Getting a Handle on RoHS

Aug. 1, 2005
Time is fast running out to comply with the Restriction of Hazardous Substances directive, but there is help available.

If your company makes products containing electrical or electronic content that are shipped into the European market, here’s hoping that you are already well familiar with the four-letter acronym RoHS and all that it means.

As a shorthand for the European Union’s Restriction of Hazardous Substances directive, RoHS will severely restrict the use of six hazardous materials commonly found in electrical and electronic products. RoHS is scheduled to take effect on July 1, 2006. And according to some industry experts, affected companies that haven’t yet taken steps to comply may already be too late to meet the RoHS deadline.

Risky business

The risks are substantial. Once the directive takes effect, companies shipping products that are found to be noncompliant could face forced recalls and shipments stopped at the borders of EU countries. The resultant revenue loss could be devastating, not to mention the prospect of civil or criminal fines, lawsuits and the damage to a company’s brand and reputation.

Given the stakes involved, most major multinational manufacturers are on track to meet the RoHS deadline, say industry sources. “The blue-chip companies of the world will be ready, and they are well on their way to becoming compliant,” says Eric Karofsky, a senior research analyst with Boston-based AMR Research Inc. “But a lot of the other companies, from the mid-tier on down, are severely behind.”

One major reason for this failing, Karofsky believes, is a lack of involvement in RoHS decision making by so-called “C-level,” or senior level, executives. As Karofsky wrote in a recent research alert, “Unfortunately, executives will finally pay attention to RoHS … when their negligent actions put them on the front page of ‘The Wall Street Journal.’ ”

The RoHS directive places tight restrictions on the use of lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyl and polybrominated diphenyl ether. Under terms of the directive, companies distributing product into European markets must be able to self-declare that their products adhere to the specified limits on the restricted substances, and if necessary, be able to demonstrate that due diligence was taken in ensuring compliance. And therein lies a sticking point.

“RoHS calls out that you must comply, but it doesn’t tell you exactly how to comply,” points out Peter Ford, director of business development for LTK Industries Ltd., a Hong Kong-based producer of cable and wire products, which operates multiple factories in China. LTK has annual revenues of around $250 million.

As a supplier to Japan’s Sony Corp. and other large multinational companies, LTK has had several years of experience in meeting the environmental requirements of so-called “green programs” put in place earlier by those customers. That experience gave LTK a leg up when the time came to declare that its products are RoHS compliant, Ford believes. But with the RoHS directive, he observes, “one of the things that we were concerned about is that it’s one thing to say that you’re in compliance, and another thing to be able to prove it—to have a paper trail that shows that, in fact, what you’re stating is indeed actually happening.”

For help on that front, LTK turned to a program offered by Underwriters Laboratories Inc. (UL), based in Northbrook, Ill. Called the Restricted Substances Compliances Solutions (RSCS) program, the UL initiative is designed to help companies declare self-compliance to RoHS through a regimen of rigorous product testing and continuing surveillance throughout the supply chain.

Under the RSCS program, UL performs audits of a company’s manufacturing processes, and also tests its products to ensure that restricted substance content does not exceed allowable levels. Testing is performed by a global network of 10 to 15 UL and UL-qualified laboratories, using UL methodologies developed over a two- to three-year period, says Maxime Elbaz, RSCS program general manager.

Products are deconstructed and tested at the “homogenous” level, or down to the core materials, per RoHS guidelines. A typical cable, for example, may contain six to 10 homogenous materials, including the jacket, insulation, individual wires and other components, Elbaz explains.

Trust, but verify

While some manufacturer declarations of RoHS compliance may be based largely upon similar self-declarations by each of their component suppliers, the RSCS program enables manufacturers to go a step further. By breaking down and testing each component suppliers’ contributions to a product, the UL program can verify that each supplier’s component products do, in fact, meet RoHS requirements.

Once products are tested, the information is placed in a Web-accessible database listing part numbers and the corresponding test data. This database can be used by RSCS customers in a variety of ways, says Elbaz—including demonstrating proof of compliance, either to EU authorities, or to potential buyers, for those RSCS customers who themselves are component suppliers. RSCS customers may also use the database to search for RoHS-compliant components as replacement parts in their current products, or for use in future product designs.

As part of the RSCS program, UL also provides continuing surveillance service to verify continuing compliance. This includes twice-a-year visits to RSCS customers sites by UL compliance engineers, as well as random checks and testing of supplier components.

Push it down

At LTK, Ford says that the company has been highly pleased with the RSCS program.

“I think the in-depth process that UL has set up, relative to the testing of materials, and the fact that they’ve established a database that your products then can live in and be shared with others, is really a step up from what we were doing before,” he notes. “The program allows manufacturers like ourselves to push the process down through the supply chain, so that not only can we state that we’re in compliance, but we can prove it.”

UL is promoting the RSCS program as a lower-cost alternative to going it alone on RoHS self-compliance. Compared to the approach taken by some large manufacturers such as Sony, which has hired hundreds of auditors to go out and perform audits and testing at each of its many customer sites, the RSCS program can reduce the annual cost of RoHS compliance “by an order of magnitude,” Elbaz says.

RSCS pricing is based on the number of products and components to be tested, as well as an annual per-factory rate for continuing surveillance services. Database access is free to RSCS customers, though UL plans later to offer license-based access to companies that don’t use the testing or surveillance services, Elbaz says.

As the RoHS deadline approaches, a variety of other third-party services are sprouting up to aid companies in RoHS self-compliance. Some companies are offering testing services only. And some electronics distributors and others are setting up databases listing components that are self-declared by their suppliers to be RoHS compliant.

PartMiner Inc., for example, based in Melville, N.Y., offers a Web-accessible database that includes RoHS information on more than 5 million components, says President Michael Manley. PartMiner for the past two years has been actively accumulating RoHS data, which is part of the company’s much larger CAPS database that provides information on 47 million components from nearly 2,000 manufacturers.

Interest in the RoHS data has lately been on the rise, says Manley. “People who don’t already have their [RoHS] program in place are a little behind the eight ball, and a database like ours is going to be one of the quickest ways for them to get up to speed and start to evaluate the components that they buy and use.” A single seat license for CAPS database access runs about $6,000 per year, and access to the RoHS data requires an add-on fee of about $2,900, according to Manley.

Which, if any, of the third-party services a manufacturer should use depends upon the company’s “risk profile,” says AMR’s Karofsky. One problem, he points out, is that while RoHS self-compliance will be a must for companies shipping product to Europe, the EU countries are offering no guidance on what legally constitutes compliance.

The UL RSCS program “is a little bit unique in that UL has the ability to actually grind these components down and test them at a homogenous level, and actually verify that there is no hazardous material in these products,” Karofsky says. “So by using a company such as UL, you are lowering your risk profile, because you’re showing that you have third-party verification.” As such, the UL service is a good option for “conservative” companies, he believes.

On the other hand, says the AMR analyst, the vast majority of manufacturers are choosing to rely upon supplier data and assurances of RoHS compliance, either gathered on their own, or through third-party services. This also mitigates risk, Karofsky notes, “and you are certainly going to be in the majority of the way that most people are complying, which has its own legal safeguards.”

But Karofsky adds that few component suppliers are providing data down to the homogenous level specified by the RoHS directive, which could raise legal questions in any eventual court case or enforcement action. And then there’s the question of trust.

Ask the chief

“There’s a lot of discussion right now about supplier disclosures, and if you just want to accept those carte blanche,” Karofsky observes. “It’s in the suppliers’ best interest to make sure that their products are compliant. But then again, how much do you want to risk your revenue and your brand on somebody else’s promise?” he asks.

In the end, Karofsky concludes, that’s a risk mitigation question that only a C-level executive can answer. If your company is lagging behind on developing a RoHS compliance plan, show this article to your chief executive officer.

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