We saw many new rules for the U.S. and Canada in 2011.
Let’s look at some of the significant changes as well as what’s expected going forward.
The Dodd-Frank Wall-Street (Financial) Reform and Consumer Protection Act was passed in 2010. The aim of Section 1502 is to stop companies from sourcing minerals from areas in the Democratic Republic of Congo (DRC) and surrounding region where armed conflict is occurring. The Securities & Exchange Commission (SEC) was required to issue a rule making companies annually disclose if their products contain “conflict minerals” (tin, tantalum, gold, or tungsten), and if the minerals came from a conflict-free source.
The SEC is expected to issue their final rule in early 2012. SEC registered companies will be told to include a conflict minerals disclosure in their annual SEC report. Companies will be required to audit their supply chains to verify the source of any tin, tantalum, tungsten or gold (and their derivatives) in their products.
Key details remain to be finalized. What documents will be required to prove compliance? Will the SEC mandate independent audits? What time frame will companies be given to respond?
Data collection and verification will be difficult for manufacturers. Ores are mined, sent to a smelter, and then the smelted material shipped to a refiner. Manufacturers typically buy refined material from local refiners. They rarely directly deal with mines or smelters. On top of that, auditor access to conflict regions is limited, and third party audit schemes are not readily available for companies to use.
It is assumed that businesses will be expected to move quickly once the final rule is issued. Although it is unclear exactly what the SEC rule will require, a couple industry trade groups are creating guidance materials for industry. The most notable is the EICC-GeSI reporting framework. The IPC is also working on an industry reporting standard that builds on the EICC-GeSI work. Stay tuned. Reporting will begin in earnest once the SEC issues its’ final rule.
Proposition 65 and Green Chemistry update
Proposition 65 is a law that requires businesses to notify consumers about chemicals known to cause cancer or birth defects or other reproductive harm that are present in products sold in California. The list of Proposition 65 toxic chemicals requiring special warning labels expanded to approximately 800 in 2011.
The California Green Chemistry law is scheduled to take effect in 2012. It is an EU REACH type law that enables California to study and restrict hazardous substances in consumer products. The Green Chemistry law is putting pressure on the federal government to amend the US Toxic Substances Control Act and provide uniform state rules governing chemicals in commerce (prevent differing state laws). A proposed TSCA reform bill has already been introduced in the US Congress and will be considered in 2012.
Formaldehyde
Not later than January 1, 2013, the US EPA is required to promulgate regulations to limit allowable emissions from formaldehyde composite wood products sold in the United States. Electronic equipment containing formaldehyde treated wood (i.e. audio speakers) is subject to this rule. Formaldehyde is considered carcinogenic and is already regulated as a toxic air pollutant in California. The federal rule was enacted to replace the California rule and prevent differing state laws.
Medical products
There are an ever growing number of substance requests from medical product companies regarding the presence of DEHP (bis ethylhexyl phthalate) and BPA (bisphenol A). Bill C-307 required Health Canada to produce a list of all medical devices sold in Canada containing ≥ 0.1% w/w of DEHP or any BPA in any concentration. Both of these materials are EU REACH SVHCs. The information is being collected in lieu of possible content restrictions. The US Food & Drug Administration (FDA) has also agreed to make a decision on banning BPA in food items (plastic bottles and can liners) by March 31 of 2012.
Counterfeit parts
Counterfeit electronic parts are appearing at an increasing rate. Counterfeiters are taking scrap components (like semiconductors and transistors), and sanding off part numbers and any other identifying marks. Then in a process known as “black topping”, they are recoating the parts to hide the sanding marks. Black topped (scrap) parts are being sold by counterfeiters as new parts.
The US defense industry is particularly vulnerable as they often rely on military and commercial-grade “obsolete parts” to maintain long-life military equipment. An electronic part may be manufactured for only a couple years, while a defense system can remain in service for over two decades.
Defense contractors are often forced to purchase “obsolete parts” from independent distributors. While some independent distributors operate legitimately, others may be set up for the sole purpose of selling illegal counterfeit parts.
An amendment to the 2012 National Defense Authorization Act addresses the problem. Starting in 2012, defense contractors will be required to establish systems for detecting and avoiding counterfeit parts. Contractors who fail to do so will face reduced payments and will be required to absorb the costs of fixing problems caused by counterfeit parts, and the Department of Defense to adopt policies and procedures for detecting/avoiding counterfeit parts.
So what's next?
In the US, we expect Conflict Minerals legislation will be a necessary but time consuming exercise for industry. We expect the California “Green Chemistry” Initiative to result in more REACH like hazardous substance actions, and we expect a healthy debate on reforming the US Toxic Substances Control Act. We also expect the FDA to take action to restrict the use of BPA in food items.
In Canada, we expect more REACH like activity under Schedule 1 of the Canadian Environmental Protection Act (CEPA).
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