China RoHS Phase 2: Hard data reveals a red flag

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Courtesy of The GoodBye Chain Group

At a time when companies are scrambling to comply with China RoHS Phase 1 requirements,  GoodBye Chain Group (GCG) has discovered an issue of high importance in regard to China RoHS Phase 2: namely, the financially risky situation that many companies will be in if a) they have used substance exemptions for EU RoHS or delayed their RoHS-conversion because their Category 8 (medical) or Category 9 (monitoring and control) products were out of scope; b) China does not allow any substance exemptions in its forthcoming Catalogue; and c) China includes products in the Catalogue that have relied on EU substance exemptions or were out of scope.

As described to GCG by a potentially-impacted customer: 'Without exemptions, it is impossible to build a compliant board.'

More generally: if common parts with EU substance exemptions are included in China RoHS Phase 2, our industry is looking at a disastrous situation. Typically, these parts are used on all board types. Since all suppliers use approximately the same manufacturing processes, all of these parts will be above the threshold value. None of them will pass China RoHS' pre-market testing requirement.

While this issue has been mentioned before as a conceptual idea, the data cited below is the first hard evidence we have seen that illustrates the severity of the problem. The purpose of this report, therefore, is to raise the issue publicly while there is hopefully time to influence the agencies in China that are developing the Catalog as we speak.

Crux of the Matter: Case Study
The following analysis was developed by one of GCG's client companies. This analysis was presented to the client company's senior executives in order to make them aware of the potential risk of both manufacturing and selling products in the Chinese market.

Over the last year, this particular GCG client has used GCG's Material Declaration Wizard database for RoHS compliance data collection, analysis, management and reporting (http://www.goodbyechain.com/content/view/14/32/). This client purchased full disclosure parts data from a third party data provider in order to provide it's customers with full disclosure material declarations. Part level full disclosure data was rolled up to higher product levels. Based on this rolled-up data, the company was able to generate on demand compliance reports for its customers and executives.

Two weeks ago, the RoHS compliance manager at this company requested that an analysis be completed to gauge potential future China RoHS risk. The customer asked GCG to provide a report in regard to the company's exposure to China RoHS, if the above scenario of zero substance exemptions occurred and if the company's products were included in one of the early Catalogues.

Utilizing MDW compliance software all of the parts in the database that contained full disclosure material and substance information ( 885)  were analyzed and a China RoHS substance analysis report was produced  Two red flags immediately  emerged:

1. The number of parts that would need to be replaced
This company was initially focused on Pb exemptions, since they were most numerous. Based on the initial analysis they concluded that : '885 parts in their material declaration data base were examined; 179 (20%) of them used one of the EU RoHS lead exemptions.'

2. The degree to which the amount of Lead (Pb) in those  products was over the 1000 ppm MCV.

China RoHS Phase 2: Hard data reveals a red flag

Table 1 above lists 14 of the 179 parts that the company had applied an exemption to in order to be compliant with EU RoHS.. As seen in Table 1, 12 of the 14 exemptions contain homogenous materials with 500,000 ppm of lead or more.  Several other parts– not listed – have homogenous materials that exceed 900,000 ppm.

As shown in Table 1, three different exemptions (5, 7a and 15) were applied to the individual parts listed in the table in order to make them EU RoHS compliant. These parts, with the associated exemptions were then rolled up into a top level product. Applying these exemptions allowed this GCG customer to declare that this top level product was compliant with the EU RoHS legislation.

This analysis confirmed what the RoHS compliance manager suspected and everyone was surprised how far above the threshold level the actual ppm values for Pb were. (cf. Graph 1 below).

China RoHS Phase 2: Hard data reveals a red flag

Graph 1. Lead (Pb) Exemptions: Part Level PPM Value vs Threshold Value (1,000 PPM)

Implications
If this particular company were required to submit its products for Phase 2 pre-market testing and substance exemptions were not allowed, the company would need to replace  approximately 20% of the parts analyzed in the likely timeframe of one year from when the first Catalog is published and when Phase 2 takes effect. Otherwise, a simple XRF screening device – never mind destructive testing – would record the tremendous discrepancy between the allowed MCV and the actual ppm data. If that were to happen, the company`s products could very well be banned from the China market with substantial financial consequences that would cascade throughout their supply chain.

Recommended Action
Very recently, AEA published an excellent FAQ that included answers to questions raised at the AEA-sponsored Oct. 26, 2006 meeting with Chinese officials. It was held in Silicon Valley and was open to the industry. More than several hundred people attended.

Within the FAQ, the following excerpt appears in response to Q. 12: `December 2006 FAQ Regulation Q/A #3 states, in pertinent part: `(China RoHS) sets forth a `Catalogue for Priority Prevention of Pollution from Electronic Information Products` This list was originally empty, but as time goes on, products `for which technologies are mature, for which (control is) economically feasible`, and for which replacement has been made for toxic and hazardous substances of which have complied with concentration limits are added to the list.`

The above hopeful statement is reinforced and expanded upon in the answer to Q. 51: `December 2006 FAQ Regulation Q/A #4 states, in pertinent part: `When it is confirmed that one class of products has been replaced or has had the toxic or hazardous substances in it replaced, or that replacement is not practical but the product can meet the concentration limits for the toxic or hazardous substance content, and it is `technologically mature and economically feasible`, this class of product is listed on the Catalogue.` The process of compiling the `Catalogue` will be gradual, and will be according to a set procedure. For example, opinions from related enterprises will be obtained, so will expert assessments, etc. At present, the Ministry of Information Industry has already drafted `the Measure on the Compilation of the Catalogue for Priority Prevention of Pollution from Electronic Information Products`, and hopes that the process of compiling this list will be systematic and regulated. Once the process for compiling the list is set, researches will be carried out to determine which products will be placed on the `Catalogue` in the first batch and at what time they will be added to the `Catalogue.`

Despite these hopeful statements, GCG and many others are aware that – around the world – regulations and standards are adopted that do not take into account the profound implications that they may have for companies. Eliminating substance exemptions and including products that rely on substance exemptions would be a very burdensome one-two punch.  GCG will contact those individuals and organizations within its network that have the ear of Chinese authorities. We encourage others to do so as well.

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