China’s manufacturing sector is experiencing its usual series of upheavals and revisions, many of which will directly impact the activities of off-shore producers. For electronics parts and components producers, July 1st, 2016 saw the entry into effect of the second round of China RoHS2 (officially the Administrative Measure on the Control of Pollution Caused by Electronic Information Products). If your supply chain has any electronics manufacturing or parts within its scope, these new rules will probably apply to you.
Why the New Rules?
In many ways, China is engaged in a massive game of catch-up. Unlike the modernized western world that developed slowly over the course of the past two centuries, China began its foray into modernization in 1979, when it opened its first Special Economic Zone. Stung by the tragic consequences of policies like the Great Leap Forward and the Cultural Revolution, the country determined to reframe its future and launched itself headfirst into the modern industrial community. While it has achieved an astonishing scale of success on many fronts, often the shortcuts it accepted along the way have stung it as bad as previous policies. Consequently, the country is still developing oversight and control mechanisms for substances that have been in use in the manufacturing sector for years.
Such is the case with the “Restrictions on Hazardous Substances in Electrical and Electronic Products” rules introduced in 2007 (China RoHS1). This body of regulations governs many aspects of the hazardous-substance information-disclosure and labeling requirements for specific electronic information products. RoHS1 requires “Compulsory Certification” for subject electronic equipment, but exempts “products manufactured for export” from its purview. Most notably, the 2007 rules do not address the volume of hazardous substance content that can be included in electronics parts, components or products. RoHS2 aims to address that gap.
RoHS2 versus RoHS1
Although it is incomplete in itself (the RoHS2 “Compliance Management Catalogue,” a list of subject electronics and electrical products, has yet to be developed), the RoHS2 definitely heightens current scrutiny over electrical products that contain hazardous substances as part of their production processes:
- RoHS2 narrows the scope of the labeling and disclosure requirements and defines “electrical and electronic products as:
“Devices and accessory products with rated working electrical voltages of no more than 1500 volts direct current and 1000 volts alternating current which function using current or electromagnetic fields, and generate, transmit and measure such currents and electromagnetic fields;”
- RoHS2 excludes power distribution, transmission and generation equipment from the definition of electrical products, which also narrows the scope of RoHS2 compared to RoHS1;
- RoHS2 changes the terminology of “compulsory certification” regarding electronic products to a “conformity assessment system,” thereby permitting a more flexible capacity to demonstrate compliance;
- RoHS2 removes the exemption for “products manufactured for export,” and will now require all applicable products to be in compliance regardless of their end destination.
How Does RoHS2 Affect Today’s Producers?
As the global network of supply chains has grown, so have the difficulties in maintaining compliance with the myriad of rules and regulations promulgated by the numerous jurisdictions in which they are located. In some cases, to achieve the best economic result, Chinese manufacturing plants will substitute parts with less expensive parts or components that violate both their contract and their local and national regulatory terms. Because so many of these products are exported, the discovery of the substandard and potentially hazardous substitution only comes after it is too late to do anything but discard the entire batch or shipment. Too often, the flaw is discovered via a tragedy, which can cause irreparable harm to the merchant’s reputation.
New Rules = New Challenges
The introduction of new rules that overlay existing rules always also introduces confusion as factories struggle to implement the new processes while maintaining an existing production schedule. For RoHS2 purposes, the new rules establish a framework that will eventually restrict the volume of hazardous substances within certain electronic product lines. For manufacturers who are currently creating products that contain hazardous materials, the incoming changes will almost certainly impact production processes, supply lists and perhaps even supply chain participants. Today’s manufacturers should be on top of the RoHS2 as it rolls out, to ensure that their products are always in compliance with the rules, regardless of when they were issued.
In my book, “Red Flag,” I discuss these and other risks of doing business in China. As the country continues its evolution into a world leader in quality as well as manufacturing volume, it will continue to introduce new rules and regulations with that goal in mind. I am very familiar with the challenges that exist in China’s production centers even without the added concerns of new rules. Contact me today so that we can ensure your enterprise remains in compliance and profitable even in these ever-changing times.