Compliance with Non-U.S. Environmental Health and Safety Regulations

Most U.S.-based companies have fairly sophisticated environmental, health and safety ('EHS') programs that are designed to ensure compliance with applicable EHS rules and regulations. The reasons for such programs are obvious: EHS compliance represents the floor for most, if not all companies, and non-compliant companies are likely to experience adverse financial, environmental, health and safety impacts as a result of non-compliance.

In order to be compliant, companies obviously must be able to identify applicable EHS rules and regulations. Although companies' EHS programs are generally well designed to identify applicable U.S. rules and regulations, these programs may overlook non-U.S. EHS laws and regulations that can also can impact U.S.-based companies' ability to market products not only abroad, but in the United States as well. An example of such 'overlooked' rules and regulations may be recent EHS directives/regulations promulgated by the European Union (the 'EU') and its individual 'Member States.'

EU 'Directives'

Over the past several years, the EU has implemented a number of EHS 'Directives,' which regulate products that are sold (either directly or indirectly) in the EU. The most significant of these Directives (from an EHS perspective) are: 1) the Restriction of Hazard-ous Substance Directive ('RoHS'); 2) the Waste Electrical and Electronic Equipment Directive ('WEEE'); and 3) the Registration, Evaluation and Authorization of Chemicals Directive ('REACH') (The latter is actually a 'regulation,' which means that it applies directly and uniformly across all member states, unlike a 'directive,' which must be integrated by each member state into its existing regulatory scheme). As is further discussed below, companies whose EHS programs fail to proactively identify and develop compliance strategies for these and other EHS rules and regulations are likely to quickly find themselves at a competitive disadvantage and may in fact find themselves unable to sell products in certain markets.

RoHS

The RoHS directive applies to specific types of electric and electronic equipment ('EEE') that is sold in the EU. The RoHS directive, which became effective on July 6, 2006, regulates the following categories of EEE: 1) large household appliances (i.e., washing machines, refrigerators, etc.); 2) small household appliances (i.e., vacuum cleaners, toasters, etc.); 3) computer and telecommunication equipment (i.e., products and equipment for the collection, storage, processing, presentation or communication of information by electronic means and products or equipment for transmitters, sound, images, or other information by telecommunications); 4) lighting equipment; 5) electrical tools (i.e., saws, drills); 6) toys; and 7) automatic dispensers (i.e., vending equipment). Subject to certain exemptions, any EEE sold in the EU that falls into one of these seven categories must now be free of lead, mercury, cadmium, hexavalent chromium, poly brominated biphenyls and poly brominated diphenyl ethers. EEE that contains any of these prohibited substances cannot be sold in any EU member state.

The RoHS exemptions are somewhat fluid as new exemption requests are filed by regulated industries on a fairly frequent basis. Currently, regulated EEE that is utilized for the protection of the security interests of an EU member state is, not surprisingly, exempt from the RoHS requirements. Exemptions are also provided for certain lead alloys and mercury that is contained in florescent and other lighting equipment (This is not an exhaustive list; manufacturers of regulated EEE are encouraged to evaluate the current exemption list to determine whether any other RoHS exemptions might apply). Companies which manufacture regulated EEE need to ensure that their EHS professionals stay abreast of these changing exemptions.

WEEE

The WEEE directive also regulates EEE; in fact, WEEE applies to the same categories of EEE as RoHS, as well as two additional categories, medical monitoring devices and control equipment. Manufacturers and importers of these EEE products are required to set up and/or fund a collection and disposal program to ensure proper management of these EEE products at the end of their useful life. The WEEE directive is similar to regulations currently being promulgated in a number of states such as California and Oregon.

Producers of regulated EEE are required to register in each member state and identify the volume of regulated EEE placed on the market. For EEE placed on the market after August 13, 2005, producers are responsible for participating in a system (either individually or collectively) for the collection and disposal of those products. With respect to historical EEE (i.e., EEE that was placed on the market prior to Aug. 13, 2005), current producers are required to contribute to the costs that are being, and will be, incurred to dispose of these historical products based on the producer's current market share. There are a number of financing mechanisms which have been put into place to enable producers to meet their WEEE obligations, including blocked bank accounts, insurance products, or participation in a collective industry group.

For U.S.-based companies, the WEEE directive poses unique challenges. At the present time, only producers, importers, and exporters based in the EU are able to register. Although U.S.-based companies cannot market non-compliant products in the EU, those companies currently cannot register their products as required by WEEE. U.S.-based companies are thus required to affiliate themselves with an EU-based importer who then is responsible for WEEE compliance.

Again, just as with the RoHS directive, companies that manufacture products in the U.S. for export into the EU will be unable to market those products unless the products are WEEE compliant, and companies that have failed to proactively identify the WEEE requirements will be at a competitive disadvantage until they are able take the necessary steps to affiliate with an EU-based importer and comply with these requirements.

REACH

The REACH regulation is similar to the Toxic Substances Control Act in the United States, and will apply to chemical manufacturers in the EU beginning on June 1, 2007. REACH is designed to streamline the existing legislative framework governing the production and importation of chemical substances in the EU. REACH is intended to create a single system to regulate 'new' and 'existing' chemical substances, and is expected to spur the phase-out of more dangerous chemicals in favor of safer substitutes.

REACH will require manufacturers and importers of chemical substances in the EU to submit registrations for every chemical that is manufactured or imported in a quantity greater than one metric ton per year. The information to be included in the registration depends on the volume of chemical produced. For chemical substances produced in amounts between one and ten tons, a technical dossier containing information on the properties, uses, and classification of the chemical is required. Chemical substances produced in excess of ten tons will require a chemical safety report that documents the hazards and classification of a particular substance, as well as an assessment of the risks associated with the particular chemical.

In addition, for chemicals that are deemed to pose high risks to health or the environment, chemical manufacturers will be required to evaluate whether lower risk substitute products exist; if lower risk products do exist, the manufacturers will be required to phase-out the more harmful substance. If no lower risk alternative exists, the manufacturer will be obligated to submit a research and development plan which documents the efforts the manufacturer will undertake to find a safer substitute chemical.

Just as with WEEE, in order for U.S.-based companies to export chemical substances into the EU, the U.S.-based company will need to partner with an EU-based importer (or appoint an 'only representative') who will be responsible for complying with the REACH requirements. Non-REACH compliant chemical substances will not be able to be marketed and/or imported in the EU after June 1, 2007.

Implications of Newly Promulgated EHS Regulations

For U.S.-based companies that produce and sell EEE and chemical products in the EU, these directives/regulations should have been on the EHS radar screens many months ago, and compliance strategies should have already been developed and implemented. If these directives/regulations were not previously identified, immediate efforts should be undertaken to develop a compliance strategy to address these new regulations. However, these are just examples of the types of regulations that can impact U.S.-based companies. There are many less publicized EHS rules and regulations promulgated by the EU and other countries on a frequent basis. For example, China is in the process of developing its own versions of RoHS and WEEE that will affect products being imported/exported from China. Many other countries are also evaluating whether to promulgate similar regulations.

As such, companies need to ensure that their EHS programs are designed to proactively identify these new rules and regulations to enable necessary product and/or process modifications to be made in a timely manner. Active participation in trade groups and review of environmental publications are excellent mechanisms for keeping abreast of EHS developments abroad. Again, the focus must be on proactively identifying these potentially applicable regulations before they are promulgated because once the regulation is promulgated, it is often too late as it takes time to modify the product or process, and companies may find them-selves in a position of being unable to produce and/or sell their products until the modification is complete.

Finally, it is important to note that these EHS directives do not only affect companies that produce and market their products outside of the United States. Companies that produce and market products in the United States may be affected as well. For example, many companies are finding that even their U.S.-based customers are demanding that electronics be RoHS compliant so that those electronics can be integrated into products that are later sold in the EU. In other instances, companies which rely on parts or components which are manufactured in the EU may find that these components have been modified in order to meet the RoHS and WEEE requirements which may result in the parts or components no longer being suitable for their intended use. Similarly, chemical manufacturers in the EU may elect or be forced to cease production of certain chemical products as a result of the REACH regulations. U.S.-based companies that rely upon those chemicals will need to seek alternative suppliers (at a potentially higher price) or modify the manufacturing process to utilize a less hazardous alternate chemical.

For many years, the EHS regulations in the United States had set the bar. Now, however, many countries are promulgating EHS regulations that go beyond the U.S. regulations. It is therefore no longer sufficient for U.S.-based companies to be solely focused on compliance with U.S. laws and regulations without considering the implications of non-U.S. EHS regulations. Companies need to ensure that their EHS compliance systems are properly designed to proactively identify these new EHS rules and regulations in sufficient time to enable any necessary modifications to be made such that a company's products can continue to be sold in the United States and abroad.

Steven M. Siros is a partner in Jenner & Block's Chicago office. He is a member of the Firm's Environmental, Energy and Natural Resources Law, Insurance Litigation and Counseling, and Products Liability and Mass Tort Defense Practices, focusing his practice on both litigation and regulatory matters. He may be reached at [email protected].

Most U.S.-based companies have fairly sophisticated environmental, health and safety ('EHS') programs that are designed to ensure compliance with applicable EHS rules and regulations. The reasons for such programs are obvious: EHS compliance represents the floor for most, if not all companies, and non-compliant companies are likely to experience adverse financial, environmental, health and safety impacts as a result of non-compliance.

In order to be compliant, companies obviously must be able to identify applicable EHS rules and regulations. Although companies' EHS programs are generally well designed to identify applicable U.S. rules and regulations, these programs may overlook non-U.S. EHS laws and regulations that can also can impact U.S.-based companies' ability to market products not only abroad, but in the United States as well. An example of such 'overlooked' rules and regulations may be recent EHS directives/regulations promulgated by the European Union (the 'EU') and its individual 'Member States.'

EU 'Directives'

Over the past several years, the EU has implemented a number of EHS 'Directives,' which regulate products that are sold (either directly or indirectly) in the EU. The most significant of these Directives (from an EHS perspective) are: 1) the Restriction of Hazard-ous Substance Directive ('RoHS'); 2) the Waste Electrical and Electronic Equipment Directive ('WEEE'); and 3) the Registration, Evaluation and Authorization of Chemicals Directive ('REACH') (The latter is actually a 'regulation,' which means that it applies directly and uniformly across all member states, unlike a 'directive,' which must be integrated by each member state into its existing regulatory scheme). As is further discussed below, companies whose EHS programs fail to proactively identify and develop compliance strategies for these and other EHS rules and regulations are likely to quickly find themselves at a competitive disadvantage and may in fact find themselves unable to sell products in certain markets.

RoHS

The RoHS directive applies to specific types of electric and electronic equipment ('EEE') that is sold in the EU. The RoHS directive, which became effective on July 6, 2006, regulates the following categories of EEE: 1) large household appliances (i.e., washing machines, refrigerators, etc.); 2) small household appliances (i.e., vacuum cleaners, toasters, etc.); 3) computer and telecommunication equipment (i.e., products and equipment for the collection, storage, processing, presentation or communication of information by electronic means and products or equipment for transmitters, sound, images, or other information by telecommunications); 4) lighting equipment; 5) electrical tools (i.e., saws, drills); 6) toys; and 7) automatic dispensers (i.e., vending equipment). Subject to certain exemptions, any EEE sold in the EU that falls into one of these seven categories must now be free of lead, mercury, cadmium, hexavalent chromium, poly brominated biphenyls and poly brominated diphenyl ethers. EEE that contains any of these prohibited substances cannot be sold in any EU member state.

The RoHS exemptions are somewhat fluid as new exemption requests are filed by regulated industries on a fairly frequent basis. Currently, regulated EEE that is utilized for the protection of the security interests of an EU member state is, not surprisingly, exempt from the RoHS requirements. Exemptions are also provided for certain lead alloys and mercury that is contained in florescent and other lighting equipment (This is not an exhaustive list; manufacturers of regulated EEE are encouraged to evaluate the current exemption list to determine whether any other RoHS exemptions might apply). Companies which manufacture regulated EEE need to ensure that their EHS professionals stay abreast of these changing exemptions.

WEEE

The WEEE directive also regulates EEE; in fact, WEEE applies to the same categories of EEE as RoHS, as well as two additional categories, medical monitoring devices and control equipment. Manufacturers and importers of these EEE products are required to set up and/or fund a collection and disposal program to ensure proper management of these EEE products at the end of their useful life. The WEEE directive is similar to regulations currently being promulgated in a number of states such as California and Oregon.

Producers of regulated EEE are required to register in each member state and identify the volume of regulated EEE placed on the market. For EEE placed on the market after August 13, 2005, producers are responsible for participating in a system (either individually or collectively) for the collection and disposal of those products. With respect to historical EEE (i.e., EEE that was placed on the market prior to Aug. 13, 2005), current producers are required to contribute to the costs that are being, and will be, incurred to dispose of these historical products based on the producer's current market share. There are a number of financing mechanisms which have been put into place to enable producers to meet their WEEE obligations, including blocked bank accounts, insurance products, or participation in a collective industry group.

For U.S.-based companies, the WEEE directive poses unique challenges. At the present time, only producers, importers, and exporters based in the EU are able to register. Although U.S.-based companies cannot market non-compliant products in the EU, those companies currently cannot register their products as required by WEEE. U.S.-based companies are thus required to affiliate themselves with an EU-based importer who then is responsible for WEEE compliance.

Again, just as with the RoHS directive, companies that manufacture products in the U.S. for export into the EU will be unable to market those products unless the products are WEEE compliant, and companies that have failed to proactively identify the WEEE requirements will be at a competitive disadvantage until they are able take the necessary steps to affiliate with an EU-based importer and comply with these requirements.

REACH

The REACH regulation is similar to the Toxic Substances Control Act in the United States, and will apply to chemical manufacturers in the EU beginning on June 1, 2007. REACH is designed to streamline the existing legislative framework governing the production and importation of chemical substances in the EU. REACH is intended to create a single system to regulate 'new' and 'existing' chemical substances, and is expected to spur the phase-out of more dangerous chemicals in favor of safer substitutes.

REACH will require manufacturers and importers of chemical substances in the EU to submit registrations for every chemical that is manufactured or imported in a quantity greater than one metric ton per year. The information to be included in the registration depends on the volume of chemical produced. For chemical substances produced in amounts between one and ten tons, a technical dossier containing information on the properties, uses, and classification of the chemical is required. Chemical substances produced in excess of ten tons will require a chemical safety report that documents the hazards and classification of a particular substance, as well as an assessment of the risks associated with the particular chemical.

In addition, for chemicals that are deemed to pose high risks to health or the environment, chemical manufacturers will be required to evaluate whether lower risk substitute products exist; if lower risk products do exist, the manufacturers will be required to phase-out the more harmful substance. If no lower risk alternative exists, the manufacturer will be obligated to submit a research and development plan which documents the efforts the manufacturer will undertake to find a safer substitute chemical.

Just as with WEEE, in order for U.S.-based companies to export chemical substances into the EU, the U.S.-based company will need to partner with an EU-based importer (or appoint an 'only representative') who will be responsible for complying with the REACH requirements. Non-REACH compliant chemical substances will not be able to be marketed and/or imported in the EU after June 1, 2007.

Implications of Newly Promulgated EHS Regulations

For U.S.-based companies that produce and sell EEE and chemical products in the EU, these directives/regulations should have been on the EHS radar screens many months ago, and compliance strategies should have already been developed and implemented. If these directives/regulations were not previously identified, immediate efforts should be undertaken to develop a compliance strategy to address these new regulations. However, these are just examples of the types of regulations that can impact U.S.-based companies. There are many less publicized EHS rules and regulations promulgated by the EU and other countries on a frequent basis. For example, China is in the process of developing its own versions of RoHS and WEEE that will affect products being imported/exported from China. Many other countries are also evaluating whether to promulgate similar regulations.

As such, companies need to ensure that their EHS programs are designed to proactively identify these new rules and regulations to enable necessary product and/or process modifications to be made in a timely manner. Active participation in trade groups and review of environmental publications are excellent mechanisms for keeping abreast of EHS developments abroad. Again, the focus must be on proactively identifying these potentially applicable regulations before they are promulgated because once the regulation is promulgated, it is often too late as it takes time to modify the product or process, and companies may find them-selves in a position of being unable to produce and/or sell their products until the modification is complete.

Finally, it is important to note that these EHS directives do not only affect companies that produce and market their products outside of the United States. Companies that produce and market products in the United States may be affected as well. For example, many companies are finding that even their U.S.-based customers are demanding that electronics be RoHS compliant so that those electronics can be integrated into products that are later sold in the EU. In other instances, companies which rely on parts or components which are manufactured in the EU may find that these components have been modified in order to meet the RoHS and WEEE requirements which may result in the parts or components no longer being suitable for their intended use. Similarly, chemical manufacturers in the EU may elect or be forced to cease production of certain chemical products as a result of the REACH regulations. U.S.-based companies that rely upon those chemicals will need to seek alternative suppliers (at a potentially higher price) or modify the manufacturing process to utilize a less hazardous alternate chemical.

For many years, the EHS regulations in the United States had set the bar. Now, however, many countries are promulgating EHS regulations that go beyond the U.S. regulations. It is therefore no longer sufficient for U.S.-based companies to be solely focused on compliance with U.S. laws and regulations without considering the implications of non-U.S. EHS regulations. Companies need to ensure that their EHS compliance systems are properly designed to proactively identify these new EHS rules and regulations in sufficient time to enable any necessary modifications to be made such that a company's products can continue to be sold in the United States and abroad.

Steven M. Siros is a partner in Jenner & Block's Chicago office. He is a member of the Firm's Environmental, Energy and Natural Resources Law, Insurance Litigation and Counseling, and Products Liability and Mass Tort Defense Practices, focusing his practice on both litigation and regulatory matters. He may be reached at [email protected].