The U.S. Environmental Protection Agency (EPA) announced on March 4, 2022, that EPA Administrator Michael S. Regan signed a final rule on March 3, 2022, that will amend the regulations applicable to phenol, isopropylated phosphate (3:1) (PIP (3:1)) promulgated under the Toxic Substances Control Act (TSCA). EPA states that it is extending the compliance date applicable to the prohibition on processing and distribution in commerce of certain PIP (3:1)-containing articles, and the PIP (3:1) used to make those articles, until October 31, 2024, along with the compliance date for the associated recordkeeping requirements for manufacturers, processors, and distributors of PIP (3:1)-containing articles. A pre-publication version of the final rule is available. The final rule will be effective when it is published in the Federal Register.
Action EPA Is Taking
In January 2021, EPA issued a final rule for PIP (3:1) that prohibits the processing and distribution in commerce of PIP (3:1), PIP (3:1)-containing products, and PIP (3:1)-containing articles, with specified exclusions; prohibits or restricts the release of PIP (3:1) to water during manufacturing, processing, distribution in commerce, and commercial use; and requires persons manufacturing, processing, and distributing in commerce PIP (3:1) and products containing PIP (3:1) to notify their customers of these prohibitions and restrictions and to keep records. 86 Fed. Reg. 894. The final rule established several different compliance dates, the first of which was 60 days after publication, or March 8, 2021, after which processing and distribution in commerce of PIP (3:1), PIP (3:1)-containing products, and PIP (3:1)-containing articles were prohibited unless an alternative compliance date or exclusion was otherwise provided. EPA then issued a final rule in September 2021 that extended the compliance date applicable to the prohibition on processing and distribution in commerce of certain PIP (3:1)-containing articles, and the PIP (3:1) used to make those articles, from March 8, 2021, to March 8, 2022, along with the compliance date for the associated recordkeeping requirements for PIP (3:1)-containing articles. 86 Fed. Reg. 51823.
The forthcoming final rule will amend the regulations at 40 C.F.R. Section 751.407(a)(2)(iii) and (d)(4) to extend further the phased-in prohibition, established in the September 2021 final rule, for the processing and distribution in commerce of PIP (3:1) for use in certain articles, and for the processing and distribution in commerce of certain PIP (3:1)-containing articles, from March 8, 2022, to October 31, 2024. The compliance date for the recordkeeping requirements for manufacturers, processors, and distributors of PIP (3:1)-containing articles will also be extended from March 8, 2022, to October 31, 2024. Articles covered by the phased-in prohibition include any article not otherwise covered by an alternative compliance deadline or exclusion described in 40 C.F.R. Section 751.407(a)(2)(ii) or (b).
Why EPA Is Extending the Compliance Dates
EPA states that it is further extending the compliance dates applicable to the prohibition on processing and distribution in commerce of PIP (3:1) for use in certain articles, and the processing and distribution in commerce of certain PIP (3:1)-containing articles, to address further “the hardships inadvertently created by the January 2021 final rule on PIP (3:1) … due to impacted uses and supply chain challenges that were not communicated to EPA until after the rule was published.” Shortly after EPA published the final rule, many stakeholders, including the electronics and electrical manufacturing sector and their customers, raised significant concerns about their ability to meet the March 8, 2021, compliance date for PIP (3:1)-containing articles. In March 2021, EPA requested additional comment on this specific issue, as well as on other aspects of all the TSCA Section 6(h) final rules for persistent, bioaccumulative, and toxic (PBT) chemicals. EPA states that according to the comments it received, a wide range of key consumer and commercial goods were affected by the prohibitions in the PIP (3:1) final rule, such as cellular telephones, laptop computers, and other electronic devices and industrial and commercial equipment used in various sectors, including transportation, life sciences, and semiconductor production. EPA states that the September 2021 final rule provided a “necessary short-term extension” of the compliance dates to March 8, 2022, “to avoid immediate and significant disruption in the supply chains for certain articles, to provide the public with regulatory certainty in the near term, and to allow EPA additional time to further evaluate the need to again extend the compliance deadlines for PIP (3:1).” As reported in our October 25, 2021, memorandum, EPA proposed to extend further the compliance dates to October 31, 2024, “based on the detailed information provided by several industry commenters in response to the proposal.”
Incremental Economic Impacts
According to the final rule, pursuant to TSCA Section 6(c)(2), EPA evaluated the potential incremental economic impacts of further extending the compliance deadline and determined that extending the compliance date to October 31, 2024, “would reduce the existing burden of the March 8, 2022, compliance date.” EPA states that the quantified effect of this compliance date extension “reflects the difference between the incremental cost and benefits of the January 2021 final rule as it was originally promulgated and the incremental cost and benefits of this final rule with the new compliance date in place.” EPA estimated this as the difference between the cost and benefits of the final rule after the compliance extension to March 8, 2022, and the cost and benefits of the forthcoming final rule with an October 31, 2024, compliance date. EPA estimated the quantified costs for substitution and recordkeeping to be incurred later than they would have been under the January 2021 rule, assuming they will be incurred when the compliance date extension expires.
EPA states that extending the compliance date from March 8, 2022, to October 31, 2024, for PIP (3:1)-containing articles results in an estimated annualized cost savings of $1.8 million (from $24.1 to $22.3 million) at a three percent discount rate or $2.4 million (from $23.4 to $21.0 million) at a seven percent discount rate over a 25-year time horizon. EPA notes that while it “has no data to quantify this, qualitative costs savings may include savings stemming from the additional time for manufacturers and retailers to sell articles prior to the prohibition deadline rather than being forced to dispose of them, thereby avoiding loss of revenue from those products.” According to EPA, reformulation (which can include research and development, laboratory testing, and re-labeling) will also be facilitated once an acceptable substitute is identified, given that companies will have more time to gather information regarding the steps involved in the reformulation process. EPA acknowledges that cost reductions for reformulation are not certain, however, since the time required for the regulated community to identify viable substitutes can be “complex and unpredictable.” Finally, the compliance date extension may provide additional time for information gathering about supply chain impacts that could alleviate the necessity for chemical testing of certain articles to identify whether and where PIP (3:1) might be present in their supply chains.
With respect to benefits, EPA notes that pursuant to TSCA Section 6(h)(2), for chemical substances that meet the criteria of TSCA Section 6(h)(1), EPA was not required to conduct a risk evaluation to meet its obligations. While EPA reviewed hazard and exposure information for the PBT chemicals, EPA states that this information did not provide a basis to develop scientifically robust and representative risk estimates to evaluate whether any of the PBT chemicals present a risk of injury to health or the environment. EPA did not quantify benefits due to the lack of risk estimates. EPA states that although it did not quantify the benefits of the January 2021 and September 2021 final rules, extending the compliance dates would also postpone decreases in potential releases and exposures to PIP (3:1). According to EPA, “[d]ue to discounting, in a manner similar to costs, this postponement would lead to lower potential benefits due to continued exposures.” EPA concludes that, “[o]n balance, this further extension of the compliance dates is appropriate to prevent the disruptive consequences of implementing the March 8, 2022, compliance date without a further compliance extension.” The economic consequences, such as loss of supply, could be severe, given the possible extent of PIP (3:1) in commerce. Thus, EPA has determined that the cost savings and avoidance of disruption to industry outweigh the delayed realization of benefits that may accrue from reduced exposure.
Next Steps for PBT Chemicals
In its March 4, 2022, announcement of the forthcoming final rule, EPA states that it intends to issue a proposal for a new separate rulemaking on PIP (3:1) and other PBT chemicals in spring 2023. According to the announcement, EPA is considering revising the final PBT rules to reduce further worker exposures, promote environmental justice, and better protect human health and the environment. EPA will consider as part of that forthcoming rulemaking any additional information on whether it is feasible for industry to meet the October 2024 compliance date for PIP (3:1), including the number of years that would be needed to incorporate any substitutes and distribute them throughout the supply chain, as well as any changes that may need to be made to current exclusions or additional measures that may further reduce exposures.
Commentary
This announcement, while expected, provides significant comfort to manufacturers, importers, wholesalers, and retailers of electric and electronic products and parts. Although EPA has yet to publish the final text of the rule and its response to comments, EPA states that it is extending the compliance deadline as it had proposed. From discussions with clients and related trade associations, it is clear that the industry continues to struggle to be able to document that PIP (3:1) is entirely absent in finished goods and replacement parts. As a result, there was a real risk that the majority of commercial manufacture, import, and distribution of anything with a wire would have to cease until the very complex global supply chain could provide certified PIP (3:1)-free parts.
For stakeholders, including article manufacturers, importers, processors, and distributors, it will be critically important to comment when EPA reopens all of the PBT rules in 2023.