TSCA Inventory Reset Rule: What's Next for Processors?
Important Considerations for Companies that Purchase and Use Chemical Substances
Numerous US businesses that manufacture and import chemical substances breathed a sigh of relief after struggling to meet the initial deadline established by EPA's Toxic Substances Control Act (TSCA) "Inventory Notification (Active-Inactive) Requirements" Rule. Now, entities that purchase and process chemical substances in the US are facing an upcoming deadline under the new rules; those businesses must decide soon how they will respond. For some companies that do not import or manufacture chemicals, but merely acquire and use chemical formulations in their manufacturing and blending operations, this might be the first time they have faced a TSCA reporting rule.
Also known as the "Inventory Reset Rule" or "Active-Inactive Rule," these new EPA requirements took effect in August 2017—approximately one year after the 2016 amendments to TSCA became law. As discussed in our June 2017 Advisory, the final Active-Inactive Rule is intended to permit EPA to clarify which chemical substances currently listed on EPA's TSCA Inventory of chemical substances are actually "active" in US commerce. The rule establishes certain "retrospective reporting requirements" which required manufacturers (including importers) of chemical substances to notify EPA, by no later than February 7 of this year, which chemical substances appearing on the current TSCA Inventory have been manufactured in or imported to the United States between June 21, 2006 and June 21, 2016 (the "lookback period"). The February deadline remained in effect despite litigation in the DC Circuit challenging certain portions of the rule.
The Active-Inactive Rule also includes certain "forward-looking reporting requirements" obligating manufacturers and processors to provide a forward-looking report to EPA when they intend to commence, manufacture, or processing any chemical substance that is designated as "inactive" on the updated Inventory. (Regulations that were codified by EPA shortly after the statute was originally enacted in 1976 already require notification to be submitted to EPA prior to manufacturing or importing a "new" chemical substance—one that is not listed on any portion of the TSCA Inventory.)
A list published by the Agency in January 2018 reveals that over 14,700 notices of activity had been received by EPA pursuant to the Rule. These substances, as well as any others reported to EPA prior to the February 7 deadline, will be identified on the TSCA Inventory as "active." EPA intends to publish a "draft" version of the updated Inventory approximately 60 days after the February 2018 close of the manufacturer reporting period. This draft version of the TSCA Inventory is likely to be of particular interest to processors of chemical substances. Although entities that processed Inventory-listed chemical substances during the lookback period were not required to submit a notice, they were permitted to do so voluntarily—and may continue to submit a notice to activate a substance until October 5, 2018. Processors who might not manufacture or import chemicals themselves, but who acquire and blend or further react chemical substances, should assume the October 2018 deadline, like the initial February 2018 deadline, will not change. Accordingly, they should monitor the most current lists of "active" substances as they are released by EPA.
Important Considerations For Processors
Although the deadline for manufacturers to comply with the retrospective reporting requirements has passed, a number of potential challenges lie ahead for processors of chemical substances on the TSCA Inventory. First, because processors are not required under the final Active-Inactive rule to comply with the retrospective reporting requirements, they should determine whether they will choose to do so. Processors should make this decision bearing in mind that they may not commence to process a substance which ultimately is designated as "inactive" until an appropriate notice seeking to "reactivate" a chemical substance has been submitted to EPA. Thus, the prudent course of action for processors is to take all possible steps to ensure the continued commercial availability of materials upon which they rely to manufacture the various goods they produce and distribute. Processors who plan to submit "retrospective reports" for substances they processed during the 10-year lookback period must do so by October 5, 2018.
A few alternative approaches can be considered by processors who did not submit reports voluntarily during the reporting period that culminated on February 7, 2018. First, if this has not occurred already, a processor should identify all of the raw materials required for its continued operations and then seek to communicate with each supplier of those materials to request assurances that all chemical components in such materials have been activated. Unfortunately, seeking assurances does not guarantee timely receipt of an assurance from every supplier, and even then will not insulate a processor from liability if it processes at a later date a substance which is placed on the "inactive" portion of the final Inventory. Second, processors could chose to continue to review EPA's updates to the on-line versions of the active substances designation list and wait to submit notifications only for those substances a processor acquires which are listed on the draft Inventory as inactive. A third alternative is for a processor to simply submit a retrospective report for all important raw materials which it is has been unable to confirm will appear on the forthcoming draft Inventory. For the reasons discussed immediately below, some combination of these three approaches is likely to be necessary.
As most entities that acquire chemical substances from suppliers have experienced, there often is not complete transparency with respect to the chemical components that comprise any mixture of substances. Considerations of intellectual property and competitive advantages very often make suppliers reluctant to reveal with complete specificity all components in a formulation delivered to a customer. Thus, even the most diligent of processors is likely to find it difficult to verify by CAS Registry number (or EPA accession number) that each component in a product it acquires has been listed on the "active" portion of the forthcoming draft Inventory. Further, many chemicals in the supply chain might be lawfully produced and distributed pursuant to an exemption from the general TSCA Inventory listing requirements. The legal status of an "exempt" chemical (such as certain polymers, or chemicals produced at a low volume under the terms of an explicit exemption granted by EPA) may be difficult to confirm and validate, even if the CAS registry number of the substance is known. Often, a processor might not be aware there are multiple chemicals in a raw material it acquires; frequently suppliers change components (or their own source of supply) in a formulated product without notice to customers of the formulation change. This can alter the product's legal status vis-a-vis the TSCA Inventory. Moreover, many chemical substances are listed only on the confidential portion of the Inventory. Thus, even if a CAS number might be known to a processor, its presence on the Inventory using the CAS number might not be obvious if it was claimed as confidential business information (CBI) at the time of the original listing. Finally, the Active-Inactive Rule makes it possible under certain circumstances for a manufacturer or importer to choose to withdraw or modify a retrospective report previously submitted until the close of the processors' reporting deadline. For these reasons we recommend that processors adopt a proactive and multifaceted approach to ensure that they will not risk interruptions in supply or disruptions to their ability to deliver products to their customers. This approach is discussed further below.
EPA has advised that it plans to issue a notice announcing the availability of the draft version of the active-inactive TSCA Inventory perhaps as early as April 2018. The draft will reflect all information submitted by manufacturers on or before the initial February 7, 2018 deadline and allow EPA to integrate the reports with the previously released "interim" and "exempt" substances lists. The draft Inventory will include a list of substances that EPA is considering designating as "inactive." Thereafter, processors of chemical substances will have about 6 months to review the updated draft TSCA Inventory before they must have filed retrospective reports they intend to submit. In preparation for the October 5, 2018 reporting deadline, processors should consider taking the following steps.
First: If they have not done so already, processors should take steps now to identify the raw materials in all formulations they purchase that are used in manufacturing and processing operations for commercial products.
Second: Prior the publication of the draft version of the TSCA Inventory, processors should take affirmative steps to reach out to suppliers and identify and confirm that components in formulations have been reported or are considered to be exempt from the reporting requirement. Seeking the chemical names, CAS Numbers, or EPA accession number for each component chemical in a formulation will make it easier for a processor to make informed decisions about whether to submit a notice of activity when the draft Active-Inactive Inventory finally appears. If a supplier is reluctant to provide that information, the supplier can be asked to provide assurances in writing that it has verified the active status designation of all components. When a supplier is unwilling or unable to verify that a timely submittal was made to obtain an active designation listing, or that such a listing already is present, or is hesitant to disclose the exact formulation of a product to a processor, a processor and a supplier may take advantage of the "joint submission" process described in the final rule.1 The joint submission process allows processors to submit retrospective reports containing the chemical information that they have in their possession, and then delegate to the supplier the responsibility of providing the specific (confidential) chemical information to EPA.
Third: Processors should examine the draft Active-Inactive Inventory when issued and then prepare and timely file a notice of activity report for any substances present in formulations that the processor acquired and processed during the lookback period. This will ensure that, going forward, these materials will remain eligible for processing—even if a processor has not received a response from a supplier to its request for information about the chemical formulation of a product. In these cases, processors should, to the best of their knowledge, attempt to identify the chemical substances at issue, drawing from the EPA-developed list of "non-CBI chemical identifiers, EPA accession number(s) and generic name(s)," for retrospective reporting.2
If a processor knows the chemical substances in a formulation, but cannot find them on the active substances portion of the draft active/inactive TSCA Inventory—either because the manufacturer of a substance did not submit a retrospective report, or because the chemical identity in the retrospective report may have been claimed as CBI and is therefore not available on the public Inventory—the processor can submit its own retrospective report. In instances where the processor believes, but is not certain that, a manufacturer submitted a retrospective report that is protected by CBI, it is in the processor's best interest to submit a retrospective report to gain certainty that commercially important substances remain on the "active" portion of the Inventory. Such reporting also ensures that the decision by a supplier or manufacturer to withdraw or revise a previously-submitted retrospective report for a substance of importance to a processor does not create potential compliance issues if a processor does not learn about the withdrawal or revision until after the October 2018 deadline.
Although processors are not required to submit retrospective notice of activity reports under the TSCA Inventory Notification (Active-Inactive) Requirements Rule, we recommend they do so to protect themselves against potential supply chain interruptions and issues that could adversely affect their relationship with suppliers if the TSCA compliance status of a processor's products should come into question. If a chemical substance used by a processor unexpectedly is placed on the "inactive"portion of the TSCA inventory, a processor might have to halt processing until it can prepare and file a "forward-looking" report to resume processing of the chemical substance, or the processor (and potentially down-stream customers) could risk become subject to steep penalties under TSCA.
*Camille Heyboer also contributed to this Advisory.
© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.