EPA will change TSCA small business definition
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December 01, 2017
EPA will change TSCA small business definition

The EPA announced that it has determined that a revision of the current small business size standards under a section of the Toxic Substances Control Act (TSCA) is warranted. Although the Agency does not indicate how the standards will change, it does state that based on current economic conditions, the levels used to define a small business will rise, meaning more businesses will likely be categorized as small.

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The prospective revision applies to reporting under TSCA Section 8, which requires that companies that manufacture or import specified chemicals provide the EPA with information about those chemicals, including production volumes, processing and use data, amount lost to the environment during production or importation, quantity of releases of the chemical, and per-release worker exposure information. However, Section 8(a)(1) exempts small businesses, as defined by the Agency, from these requirements; also, Section 8(a)(3) gives the EPA the authority to require such reporting from small businesses under limited circumstances.

Current definition

Current Section 8 rules indicate that a business qualifies as small under any either of two criteria:

  • Total annual sales are less than $40 million, unless the annual production or importation volume of a particular substance at any individual site exceeds 100,000 pounds.
  • Total annual sales are less than $4 million regardless of the quantity of substances produced or imported by that manufacturer or importer.

In addition, the EPA may adjust the total annual sales values whenever the Agency deems it necessary to do so, provided that the Producer Price Index (PPI) for Chemicals and Allied Products has changed more than 20 percent since either the most recent previous change in sales values or the date of promulgation of a revised size standard, whichever is later.

Standard is out of date

The EPA established general small manufacturer standards under Section 8(a) in 1988. As of 2015, the Agency reports that the PPI (a weighted index of prices measured at the wholesale, or producer, level) has changed 129 percent, far above the 20 percent inflation index specified as a level above which the Agency may adjust annual sales level.

“This change to the PPI is pertinent for both the $4 million annual sales standard and the $40 million threshold used in the combined sales and production standard,” the EPA notes. “Furthermore, among the more than 500 revenue-based size standards set by the Small Business Administration (SBA), the lowest is $5.5 million, and more than 75 percent of those standards are in excess of $7.5 million. Some revenue-based standards are as high as $38.5 million. Thus, EPA’s existing $4 million annual sales standard is an outlier at the low end of this range.”

The Agency adds that the sales-only size standard it recently adopted for the TSCA Section 8(a) nanoscale reporting rule is $11 million.

SBA recommendation

The TSCA also requires that the EPA consult with the SBA in conjunction with any review of the size standard. The EPA indicates that it did engage in discussions with the SBA, which recommended that the Agency evaluate multiple factors related to firm and industry characteristics and percentage of firms impacted by Section 8 rules to determine whether or not a revision to the standards is necessary. The EPA declined to do so, stating that the PPI is a sufficient basis to determine (even if other factors could have supported the same conclusion) that some revision of the standards for small manufacturers and processors is warranted, for both the sales-only and the sales plus production standards.

Safety concerns

The Agency says it heard from several commenters who believe any upward revision of the size standard numbers will deprive the Agency of important data about harmful chemicals and also deprive the states of more complete information when responding to emergencies. The EPA dismissed these concerns primarily because commenters did not provide data to substantiate their concerns. The Agency also notes that since no specific size change has yet been proposed, it is premature to predict if there will be disadvantages.

EPA’s notice was published in the November 29, 2017, FR.

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