Strategic Business Response To RoHS (Environmental) Compliance

Transcription

1 Strategic Business Response To RoHS (Environmental) Compliance Ken Stanvick + Info@DesignChainAssociates.co

2 Environmental Compliance? Choosing the Wrong Supplier or Part Used to Only Have Cost, Quality and sometimes Production Consequences Now it ALSO has LEGAL and Revenue Consequences

3 Key questions? Do you sell to or Manufacture in? EU China Company Profits Japan Korea Mexico Brazil Korea USA India Do You Sell To Exempt Segments Military Medical Aerospace Servers and Networking Infrastructure Can your company $ afford to be shut out of any major market?

4 Key questions? Do you know what the Legal and Commercial requirements are? Can you identify the other dangerous substances in you products? Do you know the EU s Thematic Strategy? Do you have a viable Corporate strategy? Do you have a viable Product strategy for today and tomorrow? Do your future plans include a merger or acquisition?

5 How did you do? If your answer to all the questions is Yes You and your company will be successful Give yourself a raise! Take some time off Figure out what to do with all the extra money If your answer to any of the questions is No We have more work to do Please ask questions YOU CAN DO IT! Let s get started!

6 Environmental Compliance Impact Business Environment Customers Competitors Investors Legal Designers Component Engineers MFG Engineers Purchasing Field Service Contracts Resources Business Processes New Part Intro Component Data Product Lifecycle Wave Solder Reflow Product Redesign Agency Certification Reliability Testing Design For Environment Component Qualification Design Equipment Soldering Irons Inventory Control Materials Part Identification MFG Materials Material Declaration Last Time Buy Assembly Test Inspection Rework Manufacturing Processes Environmental Compliance

7 Business Environment What you should expect from your Compliant Customers? Compliance documentation requests Full material disclosure not just RoHS 6 Recycling information - Take apart Audit Data Internal and External Demonstrate that you can consistently ship a compliant product Demonstrate that your suppliers can consistently ship a compliant product Changes to existing contracts Environmental Compliance clauses added or expanded Liability statements expanded Sharing of WEE costs partially or completely

8 Business Environment What you should expect from your Compliant Customers? Laws / Directives/ Unique Customer Requirements Knowledge of enacted Laws / Directives that impact the product they purchase Knowledge of proposed Laws / Directives as it may impact current and future products A sales force knowledgeable in regards to Environmental Compliance Environmentally Compliant Products Today Future

9 Business Environment What you should expect from your Exempt Customers? Continued demand for Lead termination finishes on components Lead solder used to assemble boards Non compliant subassemblies Non compliant products Proof of non compliance Business as usual

10 Business Environment What should you expect of your Suppliers? Compliance documentation Full material disclosure not just RoHS 6 Recycling information - Take apart Audits internal and External Demonstration that they can consistently ship a compliant product Demonstrate that their suppliers can consistently ship a compliant product Changes to existing contracts Environmental Compliance clauses added or expanded Liability statements expanded

11 Business Environment What should you expect of your Suppliers? Laws / Directives/ Unique Customer Requirements Knowledge of enacted Laws / Directives that impact the product you purchase Knowledge of proposed Laws / Directives as it may impact current and future products A sales force knowledgeable in regards to Environmental Compliance Environmentally Compliant Products Today Future Your Customer s expectations and your expectations of Suppliers must be in alignment!

12 Business Environment What you should expect from your Competitors? Teardowns that focus on finding violations Whistle blowing - Just ask Sony Using Environmental Compliance as a competitive advantage Rapid response and forward planning Strategic thinking - not reactionary Significant investment of time, money, resources

13 Business Environment What you should expect from your Competitors? Environmental Compliance is adding to their bottom line Reduced materials Design For the Environment Reuse Recovery Removal of Hazardous materials Recycling Yes companies pay you money for GOOD Junk Energy reductions - Manufacturing - Use Upgrades to existing products Image adds to increased sales

14 Business Environment What you should expect from your Investors? Increasing Environmental Compliance scrutiny Need to know if you are behind or ahead of the curve Proactive Buy Reactive Monitor Not started Sell IMAGE Yours Theirs Continue to invest

15 Business Environment What should you expect of your company? If you have developed a program of checks, it must work. Having a system in place that nobody follows is as bad as having no system at all. This is something that demands periodic or even constant monitoring. In creating a system you must consider all aspects of your business, from the design stage through to after sales. Identify the risks, adopt appropriate controls and safeguards, record your actions and keep it under review. Due Diligence simply means that you has systems and procedures in place that work and that you can PROVE IT What will not be taken into account are factors like ignorance of the law, poor command of a language or a lack of common sense. Source of data - National Weights & Measure Laboratory (NWML)

16 Business Environment What should you expect of your company? Reasonable Precautions and Due Diligence The courts suggest that some form of positive action is necessary to satisfy the defense. In the past some businesses have tried to suggest that because past dealings in a particular area of commerce had raised no problems, or because they had no reason to suspect problems, they could avoid prosecution. The Courts have been clear on this point; positive action is required, but the nature of that action will depend on the relevant circumstances. Businesses should check the terms and conditions of their contracts and the goods relating to those contracts whether they view them with confidence or not One of the clearest messages from the courts about reasonable precautions and due diligence is that size does matter. The size of the business, the amount of risk and the impact of failure associated with the product are some of the factors that help to determine what are all reasonable steps. For example, the absence of documented systems in larger companies might be fatal. Source of data - National Weights & Measure Laboratory (NWML)

17 Business Environment What steps should you take to protect your Company Assess the risk What could go wrong in your business that might mean a Court appearance? To assess the risk of such an incident, you should identify any weak links in the process chain. This requires you to analyze each stage of your operation and identify precautions. You should also know what is happening in your particular sector of industry and be aware of how and where your products are being used or marketed Establish what you are going to do about It Having analyzed what could go wrong, you should put in place reasonable safeguards. Have you done all that the law requires? Are you meeting accepted industry standards? You should aim to control all risks by putting in place as many precautions as you think necessary. Your aim should be to either eliminate any chance of anything going wrong or to control the risks so that errors will be detected early on and put right before too much damage is done. Source of data - National Weights & Measure Laboratory (NWML)

18 Business Environment What steps should you take to protect your Company? Consider the following Purely relying on certificates or other documentation without assessing their validity is unlikely to be considered as adequate if a business has refused or failed to take a reasonable precaution. What constitutes reasonable action depends on your business. It is recommended that all the activities of the business which may cause a breach of RoHS/WEEE should be identified, controlled and checked by a system Supplier reliability and selection of raw materials and components Goods in control and quarantine Production processes and contamination Source of data - National Weights & Measure Laboratory (NWML)

19 Business Environment What steps should you take to protect your Company? Consider the following Evidence and documentation Stores control and mixing compliant and noncompliant materials and components, labeling Staff training and experience Product recovery and Recycling Sales, does your sales team know not to sell exempt product into non-exempt markets? Source of data - National Weights & Measure Laboratory (NWML)

20 EU 25 Year Strategy Thematic Strategy on the Sustainable Use of Natural Resources WEEE Stand-By Initiative Integrated Product Policy REACH Phase 4: Use WEEE Phase 5: Disposal Phase 0: 0: Concept Phase 1: Design Phase 2: Prototype Phase 3: Production Phase 4: Phase 5: EUP RoHS REACH EOL/Support Take Back

21 Overview RoHS: Latest Developments Most aspects of the RoHS Directive are now final Almost all EU Member States have already adopted measures transposing it into national law RoHS restrictions will become effectively enforceable as from 1 July Issues Discussions on RoHS compliance/self-certification Fourth Consultation on RoHS Annex Exemptions Review of pending requests for exemptions by independent consultants and the TAC Study by UK consultancy ERA Technology on feasibility of including WEEE categories 8 ( Medical devices - with the exception of all implanted and infected products ) and 9 ( Monitoring and control instruments ) within the scope of RoHS; European Parliament s legal action against Commission Decision 2005/717/EC exempting Deca-BDE and lead in lead-bronze bearing shells and bushes from the RoHS restrictions; and Discussions over Member States interpretation of term Put on the market.

22 RoHS: Latest Developments Discussions on RoHS compliance/self-certification Currently discussions at EU level on what should be requested from producers to prove RoHS compliance Member States have not agreed yet on how to deal with this issue, however; UK being really proactive in this matter relevant information included in November 2005 UK DTI final Government Guidance Notes on RoHS, and on website of the UK's RoHS Enforcement Agency (National Weights and Measures Laboratory or NWML); The approach that enforcement authorities will expect from producers to use to comply with RoHS is thus becoming clearer "self - declaration" obtaining material declarations from suppliers with chemical analysis required only as a last resort; There are currently no standard formats for materials declarations or certificates of compliance some producers/distributors/consultancies have already started to develop materials declarations and certificates and publish them on their websites; Long-running debates are thus to be expected at TAC level some practical guidance may be expected in the near future.

23 RoHS: Latest Developments Fourth Consultation on RoHS Annex Exemptions Commission has launched new stakeholder consultations on a fourth batch of 15 industry requests for exemptions from the RoHS restrictions 13 of the exemptions requested are for lead, especially in lead solder, for example in loudspeakers, musical instruments, surge protective devices, audio equipment and amusement machines The other two are for cadmium in electrical contacts and plating. Stakeholders are invited to submit comments by 10 February Review of pending requests for exemptions by independent consultants and the TAC Independent consultants from Öko-Institut and Fraunhofer Institute for Reliability and Microintegration (IZM) are assisting Commission in evaluation of pending requests for new exemptions third package of pending exemptions Final recommendations on a significant number of these requests are included in four monthly reports sent to the Commission by Öko-Institut and Fraunhofer Institut IZM last report dated December Draft Commission Decision including some of these requests will be submitted to a formal vote by the TAC Committee Members on 15 February.

24 RoHS: Latest Developments Study on feasibility of including WEEE categories 8 and 9 within the scope of RoHS UK consultancy ERA Technology is currently undertaking a study to determine whether these categories can or should be included results of study not likely to be available before mid Commission may use its findings to prepare a proposal to amend the Directive lengthy codecision procedure producers may have at least until to comply. European Parliament s legal action European Parliament has launched an action for annulment against Commission Decision 2005/717/EC exempting Deca-BDE and lead in lead-bronze bearing shells and bushes from the RoHS restrictions; Major argument indicated to support Court action is that Commission has exceeded the implementing powers provided for in Directive Justification given for the exemption does not strictly fulfill the requirements of the Directive. Parliament has also expressed concern that Commission failed to transmit initial draft of challenged Decision thus violating the Parliament's right of scrutiny over Commission's implementing acts under so-called comitology rules. Parliament maintains that the revision made by the Decision should have been adopted through the co-decision procedure.

25 RoHS: Latest Developments Recent Commission statements suggesting changes (at European Parliament's Environment Committee (ENVI) meeting on 23 January 2006) Klaus Kögler (Acting Head of Unit G.4 - Sustainable Production and Consumption at DG Environment) said: Put on the Market/National v. EU Market/RoHS deadline when transposing the RoHS Directive, put on the market should refer to the first time the goods were placed on the Community market. Legal action "The Commission always tries to find solutions in a nonconfrontational way, but at a certain point we'll have to take legal action," Warning letters to "quite a few" Member States have been drafted but not yet sent.

26 It s not just about Europe CHINA

27 China RoHS: Background Submitted to WTO Committee on Technical Barriers to Trade Sept. 28, 2005 In Chinese Only So We Worked with Wilson Sonsini Goodrich & Rosati to get it translated now on our website AeA Has a Translation available to its Members as well Four US Entities Commented Apparently had Some Impact

28 China RoHS: Overview Title: Administration on the Control of Pollution Caused by Electronic Information Products (WTO Notification) Or Administrative Measures on the Control of Pollution Caused by Electronic Information Products (WSGR Translation) Or Management Methods for Controlling Pollution by Electronic Information Products (AeA Translation) Now simply referred to as CHINA RoHS

29 China RoHS: Overview Production and Packaging Targeted as well as Products Certification, Marking and Testing Requirements Does Not Cover Products Destined for Export Covers Electronic Information Products Takes Effect January 1, 2007 (Delayed 6 Months)

30 Material Restrictions (Article 3) Lead - Pb Mercury - Hg Cadmium - Cd Hexavalent chromium - CrVI Polybrominated biphenyl - (PBB) Polybrominated diphenyl ether - (PBDE) and

31 Material Restrictions (Article 3) Other toxic and harmful substances or elements provided by the State RoHS 6 to start other may be added later No Limits Defined Expected to be consistent with EU No Measurement Methodology Defined Expected to be consistent with industry standards (i.e. TC111 WG3)

32 The Scope and the Catalog (Article 19) Article 3 (Definitions) Describes Scope: Electronic information products refers to products and parts made with electronic information technology, which include electronic radar products, electronic communication products, broadcast and television products, computer products, household electronic products, electronic measurement and instrument products, electronic products for special use, electronic component products, electronic application products, electronic material products and software products, etc. Scope is MII s Scope Only: No Toys, Appliances, etc. Look for Clarification Shortly?

33 The Scope and the Catalog (Article 19) Separate Catalog to Define items like Specific electronic information products subject to restrictions, the types of toxic substances restricted for use, Environmental Safe Period, and the timeline for the restriction (Article 21) Catalog To be Reviewed and Potentially Amended Annually No Catalog issued yet

34 Exemptions: Comparisons With The EU are Absurd EU includes nearly everything then describes exemptions China describes only what is included, so no need for exemptions EU: Yang? China: Yin? Questions of Scope Process: Call Mr. Huang

35 Production Equipment (Article 10) Potential Impact to PCB and PCA Manufacturing Requires use of materials, technologies and processes which are energy efficient, easily recyclable and environmentally friendly No Restricted Substances Article 13 Indicates no Exemption for Electronic Information Products used for manufacturing purposes, such as PCs EU RoHS Has No Such Requirement E.g., Lead or Hex Chrome used for PCB Sacrificial layers are OK for EU. May not be for China

36 Certification Requirements (Art. 18) All Covered Products: subject to compulsory certification by the State certification and accreditation authorities Will be added to existing CCC (China Compulsory Certification) Mark system Imports In To China: subject to examination and inspection at the entry port by inspection and quarantine authorities Certification Issued at that point; product then is released from Customs No Definition of the inspection or certification processes or requirements in this document No EU RoHS analog

37 Certification Requires Testing But ONLY Accepted If Performed by Chinese Labs! Acceptable Labs To Be Announced mid-year Why? Other Countries Do Not Accept Our Labs Results; we are under NO OBLIGATION to accept theirs. A Power Play That Could Have Serious Trade Consequences Hello WTO??? At Least They re Planning to Abide by TC111 WG3 s standardization efforts Probably Delay the Requirement past 1 Jan 2007

38 Four Marking Requirements Safe Use Period Now Environmental Safety Period Packaging Materials Hazardous Material Contents Place of Origin EU RoHS has no marking requirements Expect Industrial Standards That Define Marks, Cert, National Standards Sometime Later

39 It s Not Just Other Countries

40 It s Not Just Other Countries 19 new Bills in eight States Nebraska L.B Shared responsibility for collection and recycling New Hampshire H.B 1455 Recycle Marking and Producer Fee Washington State H.B and S.B Producer Responsibility EPA Will NOT Unify! Many fragmented, voluntary programs as Federal Initiatives

41 Federal action or lack of! HR 425, the "National Computer Recycling Act Introduced by California Representative Mike Thompson, January This will would establish a grant and fee program through the Environmental Protection Agency to encourage and promote the recycling of used computers and to promote the development of a national infrastructure for the recycling of used computers. S.510 Electronic Waste Recycling Promotion and Consumer Protection Act Introduced March To reduce and eliminate electronic waste through recycling. Targeted at the Consumer not Business Covered products Computers- CRTs-NOT Cell phones Tax credit consumers $15 unit Recyclers $8 unit Lack of Federal action is driving independent State actions!

42 State of the Industry State of RoHS Compliance 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% % 0.00% Plan in place Comple te d the Implementation process underway De ve loping a plan No ne e d - exempt Evaluating need and gathering information Ha v e no t started

43 State of the Industry Compliant by July % 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 100% 80% or more 50/50 Less than 50% Zero% Were exempt - not an issue Responce 28.57% 36.97% 14.29% 9.24% 2.10% 8.82%

44 State of the Industry Tools and Process Changes % 8.00% 6.00% 4.00% 2.00% 0.00% 1 BOM review process Component management process Supplier selection process Component system of record Training of sales people Manufacturing Execution System Don't know Internal part numbering Supplier approval process Quality Auditing Process Customer contracts ECO Process for customer n None of the above

45 State of the Industry Top 5 Challenges Ensure that our supply chain is compliant Keeping up with the ever-changing legal landscape Manage OEM, EMS, Disti, Component Supplier Management buy-in and funding Manage the product and inventory transition Getting compliance status of parts Manufacturing readiness Time to redesign products

46 Thriving in a RoHS- WEEE Economy Business Environment Facts Compliance is a competitive advantage Reactive strategies cost money Proactive strategies yield cost savings

47 Document the Corporate Strategy Corporation Image Yours Your Customer Major Market Geographies (Sales) US Japan Germany Netherlands China Other countries

48 Document the Corporate Strategy Corporation Major market Segments vs. Geographies (Sales) Computers Security Signal Processing Other Legislated Requirements Local National International

49 Document the Corporate Strategy Corporation Commercial Requirements Green Procurement Top Competitors Sony Toshiba Dell Major Stockholders

50 Document the Corporate Strategy Product Customer Expectations Tangible (Contracts) Intangible (Good Will) Product Margins Barriers to Entry Product Portfolio Corporate Division Product Launch Schedules

51 Document the Corporate Strategy Product Design Complexity Risk Factors Resources Availability Skills Documentation Availability Accuracy

52 Document Corporate Strategy Product Design Tools (software) Availability Licenses Compatibility Hardware Software

53 Document the Corporate Strategy Product Materials Spares (Repair Inventory) Quantity by product Value of inventory $ Last Time Buy Inventory Quantity by product Value of Inventory $

54 Document the Corporate Strategy Product End of Life Reuse Do we really need A new mouse A new keyboard A new power cord A new remote control Recycle Plastics Recycled plastic is 80% the cost of virgin plastic Recover Metal prices continue to rise Copper Gold Silver Lead

55 Design for Environment Design For Environment (DFE) can save you $MONEY Some specific steps you can take Reduce weight Shipping costs decline Categorize materials Restricted Unrestricted Monitored and reported ECO Friendly materials cost less to recycle Focus on fasteners; use clips not screws Reduced piece parts Easier( less expensive) disassembly Cost savings

56 Facts Designers Redesign of existing products is a way of life driven by New environmental regulations Increased assembly process temperatures Changes in material sets and Specifications Boards Solders Components Assembly processes Decreasing component lifecycles New / existing failure mechanisms Whiskers Cathodic Anodic Filaments PCB de-lamination Cracked chip caps? DFE is a requirement and a cost savings

57 Design For Environment Design For Environment (DFE) can save you MONEY! Some specific steps you can take Eliminate hazardous materials Increase the value of recycled products Avoid composites Reduced recycling costs Increased value of recovered materials REUSE Consider offering accessories as options Upgrades Current product vs. replacement vs. mid life kicker Reduce stand-by and active Power consumption Marketing advantage Reliability improvement

58 Designer Action Items Design For the Environment Design boards to withstand increased reflow temperatures Validate that components are qualified to the new process temp Evaluate new board materials Evaluate placement of components Prototype RoHS-compliant boards at all manufacturing plants Don t assume the results will be the same Baseline product reliability Don t assume it will be the same without having data to prove it Agency RE-Certification if required

59 Designer Action Items Review and Update specifications Production materials Solder Flux Boards Components Maximum process temp Moisture Sensitivity Level Enclosures Sub assemblies Component System Of Record Updates RoHS Flag Date Code affectivity date Appropriate data elements

60 Designer Action Items Selection, and qualification of replacement components Not all components will have RoHS direct equivalents Not all RoHS Components are rated to 260 C process temp Moisture Sensitivity Ratings (MSL) are changing Not all suppliers can/will provide full material disclosure Include material changes as part of your - form - fit and function notification requirements Evaluation and approval of PCNs Material changes Electrical performance changes Environmental Compliance status changes

61 Designer Action Items Validate Material Disclosure documentation Is it complete Is it Accurate Do you require 3rd party validation Selection and approval of material testing labs Selection and approval of manufacturing providers and processes Define and document mfg process Identify and document unique product requirements

62 Business Processes: Review Existing Processes & Systems Internal Part Number Assignment Have clear guidelines Provide workflow for downstream stakeholder involvement Insure that component RoHS content is collected and categorized Have a means of identifying compliant and non-compliant parts Be cognizant of RoHS-Related lifecycle/eol issues Component System Of Record Updates RoHS Flag Date Code affectivity date Appropriate data elements

63 Business Processes: Review Existing Processes & Systems Customer Contracts RoHS Compliance/Reporting Material Declaration Sheets WEEE Compliance/Reporting Product Lifecycle Management Suppliers may use RoHS as catalyst to prune product offerings i.e., low volume, low profit parts Watch for EOL PCN s closely monitor your PCNs Be wary of mixed stock from suppliers / brokers - traceability and marking issues

64 New Business Processes: Green BOM Review Green BOM Review Get your commodity teams trained know what to look for! Be proactive! Review at New Part Request Insure stakeholder involvement Use supplier, EMS, and third-party resources

65 Conclusion Your Customers are requiring it Your Competitors are doing it Your Suppliers are doing it Not just about doing business in Europe YOU CAN DO IT!