Regulatory DevelopmentsJune 25, 2014
Under Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 3(e), a registrant may distribute or sell its registered product under another person's name and address instead of (or in addition to) its own without a separate FIFRA Section 3 registration. Such distribution and sale is termed "supplemental distribution" (sometimes referred to as a sub-registration) and the product is referred to as a "distributor product." FIFRA § 3(e), 7 U.S.C. § 136a(e); 40 C.F.R. § 152.132.
The U.S. Environmental Protection Agency's (EPA) Office of Enforcement and Compliance Assurance releases each year its National Enforcement Program Managers Guidance (NPMG) that "describes how EPA should work with state and tribal governments to enforce environmental laws that protect and improve the quality of the Nation's environment and public health." In its fiscal year (FY) 2012 and 2013 NPMGs, EPA identifies FIFRA supplemental distribution as a mandatory "focus area." Specifically, EPA states:
Although required to be consistent with the labels of the basic registered products, distributor product labels frequently deviate substantially from the EPA accepted labels. Such unapproved product labeling can lead to misuse and misapplication as well as pose significant risks to the users who rely on product labels to inform them about proper and safe pesticide use. Due to the potential risk associated with the use of improperly labeled pesticides, it is important that the EPA aggressively pursue compliance for supplemental registrations.
EPA has made good on its intent to focus enforcement efforts on supplemental distribution, resulting in several settlements with significant penalty assessments. Below is a discussion of the regulatory requirements for supplemental distribution, EPA's recent enforcement activities, and issues companies should address to help avoid such an enforcement action. Bergeson & Campbell, P.C. will be hosting a webinar on July 23, 2014, at 1:00 - 2:00 p.m. (EDT) to discuss in detail actions companies can take to avoid facing such enforcement actions in the future.
Supplemental distribution is permitted upon notification to EPA if all the following conditions are met:
The registrant has submitted to EPA a completed Notice of Supplemental Distribution of a Registered Pesticide Product (EPA Form 8570-5), which is signed by the registrant and the supplemental distributor.
The distributor's product meets the following criteria:
The distributor's product has the same composition as the registrant's product;
The distributor's product name may be different (but may not be misleading);
The distributor's product is produced, packaged, and labeled in a registered establishment operated by the registrant (or under contract in accordance with 40 C.F.R. § 152.30) who produces, packages, and labels the registered product;
The distributor's product must remain in the registrant's unbroken container;
The distributor's product label must bear the EPA registration number of the registrant's product, followed by a hyphen and the distributor's company number;
The distributor's product label may bear the name and address of the distributor instead of the registrant so long as the distributor's name is qualified by such terms as "packed for...," "distributed by...," or "sold by ..." to show that the name is not that of the manufacturer;
The distributor's product label must bear the establishment number of the final establishment at which the product was produced; and
The distributor's product label must bear the same claims as the registrant's product, provided, however, that specific claims may be deleted provided no other changes to the label are necessary. 40 C.F.R. § 152.132; 40 C.F.R. § 156.10(c).
- Although warranty statements are not required by EPA to be on pesticide labels, the distributor can use its own warranty statements provided the substitute warranty language: (1) is allowed by contract between the registrant and the distributor; (2) is not false or misleading; and (3) does not expand upon, either explicitly or implicitly, the uses allowed on the registrant's label and does not conflict with the claims stated on the label. EPA, Pesticide Labeling Questions & Answers – Advertising Claims, Item 7, available online.
- The distributor's product has the same composition as the registrant's product;
The distributor is considered an agent of the registrant for all intents and purposes under FIFRA, and both the registrant and the distributor may be held liable for violations pertaining to the distributor product. 40 C.F.R. § 152.132. Since all conditions of the basic registration apply equally to distributor products, it is important for the registrant and supplemental distributor each to ensure that all requirements for the distributor's product and labeling are in compliance with requirements placed on the registrant's product and labeling. Indeed, as recent cases show, EPA will pursue enforcement actions against both parties when the conditions of supplemental distribution are not satisfied. Some of the larger penalties paid since 2012 that related to supplemental distribution violations include the following:
In EPA Region 10, IBC Manufacturing Co., the registrant, paid a $265,000 penalty for allowing its product to be distributed with outdated labels and failing to inform its distributor of important label changes. The supplemental distributor paid a $35,336 penalty.
In EPA Region 7, Mason Chemical Company, the registrant, paid a $85,640 penalty, and American Chemical Systems II, Inc., a supplemental distributor, paid a $11,000 penalty because the pesticide label did not include all information necessary from the registrant's label.
Also in EPA Region 7, Wellmark International, Inc., the registrant, paid a $44,704 penalty, and Vitalix, Inc., a supplemental distributor, paid a $39,683 penalty, to settle allegations related to their roles in the distribution or sale of misbranded pesticides. EPA states that it had alleged that the two products were either misbranded with labels that did not include required cautionary language, or were distributed in conjunction with claims that differed from the pesticide registration information filed with EPA.
- In EPA Region 1, Harrell's LLC, the registrant, paid $1,736,560 in civil penalties for allegedly distributing and selling misbranded pesticides. This penalty included violations other than supplemental distribution, but issues with supplemental distributor labels was a large component of this case as EPA alleged over 350 illegal sales and distributions of misbranded pesticides (without labels or with illegible or inaccurate labels).
EPA has stated that it receives approximately 100 forms per week notifying EPA of a supplemental distributor product, indicating that compliance issues affect a large number of pesticide registrants and related distributors. Since supplemental distributor labels are not submitted to EPA for review, supplemental distributor compliance is essentially self-implementing and require companies to institute systems that ensure these regulatory requirements are satisfied. On the surface, it would appear relatively simple to meet the conditions of supplemental distribution labeling, especially considering how few changes from the registrant label are permitted on the supplemental distributor label. There are, however, nuances in what label modifications are permissible that can make compliance challenging. It is essential to a robust monitoring program to ensure that any changes made to the EPA-approved label are subsequently made to all supplemental distributor labels, a training protocol or program is implemented to ensure that supplemental distributors, who are not always as knowledgeable about FIFRA, do not unilaterally change a label in a non-compliant manner, and appropriate contracts are in place to address compliance and liability issues.
Another potential pitfall relates to the very important requirement that the "distributor's product is produced, packaged, and labeled in a registered establishment operated by the registrant (or under contract in accordance with 40 C.F.R. § 152.30) who produces, packages, and labels the registered product." The only way a product registered for a supplemental distributor can be lawfully manufactured is if the product is produced in a registered establishment operated by the registrant of the parent product, or the product is toll manufactured in an establishment operated by another producer pursuant to a contractual relationship between the parent registrant and the actual producer. This requires contractual privity between the formulator who is making the product for the supplemental distributor and the registrant. Companies must appreciate the distinctions between toll manufacturing and supplemental distribution -- even when one company is both the toll manufacturer and a supplemental distributor -- and have contracts in place that are sufficient to satisfy the regulatory requirements.
Issues also can arise with basic paperwork, as EPA has acknowledged situations where EPA headquarters and states or EPA Regional offices have conflicting information about the forms on file and the status of a supplemental distributor product. For companies trying to confirm whether EPA has acknowledged a supplemental distribution application, or trying to determine the universe of supplemental registrations for a particular product, EPA maintains a website of supplemental distributor products that could be used to verify that EPA has received a supplemental distributor application. See EPA, Pesticide Product Information System, available online (Distributor Products). It is an understatement to state that this database is not user-friendly, and this can create a host of problems for both registrants and supplemental distributors who lack sufficient information about existing supplemental distribution products.
The issue of supplemental distribution compliance will remain high on EPA's enforcement priorities. For this reason, Bergeson & Campbell, P.C. will be hosting a webinar on July 23, 2014, at 1:00 - 2:00 p.m. (EDT) to discuss in detail what companies can and must do to avoid facing enforcement action of this kind. If you would like to participate, please contact Chad Howlin by July 18, 2014.