Substantiation required for TSCA reverse engineering claims
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May 06, 2019
Substantiation required for TSCA reverse engineering claims

In September 2017, the Environmental Defense Fund (EDF) petitioned the U.S. Court of Appeals for the DC Circuit to find five aspects of the EPA’s final rule, TSCA Inventory Notification (Active-Inactive) Requirements (Aug. 11, 2017, Federal Register (FR)), unlawful. On April 26, 2019, a three-judge panel responded by denying four of the EDF’s challenges, therefore leaving those provisions of the Inventory Rule in place. But the panel did agree that the rule impermissibly exempted chemical companies from having to substantiate why chemicals they claim are entitled to be listed on the confidential portion of the Inventory cannot be discoverable through reverse engineering. Without vacatur, the panel ordered a limited remand, directing the Agency to address its “arbitrary elimination of substantiation questions regarding reverse engineering.”

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The Toxic Substances Control Act (TSCA) requires the EPA to publish an inventory of chemicals manufactured or processed in the United States. The 2016 TSCA Amendments further directed the Agency to issue a rule establishing a process for updating the Inventory. In the Inventory Rule, the Agency set the criteria chemical companies must meet to protect the identity of chemicals in the Inventory. About 18,000 of the Inventory’s 86,000 entries are classified as confidential.

Basically, companies acquire confidentiality protection by certifying that they are taking reasonable measures to protect the confidentiality of the information and that disclosure is not otherwise required by law. They must also certify that the information is not readily discoverable through reverse engineering. In TSCA, Congress requires that companies substantiate the need for secrecy and that the EPA require the substantiation of confidentiality claims.

EPA’s exclusion ‘nonsensical’

According to the panel, the EPA’s omission of any inquiry into a chemical identity’s susceptibility to reverse engineering is a flat excision of “a statutorily required criterion from the substantiation process.” The court added that the Agency’s explanation for excising that criterion was, “nonsensically,” a denial that it had done so. Specifically, the EPA explained that the omission is “intended to more succinctly secure answers for the basis of the [confidentiality] assertions[.]”

“But succinctness means no unnecessary words; it does not mean no words at all,” responded the panel. “That is precisely what the EPA did here. Lest there be any doubt, the Agency conceded at oral argument that the Inventory Rule eliminated the only questions that substantiate the assertion that ‘the information is not readily discoverable through reverse engineering.’”

“[I]t makes no sense to treat as confidential the chemical identity of a substance that can readily be discovered through reverse engineering—as the EPA itself agrees,” said the panel. “Yet the EPA’s Rule offers no sensible explanation at all for that gap in substantiation, nor does it even acknowledge the consequence of its omission. That error is fatal. The Inventory Rule is arbitrary and capricious to the extent that it omits any substantiation requirement pertaining to reverse engineering.”

Original claimants, export, et al.

Each of the following EDF claims was rejected by the panel.

Claim: The final rule impermissibly allowed a company to maintain existing confidentiality status for a chemical even if it was not the company that originally obtained that status from the EPA.

Court response: “The relevant statutory language is silent as to whether a company may maintain an existing claim of confidentiality if it was not the original claimant,” said the panel. “Congress thus left that question of implementation to the expertise of the EPA.”

According to the panel, the law’s “… sole limitation on the class of manufacturers and processors that may wish to maintain an existing confidentiality claim is that they manufacture or process ‘a chemical substance on the confidential portion of the Inventory.”

The court also notes practical considerations. For example, if the EDF’s argument that a company that did not obtain the original confidentiality status would need to file a fresh request was found valid, the EPA would have only 90 days for review in contrast to the 7 years for review allowed by the statute.

Claim: The Inventory Rule failed to “mirror” three provisions in the statute—specifically, that the EPA (i) review claims within 90 days; (ii) inform the claimant of the EPA’s denial of a confidentiality claim and allow only 30 days for appeal; and (iii) publicly disclose any nonconfidential aspects of its confidentiality decisions.

Response: Rather than not including that language in the rule, it was more important to the panel that the rule did not contradict those statutory obligations. “The Inventory Rule’s provisions simply complement and elaborate upon some of the statutory requirements without displacing the others,” said the panel.

Claim: The Inventory Rule fails to implement the statutory scheme for assigning a unique public identifier for each chemical identity kept confidential.

Response: The panel agrees that the rule does not implement this requirement. However, the panel continues, the statute does not require that the EPA develop and implement a unique identifier rule by a specific date. “And it is not unreasonable for the EPA to defer that process while it first starts the process of determining how many and which chemical substances will be accorded confidential treatment,” states the panel. “It is not for us to ‘second-guess EPA’s decision to prioritize’ those regulatory tasks.”

Claim: The EPA impermissibly excluded export-only chemicals from the Inventory Rule’s requirement that chemical companies notify the EPA of chemical substances being manufactured or processed. The EDF argued that because Congress included exported chemicals under TSCA Section 2607 (Reporting and Retention of Information), the EPA could not exclude exported chemicals from the Inventory Rule.

Response: The statute states that the EPA must require manufacturers and processors to notify the Agency of each chemical substance on the Inventory that the manufacturer or processor has manufactured or processed for a nonexempt commercial purpose. But the law does not provide a definition for a nonexempt commercial purpose.  Without any statutory guidance as to what counts as a nonexempt commercial purpose, the EPA concluded it was consistent with the Act to exclude, among other things, “[t]he manufacturing or processing of a chemical substance solely for export from the United States.” Also, the law does not explain what it means to “apply” Section 2607—a nearly 4,000-word part of the statute—to exported chemicals. “In light of this congressional silence, the Rule’s narrow excision of exports from one reporting requirement passes muster,” stated the panel.

The DC panel’s opinion in Environmental Defense Fund v. EPA is here.

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