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issue: April 2007 APPLIANCE Magazine

Standards and Regulations
Virtual Roundtable: Local/Global Standards and Regulations


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by Erin Biesen, Associate Editor

Appliance standards worldwide exist to ensure consumer safety and to help protect the environment. But are standards evolving quickly enough to keep pace with an increasingly globalized appliance industry?

Participants


Tom Siwek
Manager in the Product Safety Department
Robert Bosch Tool Corporation
(Mount Prospect, Illinois, U.S.)

Giovan Nicola Borsetti
President, Distributor Sales
Electrolux Major Appliance Europe
(Pittsburgh, Pennsylvania, U.S.)

Karen Meyers
Manager of Industry Relations and Marketing Services
Rheem (Fort Smith, Arkansas, U.S.)

Steve Milz
General Manager, Product Management and Engineering
Haier America (New York City)

Dilek Temel
Coordinator, Corporate Relations, Arçelik A.S., and President, Turkish White Goods Manufacturers’ Association (TURKBESD) (Istanbul, Turkey)

James Politeski
Executive Director
Samsung Home Appliance
(Ridgefield Park, New Jersey, U.S.)

John Mandyck
Vice President Government Relations
Carrier Corp. (Farmington, Connecticut, U.S.)

Paolo Falcioni
International Technical Affairs
Indesit Company (Fabriano, Italy)

Jim Dillon
Senior Process Engineer
Whirlpool Corporation (Benton Harbor, Michigan, U.S.)

P.J. Gursahaney
Electrolux Major Appliance Europe
(Pittsburgh, Pennsylvania, U.S.)

The implementation of RoHS, confusion over WEEE directives, and a lack of confidence in the future consistency of some appliance standards in the U.S. and China leave many questions and concerns for the industry. Appliance makers are wishing for more consistency in the regulations and standards among differing U.S. states and countries, as well as in the schedule for implementation.

APPLIANCE magazine asked OEMs from different industry segments, and from all over the world, to comment on these issues.

 

What are the benefits of regulations and global standards for the environment and for consumers?

Tom Siwek, manager in the product safety department, Robert Bosch Tool Corporation

Tom Siwek, manager in the product safety department with Robert Bosch Tool Corporation: One of the benefits particularly for the consumer is the fact that manufacturers have a better opportunity to bring products to market faster when there’s global harmonization in the standards community, because they have one design platform that all regional products can be manufactured around. Rather than having to come up with multiple designs to fit unique regional requirements, we can come up with a basic platform with very minimal deviations from a design standpoint. That helps us develop products faster and get innovations into the market faster. From an environmental standpoint, certainly the U.S. has seen the impact of the environment efforts that have been mounted by Europe and in particular through the European Union. They’ve introduced a number of directives: an outdoor noise directive, directives dealing with vibration and such, that made their way into the EN standards, which affect Europe. But as part of this harmonization effort you’re seeing pressure on the North American market to adopt these requirements and ultimately to have the same level of environmental efforts as in Europe.

Giovan Nicola Borsetti, president, distributor sales, Electrolux Major Appliance Europe

Giovan Nicola Borsetti, president, distributor sales, Electrolux Major Appliance Europe: The benefit of regulation is for consumers to be sure that they get something that they can rely on because products are supposedly to be designed and tested and approved according to certain minimum standards. It is for the benefit of the consumer that they have a safe and efficient product. If this is the case, of course the environment is going to benefit for the same reasons that the energy is efficiently used and therefore reducing pollution, etc.In terms of global standards, normally we don’t have alignment to standards at the lower level. In general the leading countries are the ones that set the most stringent standards. It is beneficial that these standards become as global as possible so a larger number of possible consumers can benefit.

Karen Meyers, manager of industry relations and marketing services, Rheem

Karen Meyers, manager of industry relations and marketing services for Rheem: Standards can provide benchmarks for companies to strive to. From that point of view, they level the playing field on which everyone can participate. But at the same time we don’t want to set regulations at a level that are so high that they take away choice from consumers. We think that market forces are very effective and when there is an economic interest to do so, consumers will choose higher efficiency products.

Steve Milz, general manager, product management and engineering, Haier America

Steve Milz, general manager, product management and engineering for Haier America: Most manufacturers wish to introduce products that use designs and materials that minimize harmful impact to the environment and to the consumer. The best products consume less amounts of energy or other resources such as water, either in their manufacture, operation or disposal. However, many of the required design changes result in an increase in manufacturing costs, and consumers are not always willing to pay for environmentally preferable designs. Regulations and global standards level the competitive landscape, as all manufacturers are subject to similar cost increases. Global standards reduce the R&D effort as similar design platforms can be used on a world-wide basis.

Dilek Temel, coordinator, corporate relations, Arçelik A.S., and president, Turkish White Goods Manufacturers’ Association (TURKBESD)

Dilek Temel, coordinator, corporate relations, Arçelik A.S., and president, Turkish White Goods Manufacturers’ Association (TURKBESD): All legal requirements and standards related to the protection of the environment and the rights of consumers have costs and benefits. Besides the costs, every company is aware of the benefits that will occur by meeting the requirements: access to the international markets, consumer confidence. But it is the consumers and the environment itself who really benefit from the regulations. In the absence of global regulations and standards in the past, the nature and the rights of consumers could be violated. Now it is time to protect the environment and the people with the globalized regulations. Furthermore, global standards and regulations are important tools in order to prevent unfair trade.

What future energy efficiency mandates will be impacting the industry?

Siwek of Robert Bosch Tool Corporation: The standard impacting the power tool industry is in the area of standby power, with respect to our battery chargers. There have been pushes on both the U.S. state level as well as the national level through the Energy Star program to minimize the standby power that these items consume while not charging the battery but when the chargers are plugged into the outlets. Through those efforts, the industry is evolving and is changing charger designs to become more energy efficient and in particular use less power when they’re in standby mode.

Meyers of Rheem: There are several standards in the works that will definitely happen. The first one is the R-22 phase-out mandate, which is the result of the Montreal Protocol. As of Jan. 1, 2010, we can no longer manufacture any air-conditioning products that use R22 (HCFC-142b and HCFC-22) and so we will change to an HFC refrigerant. We will change to R-410A. All U.S. manufacturers, including Rheem, have been working to integrate R-410A products into their current product lines.

This year standards will be finalized on new efficiency requirements for gas and oil furnaces, boilers and weatherized furnaces. Those will probably become effective in 2015.

The recent DOE report to Congress outlined the rulemaking schedule for the next round of minimum efficiency standards for central air-conditioners and heat pumps. That rulemaking should begin next year, the final rule will come out in 2011 and it will become effective in 2016.

In addition to standards that are being mandated, this industry actually worked together in consensus with some environmental groups on new standards. We were proactive in this and actually asked to be regulated on several products. For Rheem the product that was affected was commercial package air-conditioners and heat pumps. The new standards were agreed to by the energy advocate groups and we presented the agreement to the DOE, and it was included in the energy policy act of 2005. Those standards become effective in 2010.

James Politeski, executive director, Samsung Home Appliance

James Politeski, executive director for Samsung Home Appliance: Currently the DOE sets energy mandates for the appliance industry in the U.S.A. No future Federal mandates are pending. However, the Energy Star program, which is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy, is continuing to drive down energy labels on appliances every year.

The Council of the European Union and the European Parliament recently adopted a European Commission proposal for a Directive on establishing a framework for setting Eco-design requirements (e.g. energy efficiency) for all energy-using products (EuPs) in the residential, tertiary and industrial sectors.

Following are the four main objectives of the EuP Directive:

  • to ensure the free movement of energy-using products within the EU
  • to improve the overall environmental performance of these products and thereby protect the environment 
  • to contribute to the security of energy supply and enhance the competitiveness of the EU economy
  • to preserve the interests of industry, consumers, and other stakeholders

The first step, in considering whether and which eco-design requirements should be set for a particular product, is a preparatory study recommending ways to improve the environmental performance of the product. The preparatory studies will provide the necessary information to prepare for the next phases (carried out by the Commission) and in particular the impact assessment, the consultation forum and the possible draft implementing measures laying down eco-design requirements for EuPs.

John Mandyck, vice president government relations, Carrier Corp.

John Mandyck, vice president government relation, Carrier Corp.: The drive for energy efficiency will be relentless. Consumers want better payback and governments want fewer power plants and emissions. So for HVACR, we face increasing mandates across the globe. What’s important is stability with regulations, because regulatory uncertainty stifles investment and technology innovation. In the U.S., that means preservation of the federal system of regulations instead of varying and conflicting state-level mandates. On the international scale, it means solid certification programs to ensure equal regulatory compliance.

Temel of Arçelik: We expect that the producers will go on to create new technologies to produce appliances with less and less energy consumption, and the standards and legal requirements will follow these improvements by creating more and more restrictive limits to ensure the energy efficiency. New technologies are being developed, but the technological development process is close to the limits and it’s obvious that each new regulation and standard has a cost raising effect. So the products, in the long term, will be more expensive for the end-user and this means a hard way for both the consumers and manufacturers. For this reason, incentives related to energy efficiency will be necessary and will have a decisive influence for the future progress of energy efficiency issue.

Paolo Falcioni, international technical affairs Indesit Company 

Paolo Falcioni, International Technical Affairs, Indesit Company: Energy efficiency has always been at the core of household appliance interests. Today’s appliances use less then half the energy needed only 10 years ago. The trend toward higher efficiency is continuing even though now there is the need to give incentive to consumers to buy better appliances and foster an early replacement of outdated appliances. That alone would bring us much closer to reaching Kyoto objectives.

Are standards being written to look at the bigger picture? Why or why not?

Jim Dillon, senior process engineer, Whirlpool Corporation

Jim Dillon, senior process engineer, Whirlpool Corporation: Yes. Look at RoHS and what it is causing many manufacturers to change. A standard that is set for the right reason and end benefit should be carried across all manufacturers of products. In the global marketplace things should be equal and a global standard should be set. Some countries may have additional restrictions that they wish to add for their own reasons, but a standard is just that: a ‘standard’ that should be common to all.

Siwek of Robert Bosch Tool Corporation: I think standards are being written to look at the bigger picture and in particular in power tools, the industry is very active with the regulatory bodies, authorities having jurisdiction and other interested parties. We want to address standards in all areas, not only safety but also environmental issues.

Borsetti of Electrolux: Standards are not technically written having in mind the bigger picture. It seems to me that there’s quite a strong local pressure to have things taken care of in a country or in best cases a group level of countries but not really on any global level, starting from any global point of view.

Meyers of Rheem: Everyone is trying to save energy, states are trying to save energy, the U.S. is trying to save energy, and so are other countries. One solution to do that is to raise appliance standards. I would say that is not always going to be effective unless everyone is going to be involved. If the people installing the equipment aren’t committed, if the people manufacturing it aren’t committed, if the people setting the standards don’t understand how this affects everyone, then we are probably not going to be as effective as we want to be.

At Rheem, we spend a lot of time and resources training and educating contractors. As an example, a properly sized and installed 13-SEER air-conditioner could save a lot more energy than an improperly sized, charged, and installed 15-SEER air-conditioner, which may not be matched correctly, may have the wrong size coil or may be installed with leaking ducts.

Milz of Haier America: All standards must achieve a balance between many factors such as global warming, energy and water consumption; life cycle and manufacturing costs; safety; and utility. In some jurisdictions, one or more factors can be overweighted. Regulators and engineers constantly make trade-offs.

How are standards and regulations affecting the bottom line or the manufacturing process?

Siwek of Robert Bosch Tool Corporation: Standards will always affect product cost, particularly when you add that to the reality that consumers still expect lower-cost goods with greater innovation. It’s a challenge for developers to constantly push the envelope from a design and innovation standpoint.

P.J. Gursahaney, Electrolux Major Appliance Europe

P.J. Gursahaney, Electrolux: High efficiencies coming in and the safety standards as well as environmental standards do require large resources to completely change the manufacturing process. For example, when we banned CFC-11 and CFC-12, we had to completely redesign our factories. It cost us more than U.S. $200 million just to change our manufacturing processes. So, as these new standards come in, it’ll be taxing our factories more, and, of course, everything cannot be passed on to the consumer. A lot of these expenses are being borne by the manufacturers, and, as result, you can see some of the appliance manufacturers have gone out of business.

Meyers of Rheem: It is challenging, quite frankly, to juggle all the different standards that are coming at once. Successful companies are going to stay ahead of the curve. At Rheem, we have been moving higher-SEER products into our product line for years. We are involved in the regulatory process. So we are in a good position to deal with these transitions.

What probably impacts you the most are the short-term transition issues, such as making sure inventories are balanced at both the manufacturing level and the distributor level, and making sure everyone is aware of the transitions that are coming. In 2006, we not only went up to a 13 SEER, but that was when there were major issues with raw materials prices. You have to make sure that suppliers are ready for new standards as well.

Politeski of Samsung Home Appliance: Standards and regulations continue to dilute manufacturer’s resources from the real goal—providing consumer needs. By imposing new standards and regulation at odd time intervals, resource effort is always needed to meet new regulations and standards instead of focusing on consumer needs and a changing market. Having global standards imposed every 5 or even 10 years, would make resource allocation more focused and the overall goal could be met and still evolve the product with new standards and regulations.

If standards and regulations vary from country to country and region to region, the manufacturers have, in principle, two choices. One, they can develop products which fulfill as many of the differing requirements as possible. This makes these products more complex and thus more expensive than necessary. The other opportunity is to have several more simple products, which differ in their properties. This causes the need for high flexibility in the manufacturing process or even several independent manufacturing lines. Furthermore, the production lots are smaller. Again, the costs for the products are higher than necessary. This results in lost income. The investments for regulation and standards are not recaptured because of competition.

Milz of Haier America: Any change in standards requires an effort in R&D. In some cases, the cost of this effort exceeds the direct costs, as limited technical resources implies that consumer-driven enhancements may be postponed. Newer design standards often increase manufacturing costs, and in a very competitive marketplace, costs are not always fully recovered. In some cases, a major tooling expense is required, and older but still productive tooling must be prematurely written off.

How are hazardous materials standards, such as Europe’s RoHS (Restriction of Hazardous Substances Directive), different between China, Europe and other parts of the world? How is that impacting the industry?

Gursahaney of Electrolux: In Japan, China and Europe, the principle is the same, however, the way they implement it is slightly different. In Japan, they’ve implemented RoHS-type compliance, but imports into the country don’t have to meet it—they just have to declare what hazardous materials are in the product. In China, of course, it is completely different. Compliance is mostly declared by the manufacturers, and of course they depend on Europe for the technology so there are inconsistencies as to how they declare or implement the standards.

Meyers of Rheem: Hazardous materials standards are different in different parts of the world and that is probably one of the most challenging issues. It is not only RoHS, but also WEEE (Waste Electrical and Electronic Equipment Directive). Rheem is working through trade associations and we continue to concentrate efforts on harmonizing HVAC standards at the international level, including RoHS-type standards. Right now there is a lot of confusion between the requirements for each country, but what we are really trying to do is to come up with a comprehensive global outreach program that will level the playing field so we can compete effectively.

Politeski of Samsung Home Appliance: The main differences are the following:

  • The China RoHS directive includes also medical and control equipment, which is exempted in the EU RoHS directive.
  • The EU RoHS directive sets limits for the maximum content of hazardous substances that are allowed to be present in the concerned products. In China so far there is only a marking requirement. The manufacturer has to declare whether the content of the hazardous substances is below or above the limits set forward by the EU. If the content is above, the manufacturer has to declare, in addition, how long the product can be used without risk of the hazardous substance being set free to the environment.
  • The Chinese authorities are presently working on a so-called Key product catalogue, which will define the dates when products will only be allowed to be sold, if the content of hazardous substances is limited similarly to the EU. In addition, it is planned that the fulfillment of these requirements has to be certified by authorized institutions.

It can be expected that products fulfilling the EU requirements can also be sold in China. The foreseen need for certification slows down market introduction and unnecessarily increases costs.

Temel of Arçelik: EU RoHS, China RoHS, Korea RoHS, California RoHS—although the restricted substances are very similar, these environmental laws are slightly different in critical fields; scope, certification and labeling. For example, in the China RoHS, there is a legal certification and labeling requirement contrary to the EU RoHS. As the industry, of course, cannot produce different products for each law, they have to comply with the total of these provisions. And this causes higher costs and complex operations.

 

Is there a fear that there will be inconsistencies in standards between states in the U.S.? How are companies dealing with this?

Meyers of Rheem: Rheem believes in one rule and not 50 when it comes to energy efficiency and product marking regulations. Trying to manage multiple standards is very difficult and confusing for everyone. There are times when states try to institute regulation that is more stringent than those in place at a federal level. This puts manufacturers in a position of having to manufacture to more than one standard, which costs a lot of time and money. You really see the same thing on the international level, as well.

Mandyck of Carrier Corp.: The fact is inconsistencies exist today. Some states have started trying to pass state-level appliance efficiency laws that differ from the federal approach. This provides the backdrop for varying and conflicting regulations for the same products that results in an unstable regulatory framework for appliance manufacturers.

Perhaps the latest major deviation comes with California’s new climate change law that could impact the use of HFCs. Other states have introduced climate change legislation too, so the possibility exists that different requirements may be enacted for different states. For the most part, companies are dealing with the patchwork of state-by-state standards and regulations by seeking a federal solution.

Milz of Haier America: California and sometimes other states draft (usually) more restrictive standards. This is often a timing issue, and since any new design implies reliability risks, manufacturers are often reluctant to introduce changes over a broad scale without sufficient time to validate these newer designs. A byproduct of an accelerated standard is often restricted product offerings in such states. A national standard is always the preferred route.

Dillon of Whirlpool: If one state requires a certain standard, then you have to make models that fit that standard, creating several more SKUs. Companies have to decide whether to create these SKUs if the standard adds cost, or hedge their bet that the standard will proliferate and take all of their product to the standard that is tighter and reduce complexity. Some companies that do this can use doing this as a marketing tool to say that they are more ‘this or that’ than others in their industry.

Does Europe experience a similar consistency issue?

Politeski of Samsung Home Appliance: Europe started out after the Second World War with a lot of different national standards and regulations. At that time there really was such a consistency issue. By the work of CENELEC, the European Committee for Electrotechnical Standardization, a lot of standards concerning appliances are now the same for all of Europe. The European Union has adopted regulations, which have to be applied in all member countries.

There are standards that exist only on a national level and national governments can impose regulations which have more severe requirements than those from the EU. These national standards and regulations cannot be in contradiction to the European ones. There is a risk that the national standards are in conflict with each other. When this happens, it becomes a task for CENELEC and the EU to solve those conflicts.

Mandyck of Carrier Corp.: Consistent member state implementation of EU laws is always a challenge. Implementation procedures and compliance enforcement differ among many countries. The EU RoHS issue is a recent example. The European Commission had one interpretation of the effective date to include products manufactured after that date. Several countries, however, interpreted the effective date to include products sold after that date. This not-so-small nuance could have prematurely obsoleted millions of dollars of inventory. Ultimately, most countries followed the European Commission interpretation, but not without substantial time and energy by industry to corral a common position.

Temel of Arçelik: In Europe it can be said that the harmonization between the states is quite successful. Concerning the standards and regulations, which are based on concrete and specific provisions, there aren’t inconsistencies between the states. The directives, which are among the secondary legislation and which have to be transposed in order to be implemented in a EU state, have a minor risk of inconsistencies. EU can afford to control the national legal texts and to make them harmonized, but the distinct implementation issue remains unsolved in some cases, to the effect that the interpretation of the different national authorities can be different with each other. The new legal requirements, especially the ones related to the environment, pose some problems for the industry with the transposition of currently 27 member states.

 

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