1. What is the connection between e-waste exports and counterfeit electronic components?
A report by the U.S. Senate Armed Services Committee found that counterfeit electronic parts from China have flooded the U.S. defense industry, creating serious concerns about the reliability of military equipment. To ensure they perform to standards, electronic parts must be made in ultra-clean rooms. By contrast, the Committee found that “much of the material used to make counterfeit electronic parts is electronic waste, or e-waste, shipped from the United States and the rest of the world to China.”
2. How are counterfeits produced?
While the term "counterfeits" sometimes suggests making a fake product from scratch, counterfeit electronic components are actually re-processed from old, discarded equipment. Counterfeiters use a series of harsh processes to produce fake microchips that look brand new and are virtually impossible to detect even to an expert eye. But they are actually "recycled" from discarded equipment that has typically been shipped overseas to China and dismantled under primitive conditions. As a result, the report notes, with counterfeit chips “there is no way to predict how well they will perform, how long they will last, and the full impact of failure.” To learn more more details about the counterfeiting process, read this Roll Call article by defense and computer industry experts.
3. Do we know where counterfeits are coming from?
Yes. Most counterfeits come from China’s Guangdong Province, according to the Armed Services Committee, stating“ The investigation uncovered…overwhelming evidence that companies in China are the primary source of counterfeit electronics.”
4. What are the risks for national security?
The Armed Services Committee found 1,800 cases of counterfeit
parts in military technology, including helicopters, cargo planes, submarines,
thermal weapons site, and missile control systems. Military experts have also raised concerns that counterfeit chips can
help hackers and cyberterrorists launch attacks. According to DefenseTech, “For years, everyone has warned that counterfeit
microchips made in China and installed on American military hardware could
contain viruses or secret backdoors granting the Chinese military cyber access
to U.S. weapons systems… Basically, Chinese cyber spies can gain use the chip’s
built-in malware to decipher military passcodes and gain remote access to the
chip and reprogram it to do their bidding.”
5. Beyond security concerns, are there broader risks for Americans?
Yes. According to the Institute of Electrical and Electronic Engineers, counterfeits "threaten not only military systems but also commercial transportation systems, medical devices and systems, and the computers and networks that run today’s financial markets and communications systems." Semiconductor Industry Association (SIA), a leading trade organization for companies that manufacture electronic components, states that counterfeits are a "threat to public health and safety." SIA cites the following examples:
- A counterfeit semiconductor component was identified in an Automated External Defibrillator (AED), resulting in a defibrillator over-voltage condition. Failure to detect and address this issue could have resulted in improper electrical shocks being applied to heart attack victims, thus jeopardizing their lives.
- A counterfeit semiconductor component caused a fire in the control circuitry in a vacuum cleaner for residential use. This fire was successfully contained, but it had the potential to result in major property damage or even loss of life.
- A counterfeit semiconductor failed in a power supply used for airport landing lights. This did not result in any reported airline take-off or landing incidents, but the potential for such incidents was obvious.
- A broker shipped counterfeit microcontrollers intended for use in braking systems in high-speed trains in Europe.
- A broker shipped counterfeit microprocessors intended for use in automated medication applications, including intravenous (IV) drip machines.
SAE International, a global
association of more than 138,000
engineers and related technical experts in the aerospace,
automotive and commercial-vehicle industries, has stated “There has been a
significant and increasing volume of fraudulent/counterfeit electronic Parts
entering the aerospace supply chain. This poses significant performance,
reliability and safety risks for end users.” For instance, the Federal Aviation Administration estimates that two percent of the 26 million airline parts installed each year are counterfeit, accounting
for more than 520,000 units.
6. What are policy solutions to combating counterfeiters?
While improving supply chains
and detecting counterfeit microchips are critical, to date there has been
little focus on attacking the problem at its source – by reducing the flow of
raw materials culled from e-waste. The Secure E-Waste Export and Recycling Act (SEERA)
is a bill to control the export of electronic waste (e-waste) in order to
ensure that such waste does not become the source of counterfeit goods that may
reenter military and civilian electronics supply chains in the United States.
SEERA would amend existing Export Administration Regulations by designating
non-working/non-tested used electronic items (based on a list of common
electronic products or fragments of products that contain circuitry) as
“Electronic Waste” which cannot be exported outside of the U.S. unless certain
specific conditions are met. This
approach would stop the flow of e-waste from the United States that is
undermining our national security. SEERA will require domestic recycling of all
untested, nonworking electronics. By keeping these materials in the United
States, we will keep them out the hands of counterfeiters and data thieves.
This approach is consistent with CAER's long-standing support for free trade in value-added products, such as the commodities generated from the recycling process, while restricting export of untested, non-working e-scrap that provide essential raw materials for counterfeiters. In addition to combating counterfeiting, these policies will create American jobs, promote investment in our domestic recycling and increase trade in tested, working electronics. A recent study found that this approach will create 42,000 U.S. jobs with an annual payroll of $1 billion, with more added as the demand for services continues to grow.
7. How do responsible electronics recycling policies create jobs?
The United States will finally be able to better control the export of all hazardous, untreated and untested e-waste. This will give business owners in the United States more incentive to invest in capital and employees to increase the capacity to process, refurbish and manage e-waste domestically. By establishing a robust, profitable industry here in the U.S., exports of refurbished equipment and commodities refined from e-scrap will increase substantially.
8. What about international trade laws?
The approach embodied in SEERA conforms to OECD standards and parallels the Basel Convention, a treaty ratified by 180 countries including many WTO members. Nearly every country around the world is party to this treaty that restricts exports of hazardous non-working e-waste to developing countries. As a result, it’s difficult to foresee any country filing a WTO objection. We will advocate for a similar approach in the 114th Congress.
9. Can the American electronics recycling industry build capacity fast enough to meet the potential demand for domestic processing that must result from passage of this bill? Does it have the capacity to expand fast enough?
Yes. The export ban on untested, non-working equipment would go into effect two years after its enactment. This affords the industry sufficient time to develop plans, make investments, install equipment, hire staff, and essentially grow to meet the expected increase demands from this change. In addition, Coalition representatives report that they all currently have significant excess capacity and can add work shifts (employing more people) and increase processing equipment utilization without significant additional capital outlays. Third, the same concern was raised earlier about the industry developing a collection infrastructure to respond to state landfill bans of e-waste. But this problem (lack of capacity) never materialized because firms were able to quickly set up or grow appropriate resources to meet the new demand. In California, hundreds of companies registered as Collectors for that state’s e-waste recycling program. In the business world, growing capacity to meet increased demand for products or services is a challenge we are more than happy to solve.
10. What do you say to the people who claim this approach represents protectionist trade policy?
Our country has historically restricted the trade of products/information that pose a threat to national security, as well as hazardous waste. That's all this bill will do. E-waste is generally considered a hazardous waste since TCLP tests demonstrate that most electronics with circuit boards, fluorescent lamps, CRT screens and batteries contain sufficient concentrations of hazardous materials to classify them as a hazardous waste. In addition, there are documented cases of sensitive and classified information found on recovered media from unprocessed electronic equipment shipped from the U.S. to developing countries. This represents a real national security risk. In the past, Commerce has restricted trade of information technology equipment to certain countries who are enemies of America.
It’s also important to recognize that in no way does the bill enact a wholesale ban on the trade of electronics or e-waste. There is a restriction on what can be exported to developing countries, but any electronic product or e-waste can be exported to other OECD countries.
The Coalition believes tested, working electronic products should be freely traded, and this practice is preserved by the bill. We also believe processed commodities that do not contain “restricted electronic waste” should be freely traded.
11. What would be the impact on your business if this bill passes?
Currently, a large amount of electronics claimed to be recycled in the U.S. are really just “packed and stacked” into shipping containers and exported. Aggregators of used electronics work through brokers to ship equipment overseas and get paid pennies per pound for this mixed assortment of electronics. We see solicitations from these brokers all the time.
In a report issued by the U.S. International Trade Commission on March 8, 2013 , they estimated 757,721 tons of used electronic products (UEPs) were exported by the U.S. in 2011. Of that amount, more than half of the e-waste is sent for final disposal in a way is likely to be unsafe or unregulated. The report, based on survey responses of companies in the recycling industry in the U.S., even found that 18% of these shipments were exported for unknown purposes.
If this bill passes, we don’t expect it will completely shut off improper exports of electronic scrap, but we contend it will change the equation so that a larger percentage of electronics is processed in the U.S. Based on our experience, we create at least seven jobs in refurbishment, demanufacturing or material processing for every job involved in packing and stacking electronics for export. This would lead to tremendous growth in the American electronics recycling industry through existing and new businesses.
12. The U.S. International Trade Commission's report on electronics recycling estimated that e-waste exports are a relatively small percentage of the total e-waste supply. What is your viewpoint on the study?
We believe the U.S. ITC report offers some insight into the flow of electronics around the world, but it is not definitive. Regardless, the fact that it shows more than 750,000 tons of e-waste was exported in 2011 demonstrates that the export of e-waste is not insignificant.
The U.S. ITC report acknowledges biases in its methodology. As a result, readers should be careful about drawing certain conclusions from the report. For example, the report stated, “Relying on survey data presented several challenges to the Commission’s findings. The results of the Commission’s questionnaire have been aggregated and weighted to provide estimates about a broader population, with results that may be skewed towards nonexporters or responsible exporters that responded to the questionnaire, as well as to larger firms, since very small firms were not surveyed.” The report continues, “Informal and unregulated recycling of exported UEPs remains a concern within the industry. No quantitative data on this segment of the industry are available, but some descriptive information is included in this report.”
The global trade in e-waste is difficult to put a finger on, because we all know how easy it is for brokers and exporters to creatively represent the trade of these materials. In a summary introduction to the StEP Green Paper published in March, 2013, they argue that “the people and environments of the global South continue to suffer a disproportionate share of the social, health and environmental costs of e-waste processing and disposal while reaping relatively few of the benefits.”
The study commented on the effects of a SEERA-like law and concluded that, if enacted, “the product mix [of export] would likely change to reflect more tested and refurbished products and fewer end-of-life products [exported]. Conversely, exports of commodity-grade material would likely increase, as more recycling activity would take place in the United States and (related) commodities would be exported to manufacturing centers in non-OECD countries.” (p. 6-8). This is a great argument in support of responsible electronics recycling policies.
13. The MIT/NCER/StEP study also indicates that exports are relatively small. What is your viewpoint on the study?
The MIT/NCER/StEP data is clear on these details:
The problem of e-waste is expected to grow 33 percent globally by 2017;
The U.S. leads the world in total volume of annual e-waste generated per year;
The U.S. is the world’s leader among major countries in the amount of annual e-waste per person;
“There is a dearth of data” on transboundary movements of e-waste, read exports;
There are specific challenges to obtaining accurate data; and
Because of the lack of accurate data, the export figure is highlighted as one that “represents the low end of the range.”
The Executive Secretary of StEP says, “Although there is ample information about the negative environmental and health impacts of primitive e-waste recycling methods, the lack of comprehensive data has made it hard to grasp the full magnitude of the problem.”
14. What types of activities going on today in the American electronics recycling industry would be stopped under responsible electronics recycling legislation?
CAER supports legislation that make it illegal for aggregators of used electronics and brokers who buy or sell “as-is” and untested electronics to ship any of these devices to developing countries (anything can still be exported to developed countries) without meeting strict conditions and winning the consent of the recipient and transient countries. It is possible that electronics currently collected through community collection events, given to donation programs, or handled through companies claiming to be recyclers really just get transferred unsorted and untested to brokers who then manage the export transaction. Those programs will need to establish new vendor relationships to make sure they comply with the law.
There are several exceptions for what can be exported to developing countries, including warranty returns to overseas manufacturers, and recalled product. These exceptions were requested by manufacturers. In addition, electronics from vehicles are not restricted from export. This exception was requested by the scrap processing industry.
15. What are some examples of dirty recycling and “tricks of the trade” in disposing of e-waste?
It is very simple to ship a container of mixed, untested electronics to a developing country and claim it has either “working computers” (but that often increases customs duties) or to identify it as something completely different (“auto parts” is a typical false description). The number of containers actually inspected by Customs agents is minimal, so the risk of getting caught is a cost of doing business for most brokers. While China specifically bans the import of any used electronics, anyone can ship them to Hong Kong. Once in that port, it is very easy for these items to get repacked and make their way into Mainland China.
The U.S. Government Accountability Office led an investigation into this e-waste export practice to see how openly American companies were willing to export CRT devices in violation of the EPA rule on export of CRT devices. GAO posed as foreign buyers of broken CRTs in Hong Kong, India, Pakistan, and other countries, and 43 U.S. companies expressed willingness to export these items. Some of the companies, including ones that publicly tout their exemplary environmental practices, were willing to export CRTs in apparent violation of the CRT rule.
There is good recycling in the U.S., but there are plenty of examples of sham recycling, too. By passing SEERA, we can establish clear rules to limit the export of unprocessed and non-working electronics to developing countries and enforce action against unscrupulous businesses who give the public a false sense of how their old electronics are recycled.
16. We’ve been told it’s not cost-effective to recycle electronics in the U.S. Will this bill lead to an increase in electronics recycling costs for U.S. consumers and businesses?
There are plenty of successful and profitable electronics recycling operations in the United States. Our businesses are examples of how recycling can be done cost-effectively in the U.S. Our customers use us because we provide a valuable service for a fair price.
The cost to recycle electronics is based on many factors. Logistics is one of the most significant costs, so processing electronics closer to home helps save money. Total processing costs are also offset by widely variable global commodity prices. The price of steel, copper, petroleum (impacting plastics prices), gold, aluminum and other global commodities can shift dramatically. High commodity prices can hide the true cost of recycling. When these commodity prices fall, many recyclers go out of business because they can’t cover their other processing and labor costs. This is more of a business pricing problem than a result of export restrictions.
When businesses and individuals direct their old electronics to the companies most capable of handling those devices, they can maximize their value return and minimize their costs. It makes more sense for a large institution that refreshes its IT assets every three years to partner with a full service IT Asset Disposal firm to take care of data security and processing issues. Often these firms generate enough recovery revenue, due to their technical ability to repair and remarket working equipment, to more than offset for their environmentally responsible disposal costs. If a municipality is just looking for someone to process large volumes of obsolete and damaged electronics from community collection events, then it should work with a large scale demanufacturer and/or automated e-scrap processing operation to get the best return on its investment.
17. Help us understand the American electronics recycling supply chain. Why types of activities are performed by different players?
There are many different types of players in the electronics recycling industry, and no one company is completely vertically integrated and can perform all aspects. Some companies do perform multiple functions in the recycling supply chain. Activities include:
Collection and aggregation of used electronics;
Repair, refurbishment, data sanitization of equipment (whole and components) for reuse;
Demanufacturing of equipment to disassemble whole products into component parts for reuse, treatment, recycling or disposal;
Shredding and automated separation of demanufactured equipment into recoverable fractions; and,
Processing and treatment into value-added commodities (e.g., smelting for metals recovery, granulation into plastic pellets, retort for mercury recovery).
Processing, treatment, and automated separation operations typically require large scale and technical capital equipment. As a result, fewer of these facilities exist and they require large volumes of equipment to operate. Refurbishment and demanufacturing facilities are more labor intensive, and can be run at any scale.
18. If we cut off exports to developing countries, won’t we just create problems of dumping electronics in the U.S. improperly?
This shouldn’t be the case if America effectively enforces existing health, safety and environmental laws. Since American business can meet the demand for increased domestic recycling and will actively compete for business within the framework of the law, there should be no reason why domestic dumping of e-waste would increase as a result of this law.
19. How does the patchwork of state laws on e-waste affect the industry?
More than half of all U.S. states have some type of e-waste law, and no two are exactly the same. As a result, all the different rules and reporting requirements do increase the administrative cost for recycling companies to comply. This patchwork creates increased costs for everyone, as documented by the National Electronics Recycling Information Clearinghouse. Federal legislation will not address the state e-waste legislation, so it won’t do anything to address these challenges and costs.
20. Where can individuals take their electronics for responsible recycling?
Until responsible electronics recycling legislation goes into effect, it’s hard to trust when someone says they’ll recycle your e-waste responsibly. Until then, we won’t be shy by directing you to one of the Coalition for American Electronics Recyclers. You can work with them directly or through one of their collection partners to turn in your electronic equipment for responsible recycling or reuse.