Coming Distractions

If these eight risks are not on your radar screen, they will be soon.

In fact, RoHS changes the way all electronics manufacturers, suppliers, and distributors do business — regardless of whether they sell in Europe. RoHS is the blueprint for other green laws expected to be adopted in China, Japan, and the United States. California, for one, has already passed a similar E-disposal measure.

Assessing RoHS’s financial impact isn’t easy. But considering that U.S. high-tech companies export about $42 billon worth of products to Europe each year, the hit to earnings could be noticeable. Mostly, that bite will come from the retooling and testing of products, as well as inventory write-offs and warehouse snafus. An example: a manufacturer that currently orders by part numbers needs a whole new system to differentiate between leaded and nonleaded products.

Not surprisingly, large U.S. manufacturers are already retooling factories ahead of RoHS. But problems with outsourcers and sub-assemblers could prove to be the big hurdle, particularly for companies with complex supply-lines. Asks Arrow Electronics’s Reilly: “What happens on July 2 if you have to shut down production because you don’t have the right parts?”

Worse, problems arising from noncompliant products could trigger ugly disputes between suppliers and manufacturers. As Ken Rivlin, an environmental-law expert and partner at Allen & Overy LLP, asks: “Who will pay for the fines? Who will pay for product returns? Who will pay for product replacement?”

Who indeed? Managers at many smaller U.S. manufacturers and suppliers appear to be hoping that the EU extends the deadline — a dim prospect. In fact, Bijan Dastmalchi, president of advisory firm Symphony Consulting, predicts that, while most companies claim they will be in full compliance by July 1, only a few have done the due diligence necessary to ensure that their merchandise meets the requirements. That’s worrisome, given the leanness of some supply chains. “European companies feel that 75 to 80 percent are ready now,” notes Reilly. “But when it comes down to execution, the percentages will come down.” — Elaine Appleton Grant

Terrorism Insurance: Duck and Cover

Over the past few years, several high-ranking government officials, including Vice President Dick Cheney, have warned that a future terrorist attack on U.S. soil is inevitable. What’s less certain is whether you can buy insurance to cover an attack.

In December, Congress and President Bush begrudgingly okayed the Terrorist Risk Insurance Extension Act (TRIEA), the continuation of a program that covers insurers against sizable losses stemming from acts of terrorism. The bill was not expected to make it out of committee, let alone pass. As Jeff Burchill, CFO at Rhode Island–based business-property insurer FM Global, notes, “The government is reluctant to get into the insurance business.”

But nearly five months after the extension was submitted to Congress, terrorists set off bombs in a London subway. The blasts in the UK apparently convinced lawmakers in the United States to continue the government coverage a mere nine days before the original act was set to expire.


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