Hunton Retail Law Resource

The United States Environmental Protection Agency (EPA) has announced that it will provide retail companies with significant relief from its Toxic Substance Control Act (TSCA) Fees Rule. In a formal “No Action Assurance” (NAA) letter released to the public on March 25, 2020, EPA confirmed that companies importing products containing any amount of certain common “high-priority” chemicals will not be required to share in the fees for EPA’s upcoming risk evaluations for those chemicals. EPA also announced that it will provide exemptions for companies that manufacture a high-priority chemical only as a byproduct or impurity.

The NAA relieves these exempted companies of their obligation to self-report to EPA that their products contain the following 20 common chemicals EPA will review to determine whether they pose any unreasonable risks to human health or the environment:

• Formaldehyde, a chemical commonly used in building products and as a preservative;
• Five phthalates used as plasticizers in products like plastic pipes, toys, food packaging, cosmetics and medical/dental products (BBP, DBP, DEHP, DIBP and DCHP) and one chemical used to make phthalates (phthalic anhydride);
• Three flame retardants (TBBPA, TCEP and TPP) and a chemical sometimes used in the manufacture of flame retardants and fire extinguishers (ethylene dibromide);
• A fragrance additive found in perfumes, cosmetics and other consumer products (HHCB, also known as galaxolide);
• Seven chlorinated solvents found in products like cleaning solutions, paint thinners and glues (1,1-dichloroethane, 1,2-dichloroethane, 1,2-dichloropropane, o-dichlorobenzene, p-dichlorobenzene, trans-1,2-dichloroethylene and 1,1,2-trichloroethane); and
• A chemical used to manufacture synthetic rubber (1,3-butadiene).

EPA’s NAA comes after months of industry criticism over its implementation of the TSCA Fees Rule, which it is administering for the first time since TSCA was amended in 2016. The Fees Rule requires EPA to allocate and collect a $1.35 million fee per chemical from companies that manufacture or import the chemical, to offset EPA’s costs of conducting the risk evaluation.

Though the TSCA Fees Rule has been final since October 2018, it was not until a December 2019 conference call with interested stakeholders that EPA made clear that it intended to assess fees against companies that manufactured or imported any amount of a high-priority chemical—even if the chemical was present as a manufacturing byproduct, an impurity, or in an article or product.

EPA’s intent to include importers of articles and goods among the pool of responsible payors caught many companies off guard. Other TSCA regulations typically provide exemptions for importers of “articles,” or items in which a chemical is present. If enforced as to imported articles, the TSCA Fees Rule would have required companies—many of whom may have never interacted with the EPA in the past—to self-report to the EPA that their products contained high-priority chemicals. It would also have subjected those companies not only to TSCA fees but also penalties for TSCA violations (even if unintentional) and increased litigation risk.

EPA’s expansive interpretation of the TSCA Fees Rule generated widespread industry criticism. Many importers of consumer products are not privy to their suppliers’ manufacturing processes, which often occur many levels upstream and may be proprietary. Stakeholders urged EPA in public comments and during a February 2020 conference call to reconsider its stance given the challenges and expenses associated with compliance. EPA acknowledged those difficulties in the NAA, noting that “[i]mposing reporting requirements on all importers of articles … could potentially require the testing of thousands of imported articles and would be difficult if not impossible to complete” before the TSCA Fees Rule self-disclosure deadline. EPA further recognized that the complexity of the modern-day supply chain “makes both the tracking process and the obligation to self-identify very difficult, if not impossible.”

While EPA’s announcement is a welcome development for retail companies importing products, all companies should be aware that:

• EPA published preliminary lists of potentially responsible payors for each high-priority chemical in January 2020. Companies included on any preliminary list, but who fall into the three categories now exempted, must self-certify their exemption to EPA before May 27, 2020, in order to avoid being included on EPA’s final list of responsible payors (which would obligate the company to share in fees regardless of exemption status).
• For companies not identified on any preliminary list, but who are now exempt, no further action is required.
• The exemptions do not apply to companies manufacturing or importing a high-priority chemical itself (rather than importing a product that may already contain the chemical). Companies who believe they may now be exempt should review their processes to ensure complete exemption before certifying as such to EPA.
• Companies that are not exempt can now be expected to be allocated a greater share of the fees than originally anticipated.
• EPA reserved its right to revoke or modify the NAA. Although it is unlikely that EPA will revoke the NAA, companies should monitor developments associated with the proposed amendments to formalize the exemptions to ensure that they remain in full compliance with any TSCA obligations.

EPA’s March 25, 2020 announcement and NAA can be found here.