Welcome to the Winter 2007 Design Chain Associates E-mail Newsletter!

• Special Report: Dissecting the Counterfeit Electronic Component Problem
• REACH wake up call!
• DCA's 2008 Outlook and Predictions
• China RoHS Catalog DEBATE!
• EU RoHS Exemptions under Scrutiny
• Events to Attend
• Contact and Feedback

Lead in toys, exploding cell phone batteries, faulty circuit breakers, poisonous dog food, defective microprocessors. It seems whenever you turn on the news or pick up a newspaper there is another serious issue with products from China.

For the past 18 months, Design Chain Associates (DCA) has been working with clients and the United States Patent and Trademark office (USPTO) to raise awareness in the electronics industry of this significant and growing problem. DCA has participated in a series of seminars USPTO has sponsored across the country. Through study, participation, and discussions with experts including Chinese trade and embassy officials, US Department of Commerce representatives, and experienced lawyers in China and North America, as well as our own experience, we have gained significant insight and a unique perspective into the problem and the legal, cultural and economic issues that are driving it.

This will be the first in a series of special newsletter articles that will cover this problem in depth. We will examine the origins of the problem, causes, and preventative actions. We will discuss supply chain hardening and other strategies to minimize the chances of your company becoming a victim. Additionally, we have invited legal and industry experts to join us to discuss Chinese laws and what you need to know to insure you are protected before, during and after technology transfers. Special attention will be given to protection through proper execution of patents, trademarks and copyrights under Chinese law and how that differs from US law, and we will discuss what remedies are available under Chinese civil and criminal law.

We will also be expanding our resource page.

The most serious mistake an article manufacturer can make concerning REACH is to have the false impression that REACH is just for the Chemical Industry and that as an article manufacturer you don’t have any obligations under this regulation. This regulation is so ambitious and far reaching that it will affect every industry, whether you sell in the EU market or not.

REACH was adopted on 18 December 2006, and entered into force on 1 June 2007 (that’s right, it is already in effect). Most major impacts don’t really begin until 1 June 2008, but if you or a supplier(s) have an obligation to register, you don’t want to miss the 6 month pre-registration window. If you have any products that are sold in the European Union [as well as the European Economic Area (EEA) and European Free Trade Association (EFTA)] you will have obligations under REACH. You may or may not have obligations to register, but the clock is ticking and you need to ascertain registration requirements ASAP. If the requirement to register a substance (used in your product) is the responsibility of a supplier up your supply chain (like a chemical manufacturer), you must make sure that this suppler pre-registers or else you may have to discontinue sales of your products in the EU market. Even if registration requirements don’t apply, you may have notification requirements and obligations to forward information on the substances in your articles to downstream users, customers, and consumers.

Even to establish that you don’t have any obligations under REACH will take time and resources. Due diligence will require the collection of information up and down the entire supply chain. Collection of data will be huge task, so there is a level of urgency depending on where you are in this process. Article manufacturers are obligated to respond to consumer’s requests for information on substances in articles within a 45 day period. NGOs will use this provision as a tool to get manufacturers and retailers to reveal chemicals in consumer products as early as the fall of 2008. Even if your company is in compliance, this information may be used to publicly embarrass your company, or organize boycotts against your products, in an effort to pressure industry to change its chemical use.

REACH will compel the discontinuance of substances of very high concern and the implementation of suitable substitutes. This may generate assurance of supply issues that ripple down to article manufacturers in regions where the regulation does not apply. Better to anticipate and plan for effects on your products than to be in the position of having to react to a material change in the middle of a product life cycle.

Although REACH applies to the European Union, it is likely that other jurisdictions will enact REACH-like legislation. We know, for instance, that China is considering this, as is a faction here in the United States that would like to reform TSCA (Toxic Substance Control Act).So consider changes to product content on a worldwide basis. Environmental compliance can become a competitive advantage rather than just a resources burden.

• DCA expects to see a firestorm of REACH-related activity around articles starting in earnest in the second quarter. We're seeing it starting upstream in the supply chain now.

• Some time during the year we expect (but have learned not to plan) to see China come out with substance restrictions related to the "China RoHS" regulation, which went in to effect earlier this year. Depending on how those are defined and implemented it could either be a "so what" or we'll see the WTO TBT committee deluged with protests. See below for more on the "catalog".

• Other excitement could also come from China as they further define a REACH-like approach to chemical policy, and their WEEE-like regulation goes in to effect in February.

• Still more could come from Norway if they persist in being a "rogue nation" trying to outlaw substances in applications that are not banned anywhere else. Right now their proposed legislation would effectively eliminate wireless technology in the country...so they've gone back to review comments and determine what to do next.

• We should expect implementation from South Korea on their ELV/RoHS/WEEE-like regulation. We are expecting final enforcement ordinance and regulation documents, as well as a July 1, 2008 in-force date. Further definition of the "put on the market" concept as well as how they will handle existing product should also be forthcoming.

• Regarding Europe, we expect further calls for industry to provide inputs to the various ongoing RoHS and WEEE - related reviews, which include what, if any, additional substances to restrict under RoHS, whether to eliminate certain existing exemptions, centralized registration for WEEE, etc. This has, in fact, already begun. See the Oko-Institut's RoHS Exemption website.

• In the USA, we can expect continued activity in California as they work on a state-level chemical policy that may have some influence nationally. We also expect to see more states proposing and passing e-waste regulations too (in addition to the 4 states that had ewaste regulations in place at the start of the year, 5 more put them in place this year). Congress' mandate to replace analog television signals with HDTV digital signals in 2009 is expected to drive a wholesale replacement of televisions in the US and that is seen as a tangible driver for this type of regulation.

• With some major electronics OEMs working to transition server and other infrastructure products to lead-free solder by 2010 (ahead of the EU-RoHS regulated need to; this class of product currently has an exemption for lead in solder), we can expect some pressure on other companies as their sources of lead-balled BGA (Ball Grid Array) semiconductor devices dry up. This may also be driven by the continuing need for efficiency: fewer and fewer manufacturers will want to continue to maintain two manufacturing lines, one for lead-based solder and one for lead-free solder.

And so it begins. The RoHS directive threatened it and here we go, so get ready: it's REVIEW TIME! So which exemptions will continue? Which will go by the wayside? Which are you dependent on? The Oko-Institut was selected as the European consulting firm which will manage the review and make recommendations. They have created a website to track it all here. A first stakeholder consultation covering the 29 current exemptions to the RoHS Directive as well as three new exemption requests will be launched in early January 2008 and will run for 8 weeks.

Oko Institut is also working on identification of "hazardous substances in electrical and electronic equipment" which are NOT currently regulated by the RoHS directive. The intent is to identify candidate substances for addition to the RoHS 6, and determine whether the best way to handle them is through RoHS or REACH.

April 15-16, 2008: Intellectual Property Symposium San Jose, CA

This inaugural symposium is the place where those in the technology and legal arenas will meet in a communal setting to learn, analyze and engage in the issues facing the electronics industry. Co-chaired by Rick Merritt, Editor, EE Times and Mike McLean, Vice-President, Semiconductor Insights, this first annual event will be co-located with Embedded Systems Conference Silicon Valley and the EE Times ACE Awards. Tom Valliere will lead a session on counterfeiting in the electronics supply chain.

February 22-23, 2008: California-EU Regulatory Cooperation Project Seminar Berkeley, CA

Mike Kirschner, the sole US industry representative in the project, discusses "US industry challenges and responses to EU and California product-targeted environmental regulations".

January 29-30, 2008: Green Manufacturing Expo Anaheim, CA