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Who Foots the Bill?
By Ed Sperling -- Electronic News, 9/7/2005
The bookkeeping necessary to keep up with environmental compliance legislation is poised to grow exponentially, adding significantly to the cost and complexity of creating and managing electronics across the supply chain -- from the smallest components to the OEMs that brand them.
The problem, according to consultants and industry insiders, is that the laws are being created piecemeal around the globe and within various regions in individual countries. Nowhere is this more evident than in the lifecycle management piece of the rules -- what to do with the products when they’ve reached their end of life.
In the United States there already are three laws on the books involving electronics recycling. Maine, California and Maryland have created their own laws, but all of them are different. In addition, there are two regional groups looking at creating broad sets of rules that govern recycling of components.
The red flag was publicly raised by Apple Computer at a recent meeting of the American Electronics Association, but the concern has been growing across the supply chain for many months. A lack of consistency means more management headaches at a time when the entire electronics industry is already scrambling for compliance.
Maine’s Law, which takes effect on Jan. 1, 2006, requires municipal governments to recycle all computer monitors -- the law does not distinguish between flat panels and cathode ray tubes -- and requires manufacturers to pay for handling, transportation and recycling plus a share of “orphan products.” The law also affects sales of new motor vehicles with mercury switches, but does not give exact prices for how much manufacturers will have to pay.
California has been more specific. The Electronic Waste Recycling Act of 2003 -- the first such law to be instituted -- adds assessments of $6 to every screen sold that is larger than 4 inches on a sliding scale up to $10 for those larger than 35 inches.
Maryland, meanwhile, enacted a law that will require manufacturers selling more than 1,000 computers in the state to pay an initial $5,000 registration fee on Jan. 1, then to establish a take-back program to recover their systems at no cost to consumers. They also will be required to pay a $500 annual fee after that.
In addition, the Northeast Recycling Council (NERC) is in the process of developing its own legislation for 10 states, Quebec and the Virgin Islands -- which ultimately may supersede Maine’s law -- to impose a per-unit fee for products to pay for recycling.
Lynn Rubinstein, NERC’s executive director, said the goal is consistency across the region. She said a group of seven Midwestern states is looking at similar legislation. “This takes a different approach,” Rubinstein stated. “It calls for internalized advanced recovery. Manufacturers are responsible for a per-unit fee to cover products sold. They’re paid to a third party, which manages the funds.”
Exactly how much manufacturers ultimately will be charged is unknown at this point, she said. From a manufacturer’s standpoint, it will be a small fraction of the total cost of managing the transition to environmentally compliant products. Craig Conrad, senior VP at distributor TTI, said the cost of compliance with the European Restriction of Hazardous Substances regulations has already run into many billions of dollars.
“We’ve got almost 60 percent more part numbers than before,” Conrad said. “The real cost is how to manage all of that.”
He notes that with the majority of the industry now focused on consumer electronics, where pricing is extremely competitive, there is less ability to pass along those costs. But at least distributors have the infrastructure to handle parts numbering and massive amounts of data -- a task that was ceded to them by manufacturers over the past several decades. Manufacturers have far less infrastructure to deal with this kind of database management, something that will become essential as companies begin dealing with the various recycling programs around the globe.
Michael Kirschner, president of Design Chain Associates, says the nightmare of inconsistent regulations is growing, as well. He notes there are new environmental regulations under consideration in Mexico, South Korea, Brazil and Taiwan.
“We’re rapidly becoming a regulated industry,” he said. “The problem is that many of the regulations are not the same.”
