This Section Was Last Updated on December 31, 2004

This Section Was Last Updated on January 25, 2006 REV.02

PURE POLARIS RECOVERY FEES

Policy Statement: Polaris reserves the right to recover justified expenses from suppliers for performance failures related to quality and delivery issues.

We believe that it is important to preserve productive working relationships with our supplier partners while ensuring justified expenses to Polaris are recovered. Reimbursement of the following expenses may be requested from a supplier at the full rate shown or at a lesser rate (shared responsibility) as determined by Polaris.

PART 1:Non-Compliance

PART 2:Reject Material Order (RMO)Non-Compliance

PART 3:Expedited Shipments / Extra Shipments / Return (Rejected) shipments (extraordinary shipment costs)

PART 4:Repackaging or labeling fees

REQUEST FOR RECOVERY PROCESS

An event occurs where justifiable expenses are incurred by Polaris.
A Request for Recovery Fees Form is completed by the (PLD) Product Line Developer impacted by the event.
The Request for Recovery Fees is assigned to a Polaris Purchasing Agent.
The Polaris Purchasing Agent issue the Request for Recovery Fees to the responsible supplier.
The supplier has 30 days to contest the request.
Only a Polaris Purchasing Agents may negotiate the recovery fees.
After 30 days, unless otherwise agreed to, Polaris will process the appropriate debit.
Polaris management is responsible to exercise sound judgment throughout the process.

PART 1:(ISU) Item Set Up form / Non-Compliance ($1000+$100/inspection hour)

If productis sent to Polaris without a sample sent to the Developerthe supplier will be responsible for incurring costs of the inspection work to be completed by the facility receiving the items. As a supplier ensuring compliant product this is a key responsibility and one that Polaris does not want to perform for you. However, we must have assurance of product conformance and will take the necessary inspection actions if required to support our business needs at the supplier’s expense. Any deviation to the requests of the Developer must be agreed upon between the supplier and the requestor from Polaris prior to submission of the product.

PART 2:Reject Material Order (RMO)Non-Compliance ($1000 + Potential Supplier Audit Costs)

RMO PROCESS

The Reject Material Order (RMO) form is used to initiate and communicate the disposition of suspect or non–conforming purchased parts and to request documentation on the Supplier Corrective Action Response implemented to prevent further non–conformance.

As a result of the reject material, Polaris may request a Supplier Corrective Action Plan (SCAR) for the RMO issued. This Supplier Corrective Action Plan (SCAR) Requirement should be documented and forwarded to the Product Line Developer, Purchasing Agent and Quality Assurance department. Completed responses to the RMO request must be returned to the appropriate Polaris Quality Assurance department within 30 days.

The Polaris Purchasing Agent contacts the supplier to communicate all issued RMO's. Once a Return To Vendor (RTV) disposition has been completed, a Return Goods Authorization (RGA) request is made by the Polaris Purchasing Agent. Rejected parts/materials dispositioned RTV are shipped to the supplier within 72 hours.

MATERIAL REVIEW AND DISPOSITION CODES

01– UAI (Use As Is): Components are used in production without further rework or sorting operations. This disposition requires approval from the Product Line Developer and Purchasing.

02– RTV (Return To Vendor): Components are returned to the vendor without further
processing. This disposition requires approval from the Product Line Developer and the Purchasing Agent

03– Scrap at Vendor Expense: Components are scrapped at Polaris and the vendor is debited for the cost of the components. This disposition requires approval from the Product Line Developer and the Purchasing Agent.

04– Re-label / Sort at Vendor Expense: Components are sorted and/or relabeled at Polaris and the vendor is debited for the estimated cost of the sort / re-labeling operation. This disposition requires approval from the Product Line Developer and the Purchasing Agent.

05– Scrap at Polaris Expense: Components are scrapped at Polaris and the cost of the components are charged to an internal departmental account. This disposition requires approval from a Product Line Developer and the Purchasing Agent.

06– Re-label at Polaris Expense: Components are re-labeled at Polaris or Masterworks and the cost of the re-labeling is charged to an internal departmental account. This disposition requires approval from the Product Line Developer and the Purchasing Agent.

07– Re-label at Vendor at Polaris Expense: Components are re-labeled at the vendor and the cost of the re-labeling is charged to an internal departmental account. This disposition requires approval from the Product Line Developer and the Purchasing Agent.

00– Inventory Adjustment: Parts and/or materials are sent to Polaris Industries under an incorrect part number. Parts are correctly identified and inventory adjustments made. Misidentified parts/materials may be sorted and returned to the supplier at supplier expense. This disposition requires approval from the Product Line Developer. A Delivery Discrepancy Report (DDR) should be used for labeling quantity errors.

Disposition codes 01, 02, 03, 04 and 00 affect the supplier’s Quality Performance Rating, expressed in parts per million (PPM).

Quality Assurance Responsibilities

Complete the top section of the RMO form.
Return the RMO form with each shipment of returned parts.
In the event the parts are not returned, the RMO form is forwarded to the supplier’s quality assurance department.

Supplier Responsibilities

Complete the Supplier Acknowledgement requirements indicated on the RMO form. Return corrective action results to the appropriate Polaris Quality Assurance department within time designated on corrective action.
Respond to all RMO's on a timely basis. RMO's issued may require a supplier response under the Supplier Acknowledgement section of the RMO. This response is to be returned to the appropriate Polaris Quality Assurance department within thirty days.

Provide a Return Goods Authorization (RGA) number to the Polaris Purchasing Agent upon request for RMO material dispositioned RTV. The supplier must provide an RGA to Polaris within 24 hours after requested or materials/parts may be returned without an RGA.

Supplier Corrective Action Requests (SCAR) are sent to suppliers in the event of significant nonconforming product/materials received by Polaris. We will request an immediate response on containment actions and a longer term response on permanent actions (response due to Polaris within 30 days of event and communicated via e-mail to the Product Line Developer and Quality Assurance). If a supplier does not respond to the request by the designated date you will be charged and the product/materials will be put on Quality Alert.

Additional noncompliance could result in the loss of continued business with the Vendor.

Reject Labor: ($200.00 / Hour)

If defective material or parts are discovered or suspected, and the discovery is expected to impact Polaris' quality or shipping, Polaris reserves the right to apply labor resources to the sorting of the subject parts. Reject labor charges are used to account for the actual resources used.

Example: 4 people x 4 hours = 16 total labor hoursx $200 / hr = $3200 debited

NOTE: Reoccurrences on the same part will be subject to higher sorting fees.

Quality issues at the time of delivery

Vendor using incorrect materials (non-approved materials by the Product Line Developer).
Quality Assurance and the Product Line Developer reserves the right to accept or reject the shipment.
Product will be returned at the Vendors expense
A 5% penalty will be assessed for all quantities returned.
A 10% penalty will be assessed to any quantities that do not meet the sample quantity but are accepted and not returned

On-time shipping / missing the cutoff for reaching the port.

Vendor will incur a 1% penalty charge per week for late shipments for the first 4 weeks immediately following the confirmed delivery date at the time of PO acceptance.
After 4 weeks Vendor will incur a 3% penalty charge per week for any outstanding shipments.

PART 3:Expedited Shipments / Extra Shipments / Return Shipments:(Actual Costs Incurred)

Expedited shipment charges are used when Polaris incurs additional or extraordinary transportation and logistics cost when a supplier delivery failure is imminent. The supplier may be debited for the actual cost of the expedited shipment.

Extra shipment charges are used when Polaris incurs additional or extraordinary transportation and logistics cost due to a supplier's failure to meet the normal scheduled pick-up or defective/rejected material is being returned to the Vendor.

This may include charges from the carrier for truck ordered but not used, extra stop charges, extra or multiple truck charges.

PART 4:Repackaging or labeling ($50/labor hour plus material and transportation costs)

Packaging and/or barcode labeling errors

Vendor will incur all expenses for any re-labeling work completed.
Product Line Developer or Purchasing Agent reserves the right to have the re-labeling done at Masterworks or be returned at the cost of the Vendor to be re-labeled.

Thirty days after the second notice of correction has been sent, Polaris will charge back for the cost of labor, material, and other expenses needed to bring the packing, labeling, and packaging up to necessary requirements.

All items being returned to the vendor to be re-labeled have a 10-business day window to be re-labeled and returned to Polaris.