September 01, 2012

EU regulation of electronic waste: A revised Directive reflects economic and environmental concerns

Jana Viktoria Nysten

<p>On June 7, 2012, the European Commission adopted broad revisions to the Directive on Waste from Electrical or Electronic Equipment (WEEE Recast Directive). This action was a parallel effort to the June 2011 revision to the Directive on the Restrictions on the Use of Hazardous Substances in Electrical and Electronic Equipment (the so-called <a href="">RoHS Directive</a>), and together they represent a significant overhaul to the manner in which hazardous substances and electronic waste are regulated in the European Union (EU). After considerable debate between the <a href="">European Commission</a> (which has the exclusive right to initiate new legislation), the <a href="">European Council</a> (comprising the twenty-seven Member States that tend to strongly defend their national interest), and the <a href="">European Parliament</a> (a supranational body elected by all Europeans which defends interests common to all Europeans), compromise was reached and the European Council approved the WEEE Recast Directive. The Directive was published on July 24, 2012, in the <a href="">Official Journal</a>, now giving the Member States eighteen months to implement the Directive into national legislation.</p>

The WEEE Recast Directive acts as not only a strong EU environmental protection law, but also as an instrument to improve resource efficiency. Despite years of efforts to minimize electronic and electrical waste, only one-third of such waste is recycled and half of it is exported outside of the EU. Therefore, the issue has been framed not only in environmental terms, but also economic. During proceedings, both the European Parliament and the European Commission stressed that as the cost of raw materials increases resource efficiency and the recovery of raw materials becomes more important. That is, simply exporting the waste is not only contrary to EU policies that ensure high environmental standards for treatment of waste, but it may also have significant economic disadvantages.

Collect your trash: New and more stringent collection obligations

The WEEE Recast Directive targets the e-waste problem by both imposing new collection targets and broadening the Directive’s scope. While the predecessor Directive covered only a well-defined list of product categories (and thus products), the WEEE Recast Directive will apply to all waste electrical and electronic equipment, subject to only minor exceptions such as equipment used in military services or in space, industrial large-scale stationary tools, and fixed installations. Certainly it applies to all consumer electronic goods, including large and small household appliances as well as IT technology equipment.

Although the Recast Directive continued the goal of ensuring that waste from electrical and electronic equipment (electronic waste) is collected separately from ordinary household waste and treated according to best management practices, it increased the collection target and the methodology for measuring the target. The initial Directive effective in 2003 set a collection target of 4 kilograms (kg) of e-waste per person per year. Some EU members, such as Germany, have greatly surpassed the existing target by collecting some 7.8 kg per person. But, more can be done: Germany sells 1.8 million tons of electrical and electronic equipment per year, but it only collects 800,000 tons of waste. The WEEE Recast Directive defines the target differently and imposes stepped increases: starting in 2016, Member States must collect 45 percent of the weight in electrical and electronic equipment put on the market during the three preceding years, a number that will rise to 65 percent in 2019 (with the alternative of collecting 85 percent of all e-waste generated).

The “producer pays” principal

While the Directive tasks the Member States with meeting collection targets, the overarching idea of the Directive is the one of “producer responsibility.” To achieve this goal, producers are allocated a certain amount of waste depending on their share in putting it onto the market and will have to pay for its treatment. The Directive allows for third parties to collect waste from the Member State-run common collection facilities and to treat the waste on behalf of producers, as long as the producer ultimately remains responsible.

The Directive also permits producers to set up individual or collective collection and treatment systems, such as when one company has its own “take-back” system, or one or more companies with similar products sets up a system together. While corporate social responsibility may play a role in a decision to implement such a system, and quite a few producers now have such systems, economics also play a role as companies may recover resources initially used for the production. “Take back” systems have worked quite well in the past based only on the voluntary decision of the consumer to return the product at the end of its life. Some producers even offer to collect directly from the consumer’s home. For companies with strong collection programs in place, the WEEE Recast Directive does not itself pose any new obstacles, so their existing programs can likely be maintained. However, a producer that finds itself under the scope of the Directive for the first time will need to develop a new “take-back” program before the implementation deadline.

The Directive includes changes to the definition of “producer” that may have far-reaching implications. The definition includes companies established within the EU and either manufacturing and/or selling under its own name or trademark within the EU, as well as any natural or legal person who is “established in a Member States and places on the market of that Member States, on a professional basis, EEE (electrical or electronic equipment) from a third country or from another Member State,” with “placing on the market” referring to the “first making available of a product on the market within the territory of a Member State on a professional basis.” As a result, resellers can become producers, which can create complications: The term producer includes the buyer that first sells into the EU market products produced in another Member State or in a third country. For example, the sale of products made in the United States to a buyer established in the EU for resale within the EU, turns the buyer into a producer—and accordingly responsible for the treatment of the waste. This creates two potential problems for companies established outside the EU. First, the reseller will likely seek reduced prices for the goods to cover the costs for treating the waste, which will be imposed on them due to their role as “producers.” This may require renegotiating long-term contracts, a difficult task made more complicated by the fact that the costs for treatment may vary depending on the Member State, the system, and the requirements. Second, international companies may actually want to take back products at their end of life to recover the raw materials. Thus, it is possible that international firms may not only see pressure to reduce prices, but they may also lose control over the product at end of life, including the often valuable raw materials. This “producer responsibility” aspect of the Directive is binding on the Member States, so there may be little flexibility for individual Member States to deviate to address these concerns.

To mitigate this issue and address the concerns expressed by international firms doing business in the EU, the WEEE Recast Directive allows for the establishment of a so-called “authorized representative” who will be responsible for meeting the international producer’s obligations. In principle, such an authorized representative can be any legal or natural person, as long as they are established within the territory of the respective Member State. While this still means that one would need to have an authorized representative for each Member State in which one is selling to buyers for resale, and this according to the differing laws of the Member States, it offers a path for maintaining control over the products throughout their lifespan.

Of note is the WEEE Recast Directive’s sharing mechanism for so-called “historic waste,” that is, waste “from products placed on the market on or before 13 August 2005.” Under the sharing mechanism, producers existing in the market when the respective costs for the treatment of such waste occur must contribute according to their market share by the type of equipment. However, rather than set a new date for defining historic waste, the Recast Directive simply uses the date from the old Directive (August 13, 2005). This has been controversial, because using a date from the past arguably conflicts with the general EU prohibition against the retroactive application of law. This is potentially problematic for the products falling within the scope of the Directive for the first time under its expanded definitional scope. As it stands, the sharing mechanism may cause an extra financial burden on those producers of equipment newly within the Directive’s scope but who had been on EU markets before and had their individual take-back systems in place, as they have taken care—through their individual take-back system—that they would not cause any historic waste. The fact that the “cut-off” date of August 13, 2005, has been retained thus works in those producers’ favor. Some have asserted that use of this prior date may have been a mistake in the drafting, given the retroactive application of law concerns, and some stakeholders and Member States continue to push for clarification.

A patchwork of regulation?

As a Directive, it is important to understand that implementation is carried out by the Member States and they have some discretion and flexibility in doing so, which may cause problems for multinational corporations. According to article 288 of the Treaty on the Functioning of the European Union (TFEU), a Directive is only binding to the result, but not in its entirety, leaving Member States the freedom to choose the means by which they seek to achieve the results. Although, the WEEE Recast Directive is based on the EU’s legislative competence in the environmental sector, Member States can still introduce or maintain more stringent protective measures, provided they comply with the Treaties and notify the Commission. Accordingly, the Member States have leeway both to adopt different measures to implement the Directive’s provisions, so long as the Directive’s overall waste reduction results are achieved. With twenty-seven EU Member States, this may result in a patchwork of twenty-seven different systems, adding another hurdle to doing business in the EU. It should be noted that this issue already exists under the preexisting legislation, the Directives 2002/95/EC and 2002/96/EC (the old WEEE and the RoHS Directives), as some Member States have already imposed stricter measures. It is likely that such states will revise their systems to comply with the new obligations, where necessary, but the WEEE Recast Directive is unlikely to lead to a harmonized system in Europe.

Lessons learned in the new Directive

The importance of what is happening in Brussels is once again clear from the WEEE Recast Directive, which, as with Registration, Evaluation, Authorisation and Restriction of Chemical substances (REACH) and RoHS before, will have consequences for businesses selling to Europe, particularly with respect to contracts with European trading partners and the opportunities to recover raw materials at the end of a product’s life. There may also be issues relating to how the different Member States implement the WEEE Recast Directive into their national laws, particularly as implementation may vary in individual states. For those selling electronic products in Europe, it will be important to understand not only the WEEE Recast Directive, but also how it is being carried out in the specific countries in which the company sells electronic products.

Jana Viktoria Nysten

Jana Viktoria Nysten is an associate at Becker Buettner Held law firm in Brussels, Belgium, where she focuses on energy, environmental, and competition law.