www.whitecase.com kita seminar kris pollet white & case llp brussels seoul, december 17, 2004

www.whitecase.com

KITA seminar

Kris PolletWhite & Case LLP

Brussels

Seoul, December 17, 2004

WEEE/RoHS: update on latest developments / next steps

Overview

This presentation is not comprehensive in terms of WEEE/RoHS developments, but only covers a selected number of implementation issues.

13 RoHS Exemption Requests

Grey Area Products

Marking of Products

Information for Treatment

Change Separate Treatment?

Enforcement

Expand RoHS??

13 RoHS exemption requests

Only 11 subject of study, and consultant and most MSs seem willing to grant them:

Pb in optical transceivers for industrial applications: withdrawn by applicant

Pb in solders for electrical connection inside IC packages – Flip Chips: no further info received by application – EC lost contact details…

Pb in solders for servers, storage array, network infrastructure: is considered safety critical – want to avoid breakdown

Others: mercury in straight fluorescent lamps for special purposes; light bulbs; Pb in compliant pin Very High Density Medium connectors; Pb coating for thermal conduction module c-ring; Pb & Cd in optical and filter glass; Pb in solders inside microprocessors (>85% Pb); Pb in high melting temperature type solders; safety equipment for fire and rescue services

Dec 10 TAC: expected vote on basis of EC proposal to amend Annex of RoHS

Exemptions to be reviewed by July 2010; if no justification, terminate exemption (Article 5.1.c)

13 RoHS exemption requests

2 special requests: not part of study

Deca BDE: Comprehensive Risk Assessment finally concluded in May ’04 (Ireland rapporteur) – no risk to human health or environment – majority of TAC & EC seem in favour of excluding Deca from RoHS ban – BUT Denmark & Sweden (?) want to ban on basis of precautionary principle – long awaited EC proposal at Dec 10 TAC?

Danish Parliament only narrowly rejected a vote to impose Deca ban

Norway considering a Deca BDE ban

Pb in lead-bronze bearing shells and bushes: EC and majority of TAC seem in favour of granting because this is already exempt under the End of Life Vehicles directive

Other exemption requests

Use of non-RoHS compliant parts in refurbishment of « old » EEE: usually for B2B leasing – EC: no problem if refurbished product marketed as « refurbished », but if product marketed as « new »? – EC: maybe grant a time-limited exemption – MSs: maybe need a generic, not sector specific exemption; and maybe only in cases where a closed loop can be proven – EC proposal at Dec 10 TAC?

Additional requests received: as of Sept 15 cut-off date EC had received 26 additional requests – but covered only about 18 product groups – EC uses “check list” to make first selection: safety critical? scientific/technical information provided? submitted by more than one applicant? etc – EC needs to locate funding for a new consultant’s study (not before start of 2005) – will need public stakeholder consultation (Art. 5.2) – it is likely conclusion will not be available before end 2005 – vote in TAC before July 2006??? – if not, EC will probably grant “temporary exemption” or “grace period” until confirmed or rejected by vote

Grey area products

EC / TAC approach: criteria, grey area products table

TAC tries for agreement on criteria (some MSs refuse)

EC has received over 40 requests for clarification: is this product in or out of WEEE/RoHS scope?

EC submits requests to TAC for comments

If agreement, includes in grey products table

If not, EC will try to push through its own interpretation

But, MSs are not obliged to follow this ‘table’

It is likely you will have national differences

UK: pushes « due diligence » approach

UK does not believe in grey products table approach – unpractical

Companies should reach their own judgement in good faith, or after getting independent legal advice

Grey area products

(UK approach – cont’d)

But can get non-binding advice from officials (who will keep a database of prior responses)

Have developed decision-tree approach to assist on this (based largely on draft TAC criteria)

If your interpretation is challenged, you will need to prove that you « took every reasonable step » and « excercised all due diligence » to ensure compliance

Ultimately, only national courts / European Court of Justice can give a binding legal interpretation

Same due diligence defence applies in RoHS context => to be susbstantiated by supplier declarations, sample tests, etc

Grey area products

Products examined by TAC so far (not comprehensive):

RFID – Radio Frequency Identification Device: if it’s on the packaging, out of scope. If it’s on the product, in the scope.

Electrical scooters in airports: not covered; but if used for leisure purposes: covered under category 7

Space products: unclear (Art 2.1 WEEE?)

Fridges, Airco etc for caravans and motor homes: depends on whether caravans and motor homes fall under ELV

Marking of products

Art. 10.3: mark EEE with crossed-out wheeled bin

if necessary, can be printed on packaging, or on the instructions for use, or on the warranty

symbol must be visible, legible, and indelible (Annex IV)

Art. 11.2: producer clearly identifiable by mark on EEE; mark if product is put on market after 13/8/2005; EC to promote EU standards on this

CENELEC draft standard prEN 50419

marking must also be accessible and durable

if not possible on EEE, can be on flag on fixed supply cord, on operating instructions or warranty

if above does not apply: shall be on packaging

Marking of products

If standard is not ready by 13/8/2005?

legal requirement to mark remains valid

use the draft standard,

or any other marking that complies with Art’s 10.3 & 11.2

CENELEC standard will in any case remain voluntary and non-binding

Information for treament

Art. 11.1 requires:

to facilitate environmentally sound maintenance, upgrade, refurbishment, and recycling

Member States must ensure that the following measures are taken:

producers to provide reuse and treatment info for 1) each type of new EEE, 2) within one year after placing on market

information shall include (only to allow compliance with directive provisions) 1) the different EEE components and materials, 2) location of dangerous substances and preparationsin the form of 1) manuals, or 2) electronic means

Information for treatment

Most MSs have not dealt with this in detail yet

UK: seems to take a cautious approach

producers are allowed only to respond to info requests when they arise

producers can ‘reasonably’ be asked to provide info on location of items and substances covered by Environment

Agency’s guidance on treatment, or on dangerous substances or components in general

Ireland: preparatory Task Force recommends:

producers should “facilitate” development of guidance documents on recycling, materials handling, waste classification

Change Separate Treatment?

WEEE Art. 6 & Annex II lay down selective treatment requirements

Would involve manual removal of components, substances

= very costly

For minimal or no environmental gain?

NL University of Delft eco-efficiency research questions several Annex II requirements

LCD’s > 100cm2 – very low eco-efficiency

Electrolyte capacitors – very low eco-efficiency

BUT: PCBs in mobile phones can be treated in smelters which enables recycling of precious metals (profitable!)

Research results have twice been presented to TAC members

Initial reaction appears to have been positive

Enforcement

WEEE Art 15 & RoHS Art 8

MSs to determine penalties that are effective, proportionate & dissuasive

WEEE Art 16

MSs to ensure that inspection & monitoring enable proper implementation of diretive to be verified

A certain ‘honeymoon’ or ‘grace period’ will probably be observed by most regulators

Achieving compliance is hard enough as it is (in particular with a lot of guidance still missing), so « let’s not rock the boat too quickly »

National enforcement structures/agencies still need to be established, appointed, or organised in most MSs

Enforcement

But honeymoon will not last, in particular with RoHS

Assuming that it will not be strictly enforced is dangerous, and will lead to growing free rider behaviour

UK:

RoHS: DTI to enforce; will be able to 1) make test purchases, 2) carry out tests, 3) request compliance documents, 4) issue remedial compliance measures in case of breach

WEEE: various regional agencies (Environment Agency for England & Wales; powers have not been fixed yet

Steven Andrews (DTI): national enforcement authorities will exchange information on non-compliant products

Enforcement

Ireland Task Force recommendation:

Enforcement must be priority, penalties must be real deterrent, inspectors must be properly trained, need clear and consistent methodology, focus on RoHS compliance

Denmark

Has an established structure (Chemicals Inspectorate) that enforces existing Pb ban, with developed working methods

Netherlands

Established structure, existing working methods, and a track record…

Enforcement

Imposing financial penalties, or even criminal prosecution, will probably only be 2nd or 3rd options

Imposing remedial measures to achieve compliance will probably be 1st choice

BUT remedial measures could be much more costly than a financial penalty…

Expand RoHS??

Art. 6 Review

Before 13 February 2005

Present proposal for including categories 8 & 9 into scope

Study need to adapt the substance ban, on basis of precautionary principle

Deadline will be missed

No apparent room for not including cat’s 8 & 9

Proposal to EP & Council: will take 1-2 years to adopt

Include new substances in RoHS ban??

Expand RoHS??

Add new substances to RoHS ban?

Current majority approach: await/allow compliance with 6 substance ban first

So: too early to expand?

Several elements may play a role:

Substance declarations (Green Sheet, JIG) cover a much wider number of substances than RoHS 6

This draws attention to other substances

And real ban is broader anyway: 76/769 bans PCBs, azo- colourants, etc

Other EU policy initiatives could have impact: PVC, nickel, phthalates, other brominated flame retardants, etc

REACH will inevitably lead to more restrictions / bans

Expand RoHS??

Which substances could be targeted first?

Berylium (Berylium Oxide) – been mentioned in press reports – some recyclers already remove it – is considered as toxic as lead

Arsenic – is even more toxic than lead

Bismuth – heavy metal

TBBPA – Tetra Bromo Bisphenol A – brominated flame retardant – currently undergoing comprehensive risk assessment

However, since hazardousness/toxicity of these substances is usually known, they are only used if really needed, i.e. in critical applications

If banned, you would probably need a lot of exemptions

Restrictions may emerge through EuP or REACH

Energy Using Products – update & state of play

Energy Using Products – EuP

Commission proposal for a Directive on establishing a framework for the setting of Eco-design requirements for Energy-Using Products – August 2003:

The proposal aims to improve the environmental performance of energy-using products.

The proposal aims to facilitate free movement of goods across the EU.

The proposal does not introduce directly applicable requirements for specific products.

The proposal establishes a framework: i.e. defines criteria and conditions for setting requirements regarding environmentally relevant product characteristics (such as energy consumption), through implementing measures to be adopted by the Commission on the basis of this framework.

EuP – Procedure

First reading: The European Parliament proposed amendments in April 2004

The Council reached Political Agreement in June 2004

The Council adopted a Common Position in November 2004

Second reading: The European Parliament will examine the Common Position and

present its second reading text in spring 2005

Final adoption: The Directive is expected to be adopted at EU level in the second

half of 2005

The following analysis has been conducted on the basis of the text of the Common Position adopted in November 2004.

EuP – Definition & Scope I

“Energy-using products”: products that, in order to operate as they are intended to operate, require some energy input, such as electricity, fossil fuels and renewable energy sources.

Examples: electrical and electronic devices or heating equipment

Parts that require energy input, are intended to be incorporated into an EuP and are intended as individual parts for end-users(e.g. battery charges) – included

Means of transport for persons and goods – excluded

EuP – Definition & Scope II

Eco-label:

Products that have been awarded an Eco-label will be considered as compliant insofar as the Eco-label meets the requirements of the implementing measure.

EMAS:

The EMAS system can be used to demonstrate compliance. EMAS does not however grant presumption of compliance.

EuP – Conformity Assessment

If an EuP falls in the scope of an implementing measure, then the manufacturer is required to carry out an assessment of the EuP’s conformity with the requirements provided by this implementing measure.

Manufacturers will be able to choose between the “internal design control” set out in Annex IV of the Directive and the management system under Annex V.

EuP – Implementing Measures I

Once the EuP Directive is adopted, the Commission will enact implementing measures on specific grounds and environmental aspects (e.g. energy consumption, waste generation, water consumption, extension of lifetime).

Implementing measures will be enacted after impact assessment and after consultation with Member States and interested parties.

The Commission will be assisted by a regulatory Committee.

EuP – Implementing Measures II

Criteria according to which an EuP can be covered under an IM:

More than 200,000 units of the EuP to be traded in the EU in a year

Significant environmental impact within the EU

Potential that the EuP’s environmental impact will improve after application of the implementing measure without entailing excessive costs – e.g.

If no other relevant EU legislation exists

If market forces fail to make an environmental improvement

If EuPs available on the market with similar functionality have very different environmental performance

EuP – Implementing Measures III

Other parameters to be taken into account when drafting an IM:

Life cycle of the EuP

Impact assessment carried out on the environment, consumers and manufacturers

Voluntary agreements by the industry and other self-regulation

Consultation with stakeholders

The European Climate Change Programme

Member States’ existing environmental legislation

EuP – Implementing Measures IV

Criteria to be met by the IM:

The IM must not significantly worsen the use and functionality of the EuP

The IM must not adversely affect health, safety or the environment

The IM must not significantly increase the lifecycle cost of the EuP

The IM must not significantly worsen the manufacturers’ competitiveness within or outside the EU

The IM must not indirectly require the adoption of proprietary technology by manufacturers

The IM must not impose excessive administrative costs to the manufacturers

EuP – Ecodesign Requirements

Ecodesign requirements will be introduced through the implementing measures according to Annex I and Annex II of the Directive.

Annex I – generic ecodesign: requirements aiming to improve the overall performance of a product

Annex II – specific ecodesign: requirements on a selected environmental aspect of the product, such as energy consumption during its use

The Directive also allows for the adoption of no ecodesign requirements for specific cases.

If necessary, the Commission will adopt guidelines to accompany the ecodesign requirements.

EuP – Working Plan

To be prepared by the Commission: After consultation with the Consultation Forum (Member States &

industry)

Within 2 years after the adoption of the EuPs Directive

What is the working plan? An indicative list of product groups

Implementing measures to be adopted on the basis of this indicative list

Three-year time span

List to be amended periodically

EuP – Other Directives affected

Directives amended

92/42/EEC

96/57/EC

2000/55/EC

Directives repealed

78/170/EEC

86/594/EEC (existing national implementing measures will apply until IM under the EuPs Directive are adopted)

EuP – Final Provisions

The Commission will be assisted by a regulatory Committee

A Consultation Forum with Member States’ representatives and industry will advise the Commission

The Commission will review the EuP Directive 5 years after its adoption

Member States will:

Transpose the EuP Directive within 2 years after its adoption

Determine penalties for non-compliance of the EuP Directive

EuP – European Parliament I

Amendments proposed in April 2004 included:

Legal basis: introduce environmental basis in addition to internal market (not accepted)

Preliminary list of which products should be affected first included heating, electric motor systems, lighting, domestic appliances, office equipment, consumer electronics and HVAC systems

More information available to consumers on appliances by the manufacturer as well as instructions

Ecodesign board: environmental NGOs, consumers and manufacturers (partly accepted – Consultation Forum)

EuP – European Parliament II

The Council’s Common Position included 23 out of the 78 proposed amendments:

Common Position to be formally sent to the EP on 12 December

Draft recommendations to be discussed in the Environment Committee before 17 February

Vote in the Committee on 14-15 March

Second reading text to be voted in plenary in April

EuP – Common Position v COM(2003)453 I

Compared to the Commission proposal of August 2003, the Common Position:

Specifies 200,000 units/year of the EuP traded in the EU

Clarifies “potential for improvement” adding:

No EU legislation

Market forces failure

Similar EuP with different environmental performance

EuP – Common Position v COM(2003)453 II

Includes a longer list of parameters to be taken into account adding:

The ECCP

Existing legislation in Member States

Proprietary technology

Administrative costs to manufacturers

Creates Consultation Forum

Provides that Working Plan with priority list will be adopted within 2 years after the adoption of the framework

Sets that priority measures will be adopted on EuP’s with high potential of GHG reduction (ECCP)

EuP – Final adoption

Final adoption is expected no earlier than summer 2005

The proposed Directive lays down a framework no immediate legislation would need to be adopted

However, within the next few years, product groups will be selected on the basis of specific criteria legislative requirements to be adopted as a result

EuP – Summary of Provisions

Certain EuP’s to be designed according to certain requirements

These requirements to be set out in future implementing measures (IM)

IM to be decided by regulatory committee of Member State officials

IM to cover only products sold in more than 200,000 units per year in the EU

Motor vehicles to be excluded

Products that conform to European or international standards to be considered compliant

Manufacturers of sub-components to provide information on the environmental impact of parts

Commission to set working plan to develop IM

Voluntary initiatives by the industry to be taken into account when preparing IM

EuP – Reactions in the industry I

Business federations: IM only if market forces fail

Clarify link with WEEE, RoHS and IPP

Ensure involvement of stakeholders

Ensure enforceability of generic requirements

Orgalime (mechanical, electrical, electronic and metalworking industries):

Priority to voluntary measures

Proper involvement of industry

Against mandatory Life-Cycle Analysis

EuP – Reactions in the industry II

UEAPME (crafts and SMEs employers in Europe):

Against an over-ambitious approach

Difficult for small enterprises to conduct Life-Cycle Analysis

Environmental NGOs:

Weak & generic

Against single framework Directive on ecodesign both for electrical and electronic equipment and for energy efficiency requirements

Registration, Evaluation, and Authorisation of Chemicals “REACH”: latest

developments

Background

A single system to replace over 40 existing legal measures for gathering information, assessing risks to human health and the environment and authorizing or restricting the marketing and use of individual chemicals produced or supplied in the EU

To apply to the manufacture, import, placing on the market or use of substances, on their own, in preparations or in articles

If a substance does not fulfil the registration requirements set forth in the REACH proposal, its marketing in the EU will be prohibited: no data = no marketing

Main Elements of REACH System

Registration

Evaluation

Autorisation

Reduced requirement for articles

Creation of a European Chemicals Agency

The Story So Far

Internet consultations on draft text (May/July 2003)

Commission proposal (October 29, 2003)

First European Parliament report late 2003 (Environment Committee - Rapporteur Guido Sacconi, PSE, I). Second Sacconi report expected in February 2005 - First reading opinion expected by end 2005

Council first reading began in November 2003. Intensive work programme for proposal under Dutch Presidency - Political Agreement expected April 2005 (?)

Dialogue with Stakeholders has continued and continues. Stakeholder workshops held November 2003 and April 2004: Memorandum of Understanding between UNICE/CEFIC and Commission (results expected in March 2005)

Competitiveness Council 25-26/11/04

Agreement that costs of REACH for business, especially for Small and Medium-Sized Enterprises (SMEs), are too high.

Recommends that Commission take steps to reduce bureaucracy involved in implementation of REACH to a minimum and urges effective cooperation between companies on data-sharing

Agreement on UK/Hungary proposal to introduce mandatory cost and data sharing in REACH registration stage: obligation to compensate firms which are forced to surrender commercial data for joint registrations. Industry disagrees with mandatory data-sharing, except for vertebrate testing.

Agreement on more information requirements for low volume substances. Industry dissatisfied with this proposal (cost of registration)

Council will express firmer approval after experts have completed further work on details (AHWG).

Council Approach: efficient and fast-track

Ad hoc working group (AHWG) of representatives of national Competitiveness and Environment Ministries.

First stage: high-level reading of proposal to improve understanding, during which Commission explained text article by article and answered questions from Member States. Ccompleted mid-March 2004.

Second stage: AHWG focus on identifying issues for policy debates. Major proposals for cross-cutting tabled by Member States.

Workshop October 25-27, 2004 to review 36 impact studies published so far on costs and benefits (EU2004REACH report).

« Footnote paper » expected by end of 2004

European Parliament: confused procedure

Resumed work in October 2004. 9 separate Committees expected to issue their Opinions.

Rapporteur Sacconi has expressed his support for Commission proposal and urged representatives of Member States not to make significant changes.

Inter-Committee stakeholder hearing (ENVI/ IMCO/ ITRE) on January 19, 2005

Sacconi’s second report expected by mid-February 2005

Environment Committee vote to take place during summer 2005 (?)

EP plenary 1st reading vote not expected before end 2005

Further Impact Studies

Further specific studies on cost-effectiveness of REACH

Inclusive process, involving chemicals industry, downstream users, trade unions and NGOs

Transparent process of investigation and validation

Results expected in March 2005

EU industry hopes consultations will lead to redrafting of proposal. Commission does not plan to change proposal (?)

Identification of issues for further investigation

1. Substance withdrawal and chemicals supply chain

2. Impact on innovation

3. Impact on New Member States

Industry Consortium Studiesof Supply-Chain and Innovation

Working Group meets about once a month - includes industry stakeholders, trade unions, environmental NGOs and Commission officials.

High-level Group (includes Commissioners and representatives of Council, EP, industry, trade unions and environmental NGOs - First meeting January 2005, after substantive requests have been received).

Supply-chain and innovation studies carried out by KPMG consultants for industry-consortium (expected March 2005)

Automotive industry

Hi-tech electronics

Inorganic materials (REACH Alliance)

Flexible packaging

Commission staff (JRC/IPTS) carry out study of New Member States

Further developments

EC Interim Strategy: RIPs and SPORT

Reach Implementation Projects – RIPs

First EC attempt to identify implementation problems & draw up guidance to deal with them

Stakeholders involved (e.g. DUCC)

Strategic Partnership On Reach Testing – SPORT

For 9 substances go through registration/evauation procedure

Purpose: test the procedure, not the substance

Involvement of independent facilitators & all necessary actors

Started Sept 04 – end July 05

2005 Timeline

January 19, 2005: EP Inter-Committee stakeholder hearing

February 2005: Sacconi report issued

March 2005: Industry consortium impact studies ready

April 2005: Council political agreement?

Summer 2005: EP Environment Committee vote

July-August 2005: SPORT results available

2nd half 2005: EP plenary 1st reading vote

Specific requirements for articles

The Commission has softened its proposal since the Internet Consultation

Registration of any substance incorporated in an article when:

total amount present is over 1 metric ton per year and per article type;

classified as hazardous under Directive 67/548/EEC;

intended to be released during normal and foreseeable conditions of use.

Notification is required for substances in articles:

supplied in quantities over 1 metric ton per year and per article type;

classified as hazardous;

likely to be released during normal and foreseeable conditions of use (unintended);

quantity released may adversely affect human health or the environment;

Agency may decide on the basis of the notification that full registration is required for such substances.

Specific requirements for articles

Article 6 of REACH and discrimination against non-EU

producers of articles : EC claims that obligations for substances in imported articles are

slightly easier than for articles produced in the EU;

importer of an article only has to consider substances classified as dangerous which may be released during use;

Article 6 becomes applicable only 11 years and 3 months after REACH comes into force;

EC guidance document on Substances in Articles will be developed.

Council position on articles

Council questions workability and enforceability in particular where companies should be aware that dangerous substances are likely to be released from articles.

Some Member States point out that producers of articles in the EU may suffer competitive disadvantages in relation to importers of articles from non-EU producers.

Proposal to limit to only very high concern substances used in articles (CMRs, PBTs and vPvBs)

Discussion in AHWG to combine the information requirement limited to only substances of very high concern in articles with the extension of the “right to know” to professional customers.

Case study: car industry

Manufacturers or importers, rather than the public authorities, responsible for ensuring that substances, and in certain instances substances in articles, are safe to use

Information up and down the supply chain: responsibility is shared between chemical manufacturers and downstream users (DU)

Car manufacturers consider as a DU / But in case a car manufacturer actually produces a substance/preparation, then he would be considered a producer and would have to abide with all the obligations provided for producers

Cars and car components which contain substances classified as hazardous have to be registered in quantities of 1 metric ton or more

Consortia of companies which collaborate to collect and supply data is encouraged

Duty to ensure that it is handled according to the chemical manufacturer’s recommended risk management measures

Case study: car industry

Clarifications are necessary:

“intended to be released under normal and reasonably foreseeable conditions of use” in Article 6.1(c)

likely to be released…even if that release is not an intended function of the article” in Article 6.2(c)

Does it cover accidental leakage of substances (for instance during a car crash)?

Are car crashes excluded from “reasonably foreseeable condition of use”?

How to assess whether the quantity released may be of concern to human health or the environment ?

KPMG impact study would be important to address these issues (expected March 2005)

www.whitecase.com kita seminar kris pollet white & case llp brussels seoul, december 17, 2004

Documents

application ec

applicant pb

environment majority

basis of ec proposal

awaited ec proposal

proven ec proposal

product groups ec

rohs ban