94

94

European Union – The Council, European Union Code Of Conduct On Arms Exports, 5 June 1998