Due diligence has become a major factor in the electronics industry as we near the July 1, 2006 deadline to comply with the European Union's Restrictions on Hazardous Substances (RoHS). One difficulty the industry faces is the lack of standard formats for communicating compliance through the supply chain (from component manufacturer to distributor to the producer of finished goods), and a variety of approaches has been adopted. Ultimately, the producers of finished goods have to prove compliance to governing bodies.
As part of global distributor Premier Farnell, Newark InOne and its European sister Farnell InOne have developed useful standard "certificates of compliance." Both companies have made these certificates available across the industry through the Association of Franchised Distributors of Electronic Components in the U.K. and the National Electronics Distributors Association in North America. Through those two bodies, we've been putting forward standard methods for component manufacturers to provide compliance information to distributors, as well as a standard for distributors to provide compliance assurance to their customers.
LACK OF GUIDANCE
Neither the European Union itself nor any of the member states that must implement RoHS has provided much guidance on documentation or other evidence that should be provided at each point in the supply chain to support the RoHS compliance of components and finished goods.
The limited guidance issued by the U.K. government says that the enforcement agency will start any compliance investigation by looking at what documentation the company has to support the compliant status of its products. This will include confirmations of compliance from the producer's component and subassembly suppliers. The guidance also details steps the manufacturer may have taken to verify the compliance statements of its suppliers, including testing to confirm material content.
This suggests that some amount of testing needs to be part of the due diligence process. The legislation implementing RoHS in the U.K. provides a "due diligence" defense for putting a product on the market containing the banned substances at levels over those allowed. This requires all reasonable steps and due diligence to be taken to avoid the offense. There is no guidance on what exactly will be considered to be all reasonable steps, and this will be a judgment call. But it must mean something more than simply relying on what suppliers tell you without question.
Not every E.U. country intends to have a due diligence defense. Many will make the offense one of strict liability—if your product contains banned substances beyond allowable levels, you're guilty. Some countries have adopted a mix—strict liability, but with the penalty varying depending on whether the finished goods producer is considered negligent.
Under the terms of the new regulations, blind faith in a statement of compliance from a supplier of components or subassemblies may not be sufficient. So it's essential for you to scrutinize the evidence provided by product manufacturers or, more practically, your distributors.
As you can't assume that everyone will use the same due diligence process, take the time to find out the specific steps that your distributor is taking to ensure the integrity of its inventory. Here are some questions you should ask your distributor:
- Do you mix compliant and noncompliant products in your warehouse or segregate them?
- Do you assign a new stock number for any compliant version, even if the manufacturer doesn't?
- Have you created a data trail from your suppliers, requesting specific information on each product?
- Are part labels physically inspected and compared with the data collected from suppliers for disparities?
- Have you conducted a risk assessment for each of your suppliers to determine the accuracy of information you receive?
- Do you ask "high-risk" suppliers for independent test results to substantiate their claims?
- Do you conduct any outside testing to resolve disparities?
- Do you have a process to resolve disparities with the supplier?
- Do you have a process to communicate discrepancies to customers who purchased the product?
- Do you provide labeling with the part's compliance status and a certificate of compliance?