Europe's Restriction on the use of Hazardous Substances (RoHS) act and the initiative on Waste Electrical and Electronic Equipment (WEEE) are driving companies to design and manufacture products in an environmentally friendly manner so fewer hazardous substances end up polluting the air and water. But the laws are also proving to be a costly and burdensome pain in the neck for the supply chain and for purchasers.

Besides banning lead, RoHS outlaws mercury, cadmium, hexavalent chromium, polybrominated bipheyls, and polybrominated diphenyl ethers. However, lead is the mostly widely used of those materials in electronics. It is used in many components and in solder that attaches parts to printed circuit boards.

"Lead has been a conduit of electronic components for 100 years," says David Lear, vice president of corporate, social and environmental responsibilities for Hewlett-Packard, headquartered in Palo Alto, Calif. "It's a predictable and reliable material. In pulling lead, we had to go deep into various alternatives, test them and make sure we felt comfortable using them."

With reflow solder, many suppliers plan to use silver-tin copper rather than tin lead. For semiconductors, a compound of tin bismuth and solder will be used by some chip companies in leadframes and package leaders while others will use nickel-palladium-gold finish for leadframes.

Finding alternatives to lead and the other banned substances is only half the battle. Companies will have to show that they comply with RoHS. However, eight months before the RoHS deadline, the European Union (EU) has not said what kind of documentation will be needed. It is possible that the EU will not offer any specifics.

If a company is not RoHS compliant, it will face fines and won't be able to sell equipment into Europe.

While RoHS has gotten the most attention, WEEE is an initiative that companies also have to deal with. WEEE requires "producer-polluters"—the name of the company on the product—to dispose of its equipment when it reaches end of life. The equipment cannot just be dumped in a landfill. It must be recycled or reused. (See related story, p. 33).

Both initiatives are costly to the electronics industry. How costly is a matter of discussion. Some consultants have said companies will have to spend 10% of their research and development (R&D) budgets to comply with RoHS. Others have said the cost of compliance will be $100 million for large global companies.

Pamela Gordon, president of electronics manufacturing services researcher and consultant Technology Forecasters, says RoHS requirements will require a one-time investment of 2-3% of cost of goods sold.

RoHS is burdensome because it is still unclear what documentation will be needed to show compliance. OEMs are requiring suppliers to provide materials declarations that list the materials used in the product the supplier makes for the OEM.

Such declarations will be crucial for OEMs to show compliance even though the EU has not specified what information will be needed, says Holly Evans, president of Strategic Counsel, a legal consultant to companies on environmental issues based in Alexandria, Va.

Evans says it is expected that EU member states will follow the recent recommendations of the European Information Communications Technology Association (EICTA). EICTA is a trade association similar to the Electronics Industry Association in the U.S.

EICTA has proposed a "due diligence approach" toward enforcement of RoHS, says Evans.

Under the proposal, "a company has presumption of conformance. You are presumed to be in compliance if you put your product on the market," says Evans.

However, if EU officials get tipped off that a company's product is noncompliant—perhaps by an environmental group or even a competitor—then the EU would want to see the documentation on the product, she says.

"At that point you pull out your file with your materials declaration, your random testing and audit results. If they feel you have a good file, they won't go any further," says Evans.

If they are not satisfied, the EU would test the product to see if it contains any hazardous substances.

That's why it is important for electronics companies to collect as much detailed documentation of materials as possible.

A lot of materials declaration is the responsibility of purchasers because they manage suppliers.

"We are actively engaging our supply base to collect certificates of compliance (COC) from component suppliers," says Bill Ray, vice president of procurement engineering and quality at Sanmina-SCI, an EMS provider based in San Jose, Calif. "We literally have thousands of suppliers across several hundred thousands of part numbers and we have to track COCs from them so we can show compliance."

To help compliancy efforts, Sanmina-SCI took a proactive approach to manage and monitor compliance. A year ago it did a survey of customers and suppliers to measure RoHS readiness.

"We wanted to find out where customers were in terms of product transition to RoHS and what suppliers' plans and capabilities were toward compliance," says Ray.

The survey helped Sanmina-SCI determine timetables for supplier compliance. It also revealed that 30% of Sanmina-SCI's suppliers had no plans to change part numbers for RoHS parts. That would make it more difficult to manage component inventories. Older parts containing lead or other substances could get mixed up with RoHS parts. A mix-up could result in noncompliant parts being used in equipment, which could result in equipment failure.

The issuing of new part numbers has been a bone of contention in the supply chain. Buyers and distributors want new part numbers for RoHS parts. Most suppliers are issuing new part numbers, many with an R or E suffix. But some suppliers say new part numbers are unnecessary. They say after a certain date, their parts will be RoHS compliant. Some are marking parts packages.

Many OEMs and EMS companies have issued their own parts numbers for compliant components to avoid confusion.

Despite part numbers and the lack of definitive information about documentation, most electronics companies say that they will meet the July 2006 deadline.

"We started shipping some RoHS-compliant products in 2004," says Lear of HP. "By the end of the year, 50% of HP will be compliant. "Our goal is to have 100% of our products compliant by July 2006. That's everywhere—not just Europe," says Lear.

HP says all of its suppliers are on-board with RoHS compliance.

"All of the large global suppliers that we deal with, they have seen the challenge and are planning to make the transition," says Greg Shoemaker, chief procurement officer for Hewlett-Packard. Because suppliers know RoHS compliance is not an option, HP has not had to change suppliers because of the environmental initiative.

However, some smaller suppliers with limited resources are struggling with RoHS.

"It is more challenging when you go down in the supply chain, but they realize they have to prioritize and use what resources they have," says Shoemaker. "We all have to get to the same endgame."