Compliance in 2016: What You Need to Know

Compliance in 2016: What You Need to Know

So you made it through the holidays, it’s 2016, and now your manager wants to know what the new year will hold for the compliance team.

It’s impossible to tell the future. Last year, no one could have predicted the frenzy around anti-human trafficking (AHT). It made for an interesting later half of the year and resulted in a number of companies looking into their own anti-human trafficking programs to make sure they aren’t at risk of a similar incident.

That being said, we consulted with the Assent Compliance regulatory team to get an idea for what you can expect to see this year, with the understanding that just about anything can happen. From conflict minerals in the European Union (EU) to more developments on the AHT front, here are a few things you should be aware of, and maybe working on already, as you make your way through 2016.

 

European Union Conflict Minerals Regulation Coming in 2016

Our experts are eagerly anticipating the EU’s conflict mineral rule, and their expectation is that it will be released sometime in 2016.

What’s the holdup?

Currently EU Member States are in negotiations with industry stakeholders, NGOs and other interest groups to finalize the rule. The main sticking point has been mandatory participation for downstream companies.

Originally the rule was only to be mandatory for EU smelters. However, the EU members have since voted to make the rule mandatory for downstream companies as well, which could mean up to 800,000 companies will be impacted by the rule.

The EU is committed to upholding its decision, but it’s not clear just yet what will come out of the negotiations. What we do know is that 2016 should see the EU table a conflict minerals rule in some shape or form. We can’t say exactly when, but this is positioned to be one of the top compliance stories of 2016 when it does happen.

 

Federal Acquisition Regulation Guidance Released

The Federal Acquisition Regulation (FAR) has always included rules on human trafficking. But it was President Obama’s Executive Order 13627 in 2012 that widened the regulation’s scope to what we have today.

The original regulation required government contractors to be free of human slavery activities, but did not address their supply chains. The Executive Order, amendments for which came into effect in March 2015, now requires those contractors, and their supply chains, to be free of those activities. This is a much more comprehensive approach to mitigating risk of human trafficking in federally-contracted projects.

What’s new in 2016? Despite the amendments taking effect last year, guidance has yet to be released. This guidance will create common consensus on the expectations for industry, and will allow companies to apply that guidance through their supply chains. It will also give federal auditors and enforcement bodies the tool they need to handle the regulation in a consistent manner.

Between these more stringent FAR requirements, those of the California Transparency in Supply Chains Act, and the UK Modern Slavery Act 2015, 2016 is set to be a landmark year for anti-human trafficking. More and more companies are finding themselves in scope of anti-human trafficking regulations and the landscape will only become more crowded. In 2016, companies will need to address anti-human trafficking at an enterprise level as it will no longer be viable to do so simply on a case-by-case basis.

 

REACH Ruling Begins to Impact Compliance Programs

The European Chemical Agency’s (ECHA) guidance regarding the Court of Justice of the European Union’s ruling on how complex articles are handled under REACH will start to have an impact in 2016.

Companies will need to determine if their processes, both historical and current, support compliance based on the new interpretation of an article possibly being a product of many articles.

Is old data still useful? Possibly, as a means of determining potential areas of risk. But historical data on articles may not meet new compliance requirements. This means companies are going to have to re-evaluate their products in order to ensure they are compliant at a parts level.

This is the year companies absolutely have to adjust to these changes. The European Reach Enforcement Forum has committed to training European enforcement bodies on how to enforce and target substances of very high concern (SVHCs) compliance in 2016. Next year, 2017, will see a significant increase in enforcement campaigns targeting SVHC communication issues.

 

Companies Adjust to New RoHS Substances

A year after four new substances were added to the RoHS Directive, companies are either in progress of or going to start implementing these additions into their programs.

These additions were the first since the original law came into effect in 2002, meaning companies haven’t had to worry about significant alterations to their programs. This will change in 2016. Companies are going to have to establish where these substances are utilized in their products and, based on that information, will either have to get different suppliers, find differents parts, propose exemptions, or make a different product.

Although these substances won’t be restricted until 2019, starting now ensures companies will have a the data to make decisions on how they determine which products will be discontinued, changed, or unavailable for the market in the future.

 

Proposition 65 New Rules to Come Into Effect

The Office of Environmental Health Hazard Assessment (OEHHA) is expected to release new rules in the new year, regarding substance warnings and “right to know” under Proposition 65.

The new rules process started in January 2015, followed by a public meeting in March.

While the exact wording of the new rules is yet to be released, the OEHHA has said they will provide more specific guidance on the content of safe harbor warnings for a variety of exposure situations and corresponding methods for providing those warnings. A specific section will be added to the regulations, addressing the relative responsibilities for providing warnings to businesses in the chain of commerce versus retail sellers of a given product.

The rules are expected to make warnings on products and websites more explicit and detailed. For example, warnings may need to include the name of the substances present in the product and what problems they cause. The prominence of those warnings may also be regulated.

Once the rules have been released, the OEHHA will provide a two-year implementation period for companies to comply with the new regulations.

Join Assent Compliance for a webinar on January 28 to discuss these changes to Proposition 65. Register for the webinar here.

 

Other Storylines to Follow In 2016

While not expected to have serious impacts in 2016, we do expect developments in the following areas this year.

Nanomaterials continue to receive more and more attention due to the increase of their use and their exciting properties. There has been an interest in defining nanomaterials, understanding them, and to increasingly regulate them. There are concerns that despite substances not being found to be hazardous, their nano forms could, in fact, be hazardous. Don’t be surprised if governing bodies begin requesting additional information on nanomaterials in an effort to identify possible hazards leading to regulation down the road.

Companies captured under the EU’s accounting directive will need to ensure their corporate social responsibility programs meet the reporting requirements of the directive’s non-financial reporting section, starting in 2017. These non-financial reporting requirements are expected to have a scope of around 6,000 companies in Europe, capturing environmental matters, social/ethical, human resource, labour rights, anti-corruption, bribery, and diversity of board of directors. To put the scope in perspective, the U.S. conflict minerals rule impacted 1,400 companies when it was released, with an indirect impact on hundreds of thousands of others.

China RoHS came into effect in 2007 but has yet to actually restrict the use of substances in electronic products. There are disclosure requirements, but no restrictions have been made. Could this be the year that changes? Our experts hear that an update could come at any time, but there’s no indication it will actually happen in 2016.

 

We will update our blog throughout the year as new developments arise with these and other topics. At first glance, it appears as though 2016 will be a year of preparation and transition, though the EU Conflict Mineral rule could add some interesting spice to the mix.

For more information on these or other compliance topics, contact our regulatory team at info@assentcompliance.com.

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