RoHS Recast, Dodd-Frank Act Top Distributors’ Legislative Concerns

Many electronic components distributors have become adept at managing the government rules and regulations surrounding the products they sell to customers around the world, serving as gatekeepers and disseminators of information on a wide range of products and issues. This is due in no small part to the European Union’s Restrictions on Hazardous Substances (RoHS) initiative, which went into effect in 2006 and is now undergoing changes that will broaden the scope of the directive beginning in 2014.

In addition, a new law in the United States aimed at stemming trade in what is known as “conflict minerals” may well be the next big issue on the horizon—and both subjects are topping many distributors’ lists of current environmental and legislative concerns.

There is no shortage of environmental and sustainability standards governing commerce these days, and there is no doubt more to come as energy efficiency and sustainability take on a more prominent role around the world. Globally, more countries are adopting their own versions of energy-efficiency and sustainability directives. As a result, distributors of electronic components are finding themselves on the front lines of data collection and reporting tasks as they seek to keep detailed records of the safe use and compliance of the products they stock.

“I feel somewhat sorry for manufacturers because they get bombarded with requests from distributors… who are collecting data on a product-line level [to meet rules such as] RoHS and REACH (the EU’s Registration, Evaluation, Authorization and restriction of Chemicals regulation),” says Gary Nevison, head of legislation and compliance for global electronics distribution giant Premier-Farnell, parent company of the Newark and element14 brands (Fig. 1).

Nevison notes that such requests are likely to escalate once the EU’s RoHS recast, as it is known, goes into effect in about 18 months.

“There will be considerably more requests for collection of data, and that will have a significant impact on the industry,” Nevison explains, pointing to the new CE mark requirement in particular.

Identifying products with a CE mark, which stands for Conformité Européenne (or European Conformity), ensures that they comply with EU regulations. As a result of the recast, manufacturers, distributors, and importers will bear responsibility for CE marking (to varying degrees), putting legal responsibility on the entire supply chain in the EU and creating the need for more technical documentation among distributors in particular.

RoHS Recast

The EU’s 2006 RoHS directive banned the use of six substances—lead (Pb), mercury (Hg), hexavalent chromium (Cr (VI)), cadmium (Cd), polybrominated biphenyl flame retardants (PBB), and polybrominated biphenyl ether flame retardants (PBDE)—in eight categories of electrical and electronic equipment.

The directive applies to manufacturers, resellers, importers, and exporters of products sold in the EU. Components distributors play a particularly important role in providing manufacturing customers with RoHS-compliant parts to use in their finished products.

The current recast broadens the scope of the directive to include two additional categories of products from 2014 onward, medical equipment and monitoring and control instruments, which were excluded from the original 2006 directive. The recast also includes the new category 11 covering electrical and electronic equipment not covered in categories 1 through 10 of the directive, unless specifically excluded.

As Premier-Farnell’s Nevison explains, there are some key differences in the broadened scope of the directive in addition to the new CE mark requirement.

First, RoHS previously applied to electrical and electronic equipment that depends upon electric or electromagnetic fields to work properly. Now, the recast covers electronic equipment that depends on electronic or electromagnetic fields to fulfill at least one of its intended functions, effectively widening the amount of equipment that could fall within the scope of RoHS.

“So, going forward it will apply to equipment that has at least one function that is electronic,” Nevison explains. “For example, a gas cooker that has an electronic clock could fall within the scope of RoHS.”

For distributors, this may mean more customers will seek RoHS compliance information and documentation, many of whom did not previously have to worry about RoHS compliance.

Second, Nevison says the recast sheds light on the ongoing debate over whether or not research and development tools such as engineering design kits should be included in the RoHS scope. To provide industry with clarity, they will be excluded from the scope in the recast, but Nevison expects such R&D tools to come under discussion when the RoHS directive is reviewed again and becomes an “open scope” in 2019.

Nevison emphasizes that managing the mountain of paperwork involved in RoHS and other standards efforts is a full-time job, one that distributors, in particular, need to take seriously.

“You cannot give legislative responsibilities to someone who’s already employed—for example, your safety officer or procurement officer—and say ‘squeeze it into your day job,’” Nevison explains. “It requires dedicated personnel—dedicated information collectors to get the product-line information from manufacturers. You also need dedicated number-crunchers to get information required by the enforcement authorities. And most importantly, you need buy-in from senior management.”

Up Next: Conflict-Free Minerals

Looking ahead, the Dodd-Frank Wall Street Reform and Consumer Protection Act could be the next big issue on the supply chain’s compliance horizon. Signed into law a year ago by President Obama, the Dodd-Frank Act addresses a range of issues arising from the recent recession and includes a section on the sourcing of certain minerals from the Democratic Republic of the Congo (DRC), a region plagued by violence. Trade in the minerals in question—tantalum, tin, tungsten, and gold—fuels criminal networks in the region to the tune of hundreds of millions of dollars a year, perpetuating a cycle of violence.

The electronics industry is entwined in the issue, as the conflict minerals are widely used in electrical and electronic equipment. Though the act became law last year, many industry companies are struggling to understand its scope and find ways to best comply with the rules. As a result, the conversation surrounding conflict minerals is just beginning, according to some industry leaders.

The Dodd-Frank Act does not ban conflict minerals but requires companies that are registered with the U.S. Securities and Exchange Commission to disclose annually whether or not they have used minerals mined from the region. The legislation aims to stem the violence in the area by curtailing trade and stopping the flow of money to violent regimes. There is much debate over whether or not the strategy will work, with some arguing that it will harm local economies by putting mines that are not involved with the conflict, and their employees, out of business.

Gerry Fay, chief logistics and operations officer for Avnet Inc., says the Dodd-Frank Act is likely the next big issue for the electronic components industry, comparing it to RoHS in size and scope (Fig. 2). Complying with the act requires companies to provide detailed documentation throughout the supply chain, from finished products down to their basic mineral content.

It’s a daunting task, to be sure, and one that Fay says will begin with a consortium of companies devising ways to audit their supply chains to get to the root of the problem. From there, companies throughout the supply chain can access best practices for avoiding the purchase of conflict minerals altogether.

Fay points to the Electronics Industry Citizens Coaltion/Global e-Sustainability Initiative (EICC/GeSI) as a group that is leading industry efforts to attain conflict-free status.

“They are doing quite a bit of work [on this],” Fay explains.  “Their approach is to start a ‘bag and tag’ effort—what they are hoping to do is work to identify mines that are involved in this [by] bagging and tagging materials from the source and trying to create a program around that.”

Fay adds that much of the burden of this work falls to the smelters rather than the mines, as they are the places where the minerals are processed into metals.

“They are key to making sure that whatever they smelt comes from an ethical source,” Fay adds.

Industry efforts are beginning to bear fruit. In June, the EICC/GeSI published its first list of conflict-free tantalum smelters as part of its Conflict Free Smelters (SMS) program. The CFS is a voluntary program in which an independent third party assesses a smelter’s procurement activities and determines if the smelter demonstrated that all the materials it processed originated from conflict-free sources. If a smelter is not on the list, it has either not undergone a CFS assessment or is not in compliance with the CFS protocol, according to EICC/GeSI.

Lists covering smelters processing tin, tungsten, and gold are slated for release later this year, the group says. Fay urges companies to get involved with the EICC/GeSI initiative both as a way to stay up to date on the issue and to speed the process of getting to conflict-free.

“The more educated [companies] are on the issue, the better they will be able to act and react to the legislation,” he says.

Nevison agrees that Dodd-Frank could become an industry-wide concern, but says it is more of a hot-button issue in the United States than in Europe today. Global distributors are, necessarily, staying up-to-date on the problem. Premier-Farnell has been collecting conflict mineral data from manufacturers in anticipation of customers’ desire for conflict-free sourcing, for instance.

“Premier Farnell has been asking its suppliers for confirmation of use of conflict materials for a while as there is little doubt that customers down the supply chain will seek reassurance that no metals are sourced from the conflict areas or if a product is labelled ‘conflict mineral free’ [that] it does not contain any of the conflict minerals that directly finance or benefit armed groups in the Congo,” the company stated in a position paper on the legislation published to its element14.com Web site last year.

Looking Ahead

Nevison says he expects the data collection and recordkeeping surrounding these and other issues to intensify. In particular, he says he expects to see more restrictions on the use of toxic substances, driven by the EU’s REACH regulation, which bans the use of certain substances. This puts a huge burden on the industry to collect and maintain data and deliver information to customers.

Information delivery may be paramount going forward, as Nevison and others say there is still a lack of awareness in the industry about environmental standards and the work involved in adhering to them. Premier-Farnell has addressed the problem by launching a legislative page on element14.com that contains background information and the latest updates on key issues facing the electronics industry.

Distributors are in a unique position to help by being the conduit between the manufacturing and end-user community, adds Fay, noting that large distributors are also in a good position to lead the way in best practices. And he agrees that that role will become increasingly important down the road.

“We get a lot of information from our suppliers that can help our customers. I think we can help companies better understand [these issues by providing] information,” Fay says. “To be helpful in the supply chain, [we need] to help our partners leverage some of the practices that are [best in class].”

For more information on the RoHS recast, see element14’s legislative page at www.element14.com/community/community/legislation. For information on the EICC, go to www.eicc.info/. For information on the GeSI, go to http://gesi.org/.

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