Code of Business Conduct and Ethics

This Code of Business Conduct and Ethics (the “Code”) sets forth legal and ethical standards of conduct for officers and employees of Appliance Recycling Centers of America, Inc. (“ARCA”), its subsidiaries and affiliates (collectively “ARCA” or the “Company”). This Code is intended to deter wrongdoing and to promote the conduct of all Company business in accordance with high standards of integrity and in compliance with all applicable laws and regulations. This Code applies to the Company and all of its subsidiaries and other business entities controlled by it worldwide.

If you have any questions regarding this Code or its application to you in any situation, you should contact your manager or Human Resources.

I. Compliance with Laws, Rules and Regulations

The Company requires that all employees and officers comply with all laws, rules and regulations applicable to the Company wherever it does business. You are expected to use good judgment and common sense in seeking to comply with all applicable laws, rules and regulations and to ask for advice when you are uncertain about them.

If you become aware of the violation of any law, rule or regulation by the Company, whether by its officers, employees, or any third party doing business on behalf of the Company it is your responsibility to promptly report the matter to your manager or Human Resources. While it is the Company’s desire to address matters internally, nothing in this Code should discourage you from reporting any illegal activity, including any violation of the securities laws, antitrust laws, environmental laws or any other federal, state or foreign law, rule or regulation, to the appropriate regulatory authority. Employees and officers shall not discharge, demote, suspend, threaten, harass or in any other manner discriminate or retaliate against an employee because he or she reports any such violation, unless it is determined that the report was made with knowledge that it was false. This Code should not be construed to prohibit you from testifying, participating or otherwise assisting in any state or federal administrative, judicial or legislative proceeding or investigation.

II. Conflicts of Interest

Employees and officers must act in the best interests of the Company. You must refrain from engaging in any activity or having a personal interest that presents a “conflict of interest.” A conflict of interest occurs when your personal interest interferes, or appears to interfere, with the interests of the Company. A conflict of interest can arise whenever you, as an officer or employee, take action or have an interest that prevents you from performing your Company duties and responsibilities honestly, objectively and effectively.

For example:

• No employee or officer shall perform services as a consultant, employee, officer, director, advisor or in any other capacity for, or have a financial interest in, a direct competitor of the Company, other than services performed at the request of the Company and other than a financial interest representing less than one percent (1%) of the outstanding shares of a publicly-held company.

• No employee or officer shall use his or her position with the Company to influence a transaction with a supplier or customer in which such person has any personal interest, other than a financial interest representing less than one percent (1%) of the outstanding shares of a publicly-held company.

• Additional guidelines applicable to officers are attached as Exhibit A hereto.

It is your responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest to Human Resources, or, if you are an executive officer, to the Audit Committee and/or Board of Directors.

The Human Resources manager will bring all related party transactions to the attention of the Audit Committee; the Audit Committee is responsible for reviewing and approving any related party transactions. All other potential conflicts of interest will be assessed by the Human Resources manager and raised to the Board of Directors if either or both such department heads believe that a conflict of interest may exist.

III. Insider Trading

Employees and officers who have material non-public information about the Company or other companies, including our suppliers and customers, as a result of their relationship with the Company are prohibited by law and Company policy from trading in securities of the Company or such other companies, as well as from communicating such information to others who might trade on the basis of that information. To help ensure that you do not engage in prohibited insider trading and avoid even the appearance of an improper transaction, the Company has adopted an Insider Information and Insider Trading policy, available in your Employee Handbook.

If you are uncertain about the constraints on your purchase or sale of any Company securities or the securities of any other company that you are familiar with by virtue of your relationship with the Company, you should consult with the Vice President - Finance before making any such purchase or sale.

IV. Confidentiality

Employees and officers must maintain the confidentiality of confidential information entrusted to them by the Company or other companies, including our suppliers and customers, except when disclosure is authorized by a supervisor or is legally mandated. Unauthorized disclosure of any confidential information is prohibited. Additionally, employees and officers should take appropriate precautions to ensure that confidential or sensitive business information, whether it is proprietary to the Company or another company, is not communicated within the Company except to employees or officers who have a need to know such information to perform their responsibilities for the Company.

Third parties may ask you for information concerning the Company. Employees and officers (other than the Company’s authorized spokespersons) must not discuss internal Company matters with, or disseminate internal Company information to, anyone outside the Company, except as required in the performance of their Company duties and after an appropriate confidentiality (non-disclosure) agreement is in place. This prohibition applies particularly to inquiries concerning the Company from the media, market professionals (such as securities analysts, institutional investors, investment advisers, brokers and dealers) and security holders. All responses to inquires on behalf of the Company must be made only by the Company’s authorized spokespersons.

You also must abide by any lawful obligations that you have to your former employer. These obligations may include restrictions on the use and disclosure of confidential information, restrictions on the solicitation of former colleagues to work at the Company and non-competition obligations.

V. Honest and Ethical Conduct and Fair Dealing

Employees and officers should endeavor to deal honestly, ethically and fairly with the Company’s suppliers, customers, competitors and other associates. Statements regarding the Company’s products and services must not be untrue, misleading, deceptive or fraudulent. You must not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice.

VI. Protection and Proper Use of Corporate Assets

Employees and officers should seek to protect the Company’s assets. Theft, carelessness and waste have a direct impact on the Company’s financial performance. Employees and officers must use the Company’s assets and services solely for legitimate business purposes of the Company and not for any personal benefit or the personal benefit of anyone else.

Employees and officers must advance the Company’s legitimate interests when the opportunity to do so arises. You must not take for yourself personal opportunities that are discovered through your position with the Company or the use of property or information of the Company.

VII. Gifts and Gratuities

The use of Company funds or assets for gifts, gratuities or other favors to employees or government officials is prohibited, except to the extent such gifts are in compliance with applicable law, not prohibited under contract terms, nominal in amount and not given in consideration or expectation of any action by the recipient.

An employee or officer must not accept, or permit any member of his or her immediate family to accept, any gifts, gratuities, or favors from any customer, supplier or other person doing or seeking to do business with the Company, other than items of nominal value, i.e., items worth less than $250. Any gifts that are not of nominal value should be returned immediately and reported to your manager. If immediate return is not practical, they should be given to the Company for charitable disposition or such other disposition as the Company believes appropriate in its sole discretion.

Tips may be accepted if they are freely offered by the customer, not solicited, and are under $25.00.

As an example, gifts and entertainment that generally are acceptable include: (1) lunch and/or dinner; (2) gifts of small value such as calendars, pens or candy; (3) tickets to events (e.g., sports and arts); (4) gifts of holiday food items. In addition, day outings such as golf, fishing, manufacturer incentive programs, etc. are acceptable with prior approval from the employee’s manager.

Common sense and moderation should prevail in business entertainment engaged in on behalf of the Company. Employees and officers should provide, or accept, business entertainment to or from anyone dong business with the Company only if the entertainment is infrequent, modest and intended to serve legitimate business goals.

Bribes and kickbacks are criminal acts, strictly prohibited by law. You must not offer, give, solicit or receive any form of bribe or kickback anywhere in the world.

VIII. Accuracy of Books and Records and Public Reports

Employees and officers must honestly and accurately report all business transactions. You are responsible for the accuracy of your records and reports. Accurate information is essential to the Company’s ability to meet legal and regulatory obligations.

All Company books, records and account shall be maintained in accordance with all applicable regulations and standards and accurately reflect the true nature of the transactions they record. The financial statements of the Company shall conform to generally accepted accounting rules and the Company’s accounting policies. No undisclosed or unrecorded account or fund shall be established for any purpose. No false or misleading entries shall be made in the Company’s books or records for any reason, and no disbursement of corporate funds or other corporate property shall be made without adequate supporting documentation.

It is the policy of the Company to provide full, fair, accurate, timely and understandable disclosure in reports and documents filed with, or submitted to, the Securities and Exchange Commission and in other public communications.