EU Conflict Mineral Rule — Requires Attention

Reminder: time is slimming for public feedback on an EU conflict minerals initiative.

Here’s the European Commission info page. Insider comments and notes follow below.

Insider comments and notes. The Commission says it will use results to help decide whether – and how in a reasonable and effective manner – to complement and/or continue on-going due diligence initiatives and support for good governance in mineral mining, especially in developing countries affected by conflict.

The consultation is open until June 26, 2013.

The contributions received, together with the identity of the contributor, will be published on the Internet, unless the contributor objects to publication of the personal data by checking the appropriate box in the questionnaire (see question 1.1. in the EC’s questionnaire, scroll down).

IPC’s PoV. The North American electronics association IPC believes that it may be impractical to encourage the EU to take no action and that “the best strategy is to encourage a voluntary regimen based on the OECD process,” according to a recent comment from IPC’s frontperson, Fern Abrams.

OECD process. The OECD process was developed by a multi-national group with NGO and industry participation. Although the OECD process is far from perfect, IPC and others believe it’s more flexible than Dodd-Frank and other regulatory schemes. Therefore the OECD process may be the best option in terms of not having a new/competing regulatory regimen. If interested, IPC has drafted suggestions for industry in responding to the EU’s questioning.

In the US. The US conflict mineral rule was put into place in summer of 2012. Companies are required to collect data in 2013. The first deadline for reporting is in spring of 2014.

Companies who do not yet have a compliance initiative are encouraged to contact Actio or preferred vendor. Quickly. And weigh in on the EU’s possible initiative — especially if you agree that the OECD process is preferable to the Dodd-Frank compliance requirements. Take action tout de suite. Schnell. Vlug. Rapidamente.


Conflict Mineral Regulation: Vote Slated for August

The Securities and Exchange Commission (SEC) has announced an open meeting (see below) to vote on the final conflict minerals rule on August 22, 2012.

IPC says it will be making one last lobbying push to emphasize the importance of a phase in period, reasonable treatment of recycling, and other issues of concern. Additionally, they will continue to move forward with drafting of our due diligence guidance document, participation in the OECD guidance pilot implementation, and other tools to help our members.

Finally, assuming regulations are adopted on August 22, 2012, IPC will plan to hold educational seminars in California, Chicago, and Boston in late October or early November.

Other associations and lobbying groups are likely doing the same.


The announcement:
“Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold an Open Meeting on Wednesday, Aug. 22, 2012, at 10 AM, in the Auditorium, Room L-002.

The subject matters of the Open Meeting will be:

  1. Item 1: The Commission will consider whether to adopt rules regarding disclosure and reporting obligations with respect to the use of conflict minerals to implement the requirements of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
  2. Item 2: The Commission will consider whether to adopt rules regarding disclosure and reporting obligations with respect to payments to governments made by resource extraction issuers to implement the requirements of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
  3. Item 3: The Commission will consider rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act, as mandated by Section 201(a) of the Jumpstart Our Business Startups Act

At times, changes in Commission priorities require alterations in the scheduling of meeting items.  Keep your eyes peeled and/or subscribe to this blog — or to IPC updates or the like.

REACH Penalties: Belgium Found Guilty

Belgium is the first EU Member State to be condemned by European Court of Justice for breach of REACH.  This is the result of a May 5 judgment in Case 265/10 Commission vs. Belgium.

REACH has been very clear from the beginning that Member States have their own responsibilities and their own penalty structures.  For instance, the chart (above) shows comparative REACH compliance fines between countries across Europe.  Belgium has among the highest penalties in the EU.  Moreover, the chart shows the incredible discrepancies between how Member States choose to implement and moderate REACH compliance.  (The chart is from the EC December report on penalties, from a study conducted by Milieu Ltd. for the European Commission.)

Brussels fails to comply. REACH Article 126 imposes the obligation on EU Member States to adopt whatever measures necessary to ensure sufficient and correct enforcement of REACH.  Crucially, EU Member States were obligated to notify their enforcement/sanctions-systems to the Commission by Dec. 1, 2008.

Brussels-based Peter Kugel, Partner at Kugel Legal, a firm specializing in EU Law & Litigation, reports that “Belgium evidently failed to comply with that obligation because the Regions of Wallonia and Brussels-capital had not yet adopted any measures to comply with Article 126 REACH.”

REACH “cooperation agreement.” The Commission argued that Belgium failed to comply with Article 126 because there was no “cooperation agreement” in place between the Federal Government and the Regional governments.  A “cooperation agreement” would be an agreement that paves the way for cooperation between the different inspection services in a Member State, largely by implementing modalities of cooperation and information exchange pathways.

The Court dismissed the argument that lack of such an agreement would necessarily lead to lack of compliance.

The court found that, yes, such an agreement could certainly be an appropriate instrument towards the implementation of an effective sanctions-system in connection with violations of REACH (as foreseen by Article 126).

“However,” points out Kugel, “the Court ruled that neither Article 126 REACH nor any other provision of REACH oblige Member States to engage in such domestic ‘cooperation agreements’ for a correct implementation of Article 126 REACH.”

In other words:  it’s each country’s responsibility to figure out its compliance infrastructrue.  It is not up to any outside (federal) agent to coordinate or install procedures to ensure clear compliance processes for a Member State.

REACH breach ruling insight. Many were surprised that Belgium was the first to receive a judgement against their REACH compliance efforts.

Politically, in the longer term, to crack down on Belgium first could be a smart decision.  It shows lack of favoritism when it comes to compliance breach judgements.  In the short term, though, Belgium comes away with a bruised ego and a bruised Public Relations team.  Overall?  It’s nothing a month or two and a few more condemnations in other directions won’t fix.

In saying that, however, we must not be glib.  Businesses in America are watching compliance rulings on REACH like hawks.  Rightly so.  As court action heats up, so will fines, and then all import/export companies will really begin take REACH compliance risk management more seriously.

Apparently, and refreshingly perhaps, the “we didn’t know how to do it; we didn’t know what was going on” argument isn’t flying far in European courts.

European Agencies Ban Six Chemicals

In REACH and chemicals news, it was announced in Europe that six dangerous substances are to be phased out. This means that manufacturers who use these chemicals in their products — or have absorbed them somewhere in their supply chain — will have to:

a) know about those offending product ingredients, and

b) find replacement raw materials if the company is to conduct business in Europe legally.

The Commission decision follows the successful first phase of REACH’s registration and notification of chemicals. It’s all a part of REACH, Europe’s initiative to make the use of chemicals safer.

European Commission Vice President Antonio Tajani said, “Today’s decision is an example of the successful implementation of REACH and of how sustainability can be combined with competitiveness. It will encourage industry to develop alternatives and foster innovation.”

What it means is that six substances of very high concern — also known as SVHCs — have been moved from the candidate list to the authorization list, known as Annex XIV, under the EU’s REACH regulation. Annex XIV is like chemical-Alcatraz, substances there cannot be placed on the market or used unless they get a special clearance from the Agency and authorisation is granted for a specific use. All SVHC listings, selections and classifications are based on recommendations made by the European Chemicals Agency (ECHA).

The following six chemical substances of very high concern are the first entrants in the Annex XIV:

1. 5-ter-butyl-2,4,6-trinito-m-xylene (musk xylene)

2. 4,4′-diaminodiphenylmethane (MDA)

3. hexabromocyclododecane (HBCDD)

4. bis(2-ethylexyl) phthalate (DEHP)

5. benzyl butyl phthalate (BBP)

6. dibutyl phthalate (DBP)

If your company uses any of these substances – even in tiny quanitites – or if these substances appear magically in your product from a mysterious supply chain source – a timetable for substitution will have to be submitted. These six substances have been determined to be either carcinogenic, toxic for reproduction or persistent in the environment and to accumulate in living organisms, and will be banned within the next three to five years.

Environment Commissioner Janez Potonik said: “Chemicals are everywhere in the modern world and some of them can be very dangerous. Today’s decision is an important step towards better protecting our health and the environment.”

Additional substances will be added to Annex XIV in the future.

The Commission also says it will put forth a greater number of known substances of very high concern for inclusion in the candidate list. The Commission and the European Chemicals Agency say they are fully committed to achieve this goal, and are expecting the “active engagement of the Member States.”

SVHC background. As we’ve reported previously in this blog, the SVHC list is simply a list of Substances of Very High Concern. “Only the European community could come up with such a tactful term for ‘highly toxic stuff,'” as a recent article in Environmental Leader put it.

By 2012, over 165 substances are expected to be listed on the SVHC candidate list. The list includes substances which are:

* Carcinogenic, Mutagenic or toxic to Reproduction

* Persistent, Bioaccumulative and Toxic (PBT) or very Persistent and very Bioaccumulative (vPvB) (defined by REACH criteria), and/or

* Identified as causing probable serious effects to humans or the environment of an equivalent level of concern as those above, e.g. endocrine disrupters — for reference, in the US there are 134 suspected endocrine disruptors.

The latest SVHC candidate list is online here at the ECHA site, and if that site is down — as it often seems to be — go to the June 2010 SVHC candidate list hosted by Actio.