Broad Overview of the European Community REACH* Regulation and Potential Impacts to DoD

1. Broad Overview of the European Community REACH* Regulationand Potential Impacts to DoD Presented by Shannon Cunniff, Director, Emerging Contaminants July 16, 2008 * Registration, Evaluation, Authorisation, and Restriction of Chemicals

2. Overview • Learning the Hard Way – The European Union’s (EU) RoHS (Restriction of the use of certain Hazardous Substances) and Lead • REACH – Distilled Basics from 900+ Pages • Significance for DoD • DoD Activities

3. RoHS and Lead – A Cautionary Tale • One of RoHS’s Goals: Eliminate Lead from Electronics • Aeronautical/Aerospace Applications Constitute ~ 1% of Worldwide Electronics Usage; DoD Fraction of That • Consequently, DoD cannot control the market place(we can probably control “product development” – it will just cost us more) • Yet, Defense applications are UNIQUE • DoD’s electronic components must survive extreme conditions and provide yearsof service (vice civilian electronics’ service life ~ 18 months) • Known Fact: Lead-free Circuit BoardsAre In Our Supply Chain • But where? And what is the impact on mission-critical applications? • At Least Four Initiatives Are Underway at DoD to Address These Unintended Consequences • All are expensive (time-consuming) • All are re-active (vice pro-active)

4. REACH – Basic Background • Who is Regulated? • All 27 EU member states plus Iceland, Liechtenstein and Norway • Who is Directly Affected? • “Manufacturers and importers will be required to gather information on the propertiesof their substances, which affects health, safety or the environment, and to register the information in an European Commission managed central database” • When Will REACH Become Effective? • Entered into force in June 2007 • First Step: Pre-Registrations begin in June 2008 (> 1T/yr) • Draft list of candidate Substances of Very High Concern • 2009-2018 progressive implementation based on quantity & hazard

5. REACH – Basic Background (con’t) • Main Objectives • Reduce risk from chemicals • Share information on chemicals affects • Encourage substitution to safer substances • Authorize or restrict the use of high concern chemicals • Paradigm Shifts • Ensure industry adequately discloses and manages risks from substances • Substances can not be used unless authorized • Requires Manufacturers and Importers to Register Listed Chemicals, which Raises Issues About: • DoD’s ability to influence process iscomplex and unclear • Impact to DoD’s suppliers (in, into and outside of EU) • Concerns over proprietary, business confidential and national security info

6. Defense Exemption • Defense Exemption • No blanket EU wide exemption – determined by each Member State: “Member States may allow for exemptions from this Regulation in specific cases for certain substances, on their own, in production or in an article where necessary in the interest of Defence.” Article 2, Paragraph 3 • Bottom Line • Treaty of Lisbon 2007- gives EU greater say on Defense matters • Labor intensive to get • Request not guaranteed to be successful • Not uniformly interpreted by Member States • Will vary by country • Must be military unique use of chemical • First Impacts to DoD • If by November 30, 2008, if some party has not pre-registered chemicals that DoD uses, its possible that then DoD may start feeling the effects of REACH on some chemicals soon thereafter.

7. REACH – Timeline and Phases • Focus First on substances with high volumes and those of greatest concern.

8. Polychlorinated Terphenyls Bisphenol A Asbestos Fibers Mercury Cadmium Cement PFOS/ PFOA Benzene Epoxy resins Polycyclic aromatic hydrocarbons Brominated flame retardants Phthalate ester plasticizers Nickel Broadening Scope Over Time • Initial Focus: Substances of Very High Concern (SVHCs) • Initially estimates as high as 200 substances will be banned/restricted • Currently 16 dossiers filed for restrictions • Eventually, Department of Commerce suggests the number may be 1500 - 2000

9. Why DoD Should Care – Impacts of REACH to DoD • Foreign Military Sales • Competitive advantage to EU if US suppliers do not comply • US may not be able to provide maintenance or logistic supports in EU • Interoperability • NATO/EU militaries may not be able to use US systems, maintenance procedures, or logistic supports • Potential Release of Sensitive Information • Required disclosures could reveal sensitive information • Overseas Operations • Chemicals required by for maintenance and support may not be available • May not be able to import articles made with or containing some chemicals • May not be able to transit EU countries with certain materials • Cost and Availability • Commercial market could shrink for some chemicals important to DoD • Costs likely increase for evaluation, validation and chemical substitutions • Industry Pressure on DoD to Expand Qualified Products Lists

10. Complexities • DoD • US not an EU Member State • Not obligated to comply with EU laws • Sovereignty issues • SoFA / Bi-Lateral agreements • However, for EU Nations • Compliance is mandatory • May be subject to sanctions for non-enforcement within their borders (e.g. by US DoD) • US Relationships, Especially with Host Nations • Also involves transited nations

11. Current Efforts to Manage Mission Risks Involve Many AT&L Offices • Preliminary Unofficial Discussions with EU Militaries • ESOH/ERS lead • Preliminary Discussions with Industry/USTR • ESOH/EC, IP, Defense Standardization Program Office • Preliminary Evaluations of Risks and Opportunities for DoD • SERDP/ESTPC Study on Potential Impacts to DoD and Military Equipment Manufacturers and Suppliers • Identifying Affected Chemicals it Purchases and Manages • DLA lead • Identifying materials shipped to EU facilities • After which, identify chemicals in materials and contractors that supply them • Develop data sheet to support multiple functions

12. Summary • REACH May Not be aCompliance Issue for DoD…but it has Potentially Significant Supply Chain, Industrial Base and Mission PerformanceImplications • Defense Exemptions are Only a Part of the Answer • Even With Exemptions DoD Will Still Incur Mission Risks • Some materials will become unavailable or too costly to continue using • Replacement materials will need to be evaluated and validated against our unique mission performance criteria • Replacement materials will likely creep into our supply chains anyway • Potential ‘RoHS & Lead’ Story X 100s of Chemicals

13. Rest of Today • Industry Briefs: • Electronics • Aerospace • Automotive • Goals: • Identify potential impacts of REACH to DoD • Understand how industry efforts will help DoD gain visibility into materials in its supply chain • Understand how global companies are interfacing with the EU and its industrial base • Understand how industry’s response to REACH’s risk reduction goals will affect DoD (e.g., material and process substitutions)