Nebraska Computer Recycling Bill Likely to Come Back Next Session

Last legislative session a bill as introduced to mandate computer recycling in Nebraska.

While this is a noble thought and worthy of discussion, LB583 would have placed massive and unnecessary burdens on companies like Schrock Innovations who would have been lumped in as a manufacturer with companies like Dell and HP.

I testified against the bill in committee and made my objections known.

A couple days ago I received the following letter that was sent to Nebraska State Senators in late August. It reinforces the fact that without a point of purchase recycling fee (like you pay when you buy a car battery) no recycling effort will be viable in the long term financially.

August 29, 2007

TO: Nebraska legislative sponsors and supporters of electronic e-waste legislation.
RE: 583 (Electronics Recycling System Act)
FROM: Prima Technology/XOCECO, a billion-dollar plus manufacturer of video displays (primarily TV’s) under dozens of brands, operating primarily as an ODM (Original Design Manufacturer).
ISSUE: Nebraska’s 583 totally replicates a lobbying template endorsed by ‘Super Retailers’.
The bill incorporates improper technical product descriptions, legal obfuscation, and numerous implementation conflicts. More than 70% of its language comes from documents which have been described as an “environmental charade” to transfer product safety issues, easily identifiable labor conditions by manufacturer, and environmental responsibilities away from select special interests.

In reviewing bills across the United States covering electronic product recycling programs we were stunned to see activity in 2007 under Nebraska 583 — a bill that apparently has never seen the light of day outside the arena of ‘Super Retailer’ lobbyists.

The bill lacks uniform and accurate definitions provided from actual factory manufacturers and major brand owners of factories — rather than just companies who apply their brands on products made in outsourced factories.

It replicates earlier state bills in the U.S. that were either rejected or are presently coming under scrutiny for re-defining a “‘manufacturer” to include parties which lack federally accepted certifications. Nebraska’s 583 creates serious fair trade issues by allowing ‘Super Retailers’ who even as a product designer, final product approver, product purchaser, importer, distributor and the sole seller of their own exclusive private-label brands escape
e-waste responsibilities.

As written it allows a complete disconnect between some ‘Super Retailers’ and their undisclosed factory source(s). In its phrasing it actually can eliminate both products and the retailer, effectively creating “orphaned stocks” while exempting private-label brands and/or exclusive licensed brands.

We estimate the real costs behind the bill would leave Nebraska holding $6.2 to $8.5 million dollars in unpaid bills by the end of the second year of its implementation.

Our views on electronic e-waste policies are very likely 180 degrees from what you might expect.

Many of you will recognize a consortium of five world-renowned scientific institutions: Columbia University, American Museum of Natural History, The New York Botanical Garden, Wildlife Conservation Society, and the Wildlife Trust — together known as CERC, the Center for Environmental Research and Conservation.

The acronym CERC was repeatedly cited as a principal backer behind several recent electronic recycling laws including those in Washington, Oregon and Minnesota. CERC was also mentioned as an independent “reviewer” of numerous State bills endorsed by local Nebraska members of the Product Stewardship Institute.

The Boston based Product Stewardship Institute bills itself as “a national non-profit membership organization comprised of state and local governments.” It has rejected bill language that promotes electronic product ‘end-of-life’ fees or fees paid upfront by consumers when they purchase major electronic products.

Interestingly these same rejections are in perfect unison with several of the largest retailer lobbying groups in the United States. These include lobbyists supporting major wholesalers, distributors, and both national and global ‘Super Retailers’.

So how does this square with the history of CERC as a historical environmental policy and research group?

Well as it happens the Center for Environmental Research and Conservation (CERC) has not been the group repeatedly cited in legislation offered by Oregon, Washington or Minnesota legislators. Nor was CERC the actual group repeatedly mentioned (using the acronym) over months of updates provided by government ecology personnel across the country.

Rather the CERC endorsements behind the Oregon and Washington electronic recycling laws came from the Consumer Electronics Retailers Coalition.

Surprising?

It shouldn’t be. 583 isn’t an environmental bill. It’s a ‘Super Retailer’ template of chaos.
And those three states are the Corporate home for 4 of the top consumer electronic retailers. Just as Nebraska has a major player.

We previously notified members of the Sierra Club and all five members of the Center for Environmental Research and Conservation that we will not align our company with this legislation offered by the Consumer Electronics Retailers Coalition nor any of its efforts to reduce or exempt electronic products.

So why would Nebraska essentially duplicate a ‘Super Retailer’ proposal in 583?

Principally over the past two years the Consumer Electronics Retailers Coalition has worked with a few select PC companies such as HP in proposing electronic waste, recovery and recycling legislation.

Many such PC companies often outsource segments of their product line —such as HP and Gateway not producing their own TV’s in their own factories. Therefore the

coalition that is the foundation behind 583 is not representative of many actual factory manufacturers which produce a wide range of electronic products themselves.

Thus bills which claim to be supported by an “industry coalition” were in fact endorsed by the Consumer Electronics Retailers Coalition and sub-niche groups. There was no endorsement behind 583 from leading flat panel TV manufacturers who operate their own factories as an example.

Yet the Product Stewardship Institute took efforts to get these “niche supported” bills replicated from state to state.

While the Consumer Electronics Retailers Coalition is a valuable and properly managed policy association, its CERC title may be improperly linked by people outside their own organization to the Center for Environmental Research and Conservation.

Separately there are now multiple ‘Super Retailers’ promoting both national and international environmental policy statements. Their repeated references to “supported by CERC” and “endorsed by CERC” only compound the issues in separating “retailer policy goals” apart from the distinguished work of the Center for Environmental Research and Conservation and its members.

While we too have no connection to either CERC, we are dismayed that some Consumer Electronics Retailers Coalition legislative proposals and overlaps by some members of the Product Stewardship Institute (PSI) are dismal obfuscation.

Indeed we publicly described the latest proposal by the Consumer Electronics Retailers Coalition in conjunction with HP as “blatantly reeking with self-protection clauses and distortions.”

And Nebraska’s 583 replicates much of it word for word. So let’s review the “environmental” logic behind 583.

In the most recent national legislative proposal offered by the Consumer Electronics Retailers Coalition in conjunction with HP, any federal law would exclude all consumer printers and printer cartridges within any designated e-waste responsibilities mandated for a company or manufacturer. And 583 already duplicates these exclusions.

Imagine that. Printers are sold virtually one-for-one with all computers. And the rate of recycling of printers in Nebraska is estimated at less than 1 in 5. But 583 makes them exempt.

But not to be seen as asking for only one piece of the pie the Consumer Electronics Retailers Coalition also selected to not include mandated e-waste recycling responsibilities for all audio products including turntables, receivers, amplifiers, and CD players.

Nor did they include VCR’s and DVD players. And all mandated recovery and e-waste responsibilities covering keyboards, a PC’s external audio speakers, or even its mouse have vanished. And it’s the same with Nebraska’s 583.

Additionally they excluded all Nintendo, Atari, Sega, Sony PlayStation and Microsoft X-Box gaming units. That’s about 145 million units of home hardware plus another 100 million portable hand-held units.

This one gets tough. Nebraska’s 583 is so poorly worded with its definition of a “computer” that one can argue that it may or may not include most non-portable video game consoles. But then most of the language used in 583 is legal and technical gobblygoop that makes flipping a coin a fairer method to resolve who is responsible for what. Not that the bill was ever intended to be fair.

Even a hundred attorneys and technical engineers will never resolve the clever pseudo jargon used in 583.

But as all of 583’s mandated product responsibilities were likewise eliminated in the “most responsible and environmentally progressive laws” of Oregon, Minnesota and Washington, both the latest CERC/HP proposal and 583 make the next “environmental” step.

They also eliminate all mandated e-waste responsibilities for every manufacturer and brand of cell phones.

Amazingly Nebraska’s 583 actually matches every single exemption on the checklist offered by ‘Super Retailer’ lobbyists — Nebraska it seems took it hook, line and sinker.

With Nebraska’s 583 also excluding all printers and printer cartridges — with printers the principal profit trough for major PC manufacturers — Nebraska has exempted about 78% of all consumer electronic products.

We believe all products should have an assigned and legally responsible party as future e-waste. And unlike the Product Stewardship Institute and the Consumer Electronics Retailers Coalition we urge that process to go forward immediately.

A come-back from “environmental lobbyists” who are caught selectively exempting is that they only began with the most disturbing products on the market. But let’s examine that.

Why has Nebraska not placed environmental legislation on the car industry? The average new vehicle has over 180 pounds of electronics and 2 miles of wiring, and two-thirds of all lead produced in the world goes into cars. Or why has Nebraska not sought out the e-waste from the home roofing and materials industry? Or the carpet industry?

Even staying within consumer electronics let’s compare. The lead content in a new 52” flat panel television is approximately 4300 times less than the lead recently found in more than 650,000 individual “charms” in children’s 5-piece charm bracelets.

Why didn’t Nebraska legislators first turn to protecting children? Because legislators believed retailers would protect the public — not legislation to better enforce certifications by more clearly defining who is and who is not responsible. And that was a mistake.

As a real manufacturer with our own factories we’re far different from the image some are casting and chiseling of a “manufacturer” as they spin themselves as the heroes behind environmental sanctions. Indeed some are so concerned with changing our image that ‘Super Retailer’ lobbyists helped re-define the word “manufacturer” in the Washington State law to become “brand owner.”

That re-defining eliminated our company along with hundreds of actual factories and instead included parties which lack federally accepted certifications such as providing proper human labor conditions, factory environmental certifications, and regulatory product safety testing.

Today eight of the top 10 consumer electronic Super Retailers in the U.S. design, specify, purchase, import, warrant, distribute, and exclusively sell “private label” electronic brands that they own. This includes Circuit City, Best Buy, Wal-Mart, CompUSA, Sears/K-Mart, and Target.

Nebraska’s 583 not surprisingly makes no attempt to include private label or licensed brands. In fact the language used in 583 excludes this 28% segment entirely. Gone!

And the way 583 is written there is a complete legal disconnect between a private label and licensed brand product and the actual factory source(s). We are certainly concerned that Nebraska is taking the pathway of Washington State.

There the e-waste responsibilities for licensed electronic products branded as Cinderella™, Darth Vader™, Batman™, Barney™, Bratz™, Mickey Mouse™, Garfield™, Sesame Street™, or Thomas the Tank Engine™ are instantly removed from the actual production factories and all retail sellers.

One official noted that a government agency can not make actual factories or Super Retailers responsible. His assumption is that if they did the pricing for goods could increase for consumers by adding in “unnecessary” product certifications from retailers or factory producers.

From the Washington State position it’s easier to find the owner of Thomas the Tank Engine™ than placing requirements on the factories that actually produce those products. The premise is that product costs will drop as the factory recognizes that Washington State no longer holds them responsible.

Likewise a ‘Super-Retailer’ who might potentially sell a Daffy Duck™ children’s bedside television will eliminate liability and responsibility costs. In Washington State the responsible party would be instead the Looney Tunes Licensing Group.

While licensors can be responsible parties they should never be defined as a manufacturer.

But the lobbying efforts behind 583 have only been a first step. Over the past two years lobbyists have ripped apart the proper definitions of “monitor” and “TV” used in State bills. Mish-mash is a good description of what’s been left behind.

Under the federal laws and as accepted by the Consumer Electronics Association a television is a video display device which incorporates a tuner for the reception of TV signals. A monitor is a video display device which does not incorporate a tuner for the reception of TV signals. It’s that simple.

Thus Nebraska’s 583 attempt to define a “video display” as a product category is incorrect. But it does manage to dump another full paragraph of technical chaos.

In walking into any retailer today and asking for a “video display” likely the first question you would receive is — do you want a monitor or a television? And whether you use it with or without a PC connected, your choices will either be a “television” and/or a “monitor”. Most newer televisions since April 2007 provide a ‘PC’ input, just as virtually all “monitors” allow a TV tuner to be added.

So why is the template used for Nebraska’s 583 so incredibly poor?

Its foundation came from legislation offered as far back as 1993. Part of the platform came from proposals developed in West Germany before the collapse of the German Democratic Republic (East Germany), and intended to remove all responsibilities of the government agencies and transfer those to brand owners.

Later versions were adapted for Kazakhstan, Hungary and Slovakia. In fact some of the earliest drafts refer to policies adopted from “State policies made into law.” We assume that Nebraska legislators were not informed that these “State policies” were actually cost transfer protection laws for Communist States.

Indeed when questioned the spin typically used with legislators was that the template comes from “European adopted environmental laws”. Clearly over the past 15 years there has been no technical assistance in drafting the platform used in 583 — the document was passed along by technical novices and one-track lobbyists only interested in transferring costs. So much for an “industry coalition” behind the bill.

The 2006 federal lobbying efforts by Verizon and AT&T were estimated by Business Week in July 2007 to have exceeded $44 million dollars. Could this be why new federal proposals from the Product Stewardship Institute exclude any mandated “take back” recycling programs for cell phones?

The reality of proper legislation is that small local e-waste recycling centers and consolidators cannot assume high liabilities or the costs in collecting from hundreds of brand names in changing overseas markets. At least not if they continue to avoid using the federally mandated “registration plate” or “data-plate” on products listing the manufacturer.

And attempts to “divide up” all ‘orphaned waste’ — with recent estimates now as great as 47% — to solely producers will likely be off-set by further litigation costs and handling chaos at local recycling centers. And Corporate litigation. And payments to States which will go unpaid.

Our company is the ninth largest manufacturer of flat panel televisions on a worldwide basis and among the first to obtain both GB/T 24001 and ISO 14001/1996 global environmental status while operating in 119 countries.

In late 2005 one of our factories in Xiamen, China was the first within China — and
among the few worldwide — to ship environmentally RoHS television compliant products years ahead of global requirements. Today all of our factories are RoHS environmentally certified and we produce about 5% of the world’s televisions.

Within China and Taiwan we are very unique. There we are established as a premium producer with production leadership in premium flat panel televisions among 82 different Chinese TV factories and hundreds of Chinese brands.

We don’t wish to allow commodity retailers to “level the playing field” by attempting to eliminate or hamper “higher gauge” environmental and regulatory standards by
re-defining “manufacturers” to allow e-waste management through uncertified commodity parties.

Today the three largest global factory producers of video gaming systems are also among the top six producers of PC’s and also among the top five factories producing printers. Several State bills have been written to eliminate entire multi-billion dollar factories producing their entire consumer electronic production across multiple categories — and sometimes producing multi-billion dollar contracts for a single international retailer, or as the exclusive supplier for a single international brand.

Chinese products in particular have been active in news the past several months as seafood, toothpaste, pet food, and medications have been tainted or improperly produced.

Some 450,000 Chinese production tires are a concern for improper tread separation.
Thousands of bicycles have been recalled due to frames that may separate from the wheel hubs.

In mid August Mattel’s toy recall of Mattel and Fisher Price toys jumped to almost 20 million units due to excessive amounts of lead.

This follows a product recall for 1.5 million ‘Thomas the Tank Engine’ train cars with heavy metal content, including lead.

Yet in at least two of these events one or more Chinese competitors asked for higher levels of compliance and certifications for goods shipped into the U.S. which they — unlike their competitors which were awarded the winning bids — already met.
But in each case purchasing groups targeted such efforts to maintain lower costs.

The FCC has required for more than 40 years that manufacturers label all televisions with a registration label known as a “data plate” showing both the responsible manufacturer under FCC certification for TV manufacturing, and when necessary,
the X-ray emissions compliance approval by the FDA.

This is typically found on the back of the TV set. This registration label on the data plate must also show the certified manufacturer’s address and the testing lab (such as UL or ETL) certification test number which must match the manufacturer.

As it’s been on every TV produced for more than 40 years and hundreds of other consumer electronic products why do lobbyists absolutely avoid referencing it as the means to distinguish the manufacturer? Why indeed when it must include all regulatory certifications matched to the actual manufacturer?

What could be easier for workers at a recycling center as an identifier?

In fact for years many manufacturers have also included a bar-code for scanning on their data plates to help sort their products from others. Yet only silence is heard from lobbyists about using this as an effective means for environmental responsibility charges under any mandated recovery programs. Is this because it shows who is really behind private label brands?

Additionally data collection responsibilities outlined in Nebraska’s 583 are far removed from the real world. Nebraska retailers such as Nebraska Furniture Mart are part of a major change in retailing that took place over the past 20 years.

Today as a manufacturer with more than a billion-dollars in sales we do not sell, ship or bill to any location or business in Nebraska.

Yet our products and brands are found in Circuit City stores, Wal-Mart, Best Buy, Sears, and other retailers throughout Nebraska. These retailers purchase products in 40’ cargo containers in Asia and import and distribute the products themselves from their own distribution centers.

From the time the goods are loaded in cargo containers at our overseas factories until they reach U.S. consumers the entire logistics and distribution is often handled by the retailers themselves. And we certainly are not alone — this is the way business is conducted by virtually all of the top global electronics manufacturers.

So when global retailers can now instantly tap a system which logs the sales of a product directly down to the individual store scanner and check-out stand, why does 583 place the responsibility for unit weight sold by location on the manufacturer rather than the retailer?

The sole party who is often the global purchaser, weight and scale importer, segmented order distributor, warehousing owner, logistics processor, specific store stocking agent, and final consumer seller is something called today — a retailer. But 583 avoids this reality while avoiding accuracy, any costs to a retailer, and even a shred of fair play.

Retailers operating 3 or more stores in Nebraska represent the sales for almost 96% of all PC, laptop, video game units, printers, cell phones, DVD players and monitors and TV’s sold. Even without the data collected from independent retailers with three stores or less retailer data collection would be far more accurate than attempting to get overseas manufacturers to guess where items were sold across the U.S.

The State of Connecticut appears to have solved many of these issues by better defining what a “manufacturer” is under a law passed on July 6, 2007 based on HB 7249:

“Manufacturer” means any person who: (A) Manufactures or manufactured covered electronic devices under a brand that it licenses, owns or owned, for sale in this state; (B) manufactures or manufactured covered electronic devices without affixing a brand, for sale in this state; (C) resells or has resold in this state under its own brand or label a covered electronic device produced by other suppliers, including retail establishments that sell covered electronic products under their own brand names; (D) imports or
imported into the United States or exports from the United States covered electronic devices for sale in this state; (E) sells at retail a covered electronic device acquired from an importer that is the manufacturer as described in subparagraph (D) of this subdivision, and elects to register in lieu of the importer as the manufacturer for those products; or (F) manufactures or manufactured covered electronic devices, supplies them to any person or persons within a distribution network that includes wholesalers or retailers in this state, and benefits from the sale in this state of those covered electronic devices through such distribution network.”

Without such clear definitions one is left with the jumble of chaos in bills such as 583.

But the reality of is that today retailers and manufacturers are often blends in overlapping contractual agreements and at times a retailer can become a manufacturer of its own private brands. California and others recognized that fact but lobbyists have attacked it to avoid being part of the cost solution.

Nebraska 583 assumes the public is stupid. It provides retailers with an escape clause under the premise its reducing the threat of higher costs to the public.

Hundreds of global factories are “disappearing” in 583’s language supported across the U.S. by the Product Stewardship Institute and the Consumer Electronics Retailers Coalition. The ability to trace down the links between retailer brands or licensed nameplates and the actual factories behind those products are being replaced with pathways of quicksand.

And Nebraska will discover too late that the Utopian funding forecasts to offset costs are actually dependent upon a high percentage of “legal brand name mailbox slots” rather than the companies that actually build the product and own the factories.

Hundreds of ‘fly by night’ brands are likely to be “dumped” in states like Nebraska as these brands are actually designed to disappear on their own. And the check writers will also be long gone. And the dividing up of these “orphaned” brands to be paid by others will result in litigation. Why would a new company be held responsible for paying for such goods they never produced or sold when Nebraska law allowed multi-billion dollar retailers under their own private brands exemptions?

Yet the unpaid e-waste costs and volumes of e-waste will continue flowing in — including from other states with far better laws and less profit incentives for moving in out-of-state goods — and Nebraska citizens will ultimately pay the bill.

And using a “licensor/brand owner” as the responsible party — like in Washington State — rather than the actual factory producer also hampers establishing direct links connecting actual “manufacturers” who operate with responsible human labor laws, enforced environmental certifications, FCC acceptance, and FDA X-ray approvals.

Today mega billion-dollar ‘Super Retailers’ operate their own overseas purchasing and design offices and specify down to the penny what technology will be incorporated and when.

Improved e-waste technologies exist today but ‘Super Retailers’ don’t wish to purchase such options because sellers aren’t regulated. Therefore with no mandated reason to allow higher costs they support only the lowest costs available.

They achieve a ‘Thomas the Tank Engine’ toy pushed to the lowest commodity level. Or unfortunately beyond.

It’s been two years since a California bill writer noted that people forecasting the collapse of the California shared responsibility e-waste law were “either highly naïve, brainwashed or retailer lobbyists”. Yet today the California program is running smoothly, and budgets appear on target.

In fact the horror and gloom visions that consumers would rebel at upfront fees ranging from $6-10 never occurred. Instead funding is being collected to support the program and thousands of units hit recycling centers across California daily.

While higher future rates may be required many consumers agree $10-25 fees would still be acceptable across many products — particularly premium consumer electronic items.

Have Nebraska legislators forgotten that consumers have for more than 25 years accepted from retailers “take away fees” of $45-$119 in disposing of older appliances? Better Business Bureau’s contacted found complaints pertaining to these charges “non-existent” over the past 10 years.

Would we have this process today if proponents had argued in 1980 for only “brand owner” dishwasher responsibility programs or solely “producer funded” recovery programs for old refrigerators?

Interestingly by 1990 such “appliance pick up” services became so common with retailers that they soon customized “product asset recovery” programs by themselves and such services are now often profit centers.

Wouldn’t Nebraska citizens now consider that only ‘some kind of nut’ would propose changing these appliance recovery programs to be authorized and managed solely by Nebraska’s Department of Environmental Quality?

We have serious doubts that the Nebraska Department of Environmental Quality is prepared to issue “rulings” and suddenly set themselves up to impose Standard Plans, Policy Plans, Independent Plans, Market Segment Analysis Tier Structures, and Inter-State Coordinated Plans like Washington State, Oregon and Minnesota are attempting.

And their implementation rulings have reached limits where explosive litigation is next —even while these States see serious drops off’s by companies willing to accept future charges beyond registration fees. The struggle in Maine is nothing compared to the “walk-outs” in Minnesota and the litigation coming across the country.

Connecticut’s new law provides a wider platform of responsibility to cover the real world of business where there are overlapping and sometimes switching roles among global retailers and manufacturers. Yet while Connecticut’s definitions and phrasing are well regarded as “seeing all of the players” on the field, the present California law remains the golden one that is both best implemented and most utilized by consumers.

Using the registered and defined manufacturers as listed on a product data plate can further help define responsible parties.

But meanwhile the language and scope of 583 requires massive re-thinking.

We encourage those truly interested in the environment to scrap these lobbying scopes being replicated. We cannot help but wonder if the reverse were true how Nebraska legislators would feel about laws created in Beijing China and covering Cherry or Gage county imports. What would be the reaction if such overseas laws were never announced to those who would fund the programs in Nebraska, and if they were only announced in a foreign language and on a foreign web site?

In replicating a bill designed by ‘Super Retailers’ Nebraska didn’t even bother to protect its own communities from massive e-waste exemptions and excessive future costs.

Today 583 masquerades as an “environmental bill” but it is a protectionist charade.

Thank you,

John Merrell
VP of Marketing & Government Affairs
Prima Technology, Inc.
22122 20th Ave SE
Suite H-158
Bothell, WA. 98021
Phone: 425-398-1678 x105
Fax: 425-398-1679
John.Merrell@PrimaAmerica.com