Welcome to the September 2009 Design Chain Associates E-mail Newsletter!

1. We're Getting Better...
2. The DCA Supply Chain Corner - Recovery: are you ready?
3. How can DCA help you keep up with the onslaught of environmental regulations?
4. The Impact of the EU Parliament elections on the RoHS/WEEE Recasts
5. Flying under the Environmental Compliance radar?
6. US Federal Eco-Regulation Activities
7. Product Chemical Content Assessment (PCCA)
8. California Green Chemistry Initiative Update
9. DCA REACH Workshop at IPC Not Easy Being Green in Southern CA
10. Contact and Feedback

Last March, after a lengthy hiatus, our newsletter returned to your inbox. We declared our desire then to publish it quarterly. Time, however, has not been on our side and here we are 6 months later. Well, we're doing better but still not quite at quarterly. So here's your semi-annual quarterly newsletter!

That said, we are now producing a paid newsletter 4 to 6 times per year covering key developments in environmental regulations and their impacts on our subscribers, which is introduced below in item 3.

Is your company prepared for economic recovery? There are many signs that an economic recovery is underway or soon will be. Book-to-Bill, inventories, lead times, prices, these are all leading indicators that something is underway.

While economic recovery is difficult to predict and we’ll leave that issue to the many talking heads on the news channels and in Washington, some things are very easy to predict. Here are our practical rules for recovering markets:

DCA rule number 1: Supply always lags demand during recovery
DCA rule number 2: The early bird get the worm or the capacitor
DCA rule number 3: Supplier relationships matter

DCA Rule 1: Supply lags demand during recovery.

• Expect significant shortages and allocation during the first few quarters of recovery.
• Suppliers will take profits and look for sustained demand before adding capacity.
• Anticipate these shortages and take defensive actions.

DCA Rule 2: The early bird.

• Understand your needs and place orders early.
• Expedite frequently to keep your place in line and watch lead times.
• Adjust material needs and order placements accordingly.
• Play fair.
• Do not get a reputation for double ordering or placing phantom orders. Suppliers must trust that your demand signals and purchase orders are accurate.

DCA Rule 3: Supplier relationships matter. Always true, but more so in a crisis. Never forget that this is a business run by people.

• People, not machines, make decisions on which customers get supported.
• It is not just about size and volume.
• There are easy tactics and steps you can take to put you on the "A" list and keep you there. For instance,
  • Enter into a Vendor Managed Inventory (VMI) or similar agreement that places additional responsibility on the supplier to ensure your material availability.
  • Personalize the business. Don’t know how? Call Tom Valliere.

More and more often, companies large and small are coming to us asking for help staying up on all the new and changing environmental regulations that impact their products in their markets. We have a couple different levels of service for helping companies track and deal with the onslaught of environmental regulation around the world:

Level 1 is a standard service intended to satisfy the needs of companies that do not have the resources or desire to devote internal resources to legislation tracking, have a relatively limited market focus, and are able to interpret the impact to their products. This consists of a report you will receive every 2 to 3 months, focused on critical regulations in the top markets that DCA follows. We provide links to the actual regulatory documents, as well as a concise appraisal of its potential to impact our subscribers, based on our knowledge of our subscribers' products, markets, and methods of selling. The Level 1 services is often supplemented by consulting support. Contact us for a sample copy.

Level 2 is a customizable service intended to satisfy the needs of companies that do not have the resources or desire to devote internal resources to legislation tracking, require specific product impact assessments which are customized based upon country and or geographic region, and want clear and explicit recommendations for actions based upon their products, markets, sales methods and other company-specific requirements. The Level 2 service also includes access to DCA‘s team of highly respected experts who are able to answer questions directly and have access to many government agency officials worldwide.

The venerable passives distributor TTI, a long-time supporter of DCA, asked us to provide bi-monthly articles on environment and supply chain to their MarketEye Research Center. MarketEye is TTI's excellent online vehicle for providing the most accurate and up-to-date market information in the Interconnect, Passive & Electromechanical (IP&E) industry. We urge you to take a look, or pass the link on to your component, design engineering and procurement people.

Last month's installment was a particularly insightful report by Kris Pollet, DCA's Brussels-based Director of EU Law & Policy, entitled Elections for New European Parliament: Impact on Environmental Policy Making.

Enforcement agencies in the European Union Member States have become very aggressive in identifying "producers" that have not taken the appropriate actions as required by legislation such as RoHS, WEEE, the Battery Directive and REACH. If your company has not fulfilled its obligations your business risk is very high. Consider taking action now to avoid what could become an "enforcement action". Do not become lulled into a false sense of security by the lack of enforcement action headlines; most companies and enforcement agencies have been able to resolve identified non-compliances without public disclosure.

The reasons for "flying under the radar" could include

• A true lack of understanding the complexities of the specific implementations of WEEE in each EU Member State,
• Not wanting to invest the time, money and internal resources, or the perceived high cost of identifying what and how much if any "hazardous materials" are in your products,
• Not having the resources to track and assess the impact of constantly changing global environmental compliance regulations, or
• A "Catch me if you can" attitude.

The following observation can be made:

Enforcement agencies have started to actively share enforcement data, so there is a very high probability that if you are identified as being in violation in one Member State you will be subject to a close review in all Member States where your product is "put on the market".

After a 20-year drought of US federal environmental leadership, we are now seeing the first steps of the Obama administration and a Democratic congress towards once again becoming a force in international environmental policy. It's a little slow and clunky, and it's not all "good", but it's been a while since there has been so much activity at this level that actually might amount to something. So it's time, particularly if you are located in, or sell into, the United States of America, to sit up and take notice that federal actions related to environmental regulation of products are actually happening. Here's a short rundown:

• The US Senate Bill S. 891: Congo Conflict Minerals Act of 2009. This bill would require manufacturers to disclose annually to the [Securities & Exchange] Commission the country of origin of columbite-tantalite, cassiterite, or wolframite related to any of the activities. These are raw materials that are the source of substances like tantalum, tin, and tungsten. The disclosure could potentially include the name of the mine the raw materials came from.

  So just how good is your traceability back to the mines producing the raw material? And how good can it be when the miners are under the gun to sell (for a pittance) ores that are then quickly smuggled out of the Congo? Some companies have policies, but reality and a lack of supply chain control and information makes enforcement of these policies difficult at best. Is this bill - driven by NGOs - the most effective way to address this problem? Let us know your thoughts.

• As we reported to our eco-tracking newsletter subscribers back in June, the National Electrical Manufacturers Association (NEMA) has a bill before the US House of Representatives called H.R. 2420, the Environmental Design of Electrical Equipment Act of 2009 ("EDEE Act"). The bill, if passed, would revise TSCA and implement what can best be called "RoHS for certain electrical products", and adds some exemptions unique to requirements in the US. The scope is wildly different from the EU scope. See the NEMA Environmental Stewardship web site for more information.

  We've seen media articles and consultant press releases and newsletters simply assuming this is equivalent to EU RoHS and that it impacts "electronic industry" products. Evidently the congressman NEMA got to introduce it, Michael Burgess (R-TX), did too. The reality is that it is vastly different - it impacts "electroindustry" products, defined quite clearly in the bill as

  "any product or equipment that is directly used to facilitate the transmission, distribution, or control of electricity, or that uses electrical power for arc welding, lighting, signaling protection and communication, or medical imaging, or electrical motors and generators."

  This is obviously not the EU RoHS/WEEE scope. This scope is intended to protect NEMA's membership from any state-based RoHS-like regulation that might impact them as well as help give them the appearance of improving environmental performance of their products.

  Harmonization of these types of laws is key for industry; this bill is extensively unharmonized with anything else out there. We are now hearing from multiple sources that it is essentially dead.

  One key lesson here is to be very careful about who and where you get information from.

• The Kid-Safe Chemicals Act will be reintroduced (for at least the third time) by the Environmental Working Group soon. The intent of the regulation is to reform the Toxic Substance Control Act (TSCA) and pull on the order of 300 industrial substances off the market that are bioaccumulative and show up in fetuses and umbilical cord blood.

  At first blush this is a good idea - just why ARE those substances there? Hello? Chemical industry? Can you please explain this? The chemical industry has successfully fought nearly every attempt to force them to produce environmental and health data on their products for decades. That changed with REACH.

  Unfortunately, many of the substances are very high volume and used in all sorts of applications. This is a bigger issue than simply removing these substances from commerce (and then, only in the US); while this might be an interesting first step, it is not the far-sighted solution article manufacturers and the planet need (for example, what do we replace those 300 substances with in order to not completely terminate the economy while improving the environment?). We've been talking to deep-thinking academics; environmental thought leaders in major multinational corporations in aerospace, automotive, and electronics; key NGOs; and government regulators about this. The goal is fairly clear, but the path towards it is not, yet.

DCA's PCCA program helps companies that must respond to requests from regulatory agencies and customers for environmental compliance information. These requests often require completing detailed forms (such as IBM's Product Content Declaration, or PCD, form) that often ask for quantitative reporting of substances of concern contained in products, or otherwise require detailed knowledge of substance content and application, such as HP's General Spec for the Environment. The tasks of data collection, assessment of chemical content, and correct form completion can be especially daunting for many SMEs. DCA, in partnership with GreenSoft Technology, provides our clients with a suite of services, including:

• Component Material Composition Data: PCCA establishes a database to ensure products comply with regulatory requirements both today and as products and regulations are revised.
• Material Composition Data Maintenance: PCCA continues to survey and collect full-disclosure material composition data from suppliers.
• Report Generation: PCCA provides deliverables specifically for your customers.
• Periodic Compliance Update Newsletter (as described above)
• Data Management Software: GreenSoft's GreenData Manager-REACH software is an inexpensive solution to manage and report your products' material composition in an easy and straightforward manner. Use it to manage environmental data in-house with internal resources, or DCA can manage it for you.

Unfortunately, the California DTSC had not yet delivered its next version of the draft regulation on alternatives assessment, despite the fact it was promised on August 4. We expect it to be published this month.

DCA appears two days in a row, starting off the conference with an in-depth workshop on REACH, then following up on Tuesday with a one-hour update.

A. REACH Workshop: Today and the Future
Monday, November 9, 1:30 pm-5:00 pm

Instructor: Michael Kirschner, President, Design Chain Associates

An in-depth primer on the intricacies of complying with the European Union’s Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulation. This session will give you a full briefing on the complex document. Designed for those - particularly article manufacturers - who are less familiar with REACH and need additional background, this workshop is an invaluable introduction to the issues that will be discussed during the conference on November 10.

B. REACH — A Critical Update
Tuesday, November 10, 10:30 am-11:30 am

This update will cover key issues and that impact article manufacturers, including authorization and the new proposed candidate SVHCs. We'll also touch on formulator challenges.