In the third of his expert articles, Vic Clements from RFI Global looks at the “distance selling” loophole in the implementation of the WEEE and RoHS Directives

The WEEE and RoHS directives are now almost upon us. The requirements of the two directives have been transposed into Member State legislation and although in the case of WEEE directive they are being implemented in a phased way (the UK has yet to transpose and some countries have delayed full implementation) they are generally about to be enforced.

Study of the directives and the various transposed national regulations as they come on stream, borne out by recent communications with national authorities and agencies, has revealed a degree of confusion that could result in a loophole in enforcement that could be to the advantage of manufacturers outside the EU.

One of the cornerstones of EU product legislation, particularly, “Single Market” legislation, is that it is applied in an equitable fashion to all providers of products irrespective of where the products come from, whether from a Member State or outside the EU. It should not give advantage to one manufacturer over another and certainly manufacturers within the EU would be very unhappy to discover that manufacturers from outside the EU could use a loophole in the regulations to avoid complying. Unlikely? Well unfortunately there does appear to be the possibility for such a loophole for distance sellers who have no legal presence or representation in the EU.

Both the WEEE and RoHS directives require their legal obligations to fall on the “producer” of electrical and electronic equipment and products (EEE). This producer is clearly defined in the directives as follows:

• i) "producer" means any person who, irrespective of the selling technique used, including by means of distance communication in accordance with Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts(12)
• (i) manufactures and sells electrical and electronic equipment under his own brand,
  (ii) resells under his own brand equipment produced by other suppliers, a reseller not being regarded as the "producer" if the brand of the producer appears on the equipment, as provided for in subpoint (i)
• (iii) imports or exports electrical and electronic equipment on a professional basis into a Member State.

One of the main obligations of the producer under WEEE is to register as such in each Member State in which they are putting products onto the market. With one or two exceptions it is a requirement that in order to register in a Member State, producers must be resident. This enables the Member State to apply legal sanctions to the producers thus enforcing the provisions of the directives.

In order to assist with enforcement, in addition to registration, Article 11(2) of the WEEE directive requires the producer to be identified on the product by a marking of some description. This enables the product to be traced back to the party responsible for its treatment within the Member State when it eventually becomes WEEE.

Vic Clements

In the case of distance selling we see that the definition of producer includes someone selling by distance communications in accordance with directive 97/7/EC. This would appear to bring distance selling within the sanction of WEEE and RoHS. However when we examine the situation more closely there are some specific issues that give cause to question whether this is the case.

Firstly 97/7/EC is intended only for the protection of “consumers” in distance contracts and as such would have no bearing on WEEE or RoHS B2B distance contracts.

Secondly and interestingly, it attempts to extend this protection into situations where the purchaser enters into a contract with a supplier in a non-EU country and accepts the law of that country in governing the contract. It does this by including a provision in Article 12 (2) that “Member States shall take the measures needed to ensure that the consumer does not lose the protection granted by this Directive (97/7/EC) by virtue of the choice of the law of a non-member country as the law applicable to the contract if the latter has close connection with the territory of one or more Member States.”

Here we are running up against the problem of enforcing EU law outside the EU. It begs the question in regard to 97/7/EC as to what these measures might be that would be effective outside the EU but in any case they would only attempt to maintain protection for the consumer in distance contracts and clearly would not address the issue of residence and registration of the distance seller as producer for WEEE/RoHS purposes.

Again, the third part of the definition of producer indicates that distance sellers are producers if they “export” into another Member State. In the case of supply of products from one Member State into another, then any distance seller as “exporter” must register in his country of residence and declare sales into each Member State in which users of his product reside.

To support this, according to the preamble of 97/7/EC, intra EU mechanisms can be created whereby an offending producer in one Member State can be sanctioned indirectly by the authorities in another. In this way the directives can be enforced. Although there has been no official explanation of how this might work, let us for the sake of this discussion assume that these mechanisms exist.

We can then assume that the provisions and obligations of the WEEE and RoHS directives can be enforced on distance sellers within the EU.

The real problem occurs when the distance seller is outside of the EU and is supplying products to users in several member states. This happens frequently with for example consumers ordering goods over the Internet or in the B2B context where a product is manufactured outside the EU then supplied directly or “drop shipped” to the end user.

The question is who is the producer in this context and how can enforcement be carried out? If the distance seller is in China or the USA and the products are shipped directly to the end user in Italy say, then there appears to be no registered resident entity in Italy or in any other Member State, on which enforcement action may be served.

In the case of RoHS, the situation is even more disturbing. According to the UK RoHS Regulations, registration is not required and enforcement against any producer supplying non-compliant equipment can only be effected by serving documents on the producer’s principal office in the UK.

What if there isn’t one? Examination of the UK regulations reveal that the penalty for supplying non-compliant products is a fine on conviction and of course this requires notices to have been served on the suspected offender in the first place. There is also a common belief that RoHS will be enforced by prohibition of sale of non-compliant products. The directive is not specific on this, merely requiring that Member States take “appropriate measures” to ensure only compliant products are put on the market.

There are no mechanisms in the UK regulations for suspending or preventing sales and even if there were, without a resident legal entity or person, it is difficult to see how they could be enforced. It could perhaps be achieved through other existing legislation but the authorities are vague on this.

In any case enforcing any such measures against companies registered outside the EU who do not have a presence in the Member State could only be enacted through customs action (discussed below) or by some mutual arrangement between the EU Member State and the country of origin of the products and there is no evidence that such arrangements have been made, or are being considered.

So it would appear that the distance seller in China or the USA can continue to supply products into the EU immune from prosecution in his own country, without bothering to spend time effort and money on setting up WEEE compliance systems in Member States or making them RoHS compliant. So what else could be done within the EU? One way to enforce WEEE and RoHS obligations on “absent” producers would be by customs seizing his products at the point of entry into the Member State.

However foreign distance sellers should have little fear of this. Customs do not have the resources to inspect every product entering the EU and even if they did, how would they distinguish between those products coming from “illegal” distance sellers and those from legitimate sources. The WEEE directive does not require products to be identified with the WEEE mark and producer identification prior to entry into the EU (only before they are placed on the market in the EU – an entirely different thing!) and RoHS requires no indication of compliance at all, at any stage.

It might be possible to create a system when products are found in the waste stream with no producer identification but with the foreign manufacturer identified or are found to be non-compliant with RoHS, where the Member State authority could alert customs to the fact and hope that they can pick out and seize other products coming from this manufacturer but nowhere is there any evidence that this sort of system is being explored as the Member State authorities have yet to recognise there is a potential problem.

In the absence of a resident legal entity and with customs seizure an unlikely option, who else could the Member State enforcing authority take action against? Well it might well be the final user.

If the products are “historic” B2B WEEE, then the user may already be obligated under the WEEE rules in Article 9. However for “new “ WEEE, he may not be, unless he agrees under contract terms with the distance seller.  So in this case who is the producer?

Several Member States, when presented with this question have interpreted the definition and decided that in the case of direct shipment of B2B products, the end user would be considered the “producer” on the basis that he is importing the equipment into the Member State.

Therefore he would have to take on all the responsibilities of the producer including registration and reporting and could have enforcement action taken against him. This is onerous enough in the case of WEEE where the end users would have to put in place and finance systems for recycling but if the same interpretation is made for RoHS then B2B end users could find themselves legally responsible for the design features of their suppliers’ products with no other recourse in the event of non-compliance than that afforded by their contracts.

I would suggest that not many users of products bought in such a fashion realise this and if they did they would review their purchase terms without delay or prepare to challenge the interpretation in court. In order to avoid these responsibilities users may well choose to change suppliers or the way they purchase so there is a measure of contractual control for passing responsibility back on the supplier but that is a matter of contract rather than regulation. As no other mechanisms exist within WEEE or RoHS to make the final business user responsible as “producer” then this interpretation would be expected to be widely adopted by Member States otherwise there would have to be separate legislation enacted and this would take significant time.

In the case of B2C distance sales, the WEEE and RoHS directives do not allow for any circumstances where the consumer can be considered the producer or made responsible. Not only would this be against the guiding principle of “producer responsibility” but would be a nightmare to enforce. No consumer could be expected to institute systems to finance recycling or ensure RoHS compliance.

New legislation would be required to make it illegal for consumers to distance purchase any product that did not have a registered producer for WEEE or that was non-compliant with RoHS. Even if such legislation could be introduced in a uniform fashion in the 25 Member States, the courts could not handle the number of likely offenders or be assured of convictions. One Member State has said that in distance sales direct to consumers, the distance seller must register as producer but as I have argued, if the distance seller is in China how will the legislation be enforced?

If we disregard both the B2B and B2C end user then the only other target for the authorities is the shipping company, ranging from companies like UPS and FedEx to the Post Office. It might perhaps be argued that shipping companies are effectively acting as importers and so in the absence of any other connected party are the producer for the purposes of the directives but this is even less convincing than arguing for the end user. It would be an interesting debate to witness if an enforcing authority where to take this view and consider prosecution of UPS or the Post Office.

Failing this we could imagine a scenario where it is made an offence to deliver any WEEE/RoHS non-compliant products in a Member State, enforceable on the resident representative office of the shipping company. The shipping company would be obliged to establish the presence of a registered WEEE producer for a product or see “acceptable” evidence of RoHS compliance before they contracted to collect and deliver it.

This would force distance sellers to establish or partner with some legal entity in each Member State in which they want their products to be delivered but would require new legislation. I somehow think it will not come to that and that B2B end users are more likely to be targeted as producers.

So it appears that distance sellers outside of the EU will be able to continue to supply products into Member States without having to bear the burden of complying with WEEE or RoHS, able to either ignore any responsibilities in the B2C arena or see them passed onto their B2B customers. Meanwhile EU manufacturers selling within the EU will bear much of the burden of compliance with these two directives while their foreign competitors are able to take advantage of the loophole caused by the confusion over “distance selling”.

Vic Clements is a specialist in RoHS and WEEE legislation at UK test house RFI Global Services

The first article in this series looked at the forthcoming European environmental legislation, and asked who is responsible under the legislation

The second article examined the hot topic of compliance with the RoHS Directive, particularly what levels and types of evidence are required

www.rohs-weee.uk.com
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See also: Electronics Weekly's RoHS Directive and UK RoHS regulation, a roundup of content related to the RoHS Directive.