Overhaul of Toxic Substances Control Act (TSCA) has important business implications for consumer product manufacturers and retailers.

Why it matters

After a decade of negotiation, Congress has overwhelmingly approved legislation that, for the first time in 40 years, would modernize the federal Toxic Substances Control Act (TSCA)—the nation’s premier chemical control law. The TSCA amendments have deep, bipartisan support among industry, and environmental and consumer protection groups. It was signed by the President June 22.

In the past, TSCA has been primarily a concern only for manufacturers and importers of new chemicals. The new TSCA amendments, however, have the potential to disrupt existing chemical supply chains and to taint the reputation of well-accepted consumer goods made with any of the 65,000 chemicals in commerce that have never previously been reviewed for safety by EPA. These aspects make TSCA reform a potential concern for companies throughout the value chain, including consumer product manufacturers and retailers. It may not be possible to prevent all these disruptions, but there are proactive measures to take to minimize risks from the amendments and, for some companies, opportunities to develop competitive advantage.

Detailed discussion

Safety Review of “Grandfathered” Chemicals Is the Centerpiece of Reforms

The novel risk to existing supply chains arises from a new mandate and broader practical authority, under TSCA, for the US Environmental Protection Agency (EPA) systematically to prioritize and conduct risk evaluations for all chemicals currently in commerce in the United States, and to take risk management actions (everything from ordering product warning labels to complete bans) where warranted, taking into account how the chemical is used and the extent of environmental release and human exposure in workplaces and among the general public (e.g., through consumer products). For the first time, the thousands of chemicals listed on EPA’s inventory of chemicals in commerce (the “TSCA Inventory”) will be prioritized for formal risk review using measures of hazard and exposure, and EPA will be able to order testing where needed to assess hazards or exposure.

TSCA Creates New Risks for Consumer Product Manufacturers and Retailers

Risks arise for particular companies when chemicals in their product supply chain and important to their business (e.g., as a component of an important product) come under EPA safety review, or are prioritized by EPA for an early safety review. EPA is charged with reviewing the most problematic chemicals first, so the mere act of publicly listing a chemical as a high priority for safety review may cause retailers or their retail customers to deselect products containing that “high priority” chemical, even if it is used in a way in which there is no relevant exposure to the customer. Similarly, the results of toxicological testing compelled under EPA’s new, broader authorities may hurt the reputations of products containing tested chemicals that may be unwarranted, for example, when hazard study results are released to the public without relevant context necessary to understand risk. This kind of reputational damage may force companies as a practical matter to discontinue or attempt to reformulate products made with the chemical. At the end of the safety review process, EPA has the authority to restrict or set terms for the use of particular chemicals where necessary, in EPA’s view, to control risks. This may be a good outcome for companies where EPA has appropriately identified previously unknown risks and reasonable means to avoid them. On the other hand, it may be quite harmful if EPA’s review process is flawed in some way (e.g., incorrect understanding of how the chemical is used or the extent to which people are exposed in end-use products), resulting in unwarranted restrictions on use. The amendments also present (or at least perpetuate) two other supply risks relevant to retailers and consumer product manufacturers.

TSCA Inventory Reset

In the next 18 months, EPA will require all chemical manufacturers to identify and report all chemicals they have made or imported in the past 10 years. EPA will use this information to cull its list of chemicals in commerce that must be prioritized and reviewed for safety by eliminating those no longer used. Once the inventory reset is complete, chemicals previously manufactured but not on the current list (intentionally or by error) can be used again in the future, but not until after a formal notice is submitted to EPA. The rules are not yet written, but EPA may require that notice include a wide variety of health and safety information, and it may trigger new use restrictions. The reporting process also may lead manufacturers to discover that some of their products had been on the market without undergoing the pre-manufacturing review process applicable to all new chemicals introduced since 1976—a serious violation. These kinds of issues often arise where the company and EPA unknowingly assign the same substance different chemical identities. Either of these issues has the potential to significantly disrupt supply chains for consumer product manufacturers and retailer customers.

State Chemical Control Regulation Continuing

State chemical control regulation remains an important consideration. Industry support for modernizing TSCA grew in recent years in response to a number of factors, including the breakup of the U.S. as a single market for many products due to a growing patchwork of state laws restricting particular chemicals from particular products. It was anticipated that TSCA reform would include strong state law preemption terms that would prevent states from enforcing their own chemical control laws in deference to national federal standards. The final TSCA amendments do include new preemption provisions, but they largely exempt most current state laws, and generally would allow states to develop and enforce new restrictions for a chemical until EPA reviews and takes action on that chemical, which may be many years. States may also seek waivers to allow continued enforcement of state standards. In addition, the amendments indirectly authorize states to enforce TSCA standards when states enact and enforce state laws that are identical to TSCA. Notwithstanding new TSCA preemption provisions, for these and other reasons, complying with varied state-level chemical product regulation is likely to remain an important consideration for consumer product manufacturers and retailers.

TSCA Amendments Present Benefits and Competitive Opportunities as Well

Although the TSCA amendments create some new risks, they also present opportunities to protect or enhance products and brands. For example, the amendments provide a mechanism for manufacturers to obtain EPA review of a chemical sooner than its risk priority would otherwise indicate. This can be a useful tool to obtain an independent, science-based endorsement by EPA concerning the safety of a chemical for particular uses. Such an endorsement may be invaluable to protect the reputation of a substance or product targeted by environmental or consumer protection groups that influence consumers directly, or may influence large private companies or state legislatures to deselect or regulate the substance in a way that is not warranted by the science, or similarly may confirm that even known dangerous chemicals can be safely used for particular applications. EPA on its own is required to identify chemicals that represent a low priority for review—signaling some confidence by EPA experts that they are relatively “safe’ as used. (EPA has had a program for several years under which, at a manufacturer’s request, it will evaluate retail products for relative safety based on chemical content and related considerations as compared to other products in the same category). Companies may find competitive advantage in using EPA categorizations and, for example, formulating or reformulating retail products to exclude “high priority” chemicals or include only “low-priority” chemicals.

Companies may also benefit from risk reviews that identify previously unknown health risks from particular chemicals in their supply chains, which in turn help make decisions about formulation or handling that reduce long-term enterprise risk, and enhance product sustainability.

Key Takeaway—Know Which Chemicals Are in Your Products and Which Are Important to the Business

The first and most important step for consumer product manufacturers and retailers to manage the risks and potentially take advantage of the opportunities presented by of TSCA reform is to know the supply chain and the chemicals that are important to the business. Coupled with awareness of EPA chemical work plans and initiatives, this gives companies the information they need to know when risks or opportunities are being created and how they should get involved.

In some circumstances, this may mean commencing internal product reformulation work or contingency planning with suppliers. However, retailers and consumer product manufacturers can play an important role in the safety review of individual chemicals, by providing robust information about how the chemical is used in the product and the extent of exposure to consumers and the environment. Manufacturers can use this information to demonstrate that a useful chemical with some hazardous properties nevertheless is handled safely or with such little actual exposure that no regulation is required. Similarly, retailers and consumer product manufacturers also may want to take affirmative steps to assure that chemicals important to their business are reported to EPA as part of the Inventory Reset process and not inadvertently omitted. At a more fundamental level, one of EPA’s first tasks is to decide how it will prioritize chemicals for review. Depending on the circumstances, getting involved in public proceedings (either alone or as part of consortia of companies with common interests) even at this stage may help companies influence that decision process to the advantage of their products or disadvantage of competitors’. Similarly, companies with common interests in the continued availability and use of a particular chemical under attack from states, NGOs or other interests may want to solicit EPA safety evaluation of the chemical ahead of its normal risk prioritization to quell unwarranted criticisms and restrictions.

It will take years for EPA to complete its safety reviews. In the near term, EPA likely can be expected to focus first on the 90 chemicals contained in its 2014 TSCA Work Plan for Chemical Assessments. These chemicals were ranked and selected for review based on a number of considerations, including perceived health or environmental hazard, persistence in the food chain or environment, manufacturing volume, and the extent of potential consumer exposure.