United States: 5 Key Features Of The TSCA Inventory "Reset" Rule And Tips To Avoid Pitfalls

In short order, the US Environmental Protection Agency (EPA) will issue a final regulation to which all manufacturers, importers, and processors of chemical substances should pay close attention. Failing to do so could adversely affect numerous businesses that over the years probably have not worried too much about the Toxic Substances Control Act (TSCA).

TSCA requires EPA to compile and maintain a list (the Inventory) of chemical substances manufactured, imported, or processed in the United States. The initial Inventory was first compiled in 1979. In 2016, Congress amended TSCA to, among other things, require EPA to (1) designate chemical substances on the Inventory as either "active" or "inactive" in US commerce; and (2) issue a final regulation by June 22, 2017 establishing the process by which manufacturers, importers, and processors must provide EPA the information needed to update the Inventory in this manner ("TSCA Inventory Reset Rule"). On January 13, 2017, EPA published its proposed Inventory Reset Rule for comment.1

The proposed TSCA Inventory Reset Rule imposes two new reporting requirements on the regulated community including not just chemical manufacturers, but also companies that only purchase and use chemical substances to blend or formulate other products that are distributed in US commerce. First, the Rule will require "retrospective" reporting to confirm which substances have been "active" in US commerce at any time between June 21, 2006 and June 21, 2016 (the "Look-Back Period"). Active substances include not only chemicals that have been manufactured in (or imported to) the US during that period, but also substances that were processed in the US at any time during that 10-year period. Such substances, once properly reported, will be placed on the "active" portion of the Inventory. Second, for any substance that is not on the active portion of the Inventory, the Rule requires entities to provide "forward-looking" reports of the commencement of manufacturing or processing of chemical substances that are on the "inactive" portion of the Inventory. If a chemical is placed on the "inactive" portion of Inventory, the continued manufacture (including import) or processing of the chemical in the United States for a nonexempt commercial purpose would be unlawful, unless a "forward-looking" report is provided to EPA no more than 30 days before of resumption of manufacturing (including importing) or processing of the substance.2

If EPA follows the same practice it established with the proposed rule, it is possible EPA will not send the final Inventory Reset regulation to the Office of Management and Budget for prepublication review. Thus, entities that will have reporting obligations under the final rule should assume the Agency intends to meet the June 22nd deadline. Moreover, it is anticipated that the final version of the TSCA Inventory Reset Rule will largely mirror the proposed version EPA issued in January and so the regulated community would be well served to begin to plan how to comply with the new Rule. While we await publication of the final TSCA Inventory Reset Rule, here are five key features of the Rule of which businesses should be aware and related practical tips to facilitate and expedite compliance with the final TSCA Inventory Reset Rule.

1. Not All Chemical Substances Will Require Retrospective Reporting for the Look-Back Period

EPA will prepare an "interim list" of "active" substances compiled based on reports it received during the 2012 and 2016 Chemical Data Reporting (CDR) rounds (as supplemented by substances added to the Inventory during the period June 2016-June 2107); provided, such substances are already on the nonconfidential portion of the Inventory (i.e., the specific chemical identity is publicly available). Therefore, entities need not report chemical substances for which it or any other entity submitted 2012 or 2016 CDR reports and where the substance's specific chemical identity was not claimed as confidential. EPA's databases of 2012 CDR reports can be accessed here and EPA's information on the 2016 CDR reports can be accessed here.

In addition, chemical substances that were manufactured or imported pursuant to certain TSCA pre-manufacture notice (PMN) exemptions (e.g., naturally occurring substances, R&D substances, and exempt polymers that are not identified on the Inventory) are not subject to retrospective reporting.

Tip: To avoid over reporting and to save administrative resources during the reporting phases, businesses that manufacture and process chemicals in the US, even those that have historically asserted confidentiality claims for all or some of the information they have submitted, should check now whether the substances they consider active were reported for CDR purposes in 2012 or 2016 by any entity in a nonconfidential fashion.

2. Substantiating Claims of Confidential Business Information (CBI) Will Be Required

The "retrospective" reports will require reporting: (1) chemical identity; (2) type of commercial activity (e.g., manufacture, import, processing); (3) date range for such activity during the Look-Back Period; and (4) whether the submitter seeks to continue a claim from protection against disclosure of a confidential chemical identity, if applicable.3 Entities that claim CBI status for (and thereby seek to prevent the public disclosure of) any of this information other than the specific chemical identity must substantiate (i.e., justify) their CBI claims at the time of submitting the report. The 2016 amendments to TSCA changed what types of information are eligible for being considered CBI (and those that are not) and have required increased EPA scrutiny of CBI claims in general and those claims for specific chemical identity in particular. Businesses should familiarize themselves with the new TSCA CBI paradigm.

Tip: Keep CBI claims for chemical identities to a minimum. For CBI claims for the specific identity of a reported chemical substance, entities may elect whether to substantiate such claims at the time of submitting the "retrospective" report or after EPA issues its forthcoming regulations on substantiating chemical identity CBI claims. Entities may find that it would be more efficient to substantiate all confidentiality claims, including those pertaining to specific chemical identity, at the time of submitting the "retrospective" reports. However, asserting the fewest possible claims will reduce administrative burdens.

3. Retrospective Reporting Required for Low-Volume Substances Exempt from CDR Reporting

An entity who did not have to submit a report during the 2016 and 2012 CDR reporting cycles for a substance that was manufactured or imported at a volume less than 25,000 pounds per year may find that the substance is not automatically added to EPA's interim list of "active" substances as a result. In which case, even though no CDR reports were required for the substance during the 2012 and 2016 reporting cycles, the entity would need to file a "retrospective" report for the substance under the TSCA Inventory Reset Rule.

Tip: Businesses should review now the records they collected when determining how to comply with previous CDR reporting cycles. (The CDR regulation requires such records be retained for 5 years.)4 This review should include not only the list of chemicals reported, but also any substances that were not reported on the basis of not meeting the volumetric triggers for CDR reporting. If those substances do not already appear on the public list of substances reported by other entities during the 2012 and 2016 CDR reporting cycles, they will need to be reported as "active" in the retrospective reporting period.

4. Potential to Inadvertently File Information Inconsistent with Previously Submitted TSCA Information

EPA's capacity to review and scrutinize information submitted for TSCA (and other) purposes has increased recently, including through mandating electronic submissions (as is the case under the Reset Rule and recent CDR reports, for example). Such scrutiny can reveal inadvertent but potentially costly violations of TSCA reporting regulations.

Tip: Entities subject to the TSCA Inventory Reset Rule could save themselves potential headaches by compiling, reviewing, and comparing their prior TSCA submissions prior to submitting their "retrospective" reports. Such submissions not only contain much of the information needed to complete the "retrospective" reports (and therefore this may be the most efficient way to begin compiling the necessary information for these reports), but reviewing such submissions would also decrease the chance of providing information in any "retrospective"; "active substance" reports that is inconsistent with what was previously provided to EPA. For example, one could imagine a scenario where if the "retrospective" report was based on employee recollection alone, the report might contain an earlier date range for manufacturing the same substance than the company provided in its Notice of Commencement following up on its initial PMN submitted for the substance. Even seemingly small inconsistencies could raise the specter of significant penalties. The 2016 amendments to TSCA have brought the level of potential penalties for civil violations of TSCA in the range of $38,000 per day per violation.

5. Many Challenges Facing Processors

Processors generally are not used to filing reports for TSCA; but the failure to identify an important raw material as an active substance can lead to compliance issues and supply chain interruptions.

While manufacturers and importers must submit their "retrospective" reports within 180 days of the effective date of the final TSCA Inventory Reset Rule, processors will have 360 days to submit their retrospective reports. This extended time is intended to allow processors the opportunity to review the interim list and any updates to determine whether their suppliers have already notified EPA during the first 180 day retrospective reporting period. If a processor does not identify all of the materials it uses in the production of products it distributes in commerce on the interim list, the processor itself should file the "retrospective" report necessary to specify an Inventory listed substance for an "active" designation. If a processor fails to do so and the substance remains on the "inactive" portion of the Inventory, the processor's continued processing of the substance could be unlawful.

Hopefully, for most processors, this will not be an issue because another entity (including their supplier) will file the necessary "retrospective" reports. However, some processors may find it difficult to determine whether the raw material on which they rely are on the "active" portion of the TSCA Inventory (e.g., if the manufacturer or importer who is their supplier has asserted a CBI claim for the specific chemical identity). Processors should not be hesitant to file "protective" retrospective reports just to have certainty that commercially important substances are on the "active" portion of the Inventory. It is also possible that the processors themselves do not know the confidential chemical identity of all substances in a formulation (mixture) they receive from a supplier. In such cases the proposed TSCA Inventory Reset Rule would allow for joint (coordinated) submissions to EPA from the supplier and the processor.5

Tip: To mitigate these challenges, processors would be well served to begin to determine the extent to which they do not have specific chemical identity information for the various substances they acquire and use and to communicate now with their suppliers to seek assurances their suppliers will either supply that information to them or will perform the necessary retrospective reporting (and advise them when this has been accomplished).

Conclusion

EPA's forthcoming final version of the TSCA Inventory Reset Rule will require manufacturers, importers, and processors to submit numerous "retrospective" and "forward-looking" reports. By taking the steps recommended above, they can avoid potential pitfalls while following a careful and reasoned approach to providing "retrospective" and "forward-looking" reports. Taking these recommended steps early will reduce the burdens of complying with the final TSCA Inventory Reset Rule.

Footnotes

1 TSCA Inventory Notification (Active-Inactive) Requirements. 82 Fed. Reg. 4,255 (Jan. 13, 2017).

2 Id. at 4,258. "{O}nce EPA has designated a chemical substance as an inactive substance, the processing of that chemical substance for a non-exempt commercial purpose would be unlawful, unless the processor first submits a notice as required by TSCA section 8(b)(5)(B)."); id. at 4,260 ("TSCA section 8(b)(5)(B) provides that, once a chemical substance has been designated as inactive, any person who intends to manufacture or process that inactive substance for a nonexempt commercial purpose must first notify the Agency before the date on which the inactive substance is manufactured or processed.") See also 15 U.S.C. § 2607(b)(5)(B)(i) ("Any person that intends to manufacture or process for a nonexempt commercial purpose a chemical substance that is designated as an inactive substance shall notify the Administrator before the date on which the inactive substance is manufactured or processed.").

3 Notably, unlike Pre-Manufacture Notifications (PMNs) and Chemical Data Reporting (CDR) rule submittals, neither the production/import volume, nor detailed information regarding the manufacture or processing methods, or use of the chemical are required for retrospective reporting.

4 Companies must maintain records that document CDR information reported to EPA for a period of 5 years beginning on the last day of the submission period.  40 CFR § 711.25. Thus, for a CDR report submitted for the submission period ending September 30, 2016, the records on which the report is based would be retained until September 30, 2021. We encourage entities to also keep records relied upon to decide not to submit a CDR report for a particular substance (e.g., below reporting volume threshold).

5 82 Fed. Reg. 4255, 4256 (Jan. 13, 2017) "If a domestic manufacturer or processor cannot provide the specific chemical identity of a reportable substance to EPA because the chemical identity of a reactant is claimed confidential by a supplier, and therefore is unknown to the domestic manufacturer or processor, the manufacturer or processor would be required to ask the supplier to provide the confidential chemical identity information directly to the Agency in a joint submission."

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