A Review of the Impact of European Union Environmental Directives

1. A Review of the Impact of European Union Environmental Directives Stuart Sleeman Principal Sleeman Hanley & DiNitto, Inc

2. Sensata Technologies • Comprised of three major business units: • Sensors • Controls • More than 6,000 employees around the globe • Technology Development and Manufacturing in nine locations in the Americas, Asia and Europe

4. Requirements Customer Requirements: Contracts and specifications Surveys/Declarations Influence Current and Horizon Legislation/ Industry Standards Discover and Understand Influence Science and R&D Product Content Management • Decisions & Strategy • Business-Wide Strategy • Planning and Roadmaps • TI Ban List Content Decisions • Strategy for Customers • Strategy for Suppliers • Execution • Internal Manufacturing • Specifications • Chemicals & Materials • Equipment • Change Control • External Manufacturing • Specifications • Subcons/Foundries • Change Control • R&D • Market Management • Internal Communication of Decisions • External Communication and Customer Management • Supplier Management • Ban List Management

5. EC Directives/Material Content Reporting EC Directives (WEEE; ROHS & ELV) • Directive on Waste Electrical and Electronic Equipment (WEEE) • Directive on Restriction of Use of Certain Hazardous Substances (RoHS) • Directive on End-of-Life Vehicles (ELV)

7. Sony swaps PlayStation One cables Last modified: December 5, 2001, 11:55 AM PST By Reuters Sony is replacing peripheral cables for 1.3 million PlayStation One game consoles after the Dutch government blocked sales of the machines because of health and environmental concerns. The Dutch government said Tuesday it had blocked shipment of the consoles and 800,000 accessories bound for the European Union market in a warehouse in the Netherlands because the cables contained too much cadmium. On Wednesday, Sony said it had already started replacing the cables. It hoped to resume limited shipments of the consoles by mid-December. "Although we have reservations about the interpretation of the regulations (by the Dutch authorities), we have begun replacing the cables," a Sony representative said. Sony said its newer PlayStation 2 consoles were not affected by the ruling because they do not use the same cables. The company will not replace cables for PlayStation One consoles sold in countries outside Europe if they did not violate environmental regulations in those nations, the company said. Sony also said it will not recall any consoles already sold in Europe because the amount of cadmium in the cables does not--in its view--pose a health risk. The cadmium contained in the cables only poses a risk if incorrectly disposed of, in which case it could have long-term environmental effects, Sony said. Within the European Union, no goods are allowed to be imported that contain more than 0.01 percent cadmium. The Netherlands said the cables contained three times to 20 times the allowed amount. A spokesman for the Dutch Environment Ministry said Tuesday that large concentrations of cadmium are banned in the Netherlands--in line with European Union policy--to prevent it from entering the food chain. "Cadmium damages the kidneys," ministry spokesman Joost Kehrer said. Sony did not say how much the cable replacement will cost the company.

8. EU Material Content DirectivesVehicle End of Life Directive

9. Manufactures sensors that are used in various automotive systems. • Supply to all the major automakers directly as a tier one supplier or through others as a sub-tier supplier. • IMDS Entry Requirements:- existing product lines- new product lines (PPAP)- 50% - 70% complete Automotive Sensors AirConditioning Coolant Level Low GAccel. Trans- mission OccupantWeight TirePressure OilPressure ABS PowerSteering AngularRateSensor

10. End of Life Vehicles Directive • The European Parliament & the Council of European Union signed the End-of-Life vehicle directive on 9/18/00. Directive 2000/53/EC, effective 1/03. • Objective is the prevention of waste from vehicles and also the reuse, recycle, & recovery of end-of life vehicles and components, thus improving environmental performance for all economic operators involved. • Automobile producers to provide appropriate information to treatment facilities, concerning dismantling, and re-use

11. End of Life Vehicles Directive • Requirements: • Ban on the use of hazardous substances (lead, mercury, cadmium, hexavalent chromium) with exemptions. • Total limit @ 2.0 grams/vehicle of Cr+6 for corrosion protection purpose only; 0.0 gram for any other application in June 2003 • Requirements for the re-use and recovery at vehicle end-of-life. • Achieve re-use and recyclability of at least 85% average vehicle weight by 2005 with greater percentages for 2015 • Improve recycled content. • End-of-Life disposition information

12. End of Life Vehicles Directive End-of-Life Vehicles Treatment: Targets to be achieved 95 % re-use / recovery 85 % re-use / recycling 85 % re-use / recovery 80 % re-use / recycling Type Approval 95 % re-useable / recoverable 85 % re-useable / recyclable free from lead, mercury, cadmium and chromium VI (exemptions listed in Annex II) provision of dismantling information New Vehicles delivery to treatment facility with no cost for last holder and/or owner 1/2007 Year 2000 2005 2010 2015 7/2002 7/2003 2006 Vehicle Population delivery to treatment facility with no cost for last holder and/or owner

13. End of Life Vehicles Directive IMDS: One Certification Procedure for the Industry 2006 2000 2002

14. Tier 3 Tier 2 Tier 1 OEM Gather Info Supplier Product Owner IMDS provides a common method for identifying materials, substances and attributes Suppliers proactively send material composition information Material Composition Information Supplier Supplier Gather Info Supplier Product Owner Supplier Material Composition Information Supplier Supplier Gather Info Supplier Product Owner Supplier Material Composition Information IMDS manages aggregated data sent forward through the supply chain. Supplier Supplier Supplier Collect Material Account Data

15. EU Material Content DirectivesRoHS & WEEE

16. Waste Electrical & Electronic Equipment [Directive 2002/96/EC] • Sets criteria for collection, treatment, recycling and recovery of waste electrical and electronic equipment • Makes Producers Responsible • Transport from collection facilities • Financially responsible for treatment, recovery and disposal • Households/Final Holders and Distributors of WEEE can return such equipment free of charge • Recovery Targets Set for Collection from Households

17. Restriction on Use of Certain Hazardous Substances in EEE [RoHS] [Directive 2002/95/EC] • Facilitates dismantling and recycling of waste electrical and electronic equipment by restricting use of hazardous substances in manufacturing • Lead, mercury, cadmium, hexavalent chromium, PBBs and PBDEs banned by July 2006

18. Categories of Electrical and Electronic Equipment Covered by WEEE Directive • Large household appliances • Small household appliances • IT and telecommunications equipment • Consumer equipment • Lighting equipment • Electrical and electronic tools (with the exception of large-scale stationary industrial tools) • Toys, leisure and sports equipment • Medical devices (with the exception of all implanted and infected products) • Monitoring and control instruments • Automatic dispensers

19. WEEE Directive - requirements • Register with each EU country • Finance for your obliged allocation of WEEE: • Separate collection • Recycling • Treatment / Recovery • Provide information to recycling/treatment facilities • Report evidence of proper management • Report evidence that targets have been met • Ensure marking of equipment MUST have been ready by August 13, 2005

20. Sensata Products Affected by WEEE & RoHS

21. Reporting Requirements • As with the Automotive OEMs, the electronic OEMs, because the obligation to demonstrate conformance rests with the OEMs, they have developed a variety of mechanisms for obtaining conformance data of their supply chains. • A supplier is obligated to utilize whatever mechanism provided by OEM: • Simple and Complex Certification Statements • EIA/EICTA/JGPSSI Tool • Web-based tools (such as IMDS in auto industry)

22. Collect Material Account Data Base Material Supplier 7AM Cap Material Supplier Disc Material Supplier Converter/Washer Supplier Hexport Supplier Insulator Supplier Diaphragm Supplier O-ring, Gasket Supplier Silicone Seal Supplier Product Product Material Breakdown Query Suppliers

23. Reporting Requirements • Product Information • Bill of Materials defines the parts that need to be included in Material Content Breakdown • For each part: • Weights to 0.05 grams • Surface Areas to 0.1 cm2 • Identification of the material of construction • Suppliers/Venders of materials of construction provide elemental breakdown of their materials. • Use of “jokers” allowable if confirmation that none of the prohibited/regulated materials are contained in undesignated portion.

24. Material Content Breakdown • 7AM Full Material Content Breakdown Hexavalent Chromium

25. Material Content Breakdown • 7AM Cadmium

26. Material Content Breakdown • 7AM Monovalent Chromium

27. Material Content Breakdown • 7AM applicable directive: RoHS • 7AM contains no Mercury or Lead • Polyester resin contains no restricted fire retardants. • Monovalent and Trivalent Chromium are not restricted by RoHS and are allowable at any concentration. NOTE: Both Monovalent and Trivalent Chromium are on the Material Declaration Datasheet as reportable substances.

28. Material Content Breakdown • 7AM applicable directive: RoHS • Hexavalent Chromium: • RoHS limit for “unintentional incorporated” hexavalent chromium is 1.0 wt%. Hexavalent chromium is intentionally incorporated. • RoHS limit for “intentional incorporated” hexavalent chromium is 0.1 wt%. The wt% in 7AM is 0.003% -- which means that the chromating surface conforms to the RoHS limit. • In most cases, hexavalent chromium coatings specified by Sensata will not exceed this limit. Hard or decorative chromium plates will likely exceed.

29. Material Content Breakdown • 7AM applicable directive: RoHS • Cadmium: • RoHS limit for “unintentional incorporation” is 0.1 wt%. The cadmium contained in this device is intentionally incorporated. • RoHS limit for “intentional incorporation” (proposed) is 0.01 wt% of homogeneous material. The cadmium contained in contact material is much greater. • In 1976, EU passed an exemption allowing cadmium in contacts in electromechanical safety devices (Regulation 76/69/EEC) • The material content prohibition of RoHS superceded this exemption – although S&C submitted a request in Sept. 2002 to have this exemption added in the list of exemptions in RoHS. • The original design of is 7AM device did not conform to RoHS because of cadmium content of contacts. • Communicated to customer via following RoHS Declaration (or using tool required of customer) • Product Redesigned to meet RoHS Requirement

30. Supplier Management • Individual MaterialContent Declarations

32. Supplier Management Program • Customers specifically acknowledge all of the compliance information provided in this survey is accurate and complies with Directive 2002/96/EC on Waste Electrical and Electronic Equipment (WEEE), Directive 2003/108/EC amending Directive 2002/96/EC on Waste Electrical and Electronic Equipment (WEEE) and Directive 2002/95/EC on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS). • Should any components/parts you supply become non-compliant with the WEEE/RoHS Directives you will immediately notify, via email, the Sensata Technolgies WEEE/RoHS Compliance Officer

33. Supplier Management Program

34. Supplier Management Program

35. Supplier Management Program • 1,921 IMDS Entries Since Inception • 3.8 – 7.6 Man Years of Effort • Small Percentage of Possible Product Variation • 2CP15-16 • 37 Components • 6 Entries • 7AM • 6 Components • 6 Entries • Responded to 165 ELV, RoHS & WEEE Requests YTD 2006 • 66 Product Certification letters • Complete 99 IMDS Entries YTD • 1142 Sensata Suppliers • 636 Control’s Suppliers • 506 Sensor’s Suppliers

36. Final Words • The Automotive Manufacturers response to the End-of-Life Vehicle directive provides one model for responding to the WEEE and RoHS directives. • Other industry sectors are investigating models for obtaining data similar product content data (electronics, white goods, aerospace). • Impacted industries are likely to extend the requirements of the EC directives to all of their products. • Regardless of the ultimate response model, the collection and management of Material Content Data within every company is a key task.

37. Final Words • Collecting Material Content Data is a cross-functional task and takes time for a company to learn: • Even if your company isn’t yet impacted by material content reporting requirements, it is worthwhile to begin collecting content data about your products (starting with Cr+6, Hg, Pb, Cd). • Level of effort necessary to collect data can be significant. • Be in front of the curve when material content reporting requirements for your industry arrive. • Changing product material content takes time/effort. Begin looking for technology platforms that avoid use of materials prohibited by the directives.

38. Regulatory Drivers Global View Current EU Directives: WEEE, RoHS, ELV, EuP Battery, Packaging Piecemeal state laws (California SB 20/50, Maine, Ontario) Pending EU Directives: REACH, IPP, Battery Revision China has RoHS and is preparing WEEE legislation Japan Pb standards have been in place and electronics manufacturers have already responded

39. Valuable Links European Environmental Agency http://www.eea.eu.int/ The EU on-line http://europa.eu.int/index_en.htm EU Directives – Legislative Summaries http://europa.eu.int/scadplus/leg/en/s15000.htm