REGULATORY MEMORANDUM

EPA Intends Proposed Rule to Increase Flexibility and Reduce Burdens under TSCA Fees Program

On December 21, 2020, the U.S. Environmental Protection Agency (EPA) released a proposed rule that would amend the 2018 Toxic Substances Control Act (TSCA) fees rule. According to EPA, the proposed rule “reflects real-world situations, narrows the broad scope of current requirements, significantly reduces the burden on American businesses, and increases the flexibility for surrounding TSCA fees requirements.” Under TSCA, EPA collects fees from chemical manufacturers and processors to help fund implementation and to ensure that public health and the environment continue to be protected. TSCA requires EPA to review its fees every three years and, after consulting with parties potentially subject to the fees, to adjust the fees if necessary. The proposed rule describes the proposed modifications to the TSCA fees and fee categories for fiscal years 2022, 2023, and 2024 and explains the methodology by which these TSCA fees were determined. The proposed updates include:

  • Regarding EPA-initiated risk evaluations, narrowing the scope of the TSCA fees rule by exempting from the requirement to pay fees importers of articles containing a chemical substance, companies that produce a chemical as a byproduct or manufacture or import as an impurity, companies that manufacture or import a chemical in de minimis amounts, companies that manufacture or import chemicals solely for research and development (R&D) purposes, and companies that produce a chemical as a non-isolated intermediate;
     
  • Using cost data gathered over the past two years, instead of estimates, to update the fee calculations;
     
  • Ensuring fees are fairly and appropriately shared across companies by proposing a production-volume based fee allocation and including export-only manufacturers for EPA-initiated risk evaluations;
     
  • Allowing for corrections to be made to the list of manufacturers subject to fees for EPA-initiated risk evaluations after the final list is published, ensuring the accuracy of the list;
     
  • Increasing flexibility for companies by extending the amount of time to form consortia to share in fee payments;
     
  • Ensuring that EPA can fully collect fees and enabling companies to prepare better for paying fees by allowing payments in installments for EPA-initiated and manufacturer-requested risk evaluations (MRRE); and
     
  • Adding three new fee categories; two associated with new chemicals activities and one with test orders.
     

Comments will be due 45 days after EPA publishes the proposed rule in the Federal Register.

What Action Is EPA Taking?

The proposed rule would establish, update, and/or revise fees collected from manufacturers (including importers) and, in some cases, processors, to defray some of EPA’s costs related to activities under TSCA Sections 4, 5, and 6; the rule would also involve EPA collecting, processing, reviewing, and providing access to and protecting from disclosure as appropriate under TSCA Section 14 information on chemical substances. EPA proposes updates and changes to the 2018 fees rule, including: (a) the addition of three new fee categories -- a Bona Fide Intent to Manufacture or Import Notice (bona fide notice), Notice of Commencement of Manufacture or Import (NOC), and an additional fee related to test orders; (b) the addition of exemptions for manufacturers subject to fees for EPA-initiated risk evaluations under TSCA Section 6(b), including: exemptions for manufacturers if the chemical substance is imported in an article, produced as a byproduct, or produced or imported as an impurity, an exemption for R&D activities, an exemption for manufacturers of chemical substances produced as a non-isolated intermediate, and an exemption for entities manufacturing less than 2,500 lb of a chemical; (c) updates to TSCA Sections 4, 5, and 6 costs and costs of relevant information management activities, as well as fee calculation methodology; and (d) various changes to how the fee regulations are implemented, including certain timing requirements throughout the fee payment process. EPA notes that it is not proposing to change the “small business concerns” definition.

Why EPA Is Taking the Action

EPA states that the proposed fees are intended to achieve the goals articulated by Congress by providing a sustainable source of funds for EPA to fulfill its legal obligations under TSCA Sections 4, 5, and 6 and with respect to information management. According to EPA, these activities include designating applicable substances as high and low priorities for future risk evaluation, conducting risk evaluations to determine whether a chemical substance presents an unreasonable risk of injury to health or the environment, requiring testing of chemical substances and mixtures, and evaluating and reviewing new chemical submissions, as required under TSCA Sections 4, 5, and 6. The activities also include collecting, processing, reviewing, and providing access to and protecting from disclosure as appropriate under TSCA Section 14 information on chemical substances under TSCA. EPA reviewed fees established in the 2018 fees rule and determined that it is necessary to adjust the fees. EPA is proposing changes to the TSCA fee requirements established in the 2018 fees rule based upon more than two years of TSCA fee implementation and is proposing to adjust the fees based on changes to program costs and inflation and to address certain issues related to implementation of the fee requirements.

Estimated Incremental Impacts of the Proposed Rule

EPA states that it evaluated the potential incremental economic impacts of the proposed rule for fiscal years (FY) 2022 through 2024. The proposed rule briefly summarizes the “Economic Analysis of the Proposed Rule for Fees for the Administration of the Toxic Substances Control Act” (Economic Analysis), which will be available in Docket ID EPA-HQ-OPPT-2020-0493 at https://www.regulations.gov/ when the proposed rule is published in the Federal Register:

  1. Benefits. The principal benefit of the proposed rule is to provide EPA a sustainable source of funding necessary to administer certain provisions of TSCA.
     
  2. Cost. The fees collected from industry for the proposed rule under the proposed options, annualized over the period from FYs 2022 to 2024, are approximately $22 million (at both three percent and seven percent discount rates), excluding fees collected for MRREs. Total annualized fee collection was calculated by multiplying the estimated number of fee-triggering events anticipated each year by the corresponding fees. Total annual fee collection for MRREs is estimated to be $1.9 million for chemicals included in the 2014 TSCA Work Plan (based on two requests over the three-year period) and approximately $5.7 million for chemicals not included in the TSCA Work Plan (based on three requests over the three-year period). EPA analyzed a three-year period because TSCA requires EPA to reevaluate and adjust the fees, as necessary, every three years.
     
  3. Small entity impact. EPA estimates that 35 percent of Section 5 submissions will be from small businesses that are eligible to pay the Section 5 small business fee because they meet the definition of “small business concern.” “Small business concern” means a manufacturer or processor that meets the size standards at 40 C.F.R. Section 700.43. Total annualized fee collection from small businesses submitting notices under Section 5 is estimated to be $411,000. For Sections 4 and 6, reduced fees paid by eligible small businesses and fees paid by non-small businesses may differ because the fee paid by each entity would be dependent on the number of entities identified per fee-triggering event and production volume of that chemical substance. EPA estimates that the average annual fee collection from small businesses for fee-triggering events under Sections 4 and 6 would be approximately $8,000 and $922,000, respectively. For each of the three years covered by the proposed rule, EPA estimates that the total fee revenue collected from small businesses will account for about six percent of the approximately $22 million total fee collection, for an annual average total of approximately $1.3 million.
     
  4. Environmental justice. EPA states that the fees will enable it to protect better human health and the environment, including in low-income and minority communities.
     
  5. Effects on state, local, and tribal governments. The rule would not have any significant or unique effects on small governments, or federalism or tribal implications.
     

Commentary

We commend EPA for issuing timely the proposed rule and for including provisions that address practical issues that have arisen in the implementation of TSCA to date, in particular regarding MRREs. The inclusion of the three additional fee categories and the associated fees, i.e., for bona fide notices ($500/$90 for small businesses), NOCs ($500/$90 for small businesses), and an additional fee related to amended test order submissions ($9,800) are reasonable in light of the costs incurred by EPA in collecting, processing, reviewing, and providing access to and protecting from disclosure information as appropriate under TSCA Section 14.

The proposed addition of new exemptions for manufacturers and importers subject to fees for EPA-initiated risk evaluations appears well-considered and largely reflective of industry stakeholder input. These exemptions include those for manufacturers when the chemical is imported as part of an article; produced as a byproduct; produced or imported as an impurity; produced or imported in small quantities for R&D; produced as a non-isolated intermediate; and produced or imported in quantities of less than 2,500 lb per year. With regard to entities that manufacture chemicals as a byproduct, we would not be surprised to see EPA refine the proposed exemption to limit the exemption to be consistent with the exemption for byproduct producers under the TSCA Section 5 Premanufacture Notification and the TSCA Section 8 Chemical Data Reporting regulations. Under those regulations, entities that manufacture substances as byproducts for certain separate commercial purposes are required to report; in this light, coverage of these byproduct manufacturers under the fees rule seems both reasonable and practicable.

EPA’s proposed addition to the set of manufacturers required to pay fees for EPA-initiated risk evaluations of entities that manufacture a subject chemical solely for export whenever such substance is manufactured, processed, or distributed in commerce by any other entity for any purpose other than export from the United States may raise some eyebrows. TSCA Section 12(a) exempts chemicals manufactured for export, and there is no exception to the exemption for purposes of fee assessment under TSCA Section 26 (as there is for requirements under Sections 4, 8, and 12(b), and if the chemical is found to present an unreasonable risk in the United States). Based on these differences, we question whether EPA’s position is supportable, recognizing ambiguities in TSCA Section 12(a), e.g., whether the exemption applies on a chemical-, entity-, or shipment-specific basis.

EPA’s proposed new production/import volume-based methodology for calculating fees shares for EPA-initiated risk evaluations should be welcomed generally, but may present additional implementation complexities. It could also result in anomalous situations where small manufacturers are required to bear a disproportionate share of the fees. There may also be circumstances in which the proportion of fees might divulge a particular company’s production volume (or average production volume). An alternative that stakeholders should consider is a tonnage band model. That way, a fee proportion cannot be used to back-calculate another’s production volume.

Given all the surprises that potential fee payers faced in the spring when EPA published the preliminary lists of fee payers for the “next 20” substances undergoing risk evaluation, stakeholders may wish to consider carefully the implications of the various fee scenarios.

 
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