ANALYSIS OF ALTERNATIVES & SOCIO-ECONOMIC ANALYSIS
Public version
Legal name of Applicant(s): FN Herstal Manroy
Submitted by: FN Herstal
Substance: Chromium trioxide (EC 215-607-8, CAS 1333-82-0)
Use title: Use-1 Industrial use of chromium trioxide in the hard chromium coating of military small- and medium-caliber firearms barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses, in order to provide hardness, heat resistance and thermal barrier properties, as well as corrosion resistance, adhesion and low friction properties.
Use number: 1 Analysis of Alternatives – Socio-Economic Analysis
CONTENTS
LIST OF ABBREVIATIONS ...... 6 1. SUMMARY ...... 7 2. AIMS AND SCOPE OF THE ANALYSIS ...... 9 2.1. Applicants ...... 10 2.1.1. FN Herstal ...... 10 2.1.2. Manroy ...... 11 2.2. Scope of the AfA ...... 11 2.2.1. FN Herstal’s hard chromium plating process ...... 12 2.2.2. Manroy’s hard chromium plating process ...... 12 2.3. Products concerned...... 13 2.4. Supply chain ...... 14 2.5. Elements of context ...... 14 2.5.1. Market and business model ...... 14 2.5.2. Focus on the defence market ...... 15 2.5.3. Importance of the defence industry and FN Herstal for the Belgian territory ...... 15 2.5.4. Synthesis: general context of the AfA ...... 16 2.6. General methodology ...... 16 2.6.1. Scope of the AfA ...... 17 2.6.2. Actualisation ...... 19 2.6.3. Confidentiality ...... 20 2.6.4. Focus: Technology Readiness Levels ...... 21 2.7. Substitution strategy ...... 21 2.8. Presentation of the “applied for use” and “non-use” scenarios ...... 22 2.8.1. “Applied for use” scenario ...... 22 2.8.2. “Non-use” scenario ...... 22 3. “APPLIED FOR USE” SCENARIO ...... 23 3.1. Elements of context ...... 23 3.1.1. Hard chromium plating ...... 23 3.1.2. Historical background ...... 24 3.1.3. Lifespan of firearm barrels ...... 24 3.1.4. Standards requirements and customer requirements ...... 26 3.1.5. Barrel life characteristics and failure criteria ...... 28 3.2. Analysis of substance function ...... 29 3.2.1. Scope of Use-1 ...... 30 3.2.2. Functional properties of hard chromium in the context of armament manufacturing ...... 31 3.2.3. Complementary requirements for the research of alternatives to hard chromium plating ...... 33 3.3. Parts concerned...... 33 3.4. Market and business trends including the use of the substance ...... 36 3.4.1. Use of chromium trioxide ...... 36 3.5. Remaining risk of the “applied for use” scenario ...... 36 3.6. Human health impacts and monetised damage of the “applied for use” scenario ...... 37 3.6.1. Number of people exposed ...... 37 3.6.2. Medical treatment ...... 37 3.6.3. Mortality and morbidity ...... 40 3.6.4. Synthesis of the monetised damage of the “applied for use” scenario ...... 46 3.6.5. Complementary elements of analysis: values taking into account a 4% discount rate ...... 46 3.7. Environment, man-via-environment impacts and monetised damage of the “applied for use” scenario ... 46 3.7.1. Environment impacts and monetised damage ...... 46 3.7.2. Man-via-environment impacts and monetised damage ...... 47 4. SELECTION OF THE “NON-USE” SCENARIO ...... 48 4.1. Efforts made to identify alternatives ...... 48 4.1.1. Data searches and Research & Development ...... 48 4.2. Potential alternatives already abandoned ...... 49 4.2.1. Thermal spraying with HVOF (High Velocity Oxygen Fuel) ...... 49 4.2.2. Thermochemical surface modification ...... 50 4.2.3. Nickel and Nickel alloy coatings ...... 50
Use-1, public version FN Herstal - Manroy 2
Analysis of Alternatives – Socio-Economic Analysis
4.3. Research and development works in order to reduce the exposure to Cr(VI) for hard chrome plating (FNH1) 52 4.4. Assessment of shortlisted alternatives...... 54 4.4.1. Alternative 1: Chromium deposition from Cr(III) electrolyte ...... 54 4.4.2. Alternative 2: Vacuum process with PVD/CVD ...... 55 4.5. Substitution timeline ...... 57 4.6. Synthesis: summary of the potential substitution processes considered ...... 59 4.7. The most likely “non-use” scenario ...... 61 4.7.1. Potential “non-use” scenarios ...... 61 4.7.1. Synergy between uses ...... 61 5. IMPACTS OF GRANTING AN AUTHORISATION ...... 64 5.1. Economic impacts...... 64 5.1.1. Loss of revenues and profits ...... 64 5.1.2. Loss of markets ...... 68 5.1.3. Lost investments...... 69 5.1.4. Relocation costs for FN Herstal ...... 70 5.1.5. Increase of operating costs ...... 70 5.1.6. Regulatory issues...... 71 5.1.7. Potential financial opportunities ...... 72 5.2. Human health or Environmental impact ...... 73 5.2.1. Impacts on human health ...... 73 5.2.2. Greenhouse gas emissions ...... 73 5.3. Social impact ...... 75 5.3.1. Direct impact on employment ...... 75 5.3.2. Indirect impact on employment ...... 77 5.3.3. Complementary element of analysis: total cost of the loss of employment for the AfA...... 78 5.4. Wider economic impact ...... 78 5.4.1. Impact on operational capabilities and sovereignty of States...... 78 5.5. Distributional impacts ...... 79 5.6. Uncertainty analysis for both the “applied for use” and the “non-use” scenario ...... 79 5.6.1. “Applied for use” scenario ...... 79 5.6.2. “Non-use” scenario ...... 80 5.6.3. Conclusion ...... 82 5.7. General conclusion on the impacts of granting an authorisation ...... 83 6. CONCLUSIONS...... 85 6.1. Comparison of the benefits and risks ...... 85 6.2. AoA-SEA in a nutshell ...... 85 6.3. Information for the length of the review period ...... 87 6.4. Substitution effort taken by the Applicants if an authorisation is granted ...... 87 7. References ...... 88 8. Annex – Justifications for Confidentiality Claims...... 91 9. Appendixes ...... 92 9.1. Main competitors of FN Herstal ...... 92 9.2. Focus on barrel failure modes ...... 93 9.3. DGA’s position for the maintained use of hexavalent chromium for barrel bore hard chromium plating of small-calibre firearms ...... 96 9.4. Framework for the export of armament ...... 99 9.4.1. Belgian and European legal framework ...... 99 9.4.2. European Code of Conduct on Arms Export ...... 100
Use-1, public version FN Herstal - Manroy 3
Analysis of Alternatives – Socio-Economic Analysis
TABLES
Table 1. Uses of the Application for Authorisation ...... 9 Table 2. FN Herstal key figures, 2014 ...... 10 Table 3. Manroy key figures, 2014 ...... 11 Table 4. Manroy products and status in the context of the AfA ...... 13 Table 5. Scope of the AfA ...... 18 Table 6. Impact period of the AfA ...... 18 Table 7. Inflation values taken into account in this dossier ...... 19 Table 8. European Commission’s definition of Technology Readiness Levels ...... 21
Table 9. Tonnages of CrO3 over the 2013-2015 period (tons), for Use-1 and Use-2 ...... 36 Table 10. Lung cancer costs for Belgium (average of data for France, Germany and the United Kingdom) for the first two years after the diagnosis ...... 38 Table 11. Lung cancer costs in the United Kingdom for the first two years after the diagnosis ...... 39 Table 12. Net year survival rate after lung cancer diagnosis in France ,, ...... 39 Table 13. Individual lung cancer costs during the review period, not taking into account the excess of risk for workers ...... 40 Table 14. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments ...... 40 Table 15. Years of Life Lost (YLL) for Use-1 ...... 42 Table 16. Years of Life lived with Disability (YLD) for Use-1 ...... 43 Table 17. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer, Use-1 ...... 44 Table 18. Value of statistical life and willingness to pay to avoid cancer ...... 45 Table 19. Incidence and mortality associated with lung cancer in Europe, in 2012 ...... 45 Table 20. Mortality and morbidity costs for Use-1, complementary assessment ...... 46 Table 21. Overall impacts of the "applied for use" scenario, Use-1 ...... 46 Table 22. Overall impacts of the “applied for use” scenario, Use-1. Complementary analysis taking into account a 4% discount rate ...... 46 Table 23. Substitution timelines for Alternative 1 and Alternative 2 ...... 58 Table 24. Summary of potential substitution processes considered (on grey background, the two shortlisted alternatives) ...... 60 Table 25. Different "non-use” scenarios depending on the outcome of the application for authorisation for Use-1 and Use-2 ...... 62 Table 26. Loss of revenues for FN Herstal related to the “non-use” scenario ...... 66 Table 27. Loss of revenues for Manroy related to the “non-use” scenario ...... 67 Table 28. Total loss of revenues for Use-1 ...... 67 Table 29. Total loss of profits for Use-1 ...... 67 Table 30. Detail of investments in amortisation, by year of last annuity ...... 69 Table 31. Relocation costs for FN Herstal, for Use-1 and Use-2 ...... 70 Table 32. Conversion factors for transportation modes. Source: Bilan Carbone v7.1.021 ...... 73 Table 33. Characterisation of the outward trip of the transportation journey associated with the “non-use” scenario...... 74 Table 34. Greenhouse gas emissions associated with the “non-use” scenario for Use-1 ...... 74 Table 35. Loss of employment in the context of the “non-use” scenario for Use-1 ...... 75 Table 36. Average individual social cost of an unemployed person in Belgium and the United Kingdom, 2010 ...... 76 Table 37.Total cost of the loss of employment for Use-1 ...... 76 Table 38. Detail of the assessment of indirect job losses foreseen for Herstal and Erith in the context of the “non-use” scenario ...... 77
Use-1, public version FN Herstal - Manroy 4
Analysis of Alternatives – Socio-Economic Analysis
Table 39. Global direct loss of employment and associated costs for the AfA (i.e. cumulated for Use-1 and Use-2 ...... 78 Table 40. Uncertainty analysis for mortality and morbidity, Use-1 ...... 80 Table 41. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ...... 80 Table 42. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario ...... 82 Table 43. Synthesis of the monetised impacts of the “non-use” scenario ...... 83 Table 44. Other impacts of the “non-use” scenario ...... 84 Table 45. Justifications for confidentiality claims ...... 91 Table 46. Main competitors of FN Herstal, by country and product categories ...... 92 Table 47. Belgian legal framework related to the export of armament ...... 99 Table 48. Criteria of the European Code of Conduct on Arms Export ...... 100
FIGURES
Figure 1. FN Herstal ...... 10 Figure 2. Barrel manufacturing, machining and packing activities on the site of Herstal ...... 10 Figure 3. Manroy Engineering ...... 11 Figure 4. Main FN Herstal products concerned by Use-1 ...... 13 Figure 5. Supply chain of FN Herstal firearms...... 14 Figure 6. FN M2® machine gun ...... 24 Figure 7. Barrel fatigue failure modes ...... 29 Figure 8. Cross section of barrel bore, magnified (top) and general (bottom) ...... 30 Figure 9. FN MINIMI® machine gun exploded view. In red, parts concerned by Use-1...... 35 Figure 10. Share of FN Herstal revenues related and not related to hard chromium plating (Use -1 and Use-2), on the basis of cumulated revenues over the 2000-2015 period...... 64 Figure 11. FN Herstal revenues for the 2004-2014 period, in M€ ...... 65 Figure 12. Barrel fatigue failure modes ...... 93 Figure 13. Barrel wear as a function of barrel length, for new and end-of-life barrels ...... 94 Figure 14. Barrel bore pictures, for new barrel (left) and end-of life-barrel (right) ...... 94 Figure 15. Copper deposit (blue part of the picture) ...... 95
Use-1, public version FN Herstal - Manroy 5
Analysis of Alternatives – Socio-Economic Analysis
LIST OF ABBREVIATIONS
AfA Application for Authorisation B Billion (€) Cr(III) Trivalent chromium Cr(VI) Hexavalent chromium DALY Disability-Adjusted Life Years DAS Delivery and Acceptance Specification Direction Générale de l’Armement DGA French Armament Procurement Agency - French Ministry of Defence GHG Greenhouse Gas k Thousands (€)
kgCO2e Equivalent carbon dioxide kilogram M Million (€) PV Present value QAI Quality Assurance Instruction QST Quality Standard STANAG Standardised Agreement
tCO2e Equivalent carbon dioxide ton WHO World Health Organisation WTO World Trade Organisation YLD Years lived with disability YLL Years of Life Lost due to premature mortality
Use-1, public version FN Herstal - Manroy 6
Analysis of Alternatives – Socio-Economic Analysis
1. SUMMARY
CONTEXT FN Herstal (Herstal, Belgium) and Manroy (Erith, United Kingdom) are two subsidiaries of the Herstal Group, a manufacturer of small- and medium-caliber firearms. Under Use-1, FN Herstal and Manroy are downstream users of chromium trioxide in the hard chromium coating of military small- and medium-calibre firearm barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses. Hard chromium coating constitutes a key element in the performance of FN Herstal and Manroy products, notably in terms of service lifespan of firearms and therefore of ownership costs for their customers. Hard chromium coating therefore constitutes an essential condition for the competitiveness of FN Herstal and Manroy; the economic impacts of its banning from the market would strongly affect both companies.
SUBSTANCE FUNCTION The main functional properties sough-after by FN Herstal and Manroy with chromium trioxide include: hardness, heat resistance and thermal barrier properties, corrosion resistance, efficient coverage of complex or inner shapes, preservation of tolerances, as well as chemical barrier properties, adhesion properties and friction properties.
IDENTIFICATION OF AL TERNATIVES A significant work of research carried out internally and through partnerships with external research centres led to identify two potential alternative processes to hard chromium plating for the surface treatment of firearm barrel bores and auxiliary parts. As a result of testing and analysis over the last decade, two potential alternatives appear promising: deposition of chromium from a Cr(III) electrolyte (Alternative 1) and vacuum process with Physical/Chemical Vapour Deposition process (Alternative 2). These processes, however, have yet to be further investigated, implemented and qualified and will therefore not be available before the sunset date of chromium trioxide.
“APPLIED FOR USE” AND “NON-USE” SCENARIO S Under the “applied for use” scenario, FN Herstal and Manroy will pursue the use of chromium trioxide for the surface treatment of parts concerned by Use-1 for the period of time necessary to develop, implement and qualify an alternative process, thereby securing both their industrial activity in the European Union and the supply of firearms to armed forces of sovereign States. In conjunction with research works for alternatives, and subject to the granting of an authorisation, FN Herstal will implement an optimised hard chromium plating process allowing to reduce the use of the substance and the exposure of workers to
Use-1, public version FN Herstal - Manroy 7
Analysis of Alternatives – Socio-Economic Analysis
Cr(VI) during the period of time necessary to develop and implement a sustainable substitution process. The most likely “non-use” scenario is the following: with the ban on the use of Cr(VI) compounds and therefore the cessation of hard chromium treatment, FN Herstal and Manroy will have to relocate their hard chromium plating operations outside the European Union. Since Use-1 concerns the very core of FN Herstal’s and Manroy’s current and future portfolios, this scenario will have strong economic, environmental, social and wider impacts on both companies.
IMPACTS OF GRANTING AUTHORISATION The main impacts of the “applied for use” scenario include costs related to the medical treatment, morbidity and mortality associated with the excess of risk of cancer arising from the exposure to chromium trioxide of workers over the review period. The total monetised impacts of the “applied for use” scenario amount to € 1,106. Main monetised impacts of the “non-use” scenario include the loss of revenues, profits, employment and investments, as well as relocation costs The total monetised impacts of the “non-use” scenario amount to € [100- 1,000M](#1a). Based upon the present assessment, the socio-economic benefits outweigh the risks arising from the use of the substance by a factor of approximately [100,000- 1,000,000](#1b). In addition to monetised impacts, the “non-use” scenario involves the loss of markets that will be closed to FN Herstal and Manroy due to the relocation outside the EU, an increase of operating costs, stringent regulatory issues and safety of supply issues, impacts on human health, greenhouse gas emissions as well as a loss of sovereignty and loss of investments for States that are customers of FN Herstal and Manroy.
CONCLUSION Based on the argument put forward, and in order to develop, implement and qualify an alternative solution for Use-1, FN Herstal and Manroy apply for a twelve-year review period.
Use-1, public version FN Herstal - Manroy 8
Analysis of Alternatives – Socio-Economic Analysis
2. AIMS AND SCOPE OF THE ANALYSIS
FN Herstal (Herstal, Belgium) and Manroy (Erith, United Kingdom) are two subsidiaries of the Herstal Group, manufacturing small- and medium-caliber firearms. From the point of view of the REACh regulation, FN Herstal and Manroy are considered as downstream users of chromium trioxide in the hard chromium coating of military firearm barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses. Hard chromium plating is a key criterion for the performance of FN Herstal’s and Manroy’s products, notably in terms of service lifespan of firearms and ownership cost for customers. Hard chromium coating therefore constitutes an essential element for the competitiveness of the two companies; the economic impacts of its banning from the market would strongly affect the activities of the Herstal Group as well as endanger FN Herstal’s and Manroy’s overall survival.
The aim of the present document is to provide a comprehensive analysis of both the Analysis of Alternatives and Socio-Economic Analysis parts of FN Herstal’s and Manroy’s Use-1 Application for Authorisation (AfA), i.e: - to provide a comprehensive understanding of the context of the AfA; - to describe FN Herstal’s and Manroy’s research works for alternatives, potential alternatives and substitution strategy ; - to provide a comparative assessment of the monetised impacts of the pursued use of the substances (“applied for use” scenario) and the impacts of the denial of an authorisation (“non-use” scenario). For the sake of clarity, it is reminded that this document is part of a broader AfA. FN Herstal’s, Manroy’s and Browning’s authorisation dossier is indeed composed of two uses:
Industrial use of chromium trioxide in the hard chromium coating of military small- and medium-caliber firearms barrel bores and auxiliary Use-1 parts subject to thermal, mechanical and chemical stresses, in order to provide hardness, heat resistance and thermal barrier properties, as well as corrosion resistance, adhesion and low friction properties.
Industrial use of chromium trioxide in the hard chromium coating of civilian firearms barrel bores and auxiliary parts subject to thermal, Use-2 mechanical and chemical stresses, in order to provide a low friction coefficient as well as heat, corrosion and wear resistance properties.
Table 1. Uses of the Application for Authorisation
Under the brands FN Herstal, Manroy and Browning, the Herstal Group designs, manufactures and distributes a full range of firearms and associated products for
Use-1, public version FN Herstal - Manroy 9
Analysis of Alternatives – Socio-Economic Analysis
defence, law enforcement, hunting and shooting. Since 1997, Herstal Group has been 100% owned by the Walloon Region of Belgium. With manufacturing locations in Belgium, US, UK, Portugal, Japan and Finland, the global Herstal Group provides employment to a workforce of about 2,400 people.
2.1. Applicants Use-1 of the present AfA concerns two subsidiaries of the Herstal Group: FN Herstal and Manroy.
2.1.1. FN Herstal
Figure 1. FN Herstal
FN Herstal is a leading manufacturer of small- and medium-caliber firearms for both military (Use-1) and civilian (Use-2) markets located in Herstal, Belgium. The history of FN Herstal, formerly known as “Fabrique Nationale d'Armes de Guerre1” or “Fabrique Nationale”, dates back to 1889. The site of Herstal comprises all firearm manufacturing activities: machining, surface treatment, assembly, testing, packaging and dispatching.
Figure 2. Barrel manufacturing, machining and packing activities on the site of Herstal
Main figures of FN Herstal’s activity in 2014 are summarised below:
PROPRIETE REVENUES EMPLOYEES FN Herstal € 306M 1,314
Table 2. FN Herstal key figures, 2014
1 French for: “National Factory of War Weapons”
Use-1, public version FN Herstal - Manroy 10
Analysis of Alternatives – Socio-Economic Analysis
2.1.2. Manroy
Figure 3. Manroy Engineering
Manroy Engineering (referred to as “Manroy” in what follows) provides solutions for weapon design, production and mounting requirements for Infantry, AFV2 and Naval platforms. Manroy manufactures the .50 cal M2HB machine gun with Quick Change Barrel, the 7.62mm GPMG, tools, gauges and provides a full and comprehensive spares service along with the associated training for both weapons. Manroy also designs and manufactures weapon systems, one man turrets and weapon mounts. All Manroy equipment is on active service with worldwide and NATO forces and are registered with NATO Codifications in the UK. Manroy was originally formed in 1975 to support the spares requirements of the British Army, and has been a wholly-owned subsidiary of Belgium-based small arms manufacturer FN Herstal, S.A. since July 2014. Main figures of Manroy’s activity in 2013 are summarised below:
PROPRIETE REVENUES EMPLOYEES
Manroy £ 18.5M 80
Table 3. Manroy key figures, 2014
2.2. Scope of the AfA Chromium trioxide is classified under REACh as a Substance of Very High Concern due to its carcinogen category 1B and mutagen 1B properties, according to Art. 57(a) and 57(b). It was included in the Annex XIV of REACh during ECHA’s third
recommendation. Sunset date for the use of CrO3 is 21/09/2017; latest application date was set to 21/03/2016. Under Use-1, FN Herstal and Manroy use chromium trioxide for high performance hard chromium plating of military gun barrel bore and auxiliary parts of military firearms. Functional properties sought-after with hard chromium include: - corrosion resistance, - hardness, - low friction coefficient, - thermal barrier, - thickness,
2 Armoured Fighting Vehicles
Use-1, public version FN Herstal - Manroy 11
Analysis of Alternatives – Socio-Economic Analysis
- expansion coefficient, - resistance to corrosive combustion gases, - no detrimental interaction associated with the firing of ammunitions.
2.2.1. FN Herstal’s hard chromium plating process The hard chromium process is performed by FN Herstal: - in a single facility on the site of Herstal (Wallonia, Belgium), - on three hard chromium plating treatment lines, - by 21 employees directly involved in the operation of the hard chromium lines (i.e. concerned by both Use-1 and Use-2), - working two 7hr-shifts per day, - for 200 days per year. FN Herstal overall use of chromium trioxide amounts to 5.5 tons for 2015; this tonnage includes both Use-1 and Use-2 of the present AfA at the site of Herstal. General risk management measures at the site of Herstal notably comprise: - A fully automated treatment excluding manual work for the operators nearby the chromium tanks. The only manual operations consist in the instalment and removal of parts on the processing carts. These operations are carried out meters away from the chromium tanks, and do not involve contact with Cr(VI) ; - An efficient general ventilation of the overall facility, (a) involving the overpressurisation of the room and (b) ensuring an air renewal rate of 5 to 6 air changes per hour with 100% new air (no recycling) ; - A good level of containment for the chromium-containing baths, with an automatic closure system relying on movable shutters at the surface of baths and enclosing hoods fitted on the automated treatment carts carrier ; - Specific local exhaust systems fitted on all the baths’ surfaces, connected to a high performance air treatment system; - Comprehensive pollution prevention from unplanned releases, with all the treatment lines being localised above retention ponds; - An on-site wastewater treatment plant.
2.2.2. Manroy’s hard chromium plating process At Manroy’s site of Erith, hard chromium plating is carried out: - in a single facility on the site of Erith (London, United Kingdom), - on one hard chromium plating treatment line, - by 1 employee, - working on average 65 eight-hour days per year for the hard chromium line operation. Manroy overall use of chromium trioxide amounts to 117 kg for 2015.
Use-1, public version FN Herstal - Manroy 12
Analysis of Alternatives – Socio-Economic Analysis
2.3. Products concerned The whole FN Herstal’s firearms portfolio is concerned by this AfA:
Figure 4. Main FN Herstal products concerned by Use-1
In addition to mounting solutions, vehicle recovery systems and turret systems, three main firearms constitute the Manroy portfolio. Among them, Heavy Machine Gun (HMG) and General Purpose Machine Gun (GPMG) constitute the historic core business of Manroy and still generate the vast majority of the revenues of Manroy.
PRODUCTS STATUS
20 mm cannon - Not concerned by the AfA
- Represents around one .50 cal M2 Heavy third of Manroy revenues. Machine Gun - Concerned by Use-1 (hard (HMG) chromium plated by FN Herstal in Herstal)
- Represents around two 7.62mm General thirds of Manroy revenues. Purpose Machine Gun - Concerned by Use-1 (hard (GPMG) chromium plated by Manroy in Erith)
Table 4. Manroy products and status in the context of the AfA
Use-1, public version FN Herstal - Manroy 13
Analysis of Alternatives – Socio-Economic Analysis
The site of Herstal carries out chromium plating operations of parts that are intended to be implemented on Manroy’s Heavy Machine Gun (HMG); even though only GPMG parts are hard chromium plated at the site of Erith, HMG is also concerned by Use-1 of the present AfA. Given the criticality of the parts concerned by Use-1 for the proper functioning of firearms, hard chromium treatment of gun barrels and associated auxiliary parts is at the very core of FN Herstal’s and Manroy’s activity. Not only the surface treatment activity but also parts manufacturing as well as firearms assembly, packaging and dispatch activities directly depend on the hard chromium plating process.
All firearms manufactured in Herstal and the majority of firearms manufactured in Erith use parts treated with hard chromium.
2.4. Supply chain The global supply chain of FN Herstal firearms can be described as follows:
Figure 5. Supply chain of FN Herstal firearms.
2.5. Elements of context
2.5.1. Market and business model FN Herstal and Manroy serve a worldwide market. In the context of military firearms, the two companies are dedicated to serving States and are thereby not supplying individuals or non-sovereign groups. FN Herstal is subject to a strong legal framework within which export operations can be carried out. The complexity of this framework, governed by Belgian and European legal rules as well as the European Code of Conduct on Arms is outlined in section 5.1.6 and Appendix 9.2. The business model of FN Herstal and Manroy is built upon decades of experience (FN Herstal history goes back to 1889) and is dedicated to high-end firearms, offering both extremely high levels of performances (rate of fire, accuracy), quality and
Use-1, public version FN Herstal - Manroy 14
Analysis of Alternatives – Socio-Economic Analysis lifespan. As of today, and given (a) the market elasticity (see section 2.5.2.1) and (b) the stringent legal framework regulating import-export operations for firearms, this business model is the only one driving forward to a price level that is compliant with the maintenance of FN Herstal’s activity within the European Union. Hard chromium coating is a key criterion for the performance of FN Herstal’s products, since it is a direct driver of the service lifespan of firearms and therefore of the overall ownership costs of firearms for an army.
The level of performance provided by the use of CrO3, notably in terms of lifespan of cannon barrels, directly conditions the competitiveness of FN Herstal’s and Manroy’s firearms vis-à-vis its competitors. It also represents a key factor in the maintenance of FN Herstal’s and Manroy’s manufacturing activities in the European Union.
2.5.2. Focus on the defence market
2.5.2.1. A relatively elastic market... From a market point of view, FN Herstal is one of the few players able to manufacture the three main small- and medium-caliber firearms categories: handguns, rifles and machine guns. There are, however, several competing companies serving this market, leading to a somewhat strong market elasticity, as illustrated in Table 46 (Appendix 9.1).
2.5.2.2. ... for which manufacturing in the European Union constitutes a strong condition for several customers In the context of defence applications, manufacturing within the European Union usually constitutes a prerequisite to serve many of the European States. Manufacturing within the European Union constitutes, for example, a mandatory criterion for the tender procedure launched by the French Ministry of Defence in order to replace FAMAS, the current assault rifle of the French army. In this context, “manufacturing” refers to both production means and assemble means, as well as source of supply of the main components such as cannons barrels3.
2.5.3. Importance of the defence industry and FN Herstal for the Belgian territory The armament sector constitutes a significant player in the economic life in Belgium. In 2008, it generated a gross added value of € 417M, about 0.12 % of the Belgian GDP4.
3 Bulletin officiel des annonces des marchés publics, Avis n°14-70321 publié le 14/05/2014, May 16th, 2014. 4 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Note d’Analyse – Radiographie de l’Industrie de l’Armement en Belgique : mise à jour 2010, 2010.
Use-1, public version FN Herstal - Manroy 15
Analysis of Alternatives – Socio-Economic Analysis
A specific analysis of employment for the armament sector in Belgium estimates to 9,760 the number of jobs directly related to defence applications in Belgium. This report also outlines the dependency of other sectors and other companies to the defence sector: of these 9,760 jobs, 5,341 are initial jobs (i.e. in the defence industry companies) and 4,419 are direct or indirect jobs (i.e. in other companies of the defence industry or subcontractors). In other terms, it can be estimated that, on average, one job in the armament industry triggers 0.83 indirect jobs. For the Walloon region alone, it is estimated that the overall employment related to the armament industry amounts to 6,123 jobs5. With around € 106M of gross added value and 1,173 employees in 2012, FN Herstal was both the second company in terms of financial size and the first employer of the armament industry in the Walloon region6. FN Herstal is also one of the few Belgian armament companies to be 100% dedicated to defence applications.
2.5.4. Synthesis: general context of the AfA Based on the argument put forward in the foregoing sections, three main characteristics place FN Herstal’s and Manroy’s AfA in a particular context:
FN Herstal is one of the largest defence companies of the Walloon region 1 in Belgium and Manroy is a very dynamic player in the defence industry sector in the United Kingdom.
The business models of FN Herstal and Manroy are dedicated to high- end, high performance firearms. This market positioning directly 2 conditions the sustainability and the maintenance of FN Herstal’s and Manroy’s activities over the European Union.
The level of performance provided by hard chromium plating is a condition to the achievement of customer requirements and is therefore 3 a key condition to the competitiveness of FN Herstal and Manroy in a globalised and relatively elastic market regarding prices.
2.6. General methodology On the basis of the carcinogenic properties of Cr(VI) compounds for which it is not possible to determine a threshold, and since it cannot be demonstrated that the risk to human health or the environment from the use of the substance is adequately controlled, the “socio-economic route” applies for the present application. The socio- economic route applies where it can be demonstrated that the risk to human health or the environment from the use of the substance is outweighed by the socio-
5 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP – Répertoire des entreprises du secteur de l’armement en Belgique, 2014. 6 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP – Répertoire des entreprises du secteur de l’armement en Belgique, 2014.
Use-1, public version FN Herstal - Manroy 16
Analysis of Alternatives – Socio-Economic Analysis economic benefits and there are no suitable alternative substances or techniques (Art. 60(4)). As per ECHA’s guidance, the assessment of the socioeconomic component of the present AfA will be based upon a Cost-Benefit Analysis approach. A comparative assessment will therefore be carried out, between the monetised impacts related to the “applied for use” and the “non-use” scenarios. In order to best reflect the consequences of both these scenarios, an effort has been undertaken to place this AfA in the context of the realistic worst-case scenario. Whenever possible: - Over-estimating hypothesis have been used to assess the impacts of the “applied for use” scenario and, conversely, underestimating hypotheses have been used to assess the impacts of the “non-use” scenario; - Representative examples have been provided and structuring hypothesis or assertions have been justified either based on literature or institutional sources. Where appropriate, complementary elements of analysis have been provided, notably concerning: - An alternative methodology of assessment of costs related to mortality and morbidity; - An alternative assessment of the costs of the “applied for use” scenario, considering a 4% discount rate. Furthermore, and so as to provide a comprehensive understanding of the limits of the proposed assessment, an uncertainty analysis was carried out for both the results of the “applied for use” and “non-use” scenarios. This analysis, carried out both quantitatively and qualitatively, is provided in section 5.6.
2.6.1. Scope of the AfA Key elements of the scope of the AfA are provided in Table 5 below:
SCOPE COMMENT Temporal 12 years post sunset date: 2018-2029. See Table 6 for a description of boundary the triggering period for each impact. Direct impacts concern Belgium and United Kingdom. Geographic Indirect impacts for FN Herstal’s and Manroy’s supply chain customers boundaries cover a worldwide scope.
Monetised damage of the impacts on human health of the “applied for use” scenario includes: - Medical treatment; - Mortality and morbidity. Economic boundaries Main impacts of the “non-use” scenario include: - Economic impacts on FN Herstal’s and Manroy’s activity include loss of revenues, loss of markets, relocation investments as well as regulatory issues and an increase of operating costs; - Human health and environmental impacts;
Use-1, public version FN Herstal - Manroy 17
Analysis of Alternatives – Socio-Economic Analysis
- Social impacts related to the loss of employment; - Wider economic impacts related to the unavailability of the concerned equipments for armed forces. The “non-use” scenario also impacts FN Herstal’s and Manroy’s industrial partners involved in the development, production and support of the equipments concerned by Use-1. - Quantities used: 5.0 tons per year Tonnages - Quantities on the final product: none
Table 5. Scope of the AfA
Focus on the temporal boundaries and the impact period:
SCENARIO IMPACT IMPACT PERIOD DISCOUNTING PERIOD “Applied for use” Medical treatment 12 yrs: 2018 - 2029 14 yrs: 2016 - 2029 scenario Mortality and morbidity 12 yrs: 2018 - 2029 14 yrs: 2016 - 2029 Loss of profits 12 yrs: 2018 - 2029 14 yrs: 2016 - 2029 “Non-use” Relocation investments 3 yrs: 2018-2020 5 yrs: 2016 - 2029 scenario Loss of employment 1 yr: 2018(*) 3 yrs: 2016 - 2018
Table 6. Impact period of the AfA (*) Average unemployment period is considered to be 460 days, but was rounded here to 1 yr
Present value is set in 2015, at the date of drafting of this document. Considering that the sunset date for chromium trioxide takes place at the end of the year 2017, an assumption is made that impacts will take place in 2018. Similarly, the discounting period is set to begin in 2016. In order to ensure consistency of analysis between impacts of both scenarios, and as recommended by ECHA’s guidance, it was chosen to consider a common impact and discounting period for both the “applied for use” and “non-use” scenarios. In order to remain as close as possible to the temporal scope of the AfA, it was chosen to assume that the impact period and discounting period of both scenarios correspond to the review period of each use of the AfA. This assumption can be justified as follows: - The period of time covered by the review period of the uses of the AfA comprises the period of time with the highest mortality rates after diagnosis, thereby encompassing the majority of the impacts; - By assuming that the discount period is in line with the review period, and therefore assuming that the impacts will take place in a closer future than what is realistically foreseeable, it is deliberately chosen to discount the impacts of the “applied for use” scenario by a lower factor than if a more realistic period of time was chosen, for example 20 or 30 years.
Use-1, public version FN Herstal - Manroy 18
Analysis of Alternatives – Socio-Economic Analysis
2.6.2. Actualisation All final monetised results of this document are expressed in present value (PV). In this context, the following factors are used for the actualisation of past values (correction for inflation) or future values (discounting).
2.6.2.1. Inflation Given the type of values considered (health expenditures, social benefits), it was chosen to rely on the Consumer Price Index to carry out actualisation according to inflation. The choice of this statistical estimate is in line with ILO/IMF/OECD/UNECE/Eurostat/The World Bank recommendations, stating7: “CPIs are widely used for the index linking of social benefits such as pensions, unemployment benefits and other government payments, and also as escalators for adjusting prices in long-term contracts.” The following values will be used in the present document:
UNITED EUROPEAN 2 BELGIUM PORTUGAL KINGDOM UNION 2003-2015 26.0% 32.4% 22.2% 28.0% 2008-2015 11.0% 18% 7.7% 11.3% 2010-2015 8.6% 11.8% 7.0% 8.0% 2012-2015 2.0% 4.1% 0.5% 1.7%
Table 7. Inflation values taken into account in this dossier8
2.6.2.2. Discounting Comparing costs and benefits during different periods of time to present values requires the use of discounting technique to translate future costs and benefits into present-days values to account for the time value of money The choice of discount rate is important since it can affect the cost-benefit results of the analysis. The higher the discount rate, the lower the future benefits and costs values will be, as compared to present values. In our methodology, we deliberately chose to use two different discount rates depending on the type of future impacts evaluated. Thus, future human health costs described in the “applied for use” scenario of this dossier will be evaluated using a lower discount rate that the one used to consider economic impacts in the “non-use” scenario. This difference is related to the different “nature” of these impacts and aims to reflect the society’s rate of time preference with respect to health risks.
7 ILO/IMF/OECD/UNECE/Eurostat/The World Bank, Consumer price index manual: Theory and practice Geneva, International Labour Office, 2004 8 OECD, Main economic indicators, Consumer Price Index – data and methods
Use-1, public version FN Herstal - Manroy 19
Analysis of Alternatives – Socio-Economic Analysis
As per ECHA’s guidelines, the calculation of discounted values is performed on an annualised basis, with the following formula:
Considering: - = present value
- = future costs at year - = annual discount rate - = last annuity of the discount period
Discounting of health impacts A 3% discount rate is used in this dossier for health impacts. This choice is in line with WHO9, stating: “For many years, a discount rate of 5% per annum has been standard in many economic analyses of health and in other social policy analyses, but recently environmentalists and renewable energy analysts have argued for lower discount rates for social decisions. The World Bank Disease Control Priorities study and the GBD project both used a 3% discount rate, and the US Panel on Cost- Effectiveness in Health and Medicine recently recommended that economic analyses of health also use a 3% real discount rate to adjust both costs and health outcomes.” Please note that, in order to ensure a complete consistency of the values with ECHA’s requirements, a complementary assessment is provided for the “applied for use” scenario in section 3.6.5, considering a 4% discount rate.
General discounting Based on ECHA’s recommendation10, a 4% discounting rate is used to assess the future cost/benefits values for impacts not related to health matters.
2.6.3. Confidentiality In order to preserve the confidentiality of strategic data of the present AfA, confidential business information has been blanked out in this public version of the AoA-SEA document. In what follows, such figures will be indicated as follows: [€ 10-100M](#1a). Please refer to section 8 for a justification of confidentiality claims.
9 World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and methods, Assessing the environmental burden of disease at national and local levels, 2003 10 ECHA, Guidance on the preparation of socio-economic analysis as part of an application for Authorisation, 2011
Use-1, public version FN Herstal - Manroy 20
Analysis of Alternatives – Socio-Economic Analysis
2.6.4. Focus: Technology Readiness Levels Technology Readiness Levels (TRL) are a method of estimating maturity of technology elements. According to the European Commission’s definition, TRL can be defined as follows:
TRL DEFINITION TRL 1 Basic principles observed TRL 2 Technology concept formulated TRL 3 Experimental proof-of-concept TRL 4 Technology validated at laboratory scale TRL 5 Technology validated in relevant environment TRL 6 Technology demonstrated in relevant environment TRL 7 System prototype demonstration in operational conditions TRL 8 System complete and qualified TRL 9 Actual system proven in industrial environment
Table 8. European Commission’s definition of Technology Readiness Levels11
2.7. Substitution strategy A significant work of research carried out internally and through partnerships with external research centres led to identify several potential alternative processes to hard chromium plating for the surface treatment of firearm barrel bores and auxiliary parts. As a result of testing and analysis over the last decade, two potential alternatives appear promising: deposition of chromium from a Cr(III) electrolyte (Alternative 1) and vacuum process with Physical/Chemical Vapour Deposition process (Alternative 2). These processes, however, have yet to be further investigated, implemented and qualified and will therefore not be available before the sunset date of chromium trioxide.
11 European Commission, G. Technology readiness levels (TRL), Horizon 2020 – WORK Programme 2014-2015 General Annexes, Extract from Part 19 - Commission Decision C(2014)4995.
Use-1, public version FN Herstal - Manroy 21
Analysis of Alternatives – Socio-Economic Analysis
2.8. Presentation of the “applied for use” and “non-use” scenarios
2.8.1. “Applied for use” scenario Under the “applied for use” scenario, FN Herstal and Manroy will pursue the use of chromium trioxide for the surface treatment of parts concerned by Use-1 during the period of time necessary to develop, implement and qualify an alternative process, thereby securing both its activity and the supply of firearms to its customers. In conjunction with research works for alternatives, and subject to the granting of an authorisation, FN Herstal will implement an optimised hard chrome plating process allowing to reduce the exposure of workers to Cr(VI) during the period of time necessary to develop and implement a sustainable substitution process. Main impacts of the “applied for use” scenario concern operator’s health and monetized damage includes costs associated with medical treatment, mortality and morbidity. Risks and impacts of the “applied for use” scenario are respectively detailed in sections 3.5 and 3.6.
2.8.2. “Non-use” scenario The most likely “non-use” scenario is the following: with the ban on the use of Cr(VI) compounds and therefore the cessation of hard chromium treatment, FN Herstal and Manroy will have to relocate hard chromium plating activities for the manufacture and the maintenance in operational conditions of their small- and medium-calibre firearms. Since such products constitute the very core of FN Herstal’s and Manroy’s current and future portfolio, this scenario entails a temporary cease of production for the period of time necessary to relocate the activity, thereby disrupting both their activity and the supply of their customers. Impacts of the denial of an authorisation would involve economic, social and distributional dimensions: - Economic impacts on FN Herstal’s and Manroy’s activity include loss of revenues, relocation investments and increased operating costs, as well as contractual penalties; - Human health and Environmental impacts, include impacts on human health as well as greenhouse gas emissions. - Social impacts mainly consists of impacts on employment; - Wider economic impacts include the unavailability of the concerned equipments for armed forces. Impacts of the “non-use” scenario are detailed in section 5.
Use-1, public version FN Herstal - Manroy 22
Analysis of Alternatives – Socio-Economic Analysis
3. “APPLIED FOR USE” SCENARIO
Under Use-1, FN Herstal and Manroy use chromium trioxide for the hard chromium plating of small- and medium-caliber military firearm barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses. The main functional properties sough-after by FN Herstal and Manroy with Cr(VI) notably include : hardness, heat resistance, erosion resistance and resistance to hot oxidising gases. Impacts of the “applied for use” scenario are related to the carcinogen properties of Cr(VI) compounds and include medical treatment costs as well as costs associated with morbidity and mortality.
3.1. Elements of context
3.1.1. Hard chromium plating Functional hard chromium plating is characterised by the following features12,13: - High hardness up to 1200 HV, - High resistance to wear, - Low friction and tribologically advantageous, - Anti-adhesive, - Machinability, - Resistant to chemicals, - Resistant to temperature. This technique is still widely industrially used (hard chromium plating is extensively used in mechanical engineering on parts like jacks, rolling mill cylinders, drawing dies, printing plates and cylinders, etc), despite major disadvantages: - Concentration of the electrolyte (a conventional plating bath, temperature around 60°C, contains 300 g/L of chromic acid, and one or more catalysts 14,15 such as H2SO4 ) causing significant losses in the rinsing baths and high costs for reprocessing waste water. - Emission of harmful mists above the bathroom (vesicles).
12 Morisset, Chromage dur et décoratif, publication CETIM, 1993 13 Benaben, Chrome et chromage, Techniques de l’ingénieur, Référence M1615 14 Ibid. 12 15 Ibid. 13
Use-1, public version FN Herstal - Manroy 23
Analysis of Alternatives – Socio-Economic Analysis
3.1.2. Historical background Rifling of firearms bores imparts spin, thereby stabilising firearms projectiles and providing an increased accuracy as opposed to smoothbores (i.e. non-rifled firearms). Rifling, however, generates several constraints for gun bores and notably decreases muzzle velocity, increases waste heat in the barrel and helps retain highly corrosive combustion by-products in the bore, thereby damaging the rifling and weakening the barrel’s material. In order to counteract those detrimental effects, one approach has been to use corrosion-resistant materials for barrels, notably using electrodeposited chromium which was commercially developed as a commercial process as early as 192416. The first implementation of chromium plating in small arms was patented by Olin’s and Schuricht in 193217.
Hard chromium of firearms bores was consequently worldwide adopted in the 1950s. It still constitutes today the standard in military small- and medium-calibre firearms.
3.1.3. Lifespan of firearm barrels Firearm barrels have a finite lifespan, which is defined by the maximum number of rounds that a gun can fire, based on the type of round used and its muzzle velocity. A comparative assessment was carried out by FN Herstal regarding hard chromium plated and non-plated barrels, in the case of the M2 machine gun .50 caliber barrels. In order to ensure representativeness and reproducibility, these tests were performed during a long period of time between 1982 and 199418.
Figure 6. FN M2® machine gun
16 Dubpernell. Plating, 47, 35. 1960 17 US Patent 1,886,218 18 Amongst other data available from FN Herstal testing centre reports 1992-244 and 1993- 108
Use-1, public version FN Herstal - Manroy 24
Analysis of Alternatives – Socio-Economic Analysis
The main result of this study is the following: the average barrel lifespan19 was increased by a factor two for hard chromium plated as compared with non-plated barrel bores20. These internal findings are confirmed by bibliographical references21,22. In the context of military armament, lifespan requirements for such firearm are defined in the DAS366.811.00023 standard. According to the aforementioned results, gun barrels that did not undergo hard chromium plating cannot achieve such level of performance and as a consequence, firearms relying on these barrels cannot be qualified, let alone be put on the market. As a complement, it has to be noted that hard chromium does constitute an extremely efficient process thanks to its low operational cost: hard chromium plating only accounts for around 10% of the cost of the firearm while doubling its lifespan24.
Focus: Cost of ownership The lifespan of an FN Herstal’s machine guns is approximately (#2a) rounds with a cannon lifecycle of (#2b) rounds, meaning the rifle’s cannon is expected to be replaced once during the rifle’s overall lifespan. Given that the rifle’s cannon represents approx. 20% of the firearm cost, a withdrawal of the hard chromium plating would generate a 40% increase of the overall cost of ownership of the rifle. Current trend for customers is to minimise the need for spare parts, so as to optimise maintenance and logistics requirements. In this context, such an increase does not comply with the requirements of FN Herstal’s customers and does not allow FN Herstal products to compete with its competitors. As mentioned above, thanks to its relatively low operating costs, hard chromium plating therefore directly contributes to the competitiveness of FN Herstal’s and Manroy’s firearms.
The example based on M2 machine gun is representative of FN Herstal’s and Manroy’s whole military firearms range25: depending on the calibre and the ammunition type, the barrel life varies accordingly to barrel bore temperature
19 Assessed with the following methodology: firing schedule of 300 rounds in 3 minutes and maintenance every 1,800 rounds 20 Barrel chromed according to QST87093 and controlled by QAI226.010, minimum barrel life guaranteed in DAS366.811.000 21 Derek Allsop and al (1997), Brassey’s essential guide to military small arms - Design principles and operating methods, p89. Londres: Brassey’s 22 Hypervelocity guns and the control of gun erosion, Washington: National Defense Research Committee, 1946. 23 DAS stands for " Delivery and Acceptance Specification” 24 Excerpt from Baan 21st august 2015 P/N: 3662000616 and P/N : 3662008361 25 Given (a) the specific calibres manufactured by FN Herstal, (b)the high stress levels induced by the firing of ammunitions and (c) the criticality of a potential incident, the factor 2 increase in lifespan provided by hard chromium is also relevant for handguns.
Use-1, public version FN Herstal - Manroy 25
Analysis of Alternatives – Socio-Economic Analysis
(external barrel temperature may reach 350°C to 550°C) but the overall issue is the same for all military firearms manufactured by FN Herstal and Manroy.
The lifespan of FN Herstal’s and Manroy’s small- and medium-caliber firearms is directly related to the use of hard chromium for the surface treatment of gun bores and auxiliary parts. Without this treatment, FN Herstal firearms do not meet standard requirements in terms of lifespan and therefore cannot be put on the market.
3.1.4. Standards requirements and customer requirements
3.1.4.1. Standard requirements FN Herstal customers are located worldwide. In order to meet customer requirements, FN Herstal’s internal chroming procedure (QST87093) is in line with US military and aeronautical standards: - MIL-STD-17126 standard describes the appropriate coatings for military use, and hard chromium plating is recommended for all surfaces subject to wear or abrasion according to MIL-DTL-5002E; - Chromium plating shall be in accordance with requirements of the SAE AMS246027 standard, Class 2 (engineering coating), type 1 "bright finish" with a minimum hardness level of 850HV. These standards describe both the properties to be achieved and the procedures to be applied in order to reach the requirements in terms of lifespan of FN Herstal’s and Manroy’s customers. Specifically, AMS2460 states that “parts should be plated by electrodeposition of chromium from a chromic acid solution” (page 12 of 14). These standards are translated into the product technical definition by the technical drawings. For some NATO customers, when the weapon is selected in the army inventory, the product technical definition and configuration comes under customer control. This means that the product manufacturing based on the technical drawing cannot be modified unless the customer agrees so.
3.1.4.2. Customer requirements: DGA’s position for the pursued use of hexavalent chromium for hard chromium plating of small-calibre firearms’ barrel bores The DGA (Direction Générale de l’Armement – French Ministry of Defence’s Procurement Agency) was consulted in the context of the present AfA with a contribution that is provided in Appendix 9.3. A translation of the content of this contribution is provided in what follows.
26 Department of defense manufacturing process standard – Finishing of metal and wood surfaces (TABLE II. Inorganic finishes, metallic coatings; 1.2.2 Engineering plating, AMS-QQ-C- 320, class 2) 27 (replacing AMS-QQ-C-320): Aerospace material specification – Plating Chromium (Class 2 Engineering plating)
Use-1, public version FN Herstal - Manroy 26
Analysis of Alternatives – Socio-Economic Analysis
“The REACh (CE) 1907/2006 regulation aims at improving the knowledge of chemical substances’ properties manufactured or put on the market in the European Union, at ensuring the management of risks related to their uses and, if needed, at reducing or prohibiting their use. On August 14th 2016 was published the (EU) 895/2014 regulation modifying the Annex XIV of the REACh regulation so as to include salts of hexavalent chromium. Without an authorisation, the use of hexavalent chromium will be banned as of 2017/09/21 (whatever the quantities produced, imported or used). In the context of its commitments in terms of operational and training capacities, the French army uses firearms manufacturer by the Belgian company FN Herstal, which require the use of hexavalent chromium during their production (hard chromium), as detailed below: Fireams currently in operation using hard chromium plating: - Minimi Para 5.56mm x 45 machine gun: used unmounted - 7.62mm x 51 (MAG58) machine gun: used unmounted and mounted on several carriers (air, sea, land) - 12.7mm x 99 (M2 HB/QCB) machine gun: integrated on the Leclerc main battle tank - 12.7mm x 99 (M3M): integrated on Cougar and Puma helicopters Firearms being currently acquired and which will use hard chromium plating: - Minimi Para 5.56mm x 45 machine gun: market recently modified in December 2015 for the acquisition of several hundreds of firearms for the land army and navy - 7.62mm x 51 (MAG58) machine gun: pursued delivery of the market notified in December 2010 (approx. thousands of firearms are remaining to be shipped in their qualified definition) For all these cases, the barrel is a replacement part that has to be supplied throughout the duration of use of firearms. The DGA has furthermore launched a consultation for the future individual armament system (“Arme Individuelle du Futur”) intended to replace the FAMAS28. This consultation, for which an AAPC (notice of a competitive public tender) was published at the Official Journal in May 2014, refers to 90,000 firearms. It specifies that the barrel is manufacturer within the European Union because it a critical part for which the safety of supply is required. In any case, hexavalent chromium is used for hard chromium plating of barrels, guaranteeing the resistance of the barrel to aggressive environments encountered during the shooting of ammunitions (high temperatures, active chemical substances). This constitutes an essential element to the lifespan of barrels, and therefore to the operational performances of firearms. The downgrade of this coating may impact the safety of servicemen using firearms, be it indirectly, due to their inability to defend themselves in case of failure of the firearm, or directly, due to the risk of bursting
28 Fusil d'Assaut de la Manufacture d'Amies de Saint-Etienne
Use-1, public version FN Herstal - Manroy 27
Analysis of Alternatives – Socio-Economic Analysis induced by the degradation of the internal coating of the barrel. For this reason, the modification of the coating process constitutes a major change, which induces at the minimum the need for the complete re-qualification of the firearm and is a lengthy (several months to a year for the most complex cases) and costly. A ban on the use of hexavalent chromium plating would call into question the implementation of the markets obtained by FN Herstal, thereby probably generating penalties for the company, but would also delay the supply of said firearms, which would impact the operational capabilities of armed forces. Substitution studies have been conducted by industrial companies, with or without State support, and no substitution solution was identified: substitution solutions are far from being mature and offer the required military requirements. Furthermore, the French defence exemption regime cannot be used in his case, as FN Herstal does not manufacture in France. Due to this ban on the use of hexavalent chromium, the FN Herstal Company may be unable to fulfil its contractual agreements and would be disadvantaged toward competitors that would carry out hard chromium plating operations outside the EU. The ban on the use of hexavalent chromium would also have direct consequences on the availability of several equipments, and therefore on the operational capacities of armed forces. This is obviously not acceptable, as France is engaged on several external field operations. The DGA therefore supports FN Herstal’s Application for Authorisation aiming at having an additional delay to identify and qualify technically, operationally and economically viable alternatives.”
3.1.5. Barrel life characteristics and failure criteria The functional need for hard chromium plating of small- and medium-calibre firearms barrel bores and associated parts subject to thermal, mechanical and chemical stresses is directly related to failure modes of such firearms. In order to provide a comprehensive understanding of the issues at stake with Use-1’s AfA, these failure modes are covered in what follows. Apart from brutal barrel failure (caused for example by barrel obstruction and overpressure), barrels are decommissioned because of fatigue i.e. when the hit probability is degraded. A degraded hit probability is usually associated with a decreased projectile initial velocity at barrel muzzle, oscillating or obliquely striking projectiles at 50m from the muzzle as well as an increased dispersion at 50m from the muzzle. In order to ensure their maintenance in operational conditions, the main functional parameters that are monitored during servicing and maintenance of firearm include barrel forcing cone wear, barrel straightness and barrel minimum bore diameter.
Use-1, public version FN Herstal - Manroy 28
Analysis of Alternatives – Socio-Economic Analysis
The decreased hit probability may arise from three types of barrel fatigue failure modes29,30,31: - forcing cone wear, inducing a decreased projectile velocity and a loss in hit probability. It is the most frequent failure mode; - copper deposit, resulting from the interaction of the barrel metal with the projectile jacket, degrades the stabilisation of projectiles; - muzzle wear, also resulting in a loss stabilisation of projectiles. These three failure modes are illustrated in Figure 7 below:
Figure 7. Barrel fatigue failure modes
Please note that these failure modes are further described in Appendix 9.2
Forcing cone wear and muzzle wear are directly related to the wear of barrel bores induced by the firing of ammunitions. Hard chromium plating of such parts and of auxiliary parts subjects to similar stresses allows for the reduction of their wear and therefore the extension of the firearm lifespan in order to meet standard requirements.
3.2. Analysis of substance function During their operational service-life, firearms barrels and auxiliary parts have to sustain three closely interconnected types of stress: mechanical, thermal and chemical. Operational conditions and working environment related to these types of stresses are the following: - Mechanical stresses: ammunition peak pressure is around 450MPa. - Thermal stresses: maximal flame temperature of propulsive powder is greater than 1,500°C. - Chemical stresses: high temperature corrosive gases emitted during the
combustion of propellant, including CO2, CO, H2O, H2, N2 and radicals H, OH, NO.
29 Allsop and al, Brassey’s essential guide to military small arms - Design principles and operating methods, p89. Londres: Brassey’s, 1997 30 Hypervelocity guns and the control of gun erosion, Washington: National Defense Research Committee, 1946 31 Handbook on Weaponry, Rheinmetall Gmbh, 1982
Use-1, public version FN Herstal - Manroy 29
Analysis of Alternatives – Socio-Economic Analysis
In order to withstand such stresses, hard chromium plating of steel armament parts is necessary to compensate for the weaknesses of steel as a substrate, notably concerning high temperature characteristics and corrosion resistance. The bonding of the chromium layer with the steel substrate is illustrated on Figure 8 below.
Figure 8. Cross section of barrel bore, magnified (top) and general (bottom)
3.2.1. Scope of Use-1 The use of chromium compounds under Use-1 includes both surface preparation operations (electrolytic polishing and chromium pickling) and surface treatment operations (hard chrome plating) for the site of Herstal. The choice of regrouping these operations under a single use in the present AfA can be justified as follows: - Strong links and interdependencies characterise surface preparation and surface treatment operations. Each step of the hard chromium plating process as specifically developed for FN Herstal’s processes: removing or modifying one step of the process would compromise the overall outcome of Use-1. For instance, electrolytic polishing is a fundamental step of the manufacturing process; in the absence of such surface preparation, chromium adhesion to the substrate does not appear sufficient to provide all the functional requirements for military firearms. - Electrolytic polishing constitutes a military requirement for firearm barrel bores and therefore conditions the placement on the market of FN Herstal’s and firearms. - Both operations being indistinctly carried out on the treatment lines, the exact distinction of the CSR and SEA aspects could represent an issue and generate unnecessary uncertainties. As hard chromium operations carried out at the site of Erith concern auxiliary parts and not barrel bores, and since their compliance with FN Herstal’s processes is still ongoing, no surface preparation operations are carried out at the site of Erith.
Use-1, public version FN Herstal - Manroy 30
Analysis of Alternatives – Socio-Economic Analysis
3.2.2. Functional properties of hard chromium in the context of armament manufacturing Given the high level of thermal, mechanical and chemical stresses involved in their operation, production of firearms involves several technical challenges. Among them, it can be said that the coating constitutes the most difficult part32. In the case of FN Herstal and Manroy, the main sought-after coating characteristics in the context of surface treatment of firearms’ barrels bores and auxiliary parts include:
Hardness Hardness of the hard chromium layer provides wear resistance and impact resistance properties allowing withstanding impacts associated with the shooting of small- and medium-calibre firearms at high rates of fire. Specific mechanical properties that constitute the “hardness” parameter include: hardness (up to 1,000HV33) in atmospheric conditions and in high temperature conditions, erosion resistance and Young’s modulus34 in line with that of steel and high elastic limit. The coating must be resistant enough at the service temperature of firearms to withstand stresses related to the firing of projectiles and the propellant gas wash. In the case of rifled barrel bores, the coating has to possess a sufficient strength to withstand the rifling torque.
Heat resistance and thermal barrier properties Heat resistance of the hard chromium layer allows preserving the mechanical properties of the steel substrate exposed to high temperatures. The coating also has to offer thermal barrier properties, insulating the substrate from the damaging effects of the heat input from high temperature propellant gases. The coating is also expected to provide both thermal stability and "heat resistance" properties. This term encompasses a number of properties, including: a high melting point, a high hot hardness, thermal shock resistance, and a lack of phase transformations throughout the service temperature range. Thermal properties of the coating, along with its thickness, should prevent phase transformation or reaction of the substrate. This is achieved by damping out the high temperature pulse. In the case of a steel substrate, the martensite-austenite phase transformation occurs at about 727°C. When this temperature is exceeded, the transformation causes a discontinuity in the thermal expansion coefficient, resulting in large local strains. Since steel is also soft at this temperature, the strain is taken up plastically rather than elastically. On rapid cooldown, the plastically deformed austenite transforms back to martensite. This martensite, however, is hard and
32 Defense - Technical Information Center, Compilation Part Notice ADP012479 33 Vickers hardness number 34 The Young's modulus, which is also known as the elastic modulus, is a mechanical property of linear elastic solid materials. It defines the relationship between stress (force per unit area) and strain (proportional deformation) in a material.
Use-1, public version FN Herstal - Manroy 31
Analysis of Alternatives – Socio-Economic Analysis brittle, and so cracks instead of plastically deforming to accommodate thermal stresses on further cooling. This is called heat checking. Obviously, this phase transformation really wreaks havoc the integrity of the coating. It will tend to thermal fatigue and crack the coating, as well as promote de-adhesion.
Corrosion resistance In order to preserve a high level of performances all along the firearms lifespan, a good level of corrosion resistance is necessary, both in atmospheric conditions and in the presence of hot oxidising gases. The presence of high temperature gases, in addition to the high pressures generated, heats the barrel to the extent that chemical interaction with the metal itself occurs. No chemical reaction can be tolerated.
Efficient coverage of complex or inner shapes The geometrical complexity of parts to be coated (small inner tubes, blind holes, inside corners, etc.) generates the need for coating process that can provide an homogeneous treatment of the parts.
Preserve components tolerance Complementarily, the treatment has to ensure dimensional compliance with firearm parts, i.e. provide a deposit thickness of 10 to 80μm, according to their specific functional requirements.
Chemical barrier The coating must act as a chemical barrier for the substrate against the erosive effects of the hot propellant gases. It must therefore be free from cracks, both as- produced and in service. Any cracks will be exploited by the very aggressive environment of propellant gases during firing, and the substrate will be attacked. These cracks will also be wedged and ratcheted open by microscopic fragments during firing, and after firing, the substrate can be attacked by simple corrosion. There should be a low solubility of chemical elements such as hydrogen, carbon, nitrogen and oxygen since these will degrade the substrate. The coating also has to ensure a low level of reactivity with these elements: there should not be a large negative free energy of reaction at the temperatures, pressures and chemistry environment encountered during firing.
Adhesion properties A good level of adhesion on steel substrates is required so that no delamination results from the high level of thermal, mechanical and chemical stresses associated with the firing of ammunitions. The process therefore results in a coating with extremely good adhesion, to the point where it is considered as metallurgically bonded. In welding terms, it must have 100% joint efficiency
Use-1, public version FN Herstal - Manroy 32
Analysis of Alternatives – Socio-Economic Analysis
Friction coefficient In order to ensure the proper functioning of parts in relative movement, such parts have to possess both a good abrasive wear resistance and a low frictional resistance.
3.2.3. Complementary requirements for the research of alternatives to hard chromium plating
Price Both investments and running costs have to be taken into consideration in the process of research for alternatives to hard chromium plating.
Compliance with the current FN Herstal’s and Manroy’s industrial facilities FN Herstal’ surface treatment capabilities are not limited to hard chromium treatment. Compliance of the alternative process with the currently used workshop does therefore represent a potential for both economic and technical synergies in terms of know-how, facilities and collective protection equipments.
Risks for health and environment Any potential alternative is expected to ensure a lower level of risk for both human health and the environment, as compared to hard chromium plating.
Compliance with military standards Given the market for firearms concerned by Use-1, compliance with military standards constitutes a critical criterion for selecting an alternative.
3.3. Parts concerned In the armament industry, hard chromium plating is a critical process since it improves the firearms characteristics in terms of performances, reliability and lifespan. As presented in section 3.1.1, firearm barrel bores are hard chromium plated (with a minimum thickness of coating of {#2c} µm in MI.50 barrels and of {#2d} µm in other calibre barrels) in order to ensure a satisfactory service life35,36. Hard chromium is also used on auxiliary parts (gas cylinder, piston, gas block, etc.) subject to the same level of thermal, chemical and mechanical stresses, for which the coating thickness ranges from 10 to 80 µm. As an illustration, parts concerned by Use-1 for a FN MINIMI® light machine gun are identified on the firearm exploded diagram below. In the case of the FN
35 FNH R&D note réf: 0000031630 36 MIL-M-45590A
Use-1, public version FN Herstal - Manroy 33
Analysis of Alternatives – Socio-Economic Analysis
MINIMI®, such parts include: barrel assembly, plug and gas regulator, gas cylinder assembly and piston, as illustrated in Figure 9 below.
Use-1, public version FN Herstal - Manroy 34
Figure 9. FN MINIMI® machine gun exploded view. In red, parts concerned by Use-1. Analysis of Alternatives – Socio-Economic Analysis
The above figure shows that the number of parts subject to hard chromium plating is relatively low, as compared to the overall number of parts constituting the firearm: Use-1 was precisely defined on the basis of specific levels of thermal, mechanical and chemical stresses to which parts are subject.
3.4. Market and business trends including the use of the substance
3.4.1. Use of chromium trioxide
3.4.1.1. Herstal The tonnage of chromium trioxide for both Use-1 and Use-2 over the last three years is provided in Table 9 below:
In tons 2013 2014 2015
(*) CrO3 flakes (electrolytic polishing) 1.5 0.5 1.0 (**) Concentrated CrO3 (chroming) 6.5 5.5 4.5 Total 8.0 6.0 5.5
Table 9. Tonnages of CrO3 over the 2013-2015 period (tons), for Use-1 and Use-2 (*) = Used only for Use-1; (**) = Used for Use-1 and Use-2
An estimate of the breakout of concentrated CrO3 consumption between Use-1 and Use-2 at the site of Herstal was carried out and is as follows: 87% for Use-1 and 13% for Use-2.
Based upon this allocation basis, the CrO3 tonnage associated to Use-1 amounts to 5.0 tons.
3.4.1.2. Erith
The consumption of CrO3 at the site of Erith in 2015 amounts to 117 kg. As stated in the CSR, this tonnage is expected to decrease over the review period, as hard chromium plating activities are foreseen to be carried out at the site of Herstal.
3.4.1.3. Total CrO3 tonnage
The total annual consumption of chromium trioxide associated with Use-1 for the sites of Herstal and Erith amounts to 5.0 tons for 2015. This tonnage is
considered as representative of the CrO3 consumption over the review period for Use-1.
3.5. Remaining risk of the “applied for use” scenario As described in the CSR, the “applied for use” scenario only presents a risk for workers dedicated to the surface treatment operators, for quality control operators as well as for laboratory workers; risks for general population have been shown to be negligible and have therefore not been monetised. The handling of the mixture
Use-1, public version FN Herstal - Manroy 36
Analysis of Alternatives – Socio-Economic Analysis
containing the substance is well managed with general and personal protection equipments and safety procedures.
3.6. Human health impacts and monetised damage of the “applied for use” scenario Monetised damage of the impacts on human health of the “applied for use” scenario includes medical treatment, mortality and morbidity. When relevant, and in order to offer a comprehensive understanding of the amounts at stake, it was chosen to supplement values taking into account the total excess risk of cancer with values based on the individual excess of risk of cancer. In what follows: - Individual values refer to values based on the individual excess risk of cancer, thereby related to one worker; - Total values refer to values based on the total excess risk of cancer, thereby related to all the workers concerned by the use.
3.6.1. Number of people exposed
3.6.1.1. Herstal
Long-term exposures A total of 21 persons work on a daily basis at the site of Herstal over the three hard chromium plating lines for both Use-1 and Use-2; four persons are in charge of quality control operations.
Punctual potential exposures Punctual exposures are encountered for one operator of the laboratory staff, in charge of the sampling and the analysis of the baths composition.
3.6.1.2. Manroy One worker is in charge of the operation of the hard chromium plating line at the site of Erith.
3.6.2. Medical treatment Different studies evaluate the global cost of lung cancer treatment including, depending on the study: hospitalisation costs, medicine costs but also other associated costs such as in-house care37,38,39,40.
37 Mc Guire, Treatment cost of non-small cell lung cancer in three European countries: comparisons across France, Germany, and England using administrative databases, Journal of Medical Economics Vol. 18, No. 7, 2015, 525–532 38 Simrova et al, The costs and reimbursements for lung cancer treatment among selected health care providers in the Czech Republic, 2014
Use-1, public version FN Herstal - Manroy 37
Analysis of Alternatives – Socio-Economic Analysis
For the following analysis, it was chosen to rely on data provided in a recent study41 which compares the cost of medical treatments associated with lung cancer in France, UK and Germany based on regional or national administrative databases. This study is only based on NSCLC (Non Small-Cell Lung cancer) which represents approximately 80% of lung cancers without considering the other forms such as SCLC (Small-Cell Lung cancer). Nevertheless, a previous study in France42 shows that the costs associated with other forms are 50% lower than those of NSCLCs and that the combined cost is nearly the cost associated with the NSCLC only. In order to remain in the context of the realistic worst-case scenario, it was therefore considered that 100% of lung cancers are NSCLC form. Due to the lack of specific data, and in order to maintain the same level of detail over all sites of the AfA, it was chosen to use average figures of medical costs associated with NSCLC in France, Germany and the United Kingdom to characterise cancer costs in Belgium. In a 2-year follow-up after diagnosis approach, the different costs associated to lung cancer are listed in the tables below:
YEAR 1 YEAR 2 Hospital in-patient € 9,672 € 4,547 Hospital out-patient € 1,816 € 1,092 Medicines € 5,541 € 2,063 Other € 966 € 641 Total € 17,672 € 7,441 2-year total € 25,113
Table 10. Lung cancer costs for Belgium (average of data for France, Germany and the United Kingdom) for the first two years after the diagnosis
39 Chouaïd et al, Economics of the clinical management of lung cancer in France: an analysis using a Markov model, British Journal of Cancer (2004) 90, 397–402. doi:10.1038/sj.bjc.6601547 40 Braud et al, Direct treatment costs for patients with lung cancer from first recurrence to death in France, Pharmacoeconomics. 2003;21(9):671-9. 41 Mc Guire, Treatment cost of non-small cell lung cancer in three European countries: comparisons across France, Germany, and England using administrative databases, Journal of Medical Economics Vol. 18, No. 7, 2015, 525–532 42Allemani, Global surveillance of cancer survival 1995–2009: analysis of individual data for 25 676 887 patients from 279 population-based registries in 67 countries (CONCORD-2), Lancet, 385: 977–1010, 2015
Use-1, public version FN Herstal - Manroy 38
Analysis of Alternatives – Socio-Economic Analysis
YEAR 1 YEAR 2 Hospital in-patient € 5,985 € 1,156 Hospital out-patient € 1,209 € 834 Medicines € 8,593 - Other - - Total € 15,787 € 1,990 2-year total € 17,777
Table 11. Lung cancer costs in the United Kingdom for the first two years after the diagnosis
Regarding this information, to monetise the health impact, we will also consider the net survival rate by country at 1 year, 5 years and 10 years after diagnosis, with the following values:
YEARS AFTER DIAGNOSIS SURVIVAL RATE, BELGIUM SURVIVAL RATE, UK 1 year 36,9% 32.1 % 5 years 14,7% 9.6 % 10 years 8,7% 4.9%
Table 12. Net year survival rate after lung cancer diagnosis in France43,44,45
To monetise the damage on human health, we will consider the probability of appearance of lung cancer on workers. The probability, in this case, corresponds to the excess of risk to have a lung cancer. Data at five years after diagnosis are based on Allemani 2015 and data at 1 to 10 years after diagnosis are based on European data for Belgium and on specific data for UK. The individual lung cancer costs are synthesised and listed in Table 13 below, taking into account the cost of lung cancer treatment by year after diagnosis (we consider that the cost per year after year 2 is the same as for year 2), the net survival rates at 1 year, 5 years and 10 years and the requested review period of 12 years but not considering the excess of risk. In order to conform to the realistic worst-case scenario, it was chosen to apply the survival rate of the upper bound of each year after diagnosis range, i.e. for UK: - Survival rate during the first year after diagnosis is supposed to be 100% ; - Survival rate between year 2 and year 5 after diagnosis is supposed to be 32.1% ; - Survival rate between year 5 and year 10 after diagnosis is supposed to be 9.6% ;
43 Institut National du Cancer, Prévalence et survie nationales du cancer du poumon, 2015 44 Allemani, Global surveillance of cancer survival 1995–2009: analysis of individual data for 25 676 887 patients from 279 population-based registries in 67 countries (CONCORD-2), Lancet, 385: 977–1010, 2015 45 Extrapolation from European values
Use-1, public version FN Herstal - Manroy 39
Analysis of Alternatives – Socio-Economic Analysis
- Survival rate for more than 10 years after diagnosis is supposed to be 4.9%. A 3% discount rate was applied to the costs in order to take into account time preference and express the cost in current value.
YEARS AFTER DIAGNOSIS HERSTAL (BELGIUM) ERITH (UK) 0 to 1 year € 17,672 € 15,787 1 to 5 years € 10,983 € 2,555 5 to 10 years € 5,469 € 955 10 to 12 years € 1,295 € 195 Individual lung cancer costs € 35,420 € 19,492 Individual lung cancer costs, € 30,455 € 17,463 discounted(*)
Table 13. Individual lung cancer costs during the review period, not taking into account the excess of risk for workers (*) Taking into account a 3% discount rate until the end of the review period The following table synthesises the lung cancer costs per worker, taking into account the total excess of risk for Use-1 (1.2x10-3 for Herstal and 1.6x10-4 for Erith):
YEARS AFTER DIAGNOSIS HERSTAL ERITH TOTAL 0 to 1 year € 20.4 € 2.5 € 22.9 1 to 5 years € 12.7 € 0.4 € 13.1 5 to 10 years € 6.3 € 0.2 € 6.5 10 to 12 years € 1.5 € 0.0 € 1.5 Total of lung cancer costs € 40.9 € 3.1 € 44.0 Total of lung cancer costs, discounted(*) € 35.2 € 2.7 € 38.0
Table 14. Total lung cancer costs during the review period, considering the total excess of risk for workers and the respiratory equipments (*) Taking into account a 3% discount rate until the end of the review period
3.6.3. Mortality and morbidity Several summary measures of population health have been devised, including the Quality-Adjusted Life Year (QALY), the Disability-Adjusted Life Expectancy and the
Use-1, public version FN Herstal - Manroy 40
Analysis of Alternatives – Socio-Economic Analysis
Healthy Life Year46,47,48,49. The benefits and challenges of these measures have been examined in several publications50,51,52,53. According to the WHO recommendations54 and since it has been widely used, it was chosen to assess the impacts of both mortality and morbidity associated with an excess risk of cancer through one combined measure: the Disability-Adjusted Life Years or DALY. The DALY method is recommended by ECHA for the assessment of mortality and morbidity impacts55,56.
3.6.3.1. General methodology The following methodology is based on the general WHO methodology for the calculation of DALYs57. DALY is a combined measure of the period of time lived with disability and the period of time lost due to premature mortality:
Where: = years of life lost due to premature mortality and = years lived with disability. In such an approach, time is used as a common currency for non-fatal health states and years of life lost. Disability weights are thus used to formalize and quantify social preferences for different states of health, measured as number on a 0-1 scale,
46 Weinstein, Stason, Foundations of cost effective analysis for health and medical practices. New England Journal of Medicine, 296:716-721, 1977 47 Murray, Rethinking DALYs. In: Murray, Lopez, eds. The global burden of disease. Geneva, World Health Organization, Harvard School of Public Health, World Bank, 1996 48 Hyder, Rotllant, Morrow, Measuring the burden of disease: healthy life years. American Journal of Public Health, 88:196-202, 1998 49 Murray, Salomon, Mathers, A critical examination of summary measures of population health. Bulletin of the World Health Organization, 8(8):981-994, 2000 50 Anand, Hanson, Disability-adjusted life years: a critical review. Journal of Health Economics, 16:695-702, 1997 51 Williams, Calculating the global burden of disease: time for a strategic reappraisal? Health Economics, 8:1-8, 1999 52 Murray, Lopez, Progress and directions in refining the global burden of disease approach. Geneva, World Health Organization (GPE Discussion Paper No 1), 1999b 53 Murray, Salomon, Mathers, Lopez, Summary measures of population health: concepts, ethics, measurement and applications. Geneva, World Health Organization, 2002 54 World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and methods, Assessing the environmental burden of disease at national and local levels, 2003 55 ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 56 ECHA, Applying socio-economic analysis as part of restriction proposals under REACH - Workshop proceedings, Helsinki, 21-22 October 2008 57 Mathers, Stein, Fat et al, Global Burden of Disease 2000: Version 2 methods and results, Global Programme on Evidence for Health Policy Discussion Paper No. 50: World Health Organization, 2002
Use-1, public version FN Herstal - Manroy 41
Analysis of Alternatives – Socio-Economic Analysis where: “0” is assigned to a state of ideal health and “1” to a state comparable to death.
3.6.3.2. Years of Life Lost due to premature mortality The basic formula for calculating the years of life lost (YLL) metric is the following:
Where: = number of deaths and = standard life expectancy at age of death (in years). The number of deaths ( ) is supposed to be the total excess risk of cancer. Life expectancy at age of death ( ) is calculated by subtracting the standard life expectancy (81 years on average in Europe58,59) and the average age of death by lung cancer in France (68 years in France60,61). Due to the lack of specific data for Belgium and the UK and in order to ensure calculation homogeneousness, data regarding France have been used to characterise both sites of Herstal and Erith A 3% discount rate was applied to YLL in order to take into account time preference and express the cost in current value. YLL and intermediate data are detailed in Table 15 below.
PARAMETERS VALUES Standard life expectancy 81 years Mean age of lung cancer death 68 years Number of years lost 13 years Site Herstal Erith Total excess risk of lung cancer, per site 1.2x10-3 1.6x10-4 Total YLL, per site, discounted(*) 1.2x10-2 1.6x10-3 Total excess risk of lung cancer, for Use-1 1.3x10-3 Total YLL for Use-1, discounted(*) 1.3x10-2
Table 15. Years of Life Lost (YLL) for Use-1 (*): considering a 3% discount rate until the end of the review period
58 Eurostat, Mortality and life expectancy statistics, June 2015 59 This value is furthermore in line with the WHO recommendations for calculation of DALYs and corresponds to the upper end of the life expectancy range to be considered. 60 INSERM, INVS/CépiDC, 2012. In: Institut National du Cancer, Mortalité nationale des cancers, 2015 61 Due to the lack of representative data, the value for France has been used.
Use-1, public version FN Herstal - Manroy 42
Analysis of Alternatives – Socio-Economic Analysis
3.6.3.3. Years Lived with Disability The calculation of the years of life with disability (YLD) is based on the following formula:
Where: = disability weight, = number of incident cases and = average duration of disability. In the case of lung cancer, the value of 0.772 was used for 62. The number of incident cases ( ) was estimated by multiplying the number of workers exposed and
the excess of risk of cancer. The average duration of disability ( ) was obtained by subtracting the mean age of death (68 years63) and the mean age of diagnosis (66 years64,65) associated with lung cancer. A 3% discount rate was applied to YLD in order to take into account time preference and express the cost in current value. YLD and intermediate data are detailed in Table 16 below.
PARAMETERS VALUES Mean age of lung cancer death 68 years Mean age of lung cancer diagnosis 66 years Number of years with disability 2 years Disability weight 0.772 Site Herstal Erith Total excess risk of lung cancer, per site 1.2x10-3 1.6x10-4 Total YLD, per site, discounted(*) 1.4x10-3 1.9x10-4 Total excess risk of lung cancer, for Use-1 1.3x10-3 Total YLD for Use-1, discounted(*) 1.6x10-3
Table 16. Years of Life lived with Disability (YLD) for Use-1 (*): considering a 3% discount rate until the end of the review period
62 Migrin, A Review and Meta-Analysis of Utility Values for Lung Cancer, U.S. EPA 63 Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en 2014 64 Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en 2014 65 Due to the lack of representative data, the value for France has been used.
Use-1, public version FN Herstal - Manroy 43
Analysis of Alternatives – Socio-Economic Analysis
3.6.3.4. Synthesis of the monetised damage related to mortality and morbidity Monetised damage related to YLLs and YLDs was calculated using the central value of a statistical life-year recommended by ECHA66 and based on the NewExt study67: € 55,800 (in 2003 price levels). This value is in line with Desaigues68, which estimated the central value of life year to € 50k, based on a survey of French residents and with EurovaQ study69, proposing a value per life year of € 45,064. Please note that an uncertainty analysis of the costs associated to mortality and morbidity using the lower and upper bounds of Value of a Statistical Life-Year is provided in section 5.6. Correction for inflation was applied based on the change in consumer price index on average in Europe: 28.0% over the 2003-2015 period70. Final YLLs, YLDs and monetised damage are synthesised in the following table:
PARAMETERS VALUES YLL 1.3x10-2 YLD 1.6x10-3 DALY = YLL + YLD 1.5x10-2 Value of life year lost(*) € 71,403 Total cost for mortality and morbidity (PV) € 1,068
Table 17. Synthesis of YLLs, YLDs and monetised damage of mortality and morbidity related to the excess cancer risk associated with lung cancer, Use-1 (*): considering a 28.0% average inflation rate in Europe over the 2003-2015 period
3.6.3.5. Complementary assessment Since the costs associated with mortality and morbidity constitute the main monetised damage of the “applied for use” scenario, and in order to validate the previous calculation, another estimate methodology was used, based on the value of a statistical life and the willingness to pay to avoid a cancer case as provided in ECHA’s SEA guidance:
66 ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008 67 NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003 68 Desaigues, Rabl, Ami, Boun My Kene, Masson, Salomon, Santoni, 2007a. Monetary Value of a Life Expectancy Gain due to Reduced Air Pollution: Lessons from a Contingent Valuation in France. Revue d’Economie Politique 117 (5), 675–698, 2007 69 EurovaQ, European Value of a Quality Adjusted Life Year, Final Publishable Report, 2010 70 OECD, Main economic indicators, Consumer Price Index – data and methods
Use-1, public version FN Herstal - Manroy 44
Analysis of Alternatives – Socio-Economic Analysis
WILLINGNESS TO PAY VALUE OF A STATISTICAL LIFE TO AVOID A CANCER CASE € 1,052,000 € 400,000 per non-fatal case Initial value (2003 price levels) (supposed 2008 price levels) 28.0% 11.3% Inflation over the 2003-2015 period(*) over the 2008-2015 period(*) Present value € 1,346,161 € 445,361
Table 18. Value of statistical life and willingness to pay to avoid cancer71 (*) = On average in the European Union Please note that the value of € 400,000 per non-fatal case for the willingness to pay to avoid a cancer case is not referenced in ECHA’s guidelines. It was nevertheless used in this complementary analysis since it is in line with the value of € 395,656 calculated by Alberini and Ščasný72. Mortality rate was derived from incidence and mortality data in Europe:
PARAMETERS VALUES Lung cancer incidence 313,000 Lung cancer fatal cases 268,000 Mortality rate 86% Survival rate 14%
Table 19. Incidence and mortality associated with lung cancer in Europe, in 201273
Based on the parameters previously put forward, the overall impacts of cancer, as calculated with this methodology are synthesised below:
PARAMETER VALUE COMMENT
Taking into account: the total Number of fatal cancer excess risk of cancer and the cases over the review 1.1x10-3 average mortality rate of lung period Mortality cancer in France Subtotal: Discounted until the end of the € 1,185 costs of mortality review period
Number of non-fatal Taking into account: the total -4 Morbidity cancer cases over the 1.9x10 excess risk of cancer and the review period average survival rate of lung
71 ECHA, Guidance on the preparation of socio-economic analysis as part of an application for authorisation, Version 1, January 2011 72 Alberini and Ščasný, Stated-preference study to examine the economic value of benefits of avoiding selected adverse human health outcomes due to exposure to chemicals in the European Union, FD7. Final Report - Part III: Carcinogens, Charles University in Prague (Environment Center), September 2014. 73 GLOBOCAN 2012 (WHO), Lung Cancer Estimated Incidence, Mortality and Prevalence Worldwide in 2012
Use-1, public version FN Herstal - Manroy 45
Analysis of Alternatives – Socio-Economic Analysis
cancer in France
Subtotal: Discounted until the end of the € 66 costs of morbidity review period
Total € 1,251 Present value
Table 20. Mortality and morbidity costs for Use-1, complementary assessment
The results of this complementary assessment (€ 1,251) validate the order of magnitude of the results obtained with the DALY approach (€ 1,068).
3.6.4. Synthesis of the monetised damage of the “applied for use” scenario The overall monetised impacts of the “applied for use” scenario can be summarised as follows:
IMPACTS COSTS Medical treatment € 38 Mortality and morbidity € 1,068 Total € 1,106
Table 21. Overall impacts of the "applied for use" scenario, Use-1
3.6.5. Complementary elements of analysis: values taking into account a 4% discount rate In order to ensure a complete consistency of the values with ECHA’s guidelines, monetised impacts of the “applied for use” scenario are also provided considering a 4% discount rate:
IMPACTS COSTS Medical treatment € 36 Mortality and morbidity € 987 Total € 1,024
Table 22. Overall impacts of the “applied for use” scenario, Use-1. Complementary analysis taking into account a 4% discount rate
3.7. Environment, man-via-environment impacts and monetised damage of the “applied for use” scenario
3.7.1. Environment impacts and monetised damage Environment impacts have been shown to be negligible and have therefore not been subject to a monetised quantification.
Use-1, public version FN Herstal - Manroy 46
Analysis of Alternatives – Socio-Economic Analysis
3.7.2. Man-via-environment impacts and monetised damage Man-via-environment impacts have been shown to be negligible and have therefore not been subject to a monetised quantification.
Use-1, public version FN Herstal - Manroy 47
Analysis of Alternatives – Socio-Economic Analysis
4. SELECTION OF THE “NON-USE” SCENARIO
A significant work of research and testing of potential alternatives to hard chromium plating for the functional requirements of Use-1 was carried out over the last decade by FN Herstal, notably through partnerships with external research centres and Manroy, through internal research works. As a result of this work, two potential alternatives to Cr(VI) compounds have been identified: deposition of chromium from a Cr(III) electrolyte (Alternative 1) and vacuum process with Physical/Chemical Vapour Deposition process (Alternative 2). These processes, however, are currently at a low level of maturity and have yet to be further investigated, implemented and qualified; neither Alternative 1 nor Alternative 2 will therefore be available before the sunset date of chromium trioxide. In conjunction with research works for alternatives, and in order to minimise the consumption and the exposure of workers to Cr(VI) compounds, FN Herstal is furthermore involved in the development of an innovative surface chromium process for the duration of the review period, still Cr(VI)-based but that would be carried out in a closed environment.
4.1. Efforts made to identify alternatives
4.1.1. Data searches and Research & Development Research and development works for the substitution of Cr(VI) in the surface treatment of firearms barrels and auxiliary components date back to 2003. Taking into account both the expenditures already carried over the last decade and those planned in the coming years, a total of € 180k will have been spent annually on the 2010-2018 period. This amount can be divided between internal and external resources as follows: 44% for external resources (research centres or supply of equipment) and 56% for internal resources. As outlined above, data searches initiatives have been based on both internal and external resources: - Internal resources involve working hours of FN Herstal Research and Development department. - External resources mainly involve partnerships with Belgian research centres, consisting of two public-private R&D centres dedicated among others to surface treatment specialties and one university department focusing on PVD74.
74 Due to confidentiality agreements, the name of these research centres cannot be disclosed in this document.
Use-1, public version FN Herstal - Manroy 48
Analysis of Alternatives – Socio-Economic Analysis
4.2. Potential alternatives already abandoned Several potential alternative processes are mentioned in the literature75,76,77. Among these, very few processes appear to comply with FN Herstal and Manroy requirements for Use-1 in terms of (a) functional properties (hardness, heat resistance, corrosion resistance, etc.), (b) meeting of standard requirements and (c) ability to be implemented on complex shape parts. The potential substitution processes that have been considered are developed in what follows.
4.2.1. Thermal spraying with HVOF (High Velocity Oxygen Fuel) In the HVOF process, powdered material is accelerated at high speed and temperature and sprayed on the component in a plastic state. The coating is deposited droplet by droplet.
WC-Co (tungsten carbide - cobalt) and Cr3C2-NiCr (chromium carbide - Nickel chromium) powders are particularly used as substitutes for hard chromium. From a technical point of view in the context of Use-1, these processes show significant limits, such as: - Inability to coat small and intricate parts, or parts with a small internal diameter (about 100 mm)78. This last part is particularly critical for FN Herstal, since small- and medium-caliber firearms that are produced in Herstal have internal barrel diameters comprised between 6 and 13mm. - The bond between the sprayed-on coating and the substrate is purely mechanical; by contrast, chromium plating adheres to the substrate according to the laws of solid-state physics. The mechanical bond of the HVOF coatings is potentially subject to poorer adhesion of the coating. - Coatings applied are porous and, in case the coating thickness is too low (i.e. <80μm) and not fully sealed, increased corrosion may be encountered. As a consequence, HVOF cannot be accepted as a potential alternative to hard chromium plating for parts whose dimensional requirements imply low coating thicknesses (requirements for FN Herstal’ and Manroy’ small- and medium-calibre firearms are comprised between 10 and 40 µm). Conversely, small or complex components with undercuts are particularly difficult to coat with this process if they can be coated at all.
75 Holeczek, Kölle, Metzner, Report on inclusion of chromium trioxide (CrO3) in Annex XIV - Fraunhofer IPA-Institut für Produktionstechnik und Automatisierung, 2011 76 Bielewski, Replacing Cadmium and Chromium, Institute for Aerospace Research National Research Council Canada Ottawa, Ontario CANADA- RTO-AG-AVT-140, NATO Science and Technology Organization, 2011 77 Audino, Use of Electroplated Chromium in Gun Barrels - US Army RDECOM-ARDEC-Benet Laboratories, DoD Metal Finishing Workshop Washington, DC 22-23 May 2006 78Bielewski, Replacing Cadmium and Chromium, Institute for Aerospace Research National Research Council Canada Ottawa, Ontario CANADA- RTO-AG-AVT-140, NATO Science and Technology Organization, 2011
Use-1, public version FN Herstal - Manroy 49
Analysis of Alternatives – Socio-Economic Analysis
- HVOF processes result in rough coating surfaces. Depending on the application, such surfaces may require subsequent machining, which can be very costly when hard ceramic coatings such as WC-Co are used. Large quantities of hard metal dust are produced during both the spraying (up to 60% overspray can be expected) and the grinding processes, thereby posing potential hazards for the health of operators. - HVOF coatings have a very low factor for elongation at fracture and are brittle.
Taking into account the abovementioned considerations, HVOC was rejected by FN Herstal as a potential alternative solution to hard chromium.
4.2.2. Thermochemical surface modification Nitriding can be accomplished using the plasma process or heat treatment, whereby components are immersed in molten salt or gas nitriding is used. During the nitriding operation, process temperatures of 520°C to 580°C occur upon immersion in molten salt, while temperatures of 450°C to approx. 550 °C are common for plasma nitriding. For small thickness parts, nitriding can generate parts warping. For other applications, parts tolerances should be monitored. Steel mechanical properties will also be modified and should be taken into account. Deposited layers are very brittle and may lead to flaking, cavitation and even failure in the context of dynamic stress and surface pressure experienced during firing of firearms. Thermochemical surface modification processes do not effectively protect weapon hot parts such as barrels against corrosion by combustion gases and therefore have to be implemented in conjunction with other complementary processes and notably hard chromium plating.
Attempts of nitriding gun barrels before chromium plating treatment have been performed between 2003 and 2005 by FN Herstal. Further research concerning this process have been abandoned, due to the remaining need to use Cr(VI) compounds during the hard chromium plating step.
4.2.3. Nickel and Nickel alloy coatings Deposition can be accomplished either electro-chemically or without the use of electric current. Nickel-based coatings such as electroless nickel are increasingly used in the industry as safer and more environmentally-friendly alternatives to hard chromium plating. In the context of requirements in terms of high temperature wear resistance, Nickel- based coatings have a low melting point (1,455°C against 1,907°C for chromium).
Use-1, public version FN Herstal - Manroy 50
Analysis of Alternatives – Socio-Economic Analysis
For gun bore applications, nickel has a significant potential drawback related to the interaction with nickel and copper from projectiles. Due to its low melting point, copper melts during the firing of ammunition and the travel of projectiles in the barrel bore. In case of extended firing, molten copper may build up on the bore surface and then interact with the nickel coating to form low-melting, easily eroded surface layers79. Electroless nickel-phosphorus (Ni-P) are hardenable, corrosion resistant coatings consisting of nickel alloyed with a varying percentage of phosphorous, comprised between 8% for harder coating layers to 10% for better corrosion resistance properties. Such processes offer good thickness uniformity and control but the use of nickel and nickel alloys as potential alternatives is subject to a few technical limitations: - Unhardened nickel and nickel alloy coatings have a lower hardness (500-750 HV) than functional chromium plating. This value is not sufficient for FN Herstal applications and does not comply with the requirements of the SAE AMS2460 standard. - Heat treatment is required to increase the hardness of Ni-P alloys deposited without the use of electric current: temperatures of approximately 400°C are required. For small thickness parts, Nickel plating heat treatment can generate parts warping. For other applications, parts tolerances should be monitored. Also steel substrates characteristics should be checked. - Electroless Ni-P composite coatings are available with addition of nanoparticles such as silicon carbide (SiC) for an improved wear resistance. The use of such nanoparticles is increasingly mentioned in the scientific literature in order to modify the properties of nickel coatings, so as to tend toward the functional properties of hard chrome plating. This process is nevertheless reported to be very hazardous for the health and safety of workers. - Electroless nickel-boron (Ni-B) coatings exhibit better wear resistance properties, a lower friction coefficient and higher hardness but lower corrosion resistance properties as compared to hard chromium plating. In addition, Ni-B coatings are expensive to produce, have limited availability and plating baths contain toxic substances, such as lead or thallium.
Tests with Ni-B as an alternative coating have been conducted by the Herstal Group between years 2005 and 2006. Qualification tests on weapons did not appear conclusive. This alternative has therefore not been further considered since it does not match FN Herstal’s and Manroy’s technical requirements, notably in terms of
79 Montgomery, Watervliet, Interaction of copper-containing rotating band metal with gun bores at the environment present in a gun tube - Weapons. Laboratory, Watervliet Arsenal, WVT-TR-74026, 1974
Use-1, public version FN Herstal - Manroy 51
Analysis of Alternatives – Socio-Economic Analysis
hardness. In addition, boron compounds could be further regulated in the near future.
4.3. Research and development works in order to reduce the exposure to Cr(VI) for hard chrome plating (FNH1) In conjunction with research works for alternatives, FN Herstal has undertaken works for the optimisation of hard chromium plating in order to reduce the exposure of workers to Cr(VI) compounds. Confronted with the difficulty of identifying an alternative technology meeting FN Herstal’s and Manroy’s technical requirements for Use-1, it was decided in 2011 to redesign the hard chromium plating process in such a way as to greatly reduce the exposure of workers to Cr(VI). This project will be referred to as “FNH1” in what follows. The principle of this innovative chromium plating process is based on ------(#3a). FNH1’s expected benefits include: - The use of much smaller baths volumes than for immersion and removing of the soaking step in the baths, thereby reducing chemical hazards for workers’ health; workers will be separated of hard chromium plating installations by two floors and there will be no contact between the operators’ position and chemical substances during the surface treatment operations. - The possibility to obtain a chromium surface offering improved performances as compared to the immersion process. It is also known that this kind of process process helps limiting hydrogen embrittlement80 as well as the overvoltage effects related to the stagnation of gas bubbles in the barrel. - The increase in productivity made possible by the use of high current densities during electroplating, which are made possible thanks to ------(#3b). The general timeline of research works can be outlined as follows: - First exploratory phases were conducted between 2011 and 2013 under contract in an electrochemistry lab and a pilot plant of a research centre. - In the second step (2012-2013), a pilot (laboratory-scale) line for this experimental chromium plating process and tooling was designed and
80 Yin, Wang, Surface and Coatings Technology 114, 213–223, 1999
Use-1, public version FN Herstal - Manroy 52
Analysis of Alternatives – Socio-Economic Analysis
manufactured with the research centre, on the basis of results of laboratory research works. The start of FNH1 and the development of plating parameters were performed in 2013. - The first qualification testing on barrels produced on this experimental treatment line took place in 2014. FNH1 is currently at TRL 7 (Technology demonstrated in relevant environment) and is expected to attain TRL 8 (System complete and qualified) or 9 (Actual system proven in industrial environment) within 2022. - The third implementation step consists in the development and the installation of an industrial-scale prototype, requiring a significant engineering work notably in terms of scaling and safety. The budget for the third step is foreseen to amount to at least € 300k and up to € 1M. - The fourth implementation step is the replacement of current lines with FNH1-inspired lines. Estimated implementation costs of this process are comprised between € 4.5M and € 7.5M (considering a unit cost of € 1.5M to € 2.5M per chroming line and the need for three chroming lines). The implementation timeline of FNH1 is provided in section 4.5, along with that of Alternative 1 and Alternative 2. The future industrialized version of the processing line, will allow separating the positions of workers and baths by two floors. There will be no contact between the operators’ position and chemical substances during the surface treatment operations. Given its nature and level maturity, FNH1 will not require the re-qualification of firearms, which makes its implementation possible in the early phase of the review period and thereby relevant in the context of the substitution process. From an economic standpoint, aside from investments, operation costs are foreseen to be similar than those of the current hard chromium coating process. In case Alternative 1 is deemed compliant with the functional requirements of Use-1, it is also likely to be compliant with the FNH1 process, making the overall new process even more economically relevant to FN Herstal.
FNH1 will constitute an improvement of the hard chromium plating process and will be carried out in a separate room (away from workers), thereby reducing the exposure of workers for all the steps related to the operation of the plating line (notably for the installation and removal of parts to be treated on jigs). The improvement of this new process, the development of plating tools and endurance shooting tests will be pursued on a set schedule until the end of 2016. The choice to industrialise or abandon this process will be conditioned by the favourable or unfavourable opinion of ECHA toward the present AfA.
Use-1, public version FN Herstal - Manroy 53
Analysis of Alternatives – Socio-Economic Analysis
4.4. Assessment of shortlisted alternatives Research works have resulted in the identification of two potential alternatives for the functional requirements of Use-1: deposition of chromium from a Cr(III) electrolyte (Alternative 1) and vacuum process with Physical/Chemical Vapour Deposition process (Alternative 2).
4.4.1. Alternative 1: Chromium deposition from Cr(III) electrolyte
4.4.1.1. Substance ID and properties Under Alternative 1, chromium deposition is investigated with the use of a Cr(III) electrolyte instead of a Cr(VI)-based electrolyte.
4.4.1.2. Technical feasibility of Alternative 1 Research works have been focused for some time on deposition of trivalent chromium electrolytes in the context of chromium plating. In the area of decorative chromium plating, trivalent chromium electrolytes are already being used as a substitute for Cr(VI) electrolytes-based chromium plating for some applications. However, processes for the deposition of functional chromium coatings using trivalent chromium electrolytes are still in development phase. Even after conclusion of development works, deposition of hard chromium coatings from trivalent electrolytes will only be possible for special applications and for very simple component geometries due to the electro-chemical limits, low hardness and low coatings thickness. FN Herstal initiated in 2014 a literature search on the subject in collaboration with a Belgian research centre. The most promising approaches are actually laboratory tested. As of today, Alternative 1 is at TRL 3, meaning that active R&D works are in progress but that technical feasibility and compliance with FN Herstal’s and Manroy’s functional requirements have yet to be demonstrated. From an industrial point of view, Alternative 1 does not constitute a major change as compared to the current process since it consists of a replacement of the electrolytes of the current baths. As a consequence, it would certainly be compliant with current facilities and surface treatment lines and its implementation would incur much lower costs than for Alternative 2, both in terms of investments and operating costs (personnel).
4.4.1.3. Economic feasibility and economic impacts of Alternative 1 Alternative 1 will certainly be compliant with the current hard chromium plating lines and will therefore not imply heavy investments for its implementation. It will, however, imply a strong increase in the cost of electrolytes. Cr(III)-based surface treatment processes furthermore require a more frequent chemical monitoring (several analysis on a daily basis as opposed to one analysis per week with the current process) and therefore require hiring a dedicated laboratory technician.
Use-1, public version FN Herstal - Manroy 54
Analysis of Alternatives – Socio-Economic Analysis
Alternative 1 is also expected to require increased maintenance works and therefore increased wastewater treatment capacity, with related costs of the order of magnitude of € 100k per line.
4.4.1.4. Availability of Alternative 1 No commercially available solution exists that meets the requirements of FN Herstal and Manroy for the presents AfA’s Use-1.
4.4.1.5. Hazard and risk of Alternative 1 Cr(III)-based surface treatment solutions may involve the use of boric acid. Since hazard and risk constitutes a key parameter in the selection and development of an alternative, the Applicants focuses on boric acid-free solutions.
4.4.1.6. Conclusions on Alternative 1 Given its compatibility with the current surface treatment facilities at the sites of Herstal and Manroy, Alternative 1 constitutes the most hoped-for alternative to Cr(VI)-based processes. As of today, however, Alternative 1 is at a too low level of maturity to prejudge of its final compliance with the requirements of Use-1.
4.4.2. Alternative 2: Vacuum process with PVD/CVD
4.4.2.1. Substance ID and properties PVD and CVD processes are relatively well-known alternatives to hard chromium plating. Included in this category are sputtering and cathodic arc deposition that produce thin coatings (below 10 μm) and Electron Beam-PVD (EB-PVD) techniques which can produce coatings up to hundreds of micrometers in thickness. Two of the most important features of PVD coatings, relevant to hard chromium applications, are high deposition rates and compressive residual stresses in the coatings after deposition. Among PVD coatings considered as hard chromium alternative are CrN, TiN and Metal containing Diamond-Like Carbon (Me-DLC) coatings that can be deposited by magnetron sputtering or cathodic arc evaporation.
4.4.2.2. Technical feasibility of Alternative 2 Vacuum technologies are constantly evolving. As of today, these processes have limitations in the context of Use-1. FN Herstal is supporting, since 2014, projects of two Belgian research centres, with the aim of developing new high performance coatings and above all, new deposition tools, able to overcome limitations associated to the complex geometry of weapon parts. PVD processes offer high quality coatings but due to the process technology, coating capabilities of inner surfaces parts and blind holes of parts with complex geometry, are highly limited. Alternative 2 is at TRL 3, meaning that active R&D works are in progress but that technical feasibility and compliance with FN Herstal’s and Manroy’s functional requirements have yet to be demonstrated.
Use-1, public version FN Herstal - Manroy 55
Analysis of Alternatives – Socio-Economic Analysis
From an industrial point of view, Alternative 2 constitutes a complete disruption of the industrial facilities at the sites of Herstal and Erith. Its implementation would therefore require a complete modification of the workshop as well the employment of a qualified and trained personnel.
4.4.2.3. Economic feasibility and economic impacts of Alternative 2 Capital costs as well as operation costs for PVD equipments are expected to be high but, due to its low level of maturity, a precise estimate of the costs associated with Alternative 2 cannot be carried out.
4.4.2.4. Availability of Alternative 2 Vacuum processes are relatively well-known from an industrial point of view, and are notably implemented for the surface treatment of simple-shaped parts and external surfaces. These solutions, however, do not comply with the requirements of FN Herstal’s and Manroy’s products in terms of geometrical shape (notably: long and thin tubes that constitute gun barrels) and potential magnetisation of parts that are used. As of today, no vacuum solution is available that can be implemented in thin tubes such as those used by FN Herstal and Manroy and even experimental devices still have to be miniaturised by around one order of magnitude. Such a miniaturisation does involve very strong technical challenges that ongoing research works aim at overcoming.
4.4.2.5. Hazard and risk of Alternative 2 A preliminary assessment does not seem to show that Alternative 2 involves hazard and risks.
4.4.2.6. Conclusions on Alternative 2
Alternative 2 is investigated for the substitution of CrO3 for the surface treatment of firearms parts concerned by Use-1. Its development still require major technical improvements in terms of the size of device and its implementation would constitute a major change in terms of equipment and staff as compared to the current hard chromium process. As it constitutes a completely different process from hard chromium, comprehensive long and costly requalification procedures of FN Herstal’s and Manroy’s products will be required to permit their commercialisation.
Use-1, public version FN Herstal - Manroy 56
Analysis of Alternatives – Socio-Economic Analysis
4.5. Substitution timeline The substitution timeline for FNH1, Alternative 1 and Alternative 2 is outlined below. On the basis of this timeline, and considering both uncertainties on the technical steps and research results, as well as the period of time needed to submit a new dossier should the need arise, either Alternative 1 or Alternative 2 is expected to be fully developed, implemented and qualified in 2029.
Use-1, public version FN Herstal - Manroy 57
Analysis of Alternatives – Socio-Economic Analysis
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Industrial-scale research works 1 2 FNH1 Industrialisation
Internal qualification
Laboratory-scale research works Alternative 1: 3 Industrial-scale research works Chromium deposition from Cr(III) Industrialisation electrolyte Internal qualification
Laboratory-scale research works 4 Alternative 2: Industrial-scale research works Vacuum process with 5 PVD/CVD Industrialisation
Internal qualification
Table 23. Substitution timelines for Alternative 1 and Alternative 2 Key milestones: ❶ = Launch of industrial scale R&D works on FNH1 will be conditioned by the granting of an authorisation for a twelve-year review period for Use-1 ❷ = The industrialisation of FNH1 will not be required if Alternative 2 is deemed appropriate ❸ = Continuation of works on Alternative 1 will be conditioned by the results obtained between 2016 and 2021 at laboratory-scale ❹ = Investments for industrial-scale processes for Alternative 2 will be conditioned on the failure of research works on Alternative 1 ❺ = Investments for industrial facility dedicated to Alternative 2 (new facility) will depend on the issue of the industrial-scale research works
Use-1, public version FN Herstal - Manroy 58
Analysis of Alternatives – Socio-Economic Analysis
4.6. Synthesis: summary of the potential substitution processes considered As a summary of the aforementioned description of the potential technologies
investigated by FN Herstal over the last decade as potential alternatives to CrO3 in the surface treatment of firearms inner barrels and auxiliary parts is provided in Table 24 below.
Use-1, public version FN Herstal - Manroy 59
PERIOD EFFICIENT FIT WITH PRESERVE HEALTH AND MEET PERSPECTIVES OF TEST COVERAGE ON EXISTING STATUS IN CATEGORY POTENTIAL ALTERNATIVES COMPONENT ENVIRONNEMENT MILITARY WITHIN 5
AT FN HEAT COMPLEX OR PLANT 2015 TOLERANCES HAZARDS STANDARDS YEARS
HERSTAL HARDNESS INNER SHAPES FACILITIES
RESISTANCE CORROSION
HVOF High - - - - F F F - None (High Velocity Oxygen Fuel) (overspray) Rejected
Thermochemical surface 2003-2004 - F P F F - - Not all None modification - Rejected
High abandoned (if boron Ni and Ni alloy coatings P if hardened F if hardened 2005-2006 F P P P compounds or F None (Ni-B, Ni-P; Ni-W) -
F if not P if not nanoparticles are Rejected Potential alternatives already Potential used)
Alternative 1: deposition of Considered chromium from Cr(III) 2014-2017 PF P PF PF P P ? ? alternative electrolyte TRL3
Alternatives Alternative 2: vacuum Considered 2014-2017 ? ? ? PF P F - ?
process with PVD/CVD TRL3 alternative
FNH1: new industrial hard P for inner TRL8-9 if chromium plating process coating of - Lower than the authorisation reducing the risks 2011-2017 P P P barrels P F current plating P granted by associated with the use of process TRL7 PF for other ECHA
hexavalent chromium complex shapes
neededsubstitute to
review periodthe time Provisoryprocess during
Table 24. Summary of potential substitution processes considered (on grey background, the two shortlisted alternatives) P = Pass (same as current electrolytic hard chromium plating or better); F = Fail; PF = Perfectible;? = Insufficient data; − = Not applicable or no data = Pursued investigation; = Further works abandoned Analysis of Alternatives – Socio-Economic Analysis
4.7. The most likely “non-use” scenario Hard chromium plating plays a central role in the activity and the competitiveness of the firearms manufactured by FN Herstal and Manroy. As described above, due to the high level of requirement for the hard chromium plating of parts identified in the scope of Use-1, no satisfactory alternative will be available for FN Herstal and Manroy by 2017. The most likely potential “non-use” scenarios are explored in what follows.
4.7.1. Potential “non-use” scenarios It will be shown that neither the downgrade of performances (putting non-hard chromium plated firearms on the market) nor the subcontracting of hard chromium plating activities outside the EU is deemed realistic; the most likely “non-use” scenario is the relocation of hard chromium plating activities outside the EU.
4.7.1.1. The downgrade of performances hypothesis As demonstrated in section 3.1, untreated firearm barrel bores have a lifespan that does not comply with both standard requirements and customer requirements. Since no alternative process to hard chromium is available, a downgrade of FN Herstal’s and Manroy’s firearms performances by the cease of hard chromium plating of parts subject to thermal, mechanical and chemical stresses is not deemed realistic. In addition, no alternative surface treatment process exists that provide a lifespan to firearms meeting both customer and Standard requirements.
4.7.1.2. The subcontracting outside EU hypothesis Subcontracting of the surface treatment activities outside the European Union is not further investigated for the following reasons: - Hard chromium coating constitutes a very specific and complex process. Potential subcontractors for such operations have not yet been identified; - Subcontracting would imply a loss of know-how for FN Herstal and Manroy, thereby potentially impeding the companies’ research and development potential in the future; - The impact on employment would be greater than in the case of relocation, since industrial support and control functions would be impacted in addition to production teams.
4.7.1. Synergy between uses Given that FN Herstal is concerned by both Use-1 and Use-2 of the present AfA, “non-use” scenarios for each use to some point depend on the outcome of the application for each use, as illustrated in Table 25 below.
Use-1, public version FN Herstal - Manroy 61
Analysis of Alternatives – Socio-Economic Analysis
AUTHORISATION FOR USE-1
- FN Herstal (Use-2) and Manroy: - “Applied for use” scenario: pursued relocation of hard chromium
activity for FN Herstal, Browning 2
- operations outside the EU and Manroy for the period of time - Browning: pursued activity for the necessary to implement an period of time necessary to alternative process implement an alternative process
- FN Herstal (Use-1) and Manroy: pursued activity for the period of - “Non-use” scenario: relocation of time necessary to implement an hard chromium plating activities of AUTHORISATIONFOR USE alternative process FN Herstal, Browning and Manroy - Browning: relocation of hard outside the EU chromium activity outside the EU
Table 25. Different "non-use” scenarios depending on the outcome of the application for authorisation for Use-1 and Use-2 = Authorisation granted; = Authorisation not granted As can be seen, and in order to ensure a good understanding of the dossier, the “non-use” scenario for Use-2 of the present AfA is based on the assumption that neither Use-1 nor Use-2 is granted. In this context, relocation of hard chromium plating activities does appear as the most-likely “non-use” scenario.
4.7.1.1. The most likely “non-use” scenario Given (a) the dependence of FN Herstal and Manroy on products concerned by Use-1, (b) the economic and support functions capabilities of FN Herstal and Manroy and (c) the regulatory context of the Belgian and British territory, the relocation of hard chromium plating operations outside the EU is considered as the most realistic “non-use” scenario. The regulatory and economics burden of the relocation of the hard chromium plating operations outside the EU is nevertheless expected to bear strong impacts for the activity of FN Herstal and Manroy, e.g. - Economic impacts on FN Herstal’s and Manroy’s activity include the loss of revenues and profits, the loss of markets, lost investments, as well as relocation costs, the increase of operating costs and regulatory issues. - Human health and Environmental impacts, include impacts on human health as well as greenhouse gas emissions. - Social impacts mainly consists of impacts on employment; - Wider impacts include the unavailability of the concerned equipments for the armies, as well as loss of sovereignty and loss of investments for sovereign States. The relocation process is expected to require a three-year period in order to purchase the land, to build the plant and to install the hard chromium plating lines as
Use-1, public version FN Herstal - Manroy 62
Analysis of Alternatives – Socio-Economic Analysis
well as the ventilation and wastewater treatment plants. Such a disruption in production will significantly jeopardise the very activity of both FN Herstal and Manroy. In what follows, it was chosen to consider a three-year loss of revenues for the economic impacts generated by the “non-use” scenario instead of a bankruptcy of FN Herstal and Manroy. This assumption, if not realistic per se, provides underestimated amounts as compared to the bankruptcy hypothesis and was chosen for this reason.
Use-1, public version FN Herstal - Manroy 63
Analysis of Alternatives – Socio-Economic Analysis
5. IMPACTS OF GRANTING AN AUTHORISATION
The “non-use” scenario will generate significant economic impacts (and notably a loss of revenues, relocation costs and loss of investments), social impacts (loss of employment), as well as environmental impacts (greenhouse gas emissions) and other impacts (increase of operating costs, regulatory issues, impacts on the operational capabilities of sovereign armies).
5.1. Economic impacts
5.1.1. Loss of revenues and profits
FN Herstal As already stated, all firearms manufactured in Herstal contain hard chromium plated parts. The activity of FN Herstal therefore strongly depends on Use-1, as illustrated in Figure 10 showing the share of the cumulated revenues over the 2000-2015 period that are related and not related to hard chromium plating (Use-1 and Use-2):
(#1c)
Figure 10. Share of FN Herstal revenues related and not related to hard chromium plating (Use-1 and Use-2), on the basis of cumulated revenues over the 2000-2015 period.
From a global point of view over the 2000-2015 period, an average of [10- 100%](#1d) of FN Herstal’s revenues is shown to directly depend on hard chromium plating. The evolution of the global revenues of FN Herstal over the 2004-2014 period is provided on Figure 11 below:
Use-1, public version FN Herstal - Manroy 64
Analysis of Alternatives – Socio-Economic Analysis
350 306 300 249 237 250 224 214 201 203 200
179
€ M 150 136 114 118 100
50
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Figure 11. FN Herstal revenues for the 2004-2014 period, in M€
Given the restructuring of the company during the last years, the average of FN Herstal revenues for the 2011-2014 period, i.e. € 243M, is considered as representative of the future revenues of the company during the review period that is applied for Use-1 (12 years post-2017). Hard chromium plating concerns both Use-1 and Use-2, with the following breakdown in terms of revenues [10-100%](#1d-1)} for Use-1 and [1-10%](#1d-2)} for Use-2. It is estimated that the relocation of hard chromium plating activities will entail a three-year loss of revenues for FN Herstal, corresponding to the period of time needed to plan, build and render operational the relocated surface treatment workshop. The calculation of the loss of revenues associated with the “non-use” scenario will therefore be based on the assumption of a 3-year loss of revenues for FN Herstal. This hypothesis, although not considered as realistic per se (it does not, for example, take into account the fact that the very survival of the FN Herstal would be jeopardised in case of a 3-year cease of activity), was elected since it provides underestimated figures for the present assessment. An uncertainty analysis regarding the loss of revenues and the impact on employment is provided in section 5.6. In order to remain in the context of the realistic worst-case scenario, the estimate of the loss of revenues generated by the “non-use” scenario is based on a zero-growth hypothesis for the revenues of FN Herstal over the 2018-2021 period. For uncertainty analysis purpose, an alternative estimate, taking into account the growth of revenues of FN Herstal over the review period on the basis of the past years trends is provided in section 5.6. Based on the above assumptions, the calculation of the loss of revenues is synthesised in Table 26 below:
Use-1, public version FN Herstal - Manroy 65
Analysis of Alternatives – Socio-Economic Analysis
VALUE
Average annual revenues for FN Herstal over the 2011-2014 period € 243M Share of revenues directly related to hard chromium plating [10-100%](#1d-6) Share of revenues related to hard chromium plating that are related [10-100%](#1d-3) to Use-1 Relocation period considered for the loss of revenues 3 years Total loss of revenues for FN Herstal [100-1,000M](#1d-4) Total loss of revenues for FN Herstal, discounted(*) [100-1,000M](#1d-5)
Table 26. Loss of revenues for FN Herstal related to the “non-use” scenario (*): considering a 4% discount rate over the 2018-2020 period Taking into account an average gross margin rate of [10-100%](#1e), the total loss of profits associated with the “non-use” scenario amount to € [100- 1,000M](#1f).
With a loss of profits of € [100-1,000M](#1g) over the 2018-2020 period, the “non-use” scenario will generate significant impacts on the economic activity of FN Herstal. Such impacts would jeopardise the recovery of the financial situation of FN Herstal that was achieved over the last years.
Manroy The average of Manroy’s forecasted revenues over the 2016-2018 period is £ 19,6M (€ 24,9M). This figure is considered as representative of the company’s revenues for the 2018-2021 period. In addition, the two products concerned by Use-1 (GPMG in Erith and HMG in Herstal) represent [10-100%](#1g-1) of the total revenues of Manroy. As for FN Herstal, a 3-year loss of revenues is considered in the context of the “non-use” scenario. This hypothesis, although not considered as realistic per se (it does not, for example, take into account the fact that the very survival of the FN Herstal would be jeopardised in case of a 3-year cease of activity), was elected since it provides under-estimated figures for the present assessment. An uncertainty analysis regarding the loss of revenues and the impact on employment is provided in section 5.6. In order to remain in the context of the realistic worst-case scenario, the estimate of the loss of revenues generated by the “non-use” scenario is based on a zero-growth hypothesis for the revenues of Manroy over the 2018-2021 period. For uncertainty analysis purpose, an alternative estimate, taking into account the growth of revenues of Manroy over the review period on the basis of the past years trends is provided in section 5.6. Based on the above assumptions, the calculation of the loss of revenues is synthesised in Table 28 below:
Use-1, public version FN Herstal - Manroy 66
Analysis of Alternatives – Socio-Economic Analysis
VALUE
Average annual revenues for Manroy € 24.9M Share of revenues directly related to hard chromium plating [10-100%](#1g-2) Relocation period considered for the loss of revenues 3 years Total loss of revenues for Manroy [10-100M](#1g-3) Total loss of revenues for Manroy, discounted(*) [10-100M](#1g-3)
Table 27. Loss of revenues for Manroy related to the “non-use” scenario (*): considering a 4% discount rate over the 2018-2020 period Taking into account an average gross margin rate of [10-100%](#1h), the total loss of profits associated with the “non-use” scenario amounts to € [10-100M](#1i).
With a loss of profits of € [10-100M](#1j) over the 2018-2020 period, the “non- use” scenario will generate significant impacts on the economic activity of Manroy.
Total loss of revenues and profits The cumulated loss of revenues and profits in the context of the “non-use” scenario for Use-1 amounts to:
VALUE
Loss of revenues for FN Herstal discounted [100-1,000M](#1j-1) Loss of revenues for Manroy, discounted [10-100M](#1j-2) Total loss of revenues [100-1,000M](#1j-3)
Table 28. Total loss of revenues for Use-1
VALUE
Loss of profits for FN Herstal discounted [100-1,000M](#1k) Loss of profits for Manroy, discounted [10-100M](#1l) Total loss of profits [100-1,000M](#1m)
Table 29. Total loss of profits for Use-1
Cumulated for FN Herstal and Manroy, the “non-use” scenario for Use-1 will generate a loss of revenues of € [100-1,000M](#1n) over the 2018-2020 period.
Use-1, public version FN Herstal - Manroy 67
Analysis of Alternatives – Socio-Economic Analysis
5.1.2. Loss of markets
5.1.2.1. Loss of markets requiring the manufacture of firearms to be carried out in the European Union A significant part of FN Herstal and Manroy customers are European States. As illustrated in section 3.1.4.2, and in order to ensure their security of supply for military equipments, such States generally require that all the manufacturing and assembly operations are carried out over the European Union. In the context of the “non-use” scenario, such criteria will not be met and such markets will therefore be closed for FN Herstal and Manroy, thereby involving a significant loss of mid-term and long-term revenues for the company.
The loss of markets requiring the manufacture of firearms over the European Union will generate a significant loss of revenues for FN Herstal and Manroy, for a duration that would exceed the period of time needed to implement the relocation itself
5.1.2.2. Loss of markets due to the increase of lead-time related to the relocation-related logistics delays The fact that FN Herstal and Manroy manufacturing capabilities are located in the European Union constitutes a key commercial asset for the company’s activity. Manufacturing in Europe allows FN Herstal and Manroy to be extremely reactive for the processing of orders, which often constitutes a key criterion for customers. Customer requirements in terms of supply time vary between four to six months for spare parts and four to twelve months for firearms and systems. In these conditions, a one to two months delay in the production cycle, as would be generated by relocation in the context of the “non-use” scenario, would represent a significant increase in lead-time for FN Herstal and Manroy. As the Walloon and British legislations strictly govern arms trade, FN Herstal and Manroy can only produce firearms or firearms parts after a firm order is provided and a licence is granted. As a consequence, neither FN Herstal nor Manroy can stock- pile firearms parts in order to anticipate future orders.
The increase in lead-time foreseen in the context of the “non-use” scenario will close significant markets for FN Herstal and Manroy, for which the company’s reactivity currently constitutes a strong commercial asset that would be lost in case of relocation of the hard chromium plating activities.
Use-1, public version FN Herstal - Manroy 68
Analysis of Alternatives – Socio-Economic Analysis
5.1.3. Lost investments The inventory of all the investments made in favour of the hard chromium plating lines at the site of Herstal has been carried out by FN Herstal’s accounting department. The assessment of the lost investments foreseen in the context of the “non-use” scenario is based: - On the identification of the investments still due for amortisation in 2017 and after, as well as the precise number of amortising years remaining; - On the annualised costs method; - On a 4% discount rate. A synthesis of the investments amounts concerned by the assessment is provided below:
LAST ANNUITY TOTAL AMOUNT IN AMORTISATION(*) 2017 € 100,616 2018 € 222,035 2019 € 12,793 2020 € 4,850 2021 € 4,850 2023 € 61,281 2024 € 78,768 2025 € 13,917 TOTAL € 494,260
Table 30. Detail of investments in amortisation, by year of last annuity (*) = Considering a 4% discount rate over the amortisation period
The total lost investments foreseen for the site of Herstal in the context of the “non-use” scenario amounts to € 494,260.
Use-1, public version FN Herstal - Manroy 69
Analysis of Alternatives – Socio-Economic Analysis
5.1.4. Relocation costs for FN Herstal Cumulated relocation costs for Use-1 and Use-2 of the hard chromium plating activities have been estimated by FN Herstal:
DEPRECIATION COST AMOUNT JUSTIFICATION PERIOD Land purchase and building Estimation based on the costs in € 3 to 6M 30 years construction Belgium Estimation based on the costs of Chromium plating lines € 4 to 5M 15 years hard chromium plating lines in Herstal Ventilation system, wastewater Auxiliary equipments € 6M 15 years treatment plant, ... Creation of the legal entity, follow- Other € 3M 3 years up costs, industrialisation costs Total, discounted € 16 to 20M - -
Table 31. Relocation costs for FN Herstal, for Use-1 and Use-2
On the basis of the annualised costs method and taking into account (a) the lower bound of relocation costs (€ 16M) in order to remain in the context of the realistic worst-case scenario as well as (b) a 4% discount rate, the total monetary value of the investments made for relocation over the twelve-year review period amount to € 12.1M.
Considering the land purchase, building construction, installation of chromium plating lines as well as expenses for auxiliary equipments and other costs, relocation costs are estimated to € 12M.
5.1.5. Increase of operating costs
5.1.5.1. Transportation costs The “non-use” scenario will mechanically induce an increase in transportation and logistics-related costs.
5.1.5.2. Packaging costs Given the safety requirements related to the transportation of firearms, and in order to adapt to the transportation steps foreseen with the relocation, the “non-use” scenario will entail a significant increase in packaging needs.
5.1.5.3. Other costs The “non-use” scenario will generate a significant increase of costs associated with support functions, such as insurance and licensing fees.
Use-1, public version FN Herstal - Manroy 70
Analysis of Alternatives – Socio-Economic Analysis
The “non-use” scenario will directly impact the competitiveness of FN Herstal, even after the relocation of hard chromium plating activities is completed, due to an increase of transportation costs, packaging costs as well as insurance and licensing fees.
5.1.6. Regulatory issues The “non-use” scenario will entail the need to transfer firearms and firearms subcomponents to a host country located outside the European Union and back to the European Union after their surface treatment. In the context of military equipment, such import and export activities are subject to a stringent regulatory framework. In the case of FN Herstal, regulatory requirements related to import and export of firearms outside the European Union are defined by the Walloon government’s decree of 12 June 2012. Export licenses are individual and are granted or rejected after their examination on the basis of eight criteria81. Export licenses have a period of validity of 18 months and can be renewed as often as necessary to permit the execution of the order. Import license are as well delivered by the Walloon government and have the same period of validity than export licenses. In this context, the “non-use” scenario will entail strong impacts for FN Herstal, notably regarding the obligation to export and import defence-related products on the basis of individual licenses, thereby resulting in a significant increase in lead-time and consequently in the imposition of contractual penalties. Transfer of arms can furthermore be subject to the transmission of an end-user certificate to the host country. In this case, the identity of the end-user country would have to be disclosed, which would pose stringent confidentiality issues. Another issue with relocation lies in the potential implementation of arms control regulation by the host country, as is currently in effect in the United Stated under ITAR (International Traffic in Arms Regulations) and EAR (Export Administration Regulations). The following terms constitute criteria for most of tender procedures, as a qualification of the safety of supply for customers: - A technical data or service is qualified as “ITAR-controlled” or “ITAR-free” depending on whether it includes a US-originated component requiring an export license under ITAR or not. - Similarly, a technical data or service is qualified as “EAR-controlled” or “EAR- free” depending on whether it includes a US-originated component requiring an export licence that amounts to more than 25% of its overall value or not.
81 Defined by the “Position commune 2008/944/PESC du Conseil du 8 décembre 2008 définissant les règles communes régissant le contrôle des exportations de technologie et d’équipements militaires”
Use-1, public version FN Herstal - Manroy 71
Analysis of Alternatives – Socio-Economic Analysis
The potential implementation by the host country of ITAR/EAR-like regulation would thereby endanger the overall security of supply of FN Herstal and therefore of the company’s customers. Finally, it has to be mentioned that legal and customs constraints that are very stringent in the context of arms transfer will entail a supplementary administrative burden for FN Herstal. In addition, experience has shown that legal and customs requirements may vary from one country to another, which may constitute an additional factor of risk.
Due to the regulatory framework on export and import of firearms and firearms subcomponents, the relocation of hard chromium plating activities outside the European Union in the context of the “non-use” scenario will generate a strong administrative burden as well as risks for the safety of supply for FN Herstal.
5.1.7. Potential financial opportunities Even though the relocation host country has not yet been determined, it is likely to be located either in northern America or Eastern Europe. Such countries are likely to have a lower cost of labour than Belgium or the United Kingdom. This situation, however, does not represent a potential financial opportunity for the following reasons: - Even though local production workers will have to be hired, supervisory and European management staff will also have to be hired. Altogether, gains in terms of global labour costs are foreseen to be low or nil. - Even though the labour cost may be lower in northern America or Eastern Europe than the current situation for FN Herstal or Manroy, productivity rates are also known to be lower than in Belgium or the United Kingdom. Overall competitiveness gains are not foreseen to be significant in the context of the relocation of hard chromium plating activities. - Given the significant investments and the increase in operating costs triggered by the “non-use” scenario, the relocation of the hard chromium activity will generate much higher detrimental financial impacts than potential opportunities.
Potential gains in terms of cost of labour will not, by far, compensate the impacts generated by the relocation of hard chromium plating activities.
Use-1, public version FN Herstal - Manroy 72
Analysis of Alternatives – Socio-Economic Analysis
5.2. Human health or Environmental impact
5.2.1. Impacts on human health It is reminded that, even though the Applicants will implement all necessary risk management measures at the relocated site dedicated to hard chromium plating activities, the “non-use” scenario does not involve an overall reduction of risk for workers since it involves the exposure to Cr(VI) compounds outside the European Union.
5.2.2. Greenhouse gas emissions The “non-use” scenario involves an increase of transportation and therefore of greenhouse gas (GHG) emissions. A rough estimate of such emissions is provided in what follows, on the basis of the following formula:
With the following units:
- : kgCO2e - : km - : ton
- : kgCO2e/(ton.km)
5.2.2.1. Conversion factors Conversion factors from the Bilan Carbone® database82 have been used for the assessment of greenhouse gas emissions arising from the diverse transportation journeys needed for the conveyance of parts from the Herstal and Erith plant to the relocated hard chromium plating workshop:
TRANSPORTATION MODE CONVERSION FACTOR
21-ton truck 0.23 kgCO2e per ton.km
5,500 twenty-foot equivalent unit container ships 0.01 kgCO2e per ton.km
Table 32. Conversion factors for transportation modes. Source: Bilan Carbone v7.1.021 Nota: kgCO2e = equivalent carbon dioxide kilogram
5.2.2.2. Transportation journeys Since the exact location of the relocated workshop is not defined at the time of writing of the present AfA, average distances have been used to characterise the outward trip of the transportation journeys associated with the “non-use” scenario:
82 The Bilan Carbone® is a tool developed by the ADEME (“Agence de l'environnement et de la maîtrise de l'énergie” or “French Agency for the Environment and the Energy Management”) dedicated to the calculation of greenhouse gas emissions.
Use-1, public version FN Herstal - Manroy 73
Analysis of Alternatives – Socio-Economic Analysis
STEP MODE DISTANCE 1. Site to departure harbour Truck 500 km 2. Transportation by container ship Container ship 10,000 km 3. Arrival harbour to treatment plant Truck 500 km
Table 33. Characterisation of the outward trip of the transportation journey associated with the “non-use” scenario. Nota: it is assumed that the return trip will be identical to the outward trip.
5.2.2.3. Frequencies It is estimated that the transportation needs in terms of parts to be treated amount to one 40-feet container per week from Herstal. It is assumed that containers are to be loaded to their maximum load, i.e. 30.5 tons83.
5.2.2.4. Greenhouse gas emissions On the basis of the parameters mentioned above, and taking into account the need for both an outward and return journey as well as the share of activity related to Use-1 and Use-2 of the present AfA, the total greenhouse gas emissions associated with the “non-use” scenario for the site of Herstal amount to:
TOTAL GHG EMISSIONS
Annual greenhouse gas emissions 1,017 tCO2e
Total greenhouse gas emissions over the review period 12,200 tCO2e
Table 34. Greenhouse gas emissions associated with the “non-use” scenario for Use-1 Nota: tCO2e = equivalent carbon dioxide ton
Taking into account the increase needs in terms of transportation alone, the “non-use” scenario will generate the emission of around 12,200 equivalent carbon dioxide tons. This amount corresponds to the cumulated average annual greenhouse gas emissions of around 1,400 citizens of Belgium84 or to 110% of the overall greenhouse gas emissions related to the energy consumption of the site of
Herstal (11,243 tCO2e in 2012).
83 https://www.cma-cgm.fr/produits-services/conteneurs 84 Considering an average carbon footprint of 8.8 tCO2e per capita for Belgium (source : Source: World Bank, CO2 emissions (metric tons per capita), 2015)
Use-1, public version FN Herstal - Manroy 74
Analysis of Alternatives – Socio-Economic Analysis
5.3. Social impact
5.3.1. Direct impact on employment
5.3.1.1. Loss of employment The number of jobs affected by the “non-use” scenario for Use-1 was estimated by FN Herstal and Manroy, with the following figures:
NUMBER OF JOBS LOST JUSTIFICATION Employees concerned by hard chromium FN Herstal, Herstal 27 plating, maintenance and support activities for Use-1 Employee concerned by hard chromium Manroy, Erith 1 plating Overall Use-1 28 -
Table 35. Loss of employment in the context of the “non-use” scenario for Use-1
Please note that, as for the calculation of the loss of revenues and profits, underestimating hypothesis have been made for assessment of the impacts on employment, insofar as to only take into account the employees directly concerned by hard chromium plating activities. Since a 3-year cease of activity is foreseen in the context of the “non-use” scenario, this assumption does appear conservative. An uncertainty analysis regarding the loss of revenues and the impact on employment is provided in section 5.6.
5.3.1.2. Individual cost of unemployment The individual cost of unemployment was estimated from the point of view of the loss of revenues for the State related to unemployment benefits, i.e. direct unemployment benefits but also, guidance and administrative costs as well as potential loss of revenue for the State related to social contributions and taxes:
Use-1, public version FN Herstal - Manroy 75
Analysis of Alternatives – Socio-Economic Analysis
UNITED TYPE OF COSTS BELGIUM KINGDOM Unemployment benefits € 9,493 € 3,561 Public intervention Guidance and administrative costs € 1,683 € 1,746 Subtotal for public intervention € 11,176 € 5,307 Loss in social contribution of employers € 8,474 € 2,955 Loss in social contribution of workers € 4,104 € 2,539 Potential loss of Loss in direct taxation € 8,240 € 4,498 public revenues Loss in indirect taxation € 1,177 € 2,710 Subtotal for potential loss of revenue € 22,267 € 12,702 Total average annual cost of an unemployed person € 33,443 € 18,008
Table 36. Average individual social cost of an unemployed person in Belgium and the United Kingdom, 201085
In what follows, the values of € 33,443 and € 18,008 will be used to monetise the costs of unemployment in Belgium and in the UK, with the following adjustments: - Adjustment for inflation based on the change in consumer price index: 8.6% in Belgium and 11.8% in the UK on average over the 2010-2015 period86; - Correction for the average duration of unemployment in Europe: 15.3 months87. Taking these corrections into account, the final average individual present values of unemployment are € 46,264 in Belgium and € 25,665 in the UK.
5.3.1.3. Total cost of unemployment for Use-1 The overall cost of unemployment, in relation with the actual number of job losses foreseen in the context of the “non-use” scenario and the individual cost of unemployment are synthesised in the following table:
PARAMETER HERSTAL ERITH TOTAL
Number of jobs lost 27 jobs 1 job 28 jobs Individual cost of € 46,264 € 25,665 - unemployment Total cost of unemployment € 1.2M € 0.03M € 1.3M Total cost of unemployment, € 1.1M € 0.02M € 1.1M discounted(*)
Table 37.Total cost of the loss of employment for Use-1
85Idea Consult, on behalf of European Federation for Services to Individuals (EFSI), Why invest in employment? A study on the cost of unemployment, 2012 86 OECD, Main economic indicators, Consumer Price Index – data and methods 87 OECD Stat, Average unemployment duration in Europe
Use-1, public version FN Herstal - Manroy 76
Analysis of Alternatives – Socio-Economic Analysis
(*): considering a 4% discount rate over the 2016-2018 period
With a loss of around 28 jobs, the “non-use” scenario for Use-1 will have an impact on the employment at the sites of Herstal and Erith. It is reminded that this estimate only takes into account workers that are directly related to hard chromium plating and therefore constitutes an underestimated assumption that does not take into account the potential impacts on employment for the 3-year cease of activity that is foreseen to complete the relocation process.
5.3.2. Indirect impact on employment A quantitative assessment of indirect employment impacted by the “non-use” scenario is complex to achieve. It is however reminded that industrial relationships involve partners all along the supply chain and are therefore based on a network of suppliers and subcontractors. A study88, based on data issued by the Belgian State89 estimates to 1.83 the multiplicative coefficient for indirect employment in the armament industry sector. In other words, based on this study, it can be estimated that, on average, one job in the armament industry triggers 0.83 indirect jobs. It was furthermore estimated that, since a major share of the GPMG is manufactured by its supply chain of Manroy, the cease of its production would impact 15 to 20 companies and result in job losses in the supply chain alone of over 30 people. An estimate of the costs related to this indirect impact on employment of the “non-use” scenario is provided in the table below:
PARAMETER HERSTAL ERITH TOTAL
Number of jobs lost 23 jobs 30 jobs 53 jobs
Individual cost of unemployment € 46,264 € 25,665 -
Total cost of unemployment € 1.1M € 0.8M € 1.8M
Total cost of unemployment, discounted(*) € 0.9M € 0.7M € 1.6M
Table 38. Detail of the assessment of indirect job losses foreseen for Herstal and Erith in the context of the “non-use” scenario (*): considering a 4% discount rate over the 2016-2018 period
88 GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP – Répertoire des entreprises du secteur de l’armement en Belgique, 2014. 89 Bureau Fédéral du Plan, Les multiplicateurs de production, de revenu et d’emploi 1995- 2005 – Une analyse entrées-sorties à prix constants, September 2013
Use-1, public version FN Herstal - Manroy 77
Analysis of Alternatives – Socio-Economic Analysis
The “non-use” scenario will generate indirect job losses in the supply chain of FN Herstal and Manroy. Since the knock-on effect can hardly be characterised, the figures obtained for such indirect costs have not been taken into account in the risks-benefits ratio for the AfA.
5.3.3. Complementary element of analysis: total cost of the loss of employment for the AfA As a complement to the values obtained for Use-1, an assessment of the global loss of employment in the context of the “non-use” scenario for the overall AfA (i.e. cumulated for Use-1 and Use-2) was also carried out, with the following results:
PARAMETER VALUE
Number of jobs lost 48 jobs
Total cost of unemployment € 2.2M
Total cost of unemployment, discounted(*) € 1.9M
Table 39. Global direct loss of employment and associated costs for the AfA (i.e. cumulated for Use-1 and Use-2 (*): considering a 4% discount rate over the 2016-2018 period
5.4. Wider economic impact
5.4.1. Impact on operational capabilities and sovereignty of States Beyond direct impacts on FN Herstal’s and Manroy’s activity, the “non-use” scenario involves the cease of supply of new firearms ordered by States and the cease of maintenance in operational conditions of firearms currently in service within armed forces. Given the diversity of customers of FN Herstal, and the intrinsic stringent confidentiality matters at play, a quantitative assessment of such impacts cannot be provided. Key elements, however, can be provided to outline the scope of such impacts: - FN Herstal serves a worldwide market and FN Herstal firearm are in operation within several tens of armed forces on all continents; - Armed forces rely on FN Herstal firearms. The cease of supply or the cease of maintenance in operational condition of such firearms will greatly impede operational capabilities and therefore sovereignty of States. - States will have to order replacement firearms to cover the cease of supply and/or support of FN Herstal firearms, thereby inducing over-costs and early investments. As a complement, the maintenance in operational conditions and the supply of spare parts constitute key elements of the FN Herstal activity. Customers favour FN
Use-1, public version FN Herstal - Manroy 78
Analysis of Alternatives – Socio-Economic Analysis
Herstal for this very capability to support firearms over time and a cease of supply of such parts, be it for the defined duration needed to relocate the hard chromium plating operations, will strongly affect customer confidence.
The “non-use” scenario will involve strong impacts on the operational capabilities of armed forces and the sovereignty of several tens of States on all continents.
5.5. Distributional impacts Due to the uncertainty related to the assessment, no distributional impacts (international trade, competition and economic development) are considered in this AfA, even though consequences on the overall territory’s dynamism and attractiveness are to be foreseen.
5.6. Uncertainty analysis for both the “applied for use” and the “non-use” scenario
5.6.1. “Applied for use” scenario
5.6.1.1. Preliminary observation: uncertainty of exposure and risk values The assessment of exposure to Cr(VI) is mainly based upon ART modelling. In order to reduce the uncertainty on these values, it was chosen to rely on values for the 90th percentile of exposures. The exposure data and therefore the excess of risk of cancer used all along this AfA for the monetisation of impacts are considered to reflect the actual exposures of workers; no further uncertainty analysis was carried out concerning these parameters.
5.6.1.2. Uncertainty analysis of the Value of a Statistical Life-Year Uncertainty analysis of the costs associated to mortality and morbidity was carried out using the lower and upper bounds of Value of a Statistical Life-Year defined by NewExt90: respectively € 27,240 and € 225,000. Please note that these two values are considered as less robust than the central value used for the assessment because they are based upon survey results derived from smaller sample sizes. Taking into account the correction for inflation over the 2003-2015 period, the total costs associated to mortality and morbidity for these two values amount to:
90 NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003
Use-1, public version FN Herstal - Manroy 79
Analysis of Alternatives – Socio-Economic Analysis
COSTS ASSOCIATED TO MORTALITY AND MORBIDITY Considering the upper bound of € 4,305 Value of a Statistical Life-Year (€ 225,000) Considering the lower bound of € 521 Value of a Statistical Life-Year (€ 27,240)
Table 40. Uncertainty analysis for mortality and morbidity, Use-1
5.6.1.3. Other parameters: qualitative uncertainty analysis A qualitative uncertainty analysis of the main hypothesis, assumptions and parameters used for the assessment of the “applied for use” scenario is provided below:
APPLICATION PARAMETER UNCERTAINTY ANALYSIS
- Standard life expectancy Medium uncertainty: data used are based on the situation in France as well as on European - Mean age of lung cancer death Mortality and averages and therefore do not directly relate to - Mean age of lung cancer diagnosis morbidity the situation in Belgium and the U.K. Low uncertainty: the value used is specific to - Disability weight lung cancer Medium uncertainty: the value used is specific - Costs of medical treatment for lung cancer but is related to France and is therefore not specific to Belgium or the U.K. Medical Herstal - medium uncertainty: the values used treatment are specific to lung cancer but are related to - Survival rate France and therefore not specific to Belgium. Manroy - low uncertainty: the values used are specific to lung cancer in the U.K.
Table 41. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario
5.6.2. “Non-use” scenario
5.6.2.1. Uncertainty analysis of the loss of profits: growth of profits over the review period As stated in section 5.1.1, the assessment of the loss of profits associated with the “non-use” scenario is based on a zero growth hypothesis over the review period. In order to carry out uncertainty analysis over this value, a secondary assessment was carried out taking into account a positive growth rate of revenues for FN Herstal and Manroy over the review period. This assessment is based on the average annual growth rate of FN Herstal over the 2011-2014 period (12%). Considering this hypothesis and 4% discount rate, the overall loss of profits foreseen over the review period amounts to € [100- 1,000M](#1o-1).
Use-1, public version FN Herstal - Manroy 80
Analysis of Alternatives – Socio-Economic Analysis
5.6.2.2. Uncertainty analysis of the loss of profits and the impact on employment: alternatives assumptions for the “non-use” scenario As stated in sections 5.1.1 and 5.3.1, the estimate of the loss of revenues and the impact on employment in the context of the “non-use” scenario is based (a) on the hypothesis of a 3-year loss of revenues during the relocation process and (b) the assumption that the loss of employment will only concern workers directly related to the hard chromium plating line. In the light of the “non-use” scenario and the criticality of Use-1 for the activity of FN Herstal and Manroy, these two assumptions appear very conservative. In order to put into perspective the monetised results obtained on the basis of these assumptions, two alternatives scenarios are outlined in what follows: - Alternative scenario 1: 3-year loss of revenues and temporary unemployment of 30% of FN Herstal and Manroy employees; - Alternative scenario 2: inability to maintain a financial balance during the three years required for the relocation and bankruptcy of FN Herstal and Manroy.
Alternative scenario 1 The alternative scenario 1 is based on the fact that, in order to optimise personal expenses, a 3-year loss of the majority of FN Herstal’s and Manroy’s revenues and would be accompanied by temporary unemployment of a significant share of FN Herstal and Manroy employees. In the context of this uncertainty analysis, the figure of 30% of workers temporarily unemployed is considered. On the basis of these hypotheses, the total costs of unemployment would amount to € 44M. This amount will be added to the economic impacts of the 3- year loss of revenues already calculated.
Alternative scenario 2 The alternative scenario 2 considers that the “non-use” scenario generates a too strong discrepancy between the strongly degraded financial incomes and the maintained operational costs to ensure the overall sustainability of the activity of FN Herstal and Manroy. In this scenario, it is estimated that 90% of the activity will be lost and 90% of the employees will have to be laid off. Under these assumptions, and considering a 4% discount rate, a loss of revenues of € [1-10B](#1o-2) over the review period and unemployment costs of € 67M are foreseen.
Use-1, public version FN Herstal - Manroy 81
Analysis of Alternatives – Socio-Economic Analysis
5.6.2.3. Other parameters: qualitative uncertainty analysis A qualitative uncertainty analysis of the main hypothesis, assumptions and parameters used for the assessment of the “non-use” scenario is provided below:
APPLICATION PARAMETER UNCERTAINTY ANALYSIS FN Herstal - low uncertainty: the values used to estimate the loss of revenues are based on a comprehensive inventory of the categories of products concerned by the AfA, on average over the 2000-2015 period as well as on the average of the revenues of FN Herstal over the 2011-2015 - Revenues impacted by the AfA period Manroy - low uncertainty: the values used to Loss of revenues, estimate the loss of revenues are based on the profits and orders revenues for the year 2016 that are considered as representative of the economic situation of Manroy over the 2018-2021 period FN Herstal - low uncertainty: the value used is based on the financial data of FN Herstal. - Operating margin Manroy - medium uncertainty: the value used is the same as FN Herstal’s. Both companies are considered as having the same operating margin. FN Herstal - low uncertainty: the values used are Loss of - Average individual cost of an specific for Belgium employment unemployed person Manroy - low uncertainty: the values used are specific for the United Kingdom
Table 42. Qualitative uncertainty analysis of the main parameters of the “applied for use” scenario
5.6.3. Conclusion
The results of both the quantitative and qualitative uncertainty analysis presented above do not seem to invalidate the overall results of the AfA: (a) the assessment of the impacts of the “non-use” scenario appears underestimated as compared to more realistic assumptions and (b) the variability for the parameters assessed does not call into question the order of magnitude of the risk-benefits ratio for the AfA.
Use-1, public version FN Herstal - Manroy 82
Analysis of Alternatives – Socio-Economic Analysis
5.7. General conclusion on the impacts of granting an authorisation A synthesis of the monetised impacts of the “non-use” scenario is provided below:
MONETISED IMPACTS
Loss of profits € [100-1,000M](#1p) Economic impacts Lost investments € 0.5M Relocation costs € 12.1M Social impacts Loss of employment € 1.1M Total monetised impacts of the “non-use” scenario € [100-1,000M](#1q)
Table 43. Synthesis of the monetised impacts of the “non-use” scenario
As a complement, other impacts of the “non-use” scenario are synthesised in the table below:
Use-1, public version FN Herstal - Manroy 83
Analysis of Alternatives – Socio-Economic Analysis
IMPACTS ORDER OF MAGNITUDE Loss of markets requiring the manufacture The loss of markets requiring the manufacture of firearms in the European Union Millions to tens of of firearms to be carried out in the will generate a significant loss of revenues for FN Herstal, for a duration that millions of Euros European Union would exceed the period of time needed to implement the relocation itself
The increase in lead-time foreseen in the context of the “non-use” scenario would Loss of markets due to the increase of close significant markets for FN Herstal, for which the company’s reactivity Millions to tens of lead-time related to the relocation-related currently constitutes a strong commercial asset that would be lost in case of millions of Euros logistics delays Economic relocation of the hard chromium plating activities. impacts The “non-use” scenario will generate a significant increase of transportation costs, Increase of operating costs Not assessed packaging costs as well as other costs related to insurance and licensing fees. The potential relocation of hard chromium plating activities outside the European Union in the context of the “non-use” scenario will generate a strong Regulatory issues administrative burden as well as risks for the sustainability of FN Herstal’s Not assessed activities related to the regulatory framework on export and import of firearms and firearms subcomponents. From a global point of view, the “non-use” does not involve an overall reduction of Impacts on human health - Human health or risks for workers. Environmental Taking into account the increase needs in terms of transportation alone, the “non-
impact Greenhouse gas emissions use” scenario will generate the emission of around 12,200 equivalent carbon 12,200 tCO2e dioxide tons. Along with direct loss of employment, indirect job losses (suppliers, sub- Social impacts Indirect employment Not assessed contractors) are foreseen in the context of the “non-use” scenario. Impact on the operational availability of The “non-use” scenario will generate strong impacts on the operational firearms for armed forces as well as lost Wider impacts capabilities of armed forces and the sovereignty as well as a loss of investments Not assessed investments and loss of sovereignty for for several tens of States on all continents. States
Table 44. Other impacts of the “non-use” scenario
Use-1, public version FN Herstal - Manroy 84
Analysis of Alternatives – Socio-Economic Analysis
6. CONCLUSIONS
6.1. Comparison of the benefits and risks On the basis of the foregoing assessment, the socio-economic benefits outweigh the risks arising from the use of the substance by a factor of approximately [100,000- 1,000,000](#1r). It is reminded that this ratio only covers monetised impacts and is based on underestimating hypothesis, notably in terms of loss of revenues and loss of employment. In addition to these monetised impacts, the “non-use” scenario will generate significant other impacts, including: the loss of markets that will be closed to FN Herstal and Manroy due to the relocation outside the EU, an increase of operating costs, stringent regulatory issues and safety of supply issues, impacts on human health, greenhouse gas emissions as well as a loss of sovereignty and loss of investments for sovereign States that are customers of FN Herstal and Manroy.
6.2. AoA-SEA in a nutshell
Use-1, public version FN Herstal - Manroy 85
Analysis of Alternatives – Socio-Economic Analysis AoA – SEA IN A NUTSHELL
APPLICATION FOR AUTHORISATION
APPLICANTS: FN Herstal and Manroy USE: Use-1 Industrial use of chromium trioxide in the hard chromium coating of military small- and medium-caliber SUBSTANCE: Chromium trioxide firearms barrel bores and auxiliary parts subject to thermal, mechanical and chemical stresses, in order to provide hardness, heat resistance and thermal barrier properties, as well as corrosion resistance, adhesion and low friction properties ANALYSIS OF ALTERNATIVES
The main functional properties sough-after by FN Herstal and Manroy with chromium trioxide include: hardness, heat resistance and thermal barrier properties, corrosion resistance, efficient coverage of complex or inner shapes, preservation of tolerances, as well as chemical barrier properties, adhesion properties and friction properties.
A significant work of research carried out internally and through partnerships with external researchUsecentres-1 led to identify two potential alternative processes to hard chromium plating for the surface treatment of firearm barrel bores and auxiliary parts: depositionUseof-1chromium from a Cr(III) electrolyte (Alternative 1) and vacuum process with Physical/Chemical Vapour Deposition process (Alternative 2). The level of maturity of Alternative 1 and Alternative 2 is low. No potential alternative will be developed, industrialised and qualified before the sunset date of chromium trioxide and a twelve-year review period is needed to achieve substitution.
Loss of profits SOCIO-ECONOMIC ANALYSIS Mortality and morbidity 94% 97%
As per Art. 60(4) concerning the Socio-economic assessment route, evidence (#1u) was provided that the socio-economic benefits outweigh the risks arising Medical treatment from the use of the substance by a factor of approximately [100,000-1,000,000](#1s) 3% Non-monetised impacts of the “non use” scenario involve include the loss of markets that will be closed to FN Herstal and Manroy due to the relocation outside the EU, an increase of operating costs, stringent regulatory issues Loss of investments and safety of supply issues, impacts on human health, greenhouse gas 0.2%
emissions as well as a loss of sovereignty and loss of investments for States Relocation costs that are customers of FN Herstal and Manroy. Loss of employment 5% 0.5% Monetised impacts of the "applied for use" scenario: Monetised impacts of the "non use" scenario: € 1,106 € [100-1,000M](#1t)
Use-1, public version FN Herstal - Manroy 86
Analysis of Alternatives – Socio-Economic Analysis
6.3. Information for the length of the review period
On the basis of the arguments put forward, and in order to develop, implement and qualify a substitution process, FN Herstal and Manroy apply for a twelve-year review period.
6.4. Substitution effort taken by the Applicants if an authorisation is granted If an authorisation is granted, FN Herstal and Manroy will pursue the substitution process described in section 4.2.
Use-1, public version FN Herstal - Manroy 87
Analysis of Alternatives – Socio-Economic Analysis
7. REFERENCES
Alberini and Ščasný, Stated-preference study to examine the economic value of benefits of avoiding selected adverse human health outcomes due to exposure to chemicals in the [Alberini, 2014] European Union, FD7. Final Report - Part III: Carcinogens, Charles University in Prague (Environment Center), September 2014
Allemani, Global surveillance of cancer survival 1995–2009: analysis of individual data for 25 [Allemani, 2015] 676 887 patients from 279 population-based registries in 67 countries (CONCORD-2), Lancet, 385: 977–1010, 2015
Allsop and al, Brassey’s essential guide to military small arms - Design principles and [Allsop, 1997] operating methods, p89. Londres: Brassey’s, 1997
Anand, Hanson, Disability-adjusted life years: a critical review. Journal of Health Economics, [Anand, 1997] 16:695-702, 1997
[Audino, 2006 Audino, Use of Electroplated Chromium in Gun Barrels - US Army RDECOM-ARDEC-Benet Laboratories, DoD Metal Finishing Workshop Washington, DC 22-23 May 2006
[Benaben] Benaben, Chrome et chromage, Techniques de l’ingénieur, Référence M1615
Bielewski, Replacing Cadmium and Chromium, Institute for Aerospace Research National [Bielewski, 2011] Research Council Canada Ottawa, Ontario CANADA- RTO-AG-AVT-140, NATO Science and Technology Organization, 2011
[Bureau Fédéral Bureau Fédéral du Plan, Les multiplicateurs de production, de revenu et d’emploi 1995-2005 du Plan, 2013] – Une analyse entrées-sorties à prix constants, September 2013
Braud et al, Direct treatment costs for patients with lung cancer from first recurrence to [Braud, 2003] death in France, Pharmacoeconomics. 2003;21(9):671-9.
Chouaïd et al, Economics of the clinical management of lung cancer in France: an analysis [Chouaïd, 2004] using a Markov model, British Journal of Cancer (2004) 90, 397–402. doi:10.1038/sj.bjc.6601547
Desaigues, Rabl, Ami, Boun My Kene, Masson, Salomon, Santoni, 2007a. Monetary Value of a [Desaigues, 2007] Life Expectancy Gain due to Reduced Air Pollution: Lessons from a Contingent Valuation in France. Revue d’Economie Politique 117 (5), 675–698, 2007
[ECHA, 2008] ECHA, Guidance on Socio-Economic Analysis – Restrictions, May 2008
ECHA, Applying socio-economic analysis as part of restriction proposals under REACH - [ECHA, 2008] Workshop proceedings, Helsinki, 21-22 October 2008
ECHA, Guidance on the preparation of socio-economic analysis as part of an application for [ECHA, 2011] Authorisation, 2011
[European European Commission, G. Technology readiness levels (TRL), Horizon 2020 – WORK Commission, Programme 2014-2015 General Annexes, Extract from Part 19 - Commission Decision 2014] C(2014)4995
[Eurostat, 2015] Eurostat, Mortality and life expectancy statistics, June 2015
[EurovaQ, 2010] EurovaQ, European Value of a Quality Adjusted Life Year, Final Publishable Report, 2010
[Griffin, 2015] Griffin, Shotshell Reloading Handbook, 5th Edition; Lyman Products Corp. 2015
GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Note d’Analyse – [GRIP, 2010] Radiographie de l’Industrie de l’Armement en Belgique : mise à jour 2010, 2010.
GRIP (Groupe de Recherche et d’Information sur la Paix et la Sécurité), Les rapports du GRIP – [GRIP, 2014] Répertoire des entreprises du secteur de l’armement en Belgique, 2014.
[Holeczek et al, Holeczek, Kölle, Metzner, Report on inclusion of chromium trioxide (CrO3) in Annex XIV -
Use-1, public version FN Herstal - Manroy 88
Analysis of Alternatives – Socio-Economic Analysis
2011] Fraunhofer IPA-Institut für Produktionstechnik und Automatisierung, 2011
Hyder, Rotllant, Morrow, Measuring the burden of disease: healthy life years. American [Hyder, 1998] Journal of Public Health, 88:196-202, 1998
[IDEA Consult, Idea Consult, on behalf of European Federation for Services to Individuals (EFSI), Why invest 2012] in employment? A study on the cost of unemployment, 2012
ILO/IMF/OECD/UNECE/Eurostat/The World Bank, Consumer price index manual: Theory and [ILO, 2004] practice Geneva, International Labour Office, 2004
INSERM, INVS/CépiDC, 2012. In: Institut National du Cancer, Mortalité nationale des cancers, [INSERM, 2015] 2015
[Institut National Institut National du Cancer, Prévalence et survie nationales du cancer du poumon, 2015 du Cancer, 2015]
[Institut National Institut National du Cancer, Cancer du Poumon – Quelques chiffres, Les cancers en France en du Cancer, 2014] 2014
Mathers, Stein, Fat et al, Global Burden of Disease 2000: Version 2 methods and results, [Mathers, 2002] Global Programme on Evidence for Health Policy Discussion Paper No. 50: World Health Organization, 2002
Mc Guire, Treatment cost of non-small cell lung cancer in three European countries: [Mc Guire, 2015] comparisons across France, Germany, and England using administrative databases, Journal of Medical Economics Vol. 18, No. 7, 2015, 525–532
[Migrin] Migrin, A Review and Meta-Analysis of Utility Values for Lung Cancer, U.S. EPA
Montgomery, Watervliet, Interaction of copper-containing rotating band metal with gun [Montgomery et bores at the environment present in a gun tube - Weapons. Laboratory, Watervliet Arsenal, al, 1974] WVT-TR-74026, 1974
[Morisset, 1993] Morisset, Chromage dur et décoratif, publication Cetim, 1993
Murray, Rethinking DALYs. In: Murray, Lopez, eds. The global burden of disease. Geneva, [Murray, 1996] World Health Organization, Harvard School of Public Health, World Bank, 1996
Murray, Lopez, Progress and directions in refining the global burden of disease approach. [Murray, 1999] Geneva, World Health Organization (GPE Discussion Paper No 1), 1999
Murray, Salomon, Mathers, A critical examination of summary measures of population [Murray, 2000] health. Bulletin of the World Health Organization, 8(8):981-994, 2000
Murray, Salomon, Mathers, Lopez, Summary measures of population health: concepts, ethics, [Murray, 2002] measurement and applications. Geneva, World Health Organization, 2002
National Defense Research Committee, Hypervelocity guns and the control of gun erosion, [NDRC, 1946] Washington, 1946
[NewExt, 2003] NewExt, New Elements for the Assessment of External Costs from Energy Technologies, 2003
[OECD] OECD, Main economic indicators, Consumer Price Index – data and methods
[République République française, Bulletin officiel des annonces des marchés publics, Avis n°14-70321 française, 2014] publié le 14/05/2014, May 16th, 2014.
Simrova et al, The costs and reimbursements for lung cancer treatment among selected [Simrova, 2014] health care providers in the Czech Republic, 2014
[Rheinmetall, Rheinmetall Gmbh, Handbook on Weaponry, 1982 1982]
US Army Materiel Command, Interior ballistics of guns, Engineering design handbook – [US Army, 1965] Ballistics series, 1965
Use-1, public version FN Herstal - Manroy 89
Analysis of Alternatives – Socio-Economic Analysis
Weinstein, Stason, Foundations of cost effective analysis for health and medical practices. [Weinstein, 1977] New England Journal of Medicine, 296:716-721, 1977
World Health Organisation, Environmental Burden of Disease Series, No. 1 - Introduction and [WHO, 2003] methods, Assessing the environmental burden of disease at national and local levels, 2003
Williams, Calculating the global burden of disease: time for a strategic reappraisal? Health [Williams, 1999] Economics, 8:1-8, 1999
[Yin et al, 1999] Yin, Wang, Surface and Coatings Technology 114, 213–223, 1999
Use-1, public version FN Herstal - Manroy 90
Analysis of Alternatives – Socio-Economic Analysis
8. ANNEX – JUSTIFICATIONS FOR CONFIDENTIALITY CLAIMS
Confidential business information was blanked out in the public version in order to preserve the confidentiality of strategic data of the present AfA. The following table provides a justification for confidentiality of the blanked out data of this document.
BLANKED OUT PAGE JUSTIFICATION FOR CONFIDENTIALITY ITEM REFERENCE NUMBER Strategic data: the blanking of these data is made 8, 62, 64, 65, #1 necessary by the blanking of data concerning the 79, 81, 83 profits of the Applicants. Strategic data: the blanked out data are strategic #2 25, 33 process parameters. Strategic data: the blanked out data concern future #3 50, 51 innovations and cannot be publicly disclosed.
Table 45. Justifications for confidentiality claims
Please note that, wherever possible, and in order to not affect the understanding of the application, an effort was made to provide range of values for key confidential data. These data ranges are presented in square brackets, e.g. [10-100].
Use-1, public version FN Herstal - Manroy 91
Analysis of Alternatives – Socio-Economic Analysis
9. APPENDIXES
9.1. Main competitors of FN Herstal
MACHINE COUNTRY COMPETITOR HANDGUNS RIFLES GUNS Abu Dhabi Caracal X X Glock X Austria Steyr X Taurus X Brazil Imbel X Canada Colt Canada X X Czech Republic Ceska Zbrojovka X X Croatia IM Metal Company X Finland Valmet X Sako-Beretta X Heckler & Koch X X X Germany Sig Sauer X X Walther X India Ordnance Factory Board X X Italy Beretta X X Israel IWI X X X Japan Howa X Korea Daewoo X X Malaysia SMEO X Poland Fabryka Broni Łucznik X Singapore ST Kinetics X X South Africa Denel Island X X Switzerland KRISS Arms AG X Colt Defense X X General Dynamics X Manroy USA X X Barret X US Ordnance X Sig Sauer USA X X Smith & Wesson X X United States Springfield Armory X ADCOR Defense X Lewis Machine & Tool X Ruger X X Knight’s Armament X LWRC & Rock Rivers Arms X Ohio Ordnance Works, Inc. X
Table 46. Main competitors of FN Herstal, by country and product categories
Use-1, public version FN Herstal - Manroy 92
Analysis of Alternatives – Socio-Economic Analysis
9.2. Focus on barrel failure modes The decreased hit probability may arise from three types of barrel fatigue failure modes91,92,93: - forcing cone wear, - copper deposit, - Muzzle wear. These three failure modes are illustrated in Figure 7 below and described in what follows:
Figure 12. Barrel fatigue failure modes
❶ Forcing cone wear The forcing cone is the beginning of the rifling in the barrel bore and the interference between the projectile jacket and the barrel (called swaging). The main purpose for rifling the barrel is to stabilize the projectile by rotation when it exits the barrel. Before the forcing cone, the projectile has a “free” fly; it is not constrained and hence it is accelerated without being guided. In case of wear of the forcing cone, the projectile is not sealed anymore in the barrel. Combustion gases can escape around the projectile, resulting in a decreased projectile velocity at the muzzle. Additionally, since the projectile is not constrained and has a “free” fly, when the rifling eventually starts it is possible that the projectile is not aligned anymore with the barrel axis. Hence, when exiting the muzzle, the projectile rotation is not aligned with its symmetry axis and the projectile loses stability. At short striking distance, it is noticed by an obliquely striking mark. At longer range, the projectile drag coefficient increases rapidly and the projectile is not stable anymore. This phenomenon is best described by barrel diameter measurements and barrel endoscopic pictures. Barrel diameter is measured with reference (barrel diameter 0) at muzzle. As described in Figure 13 below, the barrel wear is progressing from the chamber towards the barrel muzzle.
91 Allsop and al, Brassey’s essential guide to military small arms - Design principles and operating methods, p89. Londres: Brassey’s, 1997 92 Hypervelocity guns and the control of gun erosion, Washington: National Defense Research Committee, 1946 93 Handbook on Weaponry, Rheinmetall Gmbh, 1982
Use-1, public version FN Herstal - Manroy 93
Analysis of Alternatives – Socio-Economic Analysis
Figure 13. Barrel wear as a function of barrel length, for new and end-of-life barrels
The corresponding barrel bore pictures are represented below.
Figure 14. Barrel bore pictures, for new barrel (left) and end-of life-barrel (right)
This failure mode encompasses nearly all barrels fatigue failures encountered.
❷ Copper deposit Copper deposit is related to the composition of the projectile jacket, made of brass. Due to the high temperature flame, the brass sublimates from the projectile jacket and deposits on the barrel. The deposits preferably fill the barrel groove, and could lead to a reduced bore diameter. Because the copper is filling the grooves, the rifling is not effective anymore. Projectile stabilisation by rotation is harmed. A similar phenomenon to the one described in “① Forcing cone wear” occurs, projectile becomes unstable. This phenomenon is best described by the following pictures (copper deposit is the blue part of the picture).
Use-1, public version FN Herstal - Manroy 94
Analysis of Alternatives – Socio-Economic Analysis
Figure 15. Copper deposit (blue part of the picture)
Barrel failure due to copper deposit is very rarely encountered. The main parameter that leads to excessive copper deposits is ammunition characteristics: brass and powder composition. It can also be avoided by appropriate barrel maintenance.
❸ Muzzle wear Muzzle wear occurs when the projectile centrifugal forces become very important, when the projectile jacket is hard or when the projectile jacket is worn out and the hard projectile core rubs the barrel. The centrifugal forces are proportional to the projectile velocity. The projectile velocity is at its maximum at the muzzle. When the muzzle erodes at a faster rate than the rest of the barrel, the conical shape of the bore is inversed: the projectile is not guided (swaged) when exiting the barrel muzzle. Similar phenomenon to the one described in “① Forcing cone wear” occurs and projectile becomes unstable. Muzzle wear occurs for hard jacket projectiles with velocities larger than 950m/s. Such conditions are rarely encountered for the ammunition calibers used at FN Herstal.
Use-1, public version FN Herstal - Manroy 95
Analysis of Alternatives – Socio-Economic Analysis
9.3. DGA’s position for the maintained use of hexavalent chromium for barrel bore hard chromium plating of small-calibre firearms
Use-1, public version FN Herstal - Manroy 96
Analysis of Alternatives – Socio-Economic Analysis
Use-1, public version FN Herstal - Manroy 97
Analysis of Alternatives – Socio-Economic Analysis
Use-1, public version FN Herstal - Manroy 98
Analysis of Alternatives – Socio-Economic Analysis
9.4. Framework for the export of armament
9.4.1. Belgian and European legal framework LAW CONTENT On the import, export, transit and the fight against the trafficking of arms, ammunition and equipment intended specifically for military use or law Loi du 5 août 1991 enforcement and related technology. This law establishes the general framework of export transactions, import and transit of weapons and military equipment in Belgium. Amending the law of 5 August 1991 on the import, export, transit and the Arrêté royal du 25 mars fight against the trafficking of arms, ammunition and equipment intended 2003 specifically for military use or law enforcement and the related technology. This law regulates brokerage operations. Amending the law of 5 August 1991 on the import, export, transit and the Loi du 26 mars 2033 fight against the trafficking of arms, ammunition and equipment intended specifically for military use or law enforcement and the related technology Amending the Royal Decree of 8 March 1993 regulating the import, export Arrêté royal du 2 avril and transit of arms, ammunition and equipment intended specifically for 2003 military use and related technology. Relating to the license under section 10 of the Act of August 5, 1991 on the Arrêté royal du 16 mai import, export, transit and the fight against the trafficking of arms, 2003 ammunition and equipment intended specifically for military use or law enforcement and related technology. Loi spéciale du 12 août Amending the Special Law of 8 August 1980 on institutional reforms. 2003 On the import, export, transit and transfer of civilian weapons and defense- Décret du 21 juin 2012 related products On all firearms, ammunition and spare parts with the exception of arms and Directives européennes ammunition, their parts and military equipment. These guidelines allow the 91/477/CEE et introduction of simplified procedures in the context of transactions within 93/15/CEE the EU, on hunting, sports and defense weapons (including parts, components and ammunition). Directive européenne Amending Directive 91/477 / EEC. This Directive establishes a system of 2008/51/CE traceability for civilian use weapons. Simplifying terms and conditions of transfers of defense-related products Directive 2009/43/CE within the Community Règlement européen Establishing a Community system of export control of goods and dual-use 428/2009 technologies Amending Regulation 428/2009. This Regulation introduces five new General Export Authorisations of the Règlement 1232/2011 Union and provides more uniformity regarding the use and control of such authorization. Implementing Article 10 of the UN Protocol against the Illicit Manufacturing of and Trafficking in Firearms, Their Parts and Components and Ammunition, supplementing the UN Convention against transnational Règlement 258/2012 organized crime (Protocol on weapons fire), and establishing export authorization and measures regarding the import and transit of firearms, their parts and components and ammunition.
Table 47. Belgian legal framework related to the export of armament
Use-1, public version FN Herstal - Manroy 99
Analysis of Alternatives – Socio-Economic Analysis
9.4.2. European Code of Conduct on Arms Export The European Code of Conduct on Arms Export defines eight main criteria for the arms export:
CRITERION CONTENT Respect for the international commitments of EU member states, in particular the sanctions decreed by the UN Security Council and those decreed by the Community, Criterion 1 agreements on non-proliferation and other subjects, as well as other international obligations. Criterion 2 The respect of human rights in the country of final destination The internal situation in the country of final destination, as a function of the Criterion 3 existence of tensions or armed conflicts. Criterion 4 Preservation of regional peace, security and stability. The national security of the member states and of territories whose external Criterion 5 relations are the responsibility of a Member State, as well as that of friendly and allied countries. The behaviour of the buyer country with regard to the international community, as Criterion 6 regards in particular to its attitude to terrorism, the nature of its alliances and respect for international law. The existence of a risk that the equipment will be diverted within the buyer country Criterion 7 or re-exported under undesirable conditions. The compatibility of the arms exports with the technical and economic capacity of the recipient country, taking into account the desirability that states should achieve Criterion 8 their legitimate needs of security and defence with the least diversion for armaments of human and economic resources.
Table 48. Criteria of the European Code of Conduct on Arms Export94
94 European Union – The Council, European Union Code Of Conduct On Arms Exports, 5 June 1998
Use-1, public version FN Herstal - Manroy 100