© 2007 Rolls-Royce plcThe information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc.This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies.

The impact of REACH on the aerospace sector- a DU’s perspective & response

Nigel Marsh, Company Head of Environmental ManagementUK REACH Competent Authority RoadshowsNovember/December 2007Issue 1

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A Downstream User’s Perspective

The potential impact of REACH on the aviation sector and its global supply chainHow Rolls-Royce is responding to REACHConcerns and advice on implementation

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Rolls-Royce Group plc

Power for air, sea and landAnnual sales £7+ billion (£24bn order book)Customers; 500+ airlines, 4,000 corporate and utility aircraft and helicopter operators, 160 armed forces and more than 2,000 marine customers, including 50 navies. Energy customers in nearly 120 countries38,000 employees in 50 countriesA Global company with a Global Supply Chain

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ManufacturePlacing on the market

Use

Importation

Importation

REACH scope

of substances

On their own

Trichlorethylene

In preparations

Paints, Sealants, Resins

In articles

Systems, Components, aircraft

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What REACH means to Rolls-RoyceRolls-Royce as an importer (?)

Alloys - preparations (bar, billet, specialist metallic powders etc)

Processing chemicals (drums of chemicals and powder preparations etc)

Imported finished articles (with no intended substance release)Contracts on non-EU suppliers will have to change to obtain information to complete registration.

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What REACH means to Rolls-Royce

Making articles out of preparations, and using preparations / substances during manufacture and R&O Making some preparations (eg, thermal paints)

Conducting Product and Process Oriented Research and Development (PPORD) with suppliers

Rolls-Royce as a downstream user

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What REACH means to Rolls-Royce

Check whether SVHC are in products following manufacture, at > 0.1% w/wCheck all our uses are registeredSubstances used in PPORD will require notification to the Agency, and will probably avoid SVHCs (including candidate substances)

Rolls-Royce as a downstream user

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What REACH means to Rolls-Royce

Using SVHCs within alloys, within process chemicals

Unable to change quickly to alternatives (air worthiness)

In some cases, there may be no alternatives

Rolls-Royce as a user of substances of very high concern (SVHC)

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What REACH means to Rolls-Royce

Rolls-Royce specifiers, purchasers, designers and technical experts will need to work with customers (who may specify SVHC use) and suppliers (who may have a technical necessity to use SVHC) to prove the need for each SVHC within any Authorisation.

Rolls-Royce as a user of substances of very high concern (SVHC)

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RR – As a ‘Downstream User’

REACH is aimed primarily at manufacturers and importers of chemicalsRR will mainly be a ‘downstream user’ and therefore fall outside much of the REACH burdenHowever, for strategic, niche/small market materials and targeted substances we will need to ensure that suppliers are REACH compliantWe will be an importer of ‘articles’ from all over the world and this brings responsibilities, especially when SVHC are involvedWe expect to have significant involvement in SEA

11Some Aerospace IssuesLow use speciality products may be removed from the market (uneconomic for the manufacturer to put through REACH) Some substances will be liable for Authorisation for continued useWill need to register any substances that we import into the EU where we are the only importer and may need to directly register novel uses of substances in our operations. We will also need to ensure that suppliers/RR companies complete ‘pre-registration’We may need to register/notify substances in imported ‘articles’(intended release??) Supplier awareness & security of supply? Costs of supply will most likely increaseData will need to be passed along the supply chain - exchange of information could have implications for commercial confidentiality and intellectual property rightsInternal company resource to support REACHDevelopment of lists of targeted substances/timetables and alignelimination/substitution programmesUnique Industry issues - Product life cycles, safety and reliability

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Purchasing – impact of REACH

Changes will be needed in purchasing practice – a new way of workingCloser ties with engineering, design and manufacturing functionsCost, Quality, Delivery + REACH complianceMay need to place contractual requirements on suppliers regarding a responsibility to registerand obtain any relevant authorisations

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REACH COMPLIANCE– Continued access to substances:Registration for an imported or manufactured substance is the right to bring onto the market irrespective of hazard or risk posed by the substance, OR it will be illegal:

to PURCHASE the substanceto use the substance IN PRODUCTS

Authorisation is the right to use a substance - including presence in an ‘article’ – if the substance is considered of ‘very high concern’Communication – you must tell your customer if an article you sell to them contains SVHC at >0.1% w/w

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CANDIDATE LISTList of all substances that

meet the criteriafor Authorisation

ANNEX XIV LIST: List of Subs. SUBJECT to Authorisation

ECHA WORK PROGRAMME

1,800 - 2,500 Substances?

Pressure on continued use

Priority for replacement

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Banned / Targeted list of substances- To be used by companies for forward planning- Anticipating possible obsolescence and required R & T- OEMs can target B/T list substances for phase out EARLY –

‘Future-Proofing’ our industry

Annex XIV= substances submitted to authorisation

Banned / Targeted list

Newly ClassifiedSVHC

KnownSVHC

PrioritySVHC

ALL REGISTERED SUBSTANCES

Helping aviation businesses understand REACH

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Ranking for REACH Authorisation Priorities?

Still not finalised but will be something like..Priority 1: Cat A substances (PBT, vPvB or ‘equiv concern -other’) x wide dispersive usePriority 2: Cat B substances (Carc & Mut 1&2 non-threshold) x wide dispersive usePriority 3: Cat C substances (rest) x wide dispersive use OR Cat A non-dispersive use Then it becomes unclear (algorithm’s complexity)

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Substances of concern – eg R50/R53

‘Very toxic to aquatic organisms, may cause long-term effects in the aquatic environment’Eg’s: Alochrom, Ardrox, chromic acid, colbalt oxide, copper chloride, resins, paints, potassium cyanide, potassium permanganate, sodium chromate, sodium cyanide, thermal paints …..

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Other examples of substances of concern:

TrichloroethyleneChromium (6)CadmiumBerylliumNickel oxidesPTFEKevlar

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EnforcementThe manufacture, import, sale, supply or use of substances without the appropriate registrationUsing hazardous substances outside the terms of an authorisation or contrary to a restrictionFailure to provide required information up and down the supply chainFailure to comply with other duties regarding information, eg, workers’ or consumers’ rights of access to informationFailure to comply with the duty to apply recommendations, eg, in safety assessmentsFailure to comply with the duties to co-operate and supply information (in a timely manner)

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Rolls-Royce Approach to REACH:The most cost effective solution is for a centrally co-ordinated/consistent approach:

One defined process for the GroupFormation of a Corporate IPT >> Operations CouncilREACH Executive appointed Purchasing and laboratories have a key role to play (make to Print, Design Make and Consumables)Engineering, Design, Manufacturing Operations, Repair & Overhaul~ 12 FTEs currently 20 FTE by end 2007

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A voice for the industry..

ASD REACH Task Force (lobbying >>> focus on implementation)RIPsAlliances with other industry groups and trade associations

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Helping our Supply Chains Understand REACH

Significant outreach and awareness raising including supplier workshopsASD (EU)- Paris Airshow – launch of ‘Implementation Guidelines’SBAC (UK) – EWGAIA (North America)

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http://www.sbac.co.uk/pages/42351931.asp

24Managing the Issues: Collaboration

The Aerospace sector globally is now working on several initiatives:

- ARTICLES interpretation- Standard data to be collected from suppliers for REACH- Common standards/guidelines for our sector- Supporting trade association / professional institution

workshops on REACH- Provision of international training- Sharing best practice across other sectors- RIPs- Cost sharing

Working with DEFRA and HSE (CA) (in the UK)

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Working With the European Commission and ECHA

Various companies across ASD, SBAC and GIFAS are representing our sector in REACH IMPLEMENTATION PROJECTS (RIPs)The RIPs will generate TECHNICAL GUIDANCE DOCUMENTS (TGDs) to help businesses find their way through the legal mazehttp://ec.europa.eu/echa/home_en.html

26Communication through Supply Chain US/EU

Large, Complex

Component Producer

Engine

AirframerAircraft

PlaterSteel alloy disc

w/ AMS## NiCd plating, conversion

coat, & Spec ## antigallant

Supplier 1Spec ##

Antigallant

Forger/Part Producer

Steel alloy disc

ChemicalProducer 1

Pb

ChemicalProducer 2CdO & Ni(SO3NH2)2.4H2O

ChemicalProducer 4(Importer)CrO3 (e.g.)Chemical

Producer 5(Importer)

Fe

Airline

Repair shop

Supplier 2Steel alloy

Preparation Importer (Supplier 1)

• Appoint “only representative” or provide info to importer to:• pre/register by use⇒ provide SDS or reg#/auth/restrict info

Article D/U• Register uses not covered by substance M/I⇒ For SVHC on candidate list, provide safe use info?? ⇐ Pass identified uses and hazard/risk info to next actor in supply chain

Article Importer• Register substances intended to be releasedFor SVHC on candidate list, • notify Agency⇒ provide safe use info

USUS EUEU

⇒ Information on substances intended to be released or SVHC on candidate list contained in article will need to be collected through specs, MSDS or contractual requirements

Courtesy of AIA

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Some current concernsBusiness continuity – continued access to materialsLegal entities (defined locations)‘Importer’Access to IT tools & IUCLID5Data collection!!Pre-registration (for strategic substances)RIPsRepresentation at EU/ECHA levelSupply chain awareness (7 000 UK Companies)Defence exemptionsEnforcementProvision of information

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Business PrioritiesSenior management commitment (& resource)Ownership – appoint a championAwarenessInventories of substances & preparations (& REACH responsibilities eg, Importer)SVHC – Candidate List (0.1%)Identify priority substancesSubstitution programmes (R&D)Pre-registration (08)Checking that the supply chain are going to meet their obligations for registrationCollaboration with partners, competitors and trade bodies

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End of PresentationThank you for listening

CONTACT DETAILS:+44 (0) 1332 2 48578nigel.marsh@rolls-royce.com