1. A Butzel Long Presentation The TREAD Act: “Early Warning Reporting” and What it Means to YOU! September 10, 2002 Seoul, South Korea Part III

2. A Butzel Long Presentation

3. Transportation Recall Enhancement, Accountability, And Documentation Act (“TREAD”)  Signed into law November 1, 2000  Not just tires

4. A Butzel Long Presentation Purpose of Presentation Discuss the Latest on the TREAD Act “Early Warning Reporting” and What it Means to YOU!

5. A Butzel Long Presentation Butzel Long A Michigan Based Law Firm Full-Service Law Firm Litigation (All) Product Liability Commercial Business EmploymentArbitration Transaction (All) ImmigrationCorporate International Business Labor

6. A Butzel Long Presentation LEX MUNDI The World’s Leading Association of Independent Law firms 158 member law firms around the globe Vehicle for members to extend their capabilities to serve client needs worldwide Lex Mundi Firm Hwang Mok Park Korea - Hwang Mok Park

7. A Butzel Long Presentation Overview of Presentation  “Early Warning” Reporting Requirements and Developments Since April 9, 2002 Presentation –Who needs to report? –What to report? –When to report?  How Korean Companies Should Prepare  Questions and Answers

8. A Butzel Long Presentation The Arrival Of “TREAD”  International Scope  More than just OEMs have duty to report  Coordination  Record-keeping  Reporting

9. A Butzel Long Presentation Transportation Recall Enhancement, Accountability, And Documentation Act (“TREAD”)  Signed into law on November 1, 2000  “Early Warning” reporting is here!

10. A Butzel Long Presentation TREAD : “Early Warning” Rulemaking Process  Congressional Legislation does not define details or substance of reporting  Rulemaking delegated to NHTSA Administrator to provide details of what to report

11. A Butzel Long Presentation “Early Warning” History  TREAD Act signed into law November 1, 2000  NHTSA issues ANPRMJanuary 22, 2001  KITA Presentation IMay 22, 2001  NHTSA issues NPRMDecember 21, 2001  KITA Presentation IIApril 9, 2002  Final rule statutory deadline June 30, 2002  NHTSA issues final rule July 3, 2002  Effective date of final ruleAugust 9, 2002  KITA Presentation IIISeptember 10, 2002  First reporting period begins April 1, 2003

12. A Butzel Long Presentation Purpose of TREAD Act “Early Warning”  TREAD requires an elaborate system of “Early Warning” reporting  Legislative Intent: To develop an efficient means of identifying safety related defects without imposing unreasonable burdens on the industry.

13. A Butzel Long Presentation Purpose of TREAD Act “Early Warning” "Under this rule, motor vehicle and motor vehicle equipment manufacturers will be required to report information that will assist NHTSA in promptly identifying defects related to motor vehicle safety." – Dr. Jeffrey Runge, NHTSA Administrator

14. A Butzel Long Presentation The Focus Of TREAD  Reporting requirements  Legislative and regulatory follow-up  Civil and criminal penalties

15. A Butzel Long Presentation Key Issues  Who needs to report?  What to report?  When to report?

16. A Butzel Long Presentation Current Reporting Requirements  Overseas Experience  Regarding motor vehicles or motor vehicle equipment identical or substantially similar to a vehicle or vehicle equipment sold in the U.S., the manufacturer must report: (1) a decision by a foreign government to conduct a safety recall or safety campaign; and (2) a determination by the U.S. manufacturer to conduct a safety recall or safety campaign in a foreign country

17. A Butzel Long Presentation “Early Warning Reporting”  TREAD requires an elaborate matrix of “Early Warning Reporting”  Information to be reported includes: –Warranty and claims data –Incidents involving serious injury or death alleged or proven to be caused by vehicle or equipment defects –Other data that may assist in identifying safety- related defects

18. A Butzel Long Presentation Who Must Report Under “Early Warning?” All manufacturers of motor vehicles andAll manufacturers of motor vehicles and motor vehicle equipment are within the scope of the “Early Warning” reporting requirements  U.S. vehicles and equipment and  “Substantially similar” foreign vehicles and equipment

19. A Butzel Long Presentation Final Rule  Divide manufacturers into 2 groups  Different reporting requirements

20. A Butzel Long Presentation Division Of Manufacturers Into Two Groups Group 1:  Manufacturers of motor vehicles who produce, import, offer for sale or sell in the U.S. 500 or more of a particular vehicle category annually –4 categories of vehicles:  light vehicles  medium-heavy vehicles and buses  motorcycles  trailers  All manufacturers of child restraint systems (CRS)  All manufactures of tires

21. A Butzel Long Presentation Group 2:  Manufacturers of motor vehicles who produce, import, offer for sale or sell in the U.S. 499 or less vehicles annually  All manufacturers of original motor vehicle equipment and replacement equipment (other than CRS and tires) Division Of Manufacturers Into Two Groups

22. A Butzel Long Presentation Examples of Group 2 Manufacturers  A steering wheel assembly may include: assembly may include: – –air bag – –horn control – –turn signal control – –wiper control – –ignition switch – –cruise control – –lighting controls – –as well as associated wiring Many of these units are assembled by a supplier, often with components from various manufacturers. Each of these fabricators or assemblers is considered a manufacturer of motor vehicle equipment.

23. A Butzel Long Presentation Different Reporting Requirements Group 1:  Each claim or notice of death in the U.S. potentially caused by a defect  Each claim of death in a foreign country potentially caused by a defect in a product identical or substantially similar to a product offered for sale in the U.S.  Customer Satisfaction Campaigns, Consumer advisories, recalls, or activities regarding repair/replacement (production of documents)  Each claim or notice of injury occurring in the U.S.

24. A Butzel Long Presentation Different Reporting Requirements Group 1 (continued):  Claims for property damage occurring in the U.S. (certain compounds; excluding CRS)  Aggregate number of consumer complaints and warranty claims occurring in the U.S.  Total number of field reports from employees, dealers and fleets related to potential defects in the U.S.  Production information

25. A Butzel Long Presentation Group 2:  Each claim or notice of death in the U.S. potentially caused by a defect  Each claim of death in a foreign country potentially caused by a defect in a product or in an identical or substantially similar product offered for sale in the U.S. Different Reporting Requirements

26. A Butzel Long Presentation “Substantially Similar” Defined (49 CFR 579.4 (d)(2))  Motor vehicle equipment that is sold or in use outside the U.S. and: –Contains one or more components or systems that are the same as in the U.S. –Performs the same function –Regardless of whether the part numbers are identical

27. A Butzel Long Presentation Is it “Substantially Similar?” Industry Question: “[I]f the only commonality is a single type of fastener that neither failed nor contributed to the incident, are the components or equipment substantially similar?” NHTSA’s Answer: “[T]he equipment incorporating the fasteners would be substantially similar for early warning reporting unless the claim specifically identified a non- common component as the source of the failure.”

28. A Butzel Long Presentation Example of Claim that Must be Reported Please Remember…  The following slide is just a hypothetical  Every case is unique  The statutory intent is very broad  Consider seeking legal counsel

29. A Butzel Long Presentation Example of Claim that Must be Reported Question: Must a Korean component manufacturer report under “Early Warning” if it receives notice of a death in a written request for relief based on allegations of the failure of a component? Answer: YES! The term “claim” is defined very broadly.

30. A Butzel Long Presentation Definition of “Claim”  written request or written demand for relief,  A written request or written demand for relief, including money or other compensation, assumption of expenditures, or equitable relief, related to a motor vehicle crash, accident, the failure of a component or system of a vehicle or an item of motor vehicle equipment, or a fire originating in or from a motor vehicle or a substance that leaked from a motor vehicle.

31. A Butzel Long Presentation Definition of “Claim”  demand in the absence of a lawsuit, a complaint initiating a lawsuit, an assertion or notice of litigation, a settlement, covenant not to sue or release of liability in the absence of a written demand, and a subrogation request.  Claim includes, but is not limited to, a demand in the absence of a lawsuit, a complaint initiating a lawsuit, an assertion or notice of litigation, a settlement, covenant not to sue or release of liability in the absence of a written demand, and a subrogation request.

32. A Butzel Long Presentation Definition of “Claim”  regardless of any denial or refusal to pay it,  A claim exists regardless of any denial or refusal to pay it, and regardless of whether it has been settled or resolved in the manufacturer's favor. The existence of a claim may not be conditioned on the receipt of anything beyond the document(s) stating a claim.

33. A Butzel Long Presentation Definition of “Claim”  Claim does not include demands related to asbestos exposure, to emissions of volatile organic compounds from vehicle interiors, or to end-of-life disposal of vehicles, parts or components of vehicles, equipment, or parts or components of equipment.

34. A Butzel Long Presentation Example of Claim that Must be Reported Question: what information must a Korean component manufacturer report under “Early Warning?”

35. A Butzel Long Presentation Information that Must Be Reported  Information about deaths to be reported for each incident: –make, model, and model year of the vehicle or equipment –date of the incident –number of deaths and injuries that occurred –name of the State in the United States or the foreign country in which the incident occurred –identification of each component or system that allegedly contributed to the incident or the death reported –the VIN of the vehicle (or the TIN of the tire, as applicable)

36. A Butzel Long Presentation NHTSA “Early Warning” Templates General Reporting Information InfoNameInfo Value ManufacturerName ReportQuarter ReportYear ReportNameMiscVehicleAndEquip ReportVersion ReportGeneratedDate ReportContactName ReportContactEmail ReportContactPhone NHTSATemplateRevisionNo1.01 http://www.nhtsa.dot.gov/cars/rules/EWR/MiscEquipmentVehicles.xls

37. A Butzel Long Presentation NHTSA “Early Warning” Templates Death Reporting ONLY! http://www.nhtsa.dot.gov/cars/rules/EWR/MiscEquipmentVehicles.xls ID MAKeMAKe MODElMODEl MODELYEARMODELYEARVIN INCIDENTDATEINCIDENTDATE NUMDEATHSNUMDEATHS NUMINJURIESNUMINJURIES STATEORFCNTRySTATEORFCNTRy SYSORCOMPASYSORCOMPA SYSORCOMPBSYSORCOMPB SYSORCOMPCSYSORCOMPC SYSORCOMPDSYSORCOMPD SYSORCOMPESYSORCOMPE

38. A Butzel Long Presentation Record Keeping  Record retention requirements expanded  Equipment manufacturers to retain records related to incidents referred to in claims and notices involving deaths for 5 years  Applies to records in your possession, generated or acquired on or after August 9, 2002

39. A Butzel Long Presentation Documents Must Be Submitted 49 CFR 579.5 (former 573.8)  Equipment manufacturers must furnish to NHTSA copies of: –All notices, bulletins and other tangible communications (i.e., non-verbal) –Sent to more than one manufacturer, distributor, dealer or purchaser

40. A Butzel Long Presentation Documents Must Be Submitted 49 CFR 579.5 (former 573.8)  Equipment manufacturers must furnish to NHTSA copies of any communication regarding any defect in its equipment including: –any failure or malfunction beyond normal deterioration in use, or –any failure of performance, or –any flaw or unintended deviation from design specifications  Whether or not such defect is safety related

41. A Butzel Long Presentation Documents Must Be Submitted 49 CFR 579.5 (former 573.8)  Reporting requirements are not avoided by making common communications to customers in separate months  Timing for the report is triggered by the issuance of the communication to a second customer  Law Department should be consulted in all cases in advance of issuing bulletins or other tangible communications to multiple customers

42. A Butzel Long Presentation Summary Of Reporting Requirements Information that must be reportedLarge Volume Manufacturers of Motor Vehicles Manufacturers of Child Safety Restraints Manufacturers of Tires Small Volume Manufacturers of Motor Vehicles Manufacturers of Motor Vehicle Equipment Death identified in a "claim" YES Death identified in a "notice" YES Death occurring in foreign country identified in a "claim" YES Injury identified in a "claim" YES NO Injury identified in a "notice" YES NO Property damage identified in a claim YESNOYESNO Customer complaints YES Combined with Warranty Claims NO Warranty claims YES Adjustments for Tire Mfrs NO Field reports YES NO Production YES NO Documents sent or made available to more than one dealer, distributor, owner, purchaser, lessor or lessee with respect to customer satisfaction campaigns, consumer advisories, recalls, or other YES One time historical data report YES NO

43. A Butzel Long Presentation Procedural Requirements How And When “Early Warning” Information Must Be Reported

44. A Butzel Long Presentation How and When “Early Warning” Information Must Be Reported  Electronic submission in specified format  4 reporting periods each calendar year  Documents must be submitted no later than 30 days after the end of the calendar quarter  First report covers second quarter of 2003

45. A Butzel Long Presentation How and When “Early Warning” Information Must Be Reported One-time requirement (currently Group 1 only): One-time requirement (currently Group 1 only): – By quarter, warranty claims, adjustments and field reports for three- year period April 1, 2000 through March 31, 2003 – Due September 30, 2003

46. A Butzel Long Presentation Important “Early Warning” Dates TREAD Act signed into law November 1, 2000 NHTSA issues ANPRM January 22, 2001 NHTSA issues NPRM December 21, 2002 Statutory deadline for final rule June 30, 2002 Final rule issued July 3, 2002 Final rule published in Federal Register July 10, 2002 Effective date of final rule August 9, 2002 Petitions for Reconsideration due August 26, 2002 First reporting period begins April 1, 2003 Customer satisfaction documents due May 7, 2003 Customer satisfaction documents due June 6, 2003 First reporting period ends June 30, 2003 Second reporting period begins July 1, 2003 Customer satisfaction documents due July 7, 2003 Customer satisfaction documents due August 7, 2003 First reports due September 1, 2003 Customer satisfaction documents due September 5, 2003 One-time historic report due September 30,2003 Second reporting period ends September 30, 2003 Third reporting period begins October 1, 2003 Customer satisfaction documents due October 7, 2003 Customer satisfaction documents due November 7, 2003 Second reports due December 1, 2003 Customer satisfaction documents due December 5, 2003 Third reporting period ends December 31, 2003 Courtesy of Butzel Long, P.C.

47. A Butzel Long Presentation Important “Early Warning” Dates First quarter reporting begins January 1, 2004 Customer satisfaction documents due January 7, 2004 Customer satisfaction documents due February 6, 2004 Third 2003 reports due March 1, 2004 Customer satisfaction documents due March 5, 2004 First quarter reporting ends March 30, 2004 Second quarter reporting begins April 1, 2004 Customer satisfaction documents due April 7, 2004 First quarter reporting due April 30, 2004 Customer satisfaction documents due May 7, 2004 Customer satisfaction documents due June 7, 2004 Second quarter reporting ends June 30, 2004 Third quarter reporting begins July 1, 2004 Customer satisfaction documents due July 7, 2004 Second quarter reports due July 31, 2004 Customer satisfaction documents due August 6, 2004 Customer satisfaction documents due September 7, 2004 Third quarter reporting ends September 30, 2004 Fourth quarter reporting begins October 1, 2004 Customer satisfaction documents due October 7, 2004 Third quarter reports due November 1, 2004 Customer satisfaction documents due November 5, 2004 Customer satisfaction documents due December 7, 2004 Fourth quarter reporting ends December 31, 2004 Courtesy of Butzel Long, P.C.

48. A Butzel Long Presentation Other Important Tread Provisions CIVILandCRIMINALPENALTIES

49. A Butzel Long Presentation Civil and Criminal Penalties  TREAD expands current penalty provisions: –Stiffer fines and penalties for corporate failure to comply with the Act –Provides for criminal liability for falsifying or withholding information

50. A Butzel Long Presentation TREAD Provides A “Safe Harbor” To Encourage Reporting and “Whistleblowers”  No criminal penalties if: –The violator at the time did not know that the violation would result in an accident causing death or serious bodily injury –The violator corrects any improper reports or failure to report within a reasonable time

51. A Butzel Long Presentation TREAD ACT “Early Warning Reporting” is HERE! NOW WHAT SHOULD WE DO?

52. A Butzel Long Presentation Impact On Foreign Manufactures of Motor Vehicles and Equipment  TREAD Act has extraterritorial effect  Must provide same information as U.S. manufacturers but only with respect to: –Vehicles and equipment sold, and offered for sale or lease, in the U.S. –Incidents involving death outside of the U.S. that involve “identical or substantially similar” vehicles or equipment

53. A Butzel Long Presentation Impact On Foreign Manufactures of Motor Vehicles and Equipment  Either the fabricating manufacturer or importer must file required report  Bottom-line - Requires coordination among equipment and vehicle manufacturers, and implementation of systems to electronically track required data (e.g. component manufacturers “small manufacturers” will still need to “report” to OEMS)

54. A Butzel Long Presentation How Korean Companies Should Prepare Themselves  Develop a centralized internal structure and procedure for identifying and evaluating circumstances that may require reporting to NHTSA  Implement policies and procedures for identifying and collecting the required data and documents At a Minimum...

55. A Butzel Long Presentation How Korean Companies Should Prepare Themselves  Designate “Early Warning” official(s) who will be responsible for the development and implementation of new polices  Train workers to ensure compliance with data retention and document collection, and the submission of information to the responsible in-house person At a Minimum...

56. A Butzel Long Presentation How Korean Companies Should Prepare Themselves  Develop and implement software programs and/or databases to track “Early Warning” information  Carefully monitor future modifications to TREAD Act legislation and rules at http://www.access.gpo.gov/nara/cfr/index.html http://www.access.gpo.gov/nara/cfr/index.html  Review Butzel Long Client Alerts (see www.butzel.com) and obtain “Early Warning Reporting” pamphlet www.butzel.com At a Minimum...

57. A Butzel Long Presentation If you have any questions... Daniel P. Malone, Butzel Long 150 West Jefferson, Suite 900, Detroit, MI 48226 (313) 225-7032 malone@butzel.com Contact Information:

58. A Butzel Long Presentation

59. Questions and Discussion