Impact of RoHS Legislation and Resulting Customer Requirements on Industry Anne Johnson Regulatory Affairs Associate 3M Optical Systems Division June 24, 2007

Agenda Background –RoHS –3M and Optical Systems Division Actions that 3M took to verify compliance –Scope of compliance Unexpected effects –Customer requirements –JIG/JGPSSI strategies help Effects of a “new/different” RoHS law

RoHS: Restriction of Hazardous Substances European Union Directive on the Restriction of Hazardous Substances (RoHS) in Electrical and Electronic Equipment, 2002/95/EC Prohibits six hazardous substances above certain de minims levels –Four heavy metals—lead, mercury, cadmium, hexavalent chromium –Two polybrominated flame retardant classes—PBBs and PBDEs –EXCEPT for certain exempt applications –De minimis levels Cadmium – 0.01% (100 ppm) All others – 0.1% (1000 ppm) De minimis thresholds apply to any “homogeneous material” E.g., a material that cannot be “mechanically disjointed” into different materials

3M Background 3M is a diversified technology company with a worldwide presence in the following markets: –Consumer and office –Display and graphics –Electro and communications –Health care –Industrial and transportation –Safety, security and protection services All 3M businesses have been impacted by RoHS laws.

3M Optical Systems Division Tier 3 supplier to the electronics industry OEMs Manufacture optical films to increase brightness of LCD displays Work with all tier levels of the electronics industry Our suppliers are chemical manufacturers and article manufacturers

Activities 3M Completed to Ensure Compliance 3M developed a new RoHS General Specification that is required for all new materials Involves –Legal –Sourcing –Supply Chain –Raw Material Coordinators –Regulatory

Activities 3M Completed to Ensure Compliance Modified chemical data management systems to allow for RoHS Certifications and created additional databases to store supporting data and for compliance tracking Involves: –IT –Software company –Legal –Regulatory

Activities 3M Completed to Ensure Compliance Created a supplier questionnaire to request RoHS certifications and additional information. Involved: –Legal –Regulatory –Sourcing

Activities 3M Completed to Ensure Compliance Researched and evaluated 3 rd party analytical labs that would be approved for 3M to use for RoHS testing when supplier information can not be gathered or for high risk materials Involved: –3M Environmental Science and Assessment &Lab –3M Corporate Analytical Research Lab –Regulatory

Activities Divisions Completed to Ensure Compliance Establish list of products sold in Europe or components sold for equipment that may be sold into Europe Involves –Business management –Export services –European business teams –Regulatory

Activities Divisions Completed to Ensure Compliance Determine all homogeneous inputs to product and the suppliers for those inputs Involves: –Product development –Manufacturing –Regulatory –Raw material coordinators –Sourcing –Supply Chain

Activities Divisions Completed to Ensure Compliance Send Compliance letter to suppliers of each input, review responses, follow-up, and store information Involves: Regulatory Sourcing IT

Activities Divisions Completed to Ensure Compliance Identify non-compliant and compliant materials. If materials are non-compliant determine if supplier will re-formulate, if 3M needs to find a new supplier or 3M will discontinue product Involves: Regulatory Sourcing Business teams

Activities Divisions Completed to Ensure Compliance Establish a control plan to maintain compliance. Involves: Raw material coordinators Sourcing Manufacturing Supply Chain Quality engineers Regulatory

Activities Divisions Completed to Ensure Compliance Communicate RoHS Status of products when requested Involves: –Marketing Communications –Customer Service –Tech Service –Regulatory

Reality Check All of these activities had to be done by 3M Optical Systems Division to ensure compliance. 3M Optical Systems did not have any film products that were out of compliance with RoHS to start with.

Additional Impacts Due to RoHS Adding staff to verify and manage Increased factory costs- experimental costs Additional inventory /Scrap costs Supplier/ raw material costs – –Customers prefer the cost of RoHS compliance NOT to be passed on to them! Manufacturing costs– new equipment Product numbering/ naming changes New requirement for new products Resources from new product development re-distributed to re-formulation teams Long lead times to get compliant raw materials Supplier challenges- hard to get information!

Part Number/ Product Name Challenges Changing part numbers for compliant products/ parts – may be many part numbers for one item Need to change all prints and documentation Involves IT, supply chain, marketing communications groups Resistance by some Businesses to do this but... – In some cases, customers demand this. – Changes are needed to make documentation clean. – Helps differentiate between non compliant and compliant product line.

Product Launch Challenges New Product Development –Resource issue for labs –New product teams are being slowed down or cancelled –The same engineers, designers, and chemists are pulled off new product teams to work on RoHS compliance for existing models.

Supply Chain Challenges Long lead times to get compliant inputs May have to find alternate suppliers Inventory management- compliant and non-compliant part separation Can slow down supply chain compliant parts may be provided later than expected

Supplier Challenges Suppliers do not understand RoHS or do not response to requests for information Process steps may involve: 1.Following up with suppliers: this may require weekly or daily communication 2.Simplifying requirements or requests 3.Visiting the supplier 4.Escalating the response up the management chain and involving sourcing organizations

Scope Question Seen by 3M as a Supplier and a Customer Companies often get requests for products where the intended use is not intended to be WEEE- –What are the legal responsibilities by responding to RoHS requests for these types of products? –What is the affect on competitiveness not to respond?

Additional Outcomes of RoHS that have Impacted Optical Systems Division RoHS and the introduction of regulation in the electronics industry has caused our customers to develop their own EHS requirements far beyond the requirements of RoHS legislation Complying with the law is not enough to participate in the electronics industry

Additional Customer Requirements “Green” agreement and auditing programs from customers –These programs are very extensive and require a full time person to complete and manage Alternately, many are developing their own environmental management systems to avoid a multitude of customer systems

Additional Customer Requirements Increased customer requests to respond with information about products, manufacturing, packaging, internal systems, etc. Customer requirements go beyond RoHS Chemicals and RoHS Threshold limits –Banned/ Restricted/ Investigation lists –Can include hundreds of materials Typically, 3-10 a day reach Optical Systems Regulatory and Legal for customers that will not accept standard responses

Additional Customer Requirements Customers are requiring testing for RoHS materials and others as frequently as every 6 months –Not required by law Customers are requiring RoHS status identification on packaging, packing slips,etc. for all materials –Not required by law –China Law now requires for final EEE placed on the market

Additional Activities Optical Systems Completes based on Customer Requirements Increased regulatory staff 300% Developed a new database for product EHS information Developed a database for handling, tracking, and monitoring customer requests Test all products for ~50 chemicals of interest when launched Re-test all products for RoHS, halogens, and new chemicals of concern every 6 months

Additional Activities Optical Systems Completes based on Customer Requirements Added a 3M Environmental Marketing Claims Committee approved RoHS Directive Compliant Label to product packaging Require a customer EHS requirement review of all products in development Developed a Chemicals of Interest Team to monitor customer EHS requirements and evaluate their use in our products

Current Activities to Help Manage the Customer Requirements Optical Systems is active in Joint Industry Guide (JIG) / JGPSSI activities –JIG sets a list of EHS requirements for products in the electronics industry –If more companies will use this list of requirements management of EHS issues in the industry will be much simpler It is highly recommended to support this and other harmonization efforts

Impacts of Future Regulations If new laws add a chemical, lower a limit for existing RoHS chemicals or change the scope, the entire process for compliance will start over –New supplier requests –New reformulation efforts –New communication efforts If new laws add labeling requirements, this will add an extra dimension. Different labeling requirements by different countries may become very difficult to manage.

Impacts of Future Regulations Adding packaging to the RoHS scope adds another replicates the process for compliance as adding a chemical would. However, packaging suppliers are most likely different than product raw materials suppliers so supplier education may be required and lead to long lead-times for compliance

Summary There has been an incredible amount of work completed and money spent by industry to be in compliance with EU RoHS. Customer requirements are having a significant impact on industry and harmonization of requirements is encouraged Additional RoHS laws or changes to the EU RoHS law would have a heavy impact on industry

Questions?