Financial guarantee

Background of the financial guarantee

The producer responsibility is based on the principle that the individual producer or
importer (or producer scheme) assumes responsibility for the collection and disposal of
WEEE. In this way the responsibility rests neither on society in general nor on other
producers/importers. (Further on in the text producers and importers will be termed as
producers as the rules regarding the to groups are coinciding.)

The financial guarantee is used in situations where a producer ceases to exist or in

isolated cases cannot assume the responsibility for management of the allocated
amount of WEEE. The financial guarantee must only be provided by producers of
appliances with end users in households.

In Denmark the producer responsibility has been implemented in such a way that it is not
possible directly for the individual producer to take back his own products from the
households. Therefore, the amount of WEEE the individual producer takes back will
never be product specific.
Thus, producers in the Danish system are under the obligation to take back household
WEEE from the municipal collection sites to the extent it is allocated by WEEE-System
under the so-called allocation scheme. Read more about the allocation scheme under
Household WEEE.

In the allocation scheme the producers are allocated part of the collected amounts of
WEEE in the categories to which the products they put on the market belong. This
means that newcomers on the market already from the first coming allocation scheme
are allocated WEEE corresponding to the budgeted amounts put on the market.

Principles behind the financial guarantee

The principles behind the financial guarantee are as follows:

Any existing producer must take back his share of the existing WEEE in relation
to his market share. This is ensured under the so-called allocation scheme.

Producers of equipment with end users in private households must provide a

financial guarantee annually for the equipment put on the market.

If a producer ceases to exist during an allocation period or in isolated cases fails

to collect the allocated amount of WEEE the financial guarantee will be used to
finance take-back of the allocated WEEE.

The allocation period and the financial guarantee period will be fixed for a duration of
one year. This means that at the end of an allocation period, the financial guarantee
period also expires. Therefore, the financial guarantee must be calculated annually and
adjusted for the coming period.
The financial guarantee for the previous year expires and is replaced by the new
financial guarantee.

Financial guarantee procedure

The financial guarantee sets the following requirements for the producer:

Reporting on amounts by producer

Every year and no later than 31 March the producer must report to WEEE-System sales
realised on the market in the previous calendar year and amounts expected to be put on
the market in the current calendar year.

Annual amounts put on the market must be reported per category (categories 1-10)
stated in kilos. New enterprises must use the amounts (budgeted) expected to be put on
the market.

Calculation of financial guarantee

For the calculation of the size of the financial guarantee WEEE-System calculates the
costs of take-back and reprocessing. Costs in question cover collection equipment,
collection, transportation and reprocessing of WEEE as well as associated
administrative costs. The expenses are stated as costs per kilo per category. The
financial guarantee must be calculated as the amount put on the market multiplied by the
cost rate per kilo. The cost rates are to be seen as a kind of price list recalculated
frequently by WEEE-System.

The producer calculates himself the size of the financial guarantee.

The producer must calculate the size of the financial guarantee against the background
of the amounts reported to WEEE-System. The size of the financial guarantee must be
calculated on the basis of the marketed amounts of the previous calendar year.

See below for outline of cost rates and example of calculation of the size of the financial
guarantee.

Provision of financial guarantee in practice

When the producer is to provide the guarantee this must be made in the form of a so-
called guarantee on demand with a specific wording as stated by WEEE-System. The
producer must calculate the size of the financial guarantee and establish a guarantee on
demand for the amount in a Danish credit institution or in a credit institution with a
Danish branch.

The guarantee on demand must be established every year between 1 April and 31 May
and cover a full allocation period from 1 June of the current year up to and including 31
May of the following year.
The original document establishing the guarantee must reach WEEE-System no later
than 31 May at 12 noon. WEEE-System keeps the document until the period of validity
expires.

When the term of a guarantee on demand expires the producer must replace it with a
new document for the subsequent term. WEEE-System returns the original document
with the expired guarantee to the producer when a new document has been received.
The annual provision of a guarantee on demand is a precondition for compliance with
the producer responsibility.

WEEE-System charges an hourly rate of DKK 750.- excl. VAT in connection with
administration of cases about financial guarantees, e.g. for treatment of the guarantee
on demand. The costs are stated separately per producer or producer scheme.
You can find the guarantee on demand in electronic, interactive form under the item
Financial guarantee.

Use of the financial guarantee

If a producer fails to comply with his obligations regarding collection of amounts

allocated, for example in case of cease of business, bankruptcy or similar, the financial
guarantee is to ensure that the costs will not have to be borne by other producers. The
financial guarantee will primarily be used for:

- Coverage of costs of management of the allocated and not yet received EEE that will
become waste in the time after a producer ceases to exist, goes bankrupt or in other
ways disappears.

- Coverage of costs in isolated cases where a producer does not assume collection and
separate treatment of a quantity of waste allocated and/or does not bear the costs for
so-called remedial action.

Therefore, at any time funds must be available to cover emerged costs during an
allocation period (one year), irrespective of the fact that the products have a longer
useful life.

Exemption from financial guarantee

The collective schemes and thus their members can in some cases be exempted
from the financial guarantee, cf. the provisions of the WEEE Order, Section 12(6). The
exemption will be made per product category (categories 1-10) per allocation period.

The collective scheme must apply to WEEE-System in writing regarding exemption from
provision of the financial guarantee for one allocation period at a time.

Producers that are not members of a collective scheme cannot be granted exemption
from provision of a financial guarantee.

WEEE-Systems assessment of the application is based on the following criteria:

- Whether the collective scheme is subscribed to by at least 10 producers and importers
or 30 % of the registered producers and importers within the category the exemption
concerns and

- Whether the market share of these producers and importers accounts for at least 30 %
of the total marketed amount within the category the exemption concerns and

- Whether the collective scheme fulfils the specific guidelines laid down by the Danish
Environmental Protection Agency.

Data to form the basis of the assessment must be attested by the auditor of the
producer.

The auditors attestation must document that:

- The number of members of the scheme covered by the producer responsibility where
the end user is private households corresponds to the number of members on which the
application is based.
- The sum of marketed volumes in kilos, which the scheme states in the application,
corresponds to the volumes in kilos reported by the above-mentioned producers.

The auditors attestation must be made for each category for which the collective
scheme applies for exemption.

The attested application for exemption can only be sent to WEEE-System in the period
from 1 April to 1 May. WEEE-System will respond to the application no later than 15 May
(or the following workday).

If WEEE-System has not received an application for exemption on 1 May, this means
that a guarantee on demand must be available on 31 May at 12 noon.

In connection with the application for exemption from provision of a financial guarantee
WEEE-System calculates the total market share per category covered by the collective
scheme based on the reported amounts measured in kilos.

At any time the amounts put on the market as reported on 31 March will form the basis
of the assessment.

Websites for the collective schemes are given under Links.

Decisions made by WEEE-System regarding exemption from the financial guarantee

can be appealed to the Environmental Protection Agency, cf. Section 28 of the WEEE
order.
Cost rates for calculation of size of the financial guarantee
The cost rates have been established by WEEE-System based on information gathered
from a selection of Danish reprocessors.

Category Category name* Cost rate per kilo in

DKK **
1 Large household appliances 3.57
2 Small household appliances 2.88
3 IT and telecommunications 2.88
equipment
4 Consumer equipment 2.88
5 Lighting equipment 4.83
6 Electrical and electronic tools 2.88
7 Toys, leisure and sports equipment 2.88
8 Medical devices 2.88
9 Monitoring and control instruments 2.88
10 Automatic dispensers *** --

* Cf. Directive 2002/96/EC, Annex 1A.

** Cost rates apply from 1 January 2006.
*** Automatic dispensers are not household appliances and are as such not covered by the
financial guarantee provision.

Calculation of size of the financial guarantee

Cf. the WEEE Order, producers must take back an amount of electrical and electronic
waste corresponding to the share of their marketed amounts.

The calculation of the size of the financial guarantee must be based on the exact amount
of EEE put on the market for end user private households in the year preceding the year
which the financial guarantee is to cover. New producers must use their budgetary
figures for amounts put on the market in the current year. The size of the financial
guarantee per category must be calculated as the marketed amount multiplied by the
cost rate per kilo.
Example
A company operates within categories 1 and 2 and 7. The company has put the
following on the market:
Category 1: kg 25,000
Category 2: kg 17,250
Category 7: kg 2,327
The size of the financial guarantee is calculated as follows:

Category Marketed Cost rate Amount in

amount in per kilo in DKK
kilos DKK
1. Large household appliances 25,000 3.57 89,250
2. Small household appliances 17,250 2.88 49,680
3. IT and telecommunications equipment - - -
4. Consumer equipment - - -
5. Lighting equipment - - -
6. Electrical and electronic tools - - -
7. Toys, leisure and sports equipment 2,327 2.88 6,702
8. Medical devices - - -
9. Monitoring and control instruments - - -
10. Automatic dispensers * - - -
Total financial guarantee - - 145,632

* Automatic dispensers are not household appliances and are as such not covered by
the financial guarantee provision.

As a result, the producer must establish a guarantee on demand amounting to

DKK 145,632.