Pareto Policy Solutions, LLC

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Pareto Policy Solutions, LLC is a policy analysis and advocacy firm committed to advancing sustainability through “smart” regulation: regulation that rewards, and does not penalize, superior performance.  Often, such actions leverage advances in science and technology and make the regulatory program itself more effective as well as more efficient.

The New TSCA: Its Impact on Commerce

The federal government’s ability to control chemicals in commerce is about to get a significant upgrade. After years of debate, Congress is poised to reform the Toxic Substances Control Act (TSCA), which gives EPA authority to control tens of thousands of chemicals not otherwise regulated under other product-specific statutes like the Food, Drug, and Cosmetic Act.

What will the new TSCA mean for commerce? Businesses can expect the new law to have five specific impacts on commerce:

Level the chemical playing field

Under current TSCA, EPA must review every new chemical, but there is no requirement for the Agency to review and control the many thousands of existing chemicals—those substances that were in commerce on or before 1978, when the first TSCA Inventory was established.

The new TSCA will require EPA to systematically review existing chemicals against a new health-based standard that will also apply to new chemicals. An existing chemical that EPA determines presents an unreasonable risk under this health-based standard will be regulated, creating a greater market share for manufacturers of substitutes.

Current TSCA focuses EPA attention on relatively data-rich chemicals because relatively little legal authority is provided for information gathering. The new TSCA will change the Agency’s behavior because ignorance will no longer be rewarded. EPA will find it much easier to compel the generation of new information. Manufacturers and processors of relatively data-poor substances can no longer expect a free pass.

Increase chemical testing and information generation

Current TSCA creates several hurdles for EPA to clear before it can require a manufacturer to test a product. Some have described this as a “Catch-22” for the Agency:  it needs sufficient information to compel testing, but it needs testing data to develop sufficient information. The end result is that fewer chemicals have been tested, an outcome predicted back in 1976 by then-Rep. John Dingell in a committee report accompanying the bill authorizing the original TSCA.

The new TSCA gives EPA order authority to compel the generation of information, including chemical testing, to meet the objectives of the Act. This alone will lead to more testing and publicly available information on chemical hazards, but the new law goes even further by requiring the Agency to make an affirmative finding about the safety of a chemical, a requirement that can be expected to push testing even further.

Some manufacturers and processors subject to a testing order may exit the market rather than incur extra costs. In fact, given that industry will be required to pay a significant portion of EPA’s time for risk evaluation, the combination of toxicological testing and risk evaluation will drive some manufacturers and processors (of low-value or low-profit substances) out of the market.

None of this should be unexpected; greater concentration of market share has been seen in Europe under its ten-year old chemical law known as REACh.

Shift product de-selection efforts

Political winds have changed the chemical marketplace over time, in part due to a perception that current TSCA is weak. Public demand for safer chemicals has spurred efforts by states to restrict chemical products of greatest public concern. Retailers and some business-to-consumer (B2C) manufacturers have developed lists of chemicals to be removed through their supply chains.

In fact, these product de-selection efforts were the primary reason chemical manufacturers and processors pushed for TSCA reform. Their reasoning: It is much easier to comply with a single, strong federal law than a weak federal law plus potentially dozens of unique state laws.

The new TSCA bolsters federal preemption of states and this will have the effect of lessening many types of state action. However, the new law does not eliminate the ability of states to regulate chemicals and should EPA not meet the prescribed deadlines for action, states can be expected to do more.

The new law does nothing to prevent retailers or “downstream” manufacturers to “de-select” chemicals of public concern. There is a hope that such efforts will be unnecessary should the new law bolster public confidence in EPA’s regulatory efforts—the market will simply accept the federal supply of chemical regulation to meet consumer demand for safer chemicals. Such a hope is naïve.

The new TSCA will not prevent product de-selection, but it can and probably will re-direct it toward relative risk. The federal list of high-priority (and low-priority) substances subject to risk evaluation and potential regulation will inform private sector product de-selection efforts. A chemical EPA identifies as low priority will be a less attractive candidate for private-sector de-selection efforts and, conversely, a chemical identified by the Agency as high priority will be a more attractive candidate for private-sector de-selection efforts, especially if EPA takes a long time to conduct risk evaluations and issue regulations.

Spur product stewardship

Perhaps the most significant change to be expected is that chemical manufacturers and processors will undertake their own risk evaluation in anticipation of EPA review and act before the Agency gets a chance.

Businesses prefer to control their own destiny rather than be subject to regulation. The new law will result in more regulation of chemicals in commerce, but it will do so in a predictable way, and chemical manufacturers and processors will be able to see the writing on the wall and take actions to minimize the shocks associated with product bans and otherwise aggressive effective dates for regulatory controls. For example, businesses will note which chemicals are identified as high priority for EPA review, which uses of high-priority substances are the focus of regulator attention, how the Agency will conduct risk evaluation, and how the Agency will exercise its authority when a substance fails to meet the TSCA safety standard. And businesses will take action in advance of regulators if it gives them more control over their supply chain.

The new TSCA requires EPA to be transparent about how it will identify chemicals as high priority, how it will evaluate risk, and how it will sift through evidence in making a finding of unreasonable risk. Once EPA clarifies its methods, chemical manufacturers and processors will apply these methods to its chemical products and proactively change to avoid regulatory attention in the future. The end result will be more product stewardship driven by the new “rules of the road”.

Defer critical Issues to EPA

The new TSCA will impact businesses that rely on chemicals in both obvious and non-obvious ways. Importantly, the new law is silent on many critical implementation issues, such as how EPA will evaluate risk. The most important sentence in the 181-page legislation is this one: “Not later than 2 years after the date of enactment of the Frank R. Lautenberg Chemical Safety for the 21st Century Act, the Administrator shall develop any policies, procedures, and guidance the Administrator determines are necessary to carry out the amendments to this Act made by the Frank R. Lautenberg Chemical Safety for the 21st Century Act.” Future rules and guidance from the Agency will greatly shape the new law.

The only competitive advantage to be had is to recognize how the new shifts in policy will affect your business before your competitors do, and to take action accordingly. Potentially affected businesses should pay careful attention as to how EPA implements the new law over the next two years. 

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