July/August 2011
Recyclers are applying the fair-trade model to used electronics, demonstrating that exports for refurbishment and reuse can meet developing countries’ need for low-cost products—and the facilities that do the work can meet developed-world standards.
By Adam Minter
On a warm, tropical afternoon in the Malaysian state of Penang, a pallet of used computer monitors imported from the United States sits in the shade of the Net Peripheral warehouse. They arrived the day before, the latest shipment from a U.S. supplier that has sent roughly 300,000 monitors to this facility in the past four years. You might think you know where this story is going: Here’s one more tale about the developed world dumping end-of-life electronics in the developing world, where they’ll be stripped of valuable metals and parts using environmentally destructive and unsafe techniques, with the remaining material doused in gasoline and burned, or simply dumped in a landfill. But in this case, you’d be wrong.
At this facility, which meets ISO 14001 standards, Net Peripheral imports, documents, refurbishes, repairs, and markets used U.S. computer monitors, selling them to customers within Malaysia and other developing countries who can’t afford to buy the latest technology. The only abuse around here might be the Britney Spears music playing on a radio.
Net Peripheral is an example of the other side of the electronic scrap story—the side that the major media have yet to tell and that some activists deny exists. To be sure, significant volumes of U.S. electronic scrap still end up in “digital dumps” in developing countries. But to suggest that such dumps are the only destination for electronic scrap exports to the developing world is to ignore and denigrate the vast electronics reuse and refurbishment industry, its historic dependence upon imported materials, and its growing role in supplying electronic products to local markets. Net Peripheral is just one example of a developing-world electronics processor that meets developed-world standards.
Is this company an exception—the only one of its kind in the developing world? Consider this: As of November 2010, more than 100 U.S. companies had filed written notifications with the U.S. Environmental Protection Agency (Washington, D.C.) that they intend to export intact, reusable cathode-ray tubes. That’s a significant number of companies, with significant volumes, risking serious legal sanction if they’re not following through on their commitment to export only to reputable, auditable electronics processors.
Fueling the growth of facilities such as Net Peripheral is booming demand for consumer technology in places like Egypt, Indonesia, Africa, and less developed parts of Malaysia. What these disparate places have in common is emerging middle classes anxious to get online, and—with per capita incomes that fall below (sometimes well below) $1,000 a year—they simply can’t afford new computers to do so. People who directly supply used computer equipment to the Middle East, for example, estimate that more than half of all computer purchases in some parts of Egypt are secondhand equipment. Likewise, a recent European Union-sponsored report on Ghana’s imports of used electronics determined that 70 percent were, in fact, destined for the reuse and refurbishment market; only 15 percent ended up in “digital dumps.” In other words, the “Twitter Revolution” of 2011 didn’t take place on iPhones, but rather on repaired, five- to 10-year-old desktop computers and monitors that were exported from the United States, European Union, Japan, and elsewhere in the developed world. Companies like Net Peripheral exist to supply markets like these. And Malaysia, with some of the best downstream hazardous material management in Asia (and, arguably, the developing world), makes it easier—though by no means easy—for legitimate exporters to send material here because they know that companies can and will manage any hazards they contain in a manner that meets international environmental standards. It’s a closed loop, so long as Malaysia has exporters willing to supply the high-quality monitors the refurbishers require.
Fair-Trade Electronics
Robin Ingenthron, president of electronics recycling firm American Retroworks (Middlebury, Vt.), has been a vocal advocate of exporting used electronics for reuse and refurbishment in the developing world, in part based on his experience as a Peace Corps volunteer in Cameroon in the 1980s. Back then, he recalls by phone from Vermont, some activist groups, concerned about the working conditions at coffee plantations, were contemplating a coffee boycott. “People with experience knew that a boycott wasn’t going to help,” Ingenthron recalls. “It [would] hurt the coffee farmers, not help them.” As an alternative, some savvy coffee industry people came up with the idea of “fair trade.” Those who purchase fair-trade coffee pay an agreed-upon minimum price (or more as the market dictates) and buy directly from the growers’ cooperatives. This price stability allows the growers to meet certain labor and wage standards and to invest in their product. By most measures, the idea has been a success: Fair-trade coffee is a staple at Starbucks and in the supermarket aisle, assuring customers that their morning coffee was cultivated in a manner that meets some basic labor and environmental standards. One U.S. fair-trade-certifying body, Fair Trade USA (Oakland, Calif.), now lists more than a dozen categories of fair-trade-certified products.
After returning to the United States and spending much of the 1990s as the recycling programs director of the Massachusetts Department of Environmental Protection (Boston), Ingenthron moved to rural Vermont, where his wife had accepted a job at Middlebury College (Middlebury, Vt.). Without a job but with a commercial driver’s license in his possession, Ingenthron bought a truck, launched American Retroworks, and started scrapping. While doing this, he started thinking about something he noticed during his days working as a regulator in Boston: Reusable appliances—specifically, televisions—were being labeled hazardous wastes. “The EPA basically wanted to treat CRTs like fluorescent light bulbs,” he recalls. “The problem is that nobody upgrades a light bulb. But you can upgrade and repair a television.”
In 2001, “taking a chance” on a business he did not completely understand yet, Ingenthron shipped his first load of tested, working CRTs to China. Shortly after that, he accepted an invitation from the Guangzhou Electric Repair Research Institute (Guangzhou, China) to speak at a conference—on the condition that he also could visit Chinese reuse and repair facilities. “I stood inside of these huge places, [owned and run by] mostly Taiwanese contract manufacturers, who were manufacturing monitors” from old CRTs, he recalls. Electronics recyclers might remember that in 2001, the world received some of the first disturbing images from Guiyu, the now-notorious electronics dumping ground in southern China. Based on what he saw in Guangzhou, Ingenthron says, “It occurred to me that what we were starting to see in the media was grossly oversimplified.” Exported electronics, especially CRTs, were not just being dumped in China; they also were being repaired, refurbished, and resold there on an industrial scale.
On his second trip to China, Ingenthron followed some of his own loads of CRT exports intended for repair and reuse—a trip that contained several “learning moments,” he says. He learned that not every working CRT is suitable for reuse, for example. These companies would consider factors such as incompatibilities among CRT rasters or between monitors manufactured for the U.S. market and the intended reuse market, the availability of repair kits, and the age of the equipment. “I realized that they were way beyond us” in the sophistication of their refurbishment and resale operations, he says, but the opportunity was huge: “Reuse means that a $110 picture tube for a monitor drops to $10. The profits [for the refurbisher] are huge.” At the same time, the consumer saves a significant amount of money over the cost of a new product.
That’s when Ingenthron began to think about applying the fair-trade concept to recycling. If you want to improve electronics recycling overseas, he argues, the best way to do it is through trade and civil contracts. Export bans merely serve to maintain the status quo, he says, by rewarding underground operations. “Look, if I’m contractually bound not to send Net Peripheral Apple monitors, or not to send [them more than] a set number of 21-inch monitors, then I don’t. That’s fair trade.”
In most countries, electronics recyclers’ ability to export used or scrap electronics is governed by the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal. (The agreement addresses the international trade in hazards, but countries vary in their determination of when or whether electronic products and components are hazards.) Even though the United States has not ratified the Basel Convention, Ingenthron knows, respects, and supports the law. He’s quick to point out that Annex IX of the convention explicitly allows the export of reusable and repairable CRTs, but the treaty is anything but clear on the definition of reusable and repairable. That’s one reason why he took “fair-trade recycling” from concept to guiding principle.
In October 2006, Ingenthron incorporated the World Reuse, Repair and Recycling Association (Middlebury, Vt.), or WR3A. According to its welcome letter, its goals are, in part, to “meet world demand for legitimate reusable and recyclable commodities without creating a ‘loophole’ for illegal dumping of toxic materials” and to serve as “a mechanism of ‘cooperative marketing’ for used monitors and TVs.” WR3A recognizes that “export for reuse and repair is not only legal [per the Basel Convention], it is a ‘win-win’ for legitimate recyclers and those trying to close the ‘Digital Divide’ overseas [by making] Internet access and computer skills more affordable in countries [that] are striving to enter the digital world.” It operates as a marketing cooperative for used CRTs, negotiating a single purchase order based on volumes and quality, and then allotting access to the PO to WR3A members. Members can sell independently to Net Peripheral under the PO, though some smaller members use American Retroworks or WR3A as an exporter of record. The agreement sets a base fee for all units; a reconciliation report upgrades or downgrades that price according to the unit’s quality after Net Peripheral receives it. By the sheer volume of its membership, WR3A is able to turn what had been a loss center for its members into a profit center, albeit a modest one, depending on the company involved. With demand for CRTs falling 50 percent since 2009, however, suppliers that ship LCDs and nicer working equipment now get priority access to the purchase order, Ingenthron says.
From the outset, WR3A sought reputable companies that had very high rates of CRT recycling, Ingenthron says, figuring they would best be able to positively sort intact, working monitors—and they obviously were willing to do “the right thing.” U.S. media coverage of overseas digital dumps had led many of these companies to believe the only legal, responsible option was to sell their monitors to domestic processors, but Ingenthron worked to convince them that it was not only safe to send the reusable units overseas, it was arguably better for the environment than sending them to a shredder. It wasn’t an easy sell to potential customers and members deeply concerned that they’d be painted as exporters of digital death to the developing world.
To allay those fears, WR3A set some due diligence requirements for its members: They must maintain records of their materials management—most notably, what happens to the leaded glass in the nonworking monitors they do not export. (The rationale is that if companies must report on how they manage hazards domestically, they’re less likely to try to hide hazards in their exports.) Members also must keep extensive, detailed documentation of what they send abroad for three years—a time period that matches the requirements in U.S. EPA regulations on CRT exports implemented in 2006. The association independently verifies this and other information a company provides before approving it as a vetted member, one that can use WR3A’s export services.
On the other end of the transaction, WR3A takes the time to find and certify legitimate electronics reuse and repair companies in the developing world that can provide reconciliation reports on precisely what happens to each shipped item. This approach has proved remarkably successful over the years, with as many as 14 major companies (including Ingenthron’s company, American Retroworks) sending their repairable electronics to developing countries via WR3A.
Initially WR3A marketed and sold monitors to Taiwanese-owned refurbishers in southern China, but several market shifts made it too difficult to do business there. The Chinese government had a stake in new CRT manufacturing, Ingenthron says, and by 2005 it had signaled that used CRTs were unwanted. That’s when WR3A began sending its monitors exclusively to Net Peripheral. “I get [suppliers] to sort out the good ones” for export, he explains, leaving only those that can’t be refurbished (due to incompatible formats, screen burn, age, or other problems) for dismantling, shredding, and materials recovery. The suppliers do this sorting not just because it’s the right thing to do, but because WR3A’s contract with Net Peripheral requires it. “That’s the basic idea behind ‘fair-trade recycling,’” he explains. “You do it because you have to do it under civil law. My partners expect it.” And Net Peripheral, as the exclusive overseas buyer of WR3A’s CRTs, has reason to expect a lot. The association selected this company over larger refurbishing factories in Thailand and Jakarta and Semarang, Indonesia, because it was the first to document proper recycling of accidental breakage and to have a take-back program for dud CRTs generated in its home country, Ingenthron says, and it had the closest proximity to a CRT glass cullet market.
The CRT Importer
Prior to the 1990s, Penang was best known for its tropical environment, its beaches, its diverse population, and its outstanding cuisine. Over the last 20 years, however, the Malaysian government has actively encouraged manufacturing investment in the Penang region, and now—among Malaysians, at least—it’s just as well known for rapid growth, hosting high-tech companies including Sony Corp. (Tokyo), Dell (Round Rock, Texas), and Intel Corp. (Santa Clara, Calif.). That critical mass of foreign high-tech manufacturing—and foreign environmental compliance departments—is perhaps the key reason that Penang has become something of a center for electronic scrap recycling in Southeast Asia. In an era of intense government and media scrutiny, major electronics manufacturers can no longer dispose of their scrap with no regard for its destination or handling. They demand downstream auditing of their processed products and, increasingly, they want at least some of their components back for reuse. (For example, hard-drive manufacturers buy back rare earth magnets reclaimed from disassembled defective drives.) Most of Penang’s electronic scrap facilities were established, at least in part, to meet this market. Of course, not every Penang electronics recycler operates with regard for safety and the environment. But when they do, they meet an exceptionally high standard.
That’s what brought me to Net Peripheral. As reputations go, they don’t come much better. Allen Liu, the company’s president, and Su Fung Ow Young (who goes by Fung), the managing director, meet me in a small conference room above their Penang factory. Aware of U.S. suspicions and criticisms of companies that import and export CRTs, they go out of their way to impress upon me the legality and good reputation of their business. Their local clients include some of the world’s most respected electronics manufacturers, they tell me. They possess Malaysia’s first permit to import CRTs for repair and reuse, issued in 2006 by the Malaysian Department of Environment (Putrajaya, Malaysia)—still the only permit that has no expiration or volume restrictions—and they’ve served as a model for the industry. Fung also chairs the 10-member Malaysian Electronics Recycling Association (Penang), in which capacity she helps other CRT refurbishers find environmentally acceptable disposal solutions for their CRT glass.
As best I can tell, the only piece of new electronics in Net Peripheral’s glass-walled conference room is a projector. Fung places a pile of binders on the table. They contain sorting reports, hundreds of them, documenting the handling of each of WR3A’s exported CRTs upon its arrival in Penang. Each is classified by size, graded by the condition of the case and screen, whether it requires repair, or whether it cannot be repaired. “Everything that comes in is recorded,” she tells me. “Sometimes they come in better than Robin expected, and sometimes worse.”
Downstairs, Fung leads me into the company’s 21,000-square-meter warehouse, where workers write letters and numbers in crayon on the screens of newly arrived monitors. The grading system is precise and detailed. The letters describe the monitor’s general condition: An A-grade computer is in excellent condition; a B grade might mean there’s some scuffing on the case, and so on. The numbers denote each monitor’s precise electrical and operational issues. For example, a 00 grade means that the monitor has power but no display, and it can be repaired.
Refurbishment starts right away. If there’s a scuff on the case, workers polish it out. But refurbishment isn’t just a matter of touch-ups: A nearby table is covered with monitors undergoing a burn-in that allows Net Peripheral employees to judge whether or not there are blurring problems. That’s the most common issue upon arrival—and it’s 100-percent repairable. Beyond the burn-in area, two Indonesian technicians are busy opening CRT cases and methodically clipping, poking, and soldering the electronics inside, repairing and replacing failed electronic components. They work like surgeons, removing and replacing parts—some ordered from factories in Taiwan, some recovered from monitors beyond repair that were disassembled for recycling—until the monitor’s innards work as well as they did when it was new. The technicians “have been here for 10 years,” Allen tells me. “I trained them.”
Migrant workers are common in Malaysia’s reuse and refurbishment industry, just like its scrap industry. They’re part of Southeast Asia’s vast, transnational army of workers: They move from Indonesia, Nepal, Bangladesh, and other developing countries into more developed ones, often for decades. Of Net Peripheral’s roughly 60 employees, most are migrants, with a large proportion from Bangladesh. The migrants tend to be more stable, longer-term employees than local hires, Allen tells me. He’s a migrant as well: He grew up in Taipei, Taiwan, where he trained as an engineer and did his earliest work developing technology to allow traditional computer terminals to display Chinese characters. He worked in the display industry for years, until he launched Net Peripheral in Indonesia in 2002. The business didn’t remain there for long, however: Under pressure from activists, Indonesia has tightened its import regulations, banning electronics imports for reuse or recycling in most parts of the country. Liu set up this plant in Malaysia “to protect ourselves,” he says. The company maintains a local service center in Penang and two distribution centers, one in Penang and the other in Indonesia.
On the other side of the Net Peripheral plant, two workers with gloved hands place CRTs that have been removed from their cases onto a conveyor belt. Another worker, in a face mask, polishes out scuffs and chips from the glass screen while carefully maintaining the integrity of the tube and the electron gun, which is partly encased during this process. These polished CRTs travel across the factory, where workers place them into new or newly refurbished cases—a process called semi-knockdown—upgrade them with new electronics, and then test them for white balance and blurring before shipping them out to customers. The new parts give the company more confidence that the monitor will function properly—enough confidence that it warranties its products. Before the company offered warranties on its goods, it was difficult to sell the monitors, says Fung, who’s in charge of the sales side of the business. “You have to be able to guarantee that your quality is as good as new,” she insists. “Otherwise you’ll have trouble. Also, because the Chinese are in this business, and so many of their monitors are defective, it’s a real competitive advantage.” She estimates that as many as 40 percent of monitors refurbished in China are defective, and the proportion appears to be rising.
Every shipment of monitors the company receives includes a few—and sometimes more than a few—that turn out to be unsuitable for reuse and refurbishment. Sometimes monitors break en route to Malaysia; sometimes WR3A’s shippers mistakenly include monitors that don’t meet the contract terms. Net Peripheral must recycle such devices, document their handling, and report back to WR3A in Vermont. After scavenging the dead CRT for reusable parts, the company must report the hazards (such as CRT glass) to the Malaysian Department of Environment, starting a clock that gives it 90 days to properly dispose of the material. For WR3A’s reporting and recordkeeping purposes, the leaded CRT glass is the key hazard that Net Peripheral must track. It’s not easy: In many countries, CRT glass is such an expensive item to recycle that processors choose to landfill it. Fortunately for Net Peripheral, southern Malaysia is home to a CRT glass-to-glass recycling facility that turns the material into new CRTs. The plant, a joint venture of Samsung (Seoul, South Korea) and Corning (Corning, N.Y.), is one of the last new CRT manufacturing facilities in the world, providing Net Peripheral (and, by extension, WR3A) a world-class, environmentally sound destination for the material—for now. “Perhaps it will be open for two or three more years,” Fung surmises. “And then we don’t know. I worry.” (Samsung Corning declined my request to visit the facility due to scheduling conflicts.)
Other materials the country deems hazardous—in particular, printed circuitboards—go to one of two facilities, both licensed by Malaysia’s DOE to accept and process “scheduled wastes”: Kualiti Alam, a massive hazardous waste processing facility in Kuala Lumpur, or Shan Poornam Metals, one of the most innovative and promising electronics and hazardous materials recyclers in Asia today, also located in Penang. (Read more about Shan Poornam and other electronics processing facilities in Southeast Asia in the September/October issue of Scrap.)
Coping With Change
While giving me a driving tour of Penang’s industrial zones, Fung groans with frustration at the Southeast Asian markets closed to imports of used electronics irrespective of whether they are repairable. She and others well versed in the industry blame a series of factors for the closed doors, but two culprits stand out: misguided activists and economic interests that want to encourage the purchase of new electronics. Working together, these two forces can be almost unstoppable. “It causes a lot of waste,” she says. “Often, because something can’t be exported for repair, it ends up in a backyard in China, being burnt. And that’s good for the environment?”
Occasionally, Net Peripheral is in a position to help. Fung tells me about a client who has a tender to send CRTs from Malaysia to India for repair and reuse. Because India has strict regulations on the import of used CRTs, however, the client sends them first to Penang, where Net Peripheral repairs them and then sends them to India, avoiding any issues at the ports. On the plus side, this means that Net Peripheral can filter out the bad monitors, disassemble them, and send the hazards they contain to reputable Malaysian downstream processors. But the extra shipping expenses make this a borderline break-even proposition.
In the short term, the biggest threat to Net Peripheral and WR3A is the weakening market for CRTs. As a result of the falling prices of flat-screen monitors and televisions, demand for traditional CRTs has dropped precipitously over the last 18 months, especially in the developing world. In response, WR3A and Net Peripheral have started refurbishing and repairing used flat-panel LCD monitors, despite their small margins and new challenges, including the mercury-containing bulbs that illuminate the screens. Net Peripheral also has branched out into refurbishing computers, though it doesn’t yet import those from WR3A. “The downstream reconciliation process [for computers] is much more difficult than CRT glass going just to Samsung Corning,” Ingenthron explains. “But it’s doable. We’ll see. The business is changing so fast.”
What isn’t changing is that the developing world wants computers and Internet access at a price people in those countries can afford, which in most cases means buying used. In China, home to a population of Internet users that’s bigger than the total population of the United States, secondhand computer markets—stocked with used flat-screen monitors and PCs originally manufactured for domestic and international markets—are invariably bigger, busier, and more crowded than traditional home electronics retailers. The products in those markets are coming from somewhere outside of China—which is one more sign that not all electronics end up in Asia’s digital dumps.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for U.S. and international publications. He also maintains a blog at www.shanghaiscrap.com.
Recyclers are applying the fair-trade model to used electronics, demonstrating that exports for refurbishment and reuse can meet developing countries’ need for low-cost products—and the facilities that do the work can meet developed-world standards.