AR October 2006

Sunnyvale, CA— With the passing of the deadline last month for RoHS (Restriction of Hazardous Substances) compliance with European Union (EU) laws governing the recycling of electronic equipment, manufacturers now face the very real possibility of lost or at the very least, disrupted revenue when countries begin enforcement of RoHS and WEEE recycling laws, according to M-Cubed LLC, a worldwide provider of turnkey RoHS/WEEE, Excess & Obsolete and E-Waste Solutions for Fortune 500 companies.

The EU laws regarding WEEE involve much more than just Electronic Waste recycling. It requires a “design for the environment” on the R&D side of the product life cycle as well as product declaration, certification, and take- back on the manufacturing/production side through the end of use of the product. This adds much complexity to product planning and fundamentally changes how companies should conduct business in the EU.

“Every electronics manufacturer that sells products directly or indirectly into Europe needs to be compliant now with the new WEEE laws. With more than an estimated six million tons of waste electronic equipment being dumped into EU landfills every year, we expect full enforcement of these new laws to start,” said Mike Battaion, vice president, technology development for M-Cubed. “For most electronics manufacturers, getting shut out of a particular European country for non-compliance can have a devastating financial impact. For the larger public companies, it can cause serious revenue unpredictability that will negatively impact stock price, and will require disclosure of risk to revenue under the Sarbanes-Oxley rules.”

While each EU State has in place or is developing its own take-back WEEE requirements, in every scenario the burden for recycling ultimately rests with the producer. Confusingly, the “producer” has five different definitions depending upon how a company conducts business in a particular EU state. The stringent WEEE law, which was originally passed by the EU in 2003 and took effect in August 2005, is just now beginning to see across-the-board enforcement. Early this year, a British pharmaceutical company was heavily fined and fell victim to the rules through its failure to provide a specific in-store notice alerting customers to the fact that its prices include a contribution to the product recycling fund, set up to ensure that WEEE is collected and recycled in a responsible manner.

“Even after most of the deadlines have run out, the RoHS and WEEE landscape is still developing and smaller U.S. companies need to develop practical, affordable approaches in order to stay legal and competitive at the same time,” advises Dr. Lothar Determann, partner at the international law firm of Baker & McKenzie, which has offices in 70 cities worldwide.

Prompting the enforcement is the requirement that companies conform, as of July 2006, to the ED directive called RoHS. The RoHS deadline is seen as a catalyst that is sparking wide scale enforcement in the EU. WEEE is no longer just an EU issue, as many other countries and state legislators within the United States are busily drafting, enacting and enforcing similar regulations. Japan, South Korea, China, numerous countries in South America, and states such as California, Maine, Washington and Michigan already have legislation in place.

WEEE is most easily defined as Recoverable equals Re-use plus Recycle. The targets set in WEEE documents focus on Recoverable and Recyclable. As an example, in Category 3 IT and Telecommunications Equipment, 75% of product’s weight must be recoverable and 65% must be recyclable. This means at a minimum 10% of the product must be reusable. The EU is not only concerned about the proper dismantling and disposal of E-Waste, its focus is also to minimize the amount of E-Waste entering landfills and that is accomplished by re-use of the product or its components.