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The EU adopts new mandatory supply chain due diligence rules for batteries and their raw materials

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The text of the new European Battery Regulation (the Regulation) has now been formally approved by both the European Parliament (14 June) and the Council of the EU (10 July). The Regulation will target the entire life cycle of batteries, from their production, their reuse, and recycling to guarantee the safety, sustainability, and competitiveness of batteries. The framework will ensure sustainability through the supply chain of batteries, as well as promote the competitiveness of the Union industry and provide rules for end-of-life batteries to be properly collected and recycled in order to enable the recovery of useful materials and prevent the release of harmful substances into the environment. The Regulation will also repeal the currently applicable Batteries Directive.

Below, we review the key elements of the Regulation and its practical implications on the supply chain of batteries.

Key elements

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Covered products: The Regulation will cover all batteries and raw materials used for batteries:

Batteries: waste portable batteries; electric vehicle batteries; industrial batteries; starting, lightning, and ignition (SLI) batteries (used mostly for vehicles and machinery); and batteries for light means of transport (LMT), such as e-bikes, e-mopeds and e-scooters

Raw materials used for batteries: cobalt; natural graphite; lithium; nickel; and chemical compounds based on the raw materials listed which are necessary for the manufacturing of the active materials of batteries

Economic operators: Economic operators who must comply with the Regulation are manufacturers, their authorized representatives, importers, distributors, and fulfilment service providers, as well as any other natural or legal person in relation to the manufacture of batteries, the preparation for their reuse, repurposing (or preparation for), remanufacturing, and making them available or placing them on the EU market, including online, or putting them in service.

Covered activities: The Regulation targets the following activities: (i) placing of batteries in the EU market, which means any first supply of batteries for distribution or use on the EU market in the course of commercial activity, and (ii) putting into service, meaning the first use, for intended purpose, in the EU, a battery, without having been placed on the market previously.

Due diligence obligations: Economic operators, excluding small and medium-sized enterprises (SMEs), will be required to fulfil the following due diligence obligations when placing batteries or putting them into service on the EU market:

Adopt a company policy for the supply chain of raw materials.
Prepare annual report on steps taken to comply with the Regulation.
Incorporate OECD Due Diligence standards into the company supply chain policy.
Establish internal management systems to support due diligence.
Establish a system of controls and transparency of the supply chain which include chain of custody or traceability of upstream actors in the supply chain and documentation regarding raw materials, suppliers, country of origin, quantities present in the batteries.
Incorporate supply chain policy into contracts and agreements with suppliers.
Establish grievance mechanisms and early-warning, risk-awareness systems.
Labelling, marking, and information obligation: The Regulation imposes CE marking with different mandatory labelling requirements, in particular:

A label of general information for all batteries

A label containing information on capacity of rechargeable portable batteries, LMT, and SLI batteries

A label on the minimum average duration and indication “non-rechargeable” for non-rechargeable batteries

A marking with a symbol indicating “separate collection”

A marking indicating the batteries’ content of cadmium or lead

A QR code to provide online access to the battery passport for electric vehicle batteries, LMT batteries, and rechargeable industrial batteries with a capacity above 2kWh, a declaration of conformity for all other batteries, and the amount of certain raw material in SLI batteries

A battery passport containing information on battery model and specific information on the individual battery, including composition, dismantling, repairs, remanufacture, repurpose, second-life operators, and recyclers.

The labelling obligations will apply 36 months after entry into force, while the QR code and battery passport requirement will become applicable 42 months after the entry into force of the Regulation. As explained below, batteries subject to the carbon footprint obligation must also bear a label indicating the footprint of the battery over its expected service life.

Carbon footprint declaration: Electric vehicle batteries, LMT batteries, and rechargeable industrial batteries with a capacity above 2kWh will be subject to a carbon footprint declaration for each battery model per manufacturing plant which must accompany the battery until the applicability of the QR code. This declaration will include information on the battery manufacturer and identification of the EU declaration of conformity, its carbon footprint over its expected service life, and per life cycle stage.

Carbon footprint calculation method will be laid down by the Commission in a delegated act.
Depending on the battery type, the declaration obligation will become applicable 18 to 84 months after entry into force of the Regulation, or after the entry into force of the delegated or implementing act, whichever is the latest.

Carbon footprint performance will be determined according to classes and threshold to be set by the Commission, which will institute a maximum required life cycle carbon footprint for electric vehicle batteries, LMT batteries, and rechargeable industrial batteries.

Exemption for batteries prepared for re-use, for repurpose, or for being repurposed or remanufactured, which have already been placed on the market or put into service.

Circular economy of batteries: The Regulation also provides a framework covering the entire life cycle of batteries – from design to recycling and disposal. The rules will include end-of-life requirements, collection, and recovery obligations.

Restriction on hazardous substances: Restrictions on hazardous materials will be applicable to substances such as mercury, cadmium, and lead.

Penalties for infringements are to be set by EU Member States within 24 months from entry into force of the Regulation. They should be effective, proportionate, and dissuasive. The level of sanctions should correlate with the nature, gravity, scope, intentional nature, and repetition of infringement, as well as the level of cooperation of the natural or legal person responsible.

Conformity assessment: Compliance and verification of compliance of batteries with the requirements set in the Regulation must be assessed through reliable, accurate, and reproducible methods. Batteries which conform with the harmonised standards will be presumed to be compliant with requirements of performance, durability, safety, labelling, state of health information, and technical design and operation of the battery passport, where they are covered by such standards or parts thereof, and, to the extent that the minimum values established for those requirements are attained.

Looking ahead

After the final text of the Regulation was provisionally agreed on by the European Parliament and the Council in December 2022, the Parliament adopted the final text on 14 June 2023 and the Council on 10 July 2023. The Regulation will be published in the EU Official Journal in coming weeks and will be applied six months after its entry into force though there are different transition periods that will apply.

Mandatory supply chain due diligence beyond batteries

Various supply chain due diligence schemes already govern the placing of goods on the EU market, and several more are currently being adopted by the EU. In the context of the EU Green Deal, the Carbon Border Adjustment Mechanism and the Deforestation Regulation entered into force in 2023. The EU is also currently working on the Forced Labour Regulation and the Supply Chain Due Diligence Directive. Other supply chain due diligence schemes are already in force, including the Conflict Minerals Regulation, covering tin, tungsten, tantalum, and gold (since January 2021), and the Kimberley Process for certifying conflict diamonds (since December 2002). All of these schemes have one important thing in common: they all require manufacturers to obtain detailed information from their suppliers and from importers to know how the products they place on the EU market have been manufactured and be able to present documentary evidence to demonstrate it.

 

Source: Lexology

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