Every four years, companies that manufacture or import chemical substances in the U.S. in quantities greater than 25,000 lbs./year by site must submit detailed manufacturing, processing and use information on each of these chemicals to the Environmental Protection Agency (EPA). 40 CFR Part 711. Information submitted under this Chemical Data Reporting (CDR) Rule is used by EPA both as a stepping-off point for assessing compliance with the federal Toxic Substances Control Act (TSCA) and also to compile and maintain the agency’s inventory of chemical substances in commerce in the U.S. (the TSCA Inventory). CDR reporting can be very burdensome because it requires a multidisciplinary effort within companies, and may require investigations and coordination with partners, as well as with direct and indirect customers up and down product supply chains. The next CDR reports must be submitted electronically to EPA on or before September 30, 2016, covering chemical manufacture and import activities during the period 2012-2015.

The rule covers almost all chemical substances manufactured or imported in excess of the reporting threshold, but with limited exemptions for chemicals incorporated into manufactured articles, impurities, R&D chemicals, non-isolated intermediates, pesticides, foods, drugs, cosmetics, polymers, microorganisms and certain other products.

Reporting Requirements Expanded

Since the last reporting period in 2012, EPA has made several significant changes to requirements. This includes lowering the reporting threshold to 2,500 lbs./year for substances that are subject to particular, chemical-specific risk management rules or orders under TSCA, as well as requiring all reporting companies to provide detailed chemical processing and end-use information for all uses down the chemical’s distribution chain. In the past, only the largest-volume producers were subject to this extensive reporting. There are also important changes to rules otherwise allowing companies to prevent EPA from disclosing data claimed as confidential business information (CBI). In the past, companies could defer substantiating CBI claims until the claims were challenged, if ever. Starting with this cycle, companies will need to submit substantiation (proof of likely competitive harm from disclosure) when the CDR report is submitted, at least for certain claims (e.g., chemical identity and processing, use and exposure chemical information).

Common Reporting Issues and Errors

Despite 25 pages of regulation and hundreds of pages of guidance documents, there are a number of challenging areas that complicate reporting and may cause reporting violations.

The most significant step in the CDR process is identifying which substances, if any, need to be reported. Most enforcement cases involve reportable chemicals that were inadvertently missed. In theory, fines can be as much as $37,500/day per missing report. And while penalties at that level are unlikely, total fines for missing reports often run to $50,000 and, more rarely, in excess of $100,000.

Importers can be particularly vulnerable to errors if they do not know the specific molecular identity and proportion of all individual chemicals in imported commercial mixtures. They typically must obtain that information from the supplier or arrange for the supplier to provide the information directly to EPA on a confidential basis. Importers also may fail to recognize reportable chemicals in manufactured items that do not qualify for the “articles” exemption. The exemption excludes only chemicals incorporated into manufactured items and not intended for release. The manufactured items must be formed to a specific design necessary to the item’s final function. For example, a metal ingot is not exempt, because its design is unrelated to the final use of the metal. But if imported in the form of a barrel for a pen, the metal (and any protective coating) would be exempt. On the other hand, the liquid ink in the pen would not be exempt and would be potentially reportable because the ink is intended to be released from the pen when used. All manufactured items should be evaluated for possible reporting obligations.

Companies also run into issues with incidental manufacturing and by-products—chemicals produced unintentionally during other chemical manufacturing or processing operations (e.g., new metal compounds formed in chemical etching solutions when used, or calcium compounds formed in flue gas scrubbers). Depending on the circumstances, these may or may not be exempt when formed. By-products are potentially subject to reporting unless they are disposed of as waste, burned as fuel, or processed to extract a chemical substance that exists in the by-product. But manufacturers are responsible for downstream uses. For example, even if the manufacturer sought to exempt the by-product by treating it as a waste, the exemption would be lost if the waste hauler instead recycled the by-product for a different commercial use. Similar to by-products are chemical intermediates, which are exempt in limited circumstances. Care is required both to identify when these chemicals are formed during processing and to reach appropriate conclusions about applicable exemptions.

CDR Presents Sustainability and Compliance Improvement Opportunities

Assembling and submitting comprehensive CDR information to EPA can be a burdensome paperwork exercise, with little or no apparent benefit to the reporting company. However, there are at least two opportunities for companies to extract significant value from the CDR information and process.

First, with a little additional effort, the CDR information collection and review can serve as the foundation for an affirmative compliance audit of a company’s chemical product compliance. It is not uncommon for CDR reviews to lead to the discovery of noncompliance (e.g., inadvertent import or manufacture of chemicals not on the TSCA Inventory). Indeed, in EPA’s CDR compliance inspections at individual facilities, the Agency reviews manufacturing and import documents to confirm the sufficiency of the CDR report, but it also takes the next step to confirm compliance with related TSCA obligations. For example, confirming the company has submitted the required TSCA compliance certifications for all chemical imports, or provided required export notices for chemicals subject to TSCA significant new use rules. Coupling the unavoidable CDR information investigations with a compliance auditing program (preferably designed and conducted with counsel) gives reporting companies the opportunity to find and correct compliance excursions without enforcement, often even where it becomes necessary or practical to affirmatively disclose the issue to EPA.

Second, CDR information may provide companies with useful insights into both their supply chains and the downstream uses and markets for their products. For example, importers may discover that a commercial product they distribute contains ingredients inconsistent with the company’s “green chemistry” or sustainability product policies. Chemical manufacturers may discover downstream uses of their products that represent previously unknown potential liability or reputational risks, or that otherwise warrant additional product stewardship efforts. On the positive side, newly discovered downstream uses also may present a range of new marketing opportunities for a chemical.

Start Early and Plan Thoroughly

While CDR reports can be submitted as late as September 1, given the need to assemble a multidisciplinary internal team and potentially to coordinate with and collect information from upstream suppliers, import customs brokers, contract manufacturers, process chemical reclaimers, and a range of downstream distributors and users, it is prudent to assemble a team and develop a work plan and schedule as early as practicable. The plan should be designed to timely meet both CDR obligations and any other compliance and sustainability objectives selected.

This article was originally published in Environmental Leader, May 24, 2016.