Manufacturer and Importer Liability under the TSCA Fees Rule for EPA-Initiated Risk Evaluations: An Opaque and Evolving Story

Under Toxic Substances Control Act (TSCA) Section 26(b), as amended by the Frank R. Lautenberg Chemical Safety for the 21st Century Act (Lautenberg Act), the U.S. Environmental Protection Agency (EPA) is authorized to collect fees from chemical manufacturers (defined to include importers under TSCA) to defray a portion of the EPA costs associated with TSCA implementation efforts. The TSCA Fees Rule, which became effective on October 18, 2018, requires payment of fees for eight categories of fee-triggering events under TSCA, including EPA-initiated risk evaluations under TSCA Section 6. 83 Fed. Reg. 52694.

As part of the final Fees Rule, EPA is required to prepare a preliminary list of manufacturers subject to fee obligations for EPA-initiated Section 6 risk assessments. On January 27, 2020, EPA published a Federal Register notice identifying the preliminary lists of manufacturers of the 20 high-priority chemical substances for risk evaluation for which fees will be charged. 85 Fed. Reg. 4661. The notice included information on the circumstances and processes for which manufacturers (including importers) are required to self-identify as manufacturers of a high-priority substance irrespective of whether they are included on the preliminary lists identified by EPA.

On March 25, 2020, EPA announced that it would consider the development of a proposed rule that would look at potential exemptions to the TSCA Fees Rule in response to stakeholder concerns about implementation challenges. EPA stated that by considering a proposal to narrow the broad scope of the current requirements, it “could significantly reduce burden on potentially thousands of businesses across the country while maintaining the ability to successfully implement the Lautenberg Act amendments to [TSCA] to protect human health and the environment.” According to EPA, it planned to initiate a new rulemaking process to consider proposing exemptions to the current rule’s self-identification requirements associated with EPA-initiated risk evaluations for manufacturers that import the chemical substance in an article; produce the chemical substance as a byproduct; or produce or import the chemical substance as an impurity. EPA stated that it may also consider proposing other changes to the rule during this process consistent with TSCA’s requirement to reevaluate the fees rule every three years. EPA noted that it believes that considering exempting certain entities from self-identification requirements will not impede the ability to collect fully the necessary fees and will still allow it to achieve the ultimate objective of the TSCA Fees Rule and the statute — “to defray a portion of EPA’s TSCA implementation costs.”

EPA stated that it intends to issue proposed amendments to the current Fees Rule later in 2020, with the goal of promulgating the amendments in 2021. As reflected in the Fall 2020 Unified Agenda of Regulatory and Deregulatory Action (the latest version available as of early December 2020), the proposed rule was scheduled to be published December 2020 and the final rule October 2021. As of early December 2020, the proposed rule was undergoing Executive Order 12866 review with the Office of Management and Budget.

In the March 25, 2020, announcement, EPA stated also that “in light of the extremely unusual circumstances of this situation and the undue hardship imposed on certain businesses who would be required to collect and report information” under the TSCA Fees Rule, it issued a “no action assurance” for the three categories of manufacturers (i.e., for manufacturers that import the chemical substance in an article; produce the chemical substance as a byproduct; or produce or import the chemical substance as an impurity). More specifically, EPA stated that it “will exercise its enforcement discretion regarding the self-identification requirement for the three categories of manufacturers” for which EPA intends to propose an exemption. At the time, EPA suggested that businesses that are erroneously on the preliminary lists of fee payers or fall into one of the three categories discussed above should see its frequently asked questions for more information about how to certify as such to EPA and to avoid fee obligations.

On September 4, 2020, EPA published a Federal Register notice announcing the “final” lists of manufacturers of the 20 high-priority chemical substances for risk evaluation for which fees will be charged. 85 Fed. Reg. 55283. In that notice, EPA stated that the “TSCA Fees Rule provides EPA flexibility to refine the final list of manufacturers in a manner that is reasonable and prudent, in light of statutory and regulatory obligations related to TSCA risk evaluations and associated fee payment obligations. As such, the Agency decided to not charge a fee to those importers who were only importing small quantities of the 20 [high-priority substances] for research and development purposes only.” On November 25, 2020, EPA released updates to the interim final list, stating that the updated list includes additional manufacturers not identified on the final list of companies and removes manufacturers that self-identified in error or imported the chemical solely for the purpose of research and development. EPA stated further that it is committed to ensuring the list is accurate and plans to use the updated list to begin invoicing for fees. EPA added that due to the public health emergency, EPA was exploring options for payment flexibilities; installment payment options had been advocated for by certain prospective fee payers.

Under 40 C.F.R. Section 700.45(g)(3)(iv) of the Fees Rule, fee payments are due January 2, 2021, 120 days from publication of the final scopes of the risk evaluations for the 20 high-priority chemical substances now undergoing risk evaluation. 85 Fed. Reg. 55281.

Commentary

Since issuing in January 2020 the preliminary lists of manufacturers of the 20 high-priority chemical substances for risk evaluation for which fees will be charged, the lists have been a moving target, not only because of procedures mandated under the Fees Rule that contemplate the self-identification of manufacturers covered by the rule, but also as a result of policy changes made outside of the rulemaking process that served to reduce the set of persons required to pay a fee and the need to make corrections to the lists. The specific basis for an individual company’s addition to or removal from the lists is not clear. We believe EPA would be well-served to be more transparent, consistent with TSCA Section 14 requirements regarding the treatment of confidential business information, in how the lists evolved, and how fee payment shares are assessed for those manufacturers remaining on the lists.

We understand that invoices have been transmitted to at least certain manufacturers of the 20 high-priority chemical substances for risk evaluation subject to fee payments. In the invoices that we are aware of, EPA is assessing one-third of the fee owed at this time, with a due date of January 2, 2021; it has not stated the due date(s) for the remainder of the fee. Under the Fees Rule, the entire fee is due by January 2, 2021. While we believe that the deferral of the assessment of two-thirds of the fee will be a welcomed development for most fee payers, especially in light of the COVID-19 health crisis, greater transparency in how and when EPA is invoicing for the fees would also be welcomed. We are aware of no general announcement by EPA of this modified process.

EPA noted in issuing the final rule that persons that fail to self-identify for purposes of fees assessments will be subject to TSCA non-compliance penalties — versus the payment of a share of the fee that they might have otherwise been assessed if they had self-identified in compliance with the Fees Rule (in addition to penalties). Depending on what the penalty might be, there may be perverse incentives for manufacturers to take a chance that they will not be caught or be caught and be subject to a penalty that is less than the fee would be — and not to report. While we understand that reallocation of assessed fees based on the addition of manufacturers to the set of persons responsible for fee payment would be impractical, we hope that the financial gain obtained by non-compliance will be a substantial factor considered by EPA in assessing penalties to discourage non-compliance.

We await the planned proposed amendments to the TSCA Fees Rule to see how EPA addresses the issues that have arisen in the early stages of its implementation, especially for those associated with EPA-initiated risk evaluations. It appears likely that, based on EPA’s March 2020 announcement on the proposed amendments to the Fees Rule, exemptions will be proposed for manufacturers that import chemicals in an article, produce the chemical as a byproduct, or produce or import the chemical as an impurity. Additionally, based on the September 4, 2020, Federal Register notice announcing the “final” list of manufacturers of the 20 high-priority chemicals for risk evaluation for which fees will be charged under the Fees Rule and the November 25, 2020, update to the list, it also appears that an exemption will be proposed for persons that import chemicals solely for research and development. Whether exemptions for other persons are included (e.g., for persons that manufacture a chemical in some defined low volume or low concentration, or as a non-isolated intermediate) or the exemptions added outside of rulemaking are refined or nuanced (e.g., to require fees for persons that produce substances as byproducts for certain separate commercial purposes, consistent with reporting required under TSCA premanufacture notification and Chemical Data Reporting requirements, versus across the board) remains to be seen. Given the stakes involved and the wider attention being given to TSCA implementation due to the mandates in the TSCA Lautenberg Act amendments, there should be a great deal of interest in the development of the Fees Rule amendments.