On December 12, 2016, EPA published the final Formaldehyde Standards For Composite Wood Products Rule (the Rule) in the Federal Register. The compliance date for most aspects of the Rule is December 12, 2017, with a sell-through provision for wood composite products manufactured or imported prior to that date. The Rule limits formaldehyde emitted into the air from certain composite wood products, which are products made by binding strands, particles, fibers, veneers, or boards of wood together with adhesives. Domestic and foreign companies operating in the U.S. use composite wood products to manufacture a wide variety of consumer products such as furniture, flooring, cabinets, children’s toys, and more.

EPA promulgated the Rule to implement the 2010 Formaldehyde Standards for Composite Wood Products Act (the Act), which Congress enacted as Title VI of the Toxic Substances Control Act (TSCA). The Act established emission standards that mirror the California Air Resource Board’s (CARB) Phase II standards for composite wood products—including hardwood plywood (HWPW), medium-density fiberwood (MDF), and particleboard (PB).[1] Similar to the California requirements, the new federal Rule regulates composite wood products from initial manufacture to final sale by (1) imposing emissions restrictions; (2) regulating product labeling, chain of custody, non-compliant product sell-through, recordkeeping and enforcement; and (3) requiring certification by EPA-approved third-party certifiers (TPC) that conduct quality assurance activities, emissions testing, inspections and auditing services.

New Federal Emissions Limits

Suppliers of composite wood products and items containing composite wood products—including all manufacturers, importers, fabricators, suppliers, distributors, and retailers—must comply with the following emission standards for HWPW, PB, and MDF to be offered for sale in the United States:

  • HWPW (made with a veneer core or a composite core) = 0.05 ppm
  • PB = 0.09 ppm
  • MDF = 0.11 ppm
  • Thin MDF = 0.13 ppm

The effective date for these emissions limits is December 12, 2017, one year following final publication of the Rule, subject to limited exceptions. Producers of laminated products have until December 12, 2023 to comply with the Rule’s emission standard for HWPW.[2]

Applicability & Scope

The emission standards apply to any defined composite wood product in the form of a panel or a component part, or incorporated into a finished good. The Rule applies to all entities along the supply chain, including importers, distributors, retailers, panel producers, fabricators, TPCs, and accreditation bodies. The EPA’s Summary of Provisions (pp. 89675-89676) unpacks the major compliance obligations particular to each type of supplier. Like CARB’s Composite Wood Products Measures, the Rule imposes robust compliance obligations on panel producers (manufacturers), but softens obligations down the supply chain, with the least burden imposed on distributors and retailers of finished goods.

Exclusions apply to certain types of products and goods made therefrom. For example, any “finished good” that has been previously sold or supplied to a good faith purchaser for purposes other than resale, including antiques and secondhand furniture, is not subject to emissions limits imposed by the new Rule. Structural plywood and structural panels, as specified in National Institute of Standards & Technology (NIST) Voluntary Product Standards are likewise exempt.[3] Further, certain products made with no-added-formaldehyde-based resins and ultra-low-emitting formaldehyde resins are exempt from the Rule, such as hardboard, oriented strand board, structural composite lumber, and more. Renovators and construction contractors that sell, remodel, or renovate buildings containing composite wood products are not covered by the Rule, and neither are new vehicles (other than recreational vehicles), new rail cars, new boats or new aircraft.

Notably, the Rule does not contain a wholesale exemption for laminated products, which some have viewed as closure of a loophole left by CARB in its Composite Wood Products Measures. Rather, the Rule distinguishes between exempt and non-exempt sorts of laminated products.[4] As indicated in the Compliance Chart below, before the December 12, 2023 manufactured-by date, laminated product producers must use compliant composite wood product platforms.[5] After that date, producers of exempt laminated products must keep, as a condition of the exemption, records demonstrating eligibility for the exemption. Producers of non-exempt laminated products will have to comply with the full emissions testing and certification requirements for HWPW as of December 12, 2023.

Sell-Through and Stockpiling of Non-Compliant Products

The Act allowed EPA, in developing the final Rule, to incorporate “sell-through regulations” that permit the continued sale of non-compliant products produced or imported before the compliance date. EPA set the compliance date one year after the final rule’s publication, or December 12, 2017.

To prevent circumvention of the new limits by over-producing prior to the compliance date, the Rule prohibits sale of “stockpiled” inventory, defined as manufacturing or purchasing of non-compliant products at a rate 20 percent or greater above 2009 annual average levels at any time during the period between passage of the Act on July 7, 2010, and the effective date of the Rule on December 12, 2017. To enforce the rule against sale of stockpiled inventory, EPA must find that the producer increased production for the specific purpose of circumventing the Rule’s emissions standards.

Third-Party Certification

All panel producers, as well as laminated product producers subject to the December 12, 2023 compliance date, are required to have their products certified by an EPA-approved TPC that tests samples of the products for compliance with the emissions standards. Panel producers are also required to conduct quality control testing to ensure that regulated composite wood products meet emissions standards. TPCs or their laboratories must test their panel producers’ composite wood products quarterly.[6] TPCs must also perform quarterly inspections of producers’ products and records, and where a certified product fails a quarterly test, certifications for all products represented by the failing sample must be suspended until a compliant quarterly test is obtained.

Required Precautions for Non-Producers

Importers, fabricators, distributors, and retailers must take “reasonable precautions” to ensure that the composite wood products they supply or offer for sale comply with the Rule’s emission standards. Importers, who are subject to the strictest precautionary requirements, must demonstrate that they have taken reasonable precautions by maintaining bills of lading, invoices, or comparable documents that include a written statement of compliance from their suppliers. Importers must maintain these documents for three years, and must make available to EPA upon 30 days’ notice (1) records identifying the panel producer and the date the composite wood products were produced, and (2) records identifying the supplier (if different) and the date the composite wood products, component parts, or finished goods were purchased.[7] Down the supply chain, for three years following the date of import, purchase or shipment, all fabricators, distributors, and retailers can demonstrate reasonable precautions by obtaining bills of lading, invoices, or comparable documents containing a statement of compliance from the supplier.

Civil and Criminal Penalties for Violators

Any individual or entity that violates any requirement under the Rule is deemed to have committed a “prohibited act” under TSCA Section 2614, and is therefore subject to strict liability civil penalties not to exceed $37,500 for each day a violation persists. TSCA also allows for heightened penalties for certain categories of violators. An individual or entity that commits a “knowing or willful” violation of the Rule is subject to additional criminal penalties, including imprisonment up to a year and daily criminal fines of up to $50,000 on top of any assessed civil penalties. In limited circumstances, violations of the Rule could also trigger prosecution under TSCA’s felony endangerment provision, which provides for a maximum daily fine of $250,000 and up to 15 years imprisonment where a knowing and willful violator causes “imminent danger of death or serious bodily injury” to an individual.

Potential Implications

Given the breadth of obligations under the Rule and potential exposure to substantial monetary penalties for violations, suppliers of composite wood products and finished goods are advised to develop compliance strategies to be prepared for the Rule’s compliance dates, beginning December 12, 2017. This includes compliance with the Rule’s certification, recordkeeping and labeling requirements as well as the emissions limitations.

Stakeholders might begin by surveying the Compliance Chart reproduced below, as well as EPA’s Fact Sheet and Regulated Stakeholder Q&A guidance documents. EPA has also released notices for upcoming Rule Requirements Webinars during January and February 2017 directed variously at the general public and targeted stakeholders groups.

Concomitantly, potential high-priority objectives for those operating in the composite wood products supply chain include:

  • Internal compliance audits and product testing to identify sources of potential enforcement risk. Elements of a successful internal audit might include (a) identification of types and volumes of composite wood products and regulated finished goods offered for sale; (b) confidential preliminary emissions testing under contract with EPA- or CARB-approved TPCs; and (c) review of invoicing, labeling, quality control and recordkeeping practices.
  • Timely preparation of all required certification applications by producers of panels and non-exempt laminated products to EPA-authorized TPCs;
  • Notification and obtainment of assurances of compliance from upstream suppliers and, if prudent, written indemnification agreements with third-party suppliers against future non-compliance.

We will continue to track the implementation of the Rule and monitor the how the Rule will impact our clients.

Summary of Provisions

Please click here to view table.