The Toxic Substances Control Act: EPA´s Enforcement Of This Oft-Forgotten Environmental Statute

This article appeared in the February 2007 edition of the ABA Environmental Enforcement and Crimes Committee Newsletter

When one thinks of environmental enforcement, the statutes that typically jump to mind are the Clean Air Act and the Clean Water Act (and justifiably so). It would behoove companies, however, to take a second look at another statute that can fly under the corporate radar: the Toxic Substances Control Act (TSCA). Although TSCA does not compare with the Clean Air Act or the Clean Water Act in total enforcement numbers, EPA's historical enforcement of TSCA shows that it can result in significant administrative penalties. In addition, the passive nature of the statute and its focus on reporting and recordkeeping can result in company-wide instances of noncompliance, particularly when a company is wholly unaware of the obligations that it owes under TSCA.

The potential for TSCA issues to fly under the radar is much higher at companies that do not believe that they are regulated by TSCA or at companies that are wholly unaware of certain TSCA requirements. Many companies should note that even if they are not in the chemical industry, TSCA may still apply to them. Of course, companies exceedingly familiar with TSCA can also be snared by its requirements. This article briefly reviews some of the pitfalls associated with TSCA and the Environmental Protection Agency's recent enforcement of this oft-forgotten environmental statute.

In 1976, the United States Congress enacted TSCA (15 U.S.C. § 2601 et seq.) to help ensure the protection of human health and the environment from risks associated with new and existing chemicals. In practice, it places significant responsibilities on manufacturers, importers and processors of chemical substances. TSCA is implemented and enforced by the United States Environmental Protection Agency (EPA) and the United States Customs Service (now part of the Department of Homeland Security). Both EPA and the Customs Service have issued regulations to fulfill the provisions of TSCA. See 40 C.F.R. §§ 700-799 and 19 C.F.R. §§ 12.118 through 127.28.

Among other things, TSCA (and the related regulations) requires regulated entities to: (1) obtain approval from EPA prior to the manufacture or importation of new chemical substances; (2) provide information to EPA about risks to human health and the environment from specific chemicals; (3) keep extensive records concerning chemicals and how they are used and how they affect third parties; and (4) report chemical usage and process- and use-related information to the government. In other words, TSCA places a broad responsibility on manufacturers, processors, and importers of chemical substances and requires them to be knowledgeable about the chemicals with which they deal, to develop information about chemicals they distribute in commerce, and to monitor and report on the effects of those substances on human health and the environment.

When dealing with TSCA, there are several key concepts to keep in mind:

First, TSCA regulates chemicals, not environmental media. The most well-known environmental statutes focus on the protection or remediation of air, water and soil. TSCA, on the other hand, focuses on chemical substances and the risks they may pose, regardless of which environmental medium might be affected. In addition, TSCA regulates chemical substances at each important stage of the chemical’s life-cycle, such as: (1) manufacture or importation, (2) marketing, (3) distribution in commerce, (4) processing, (5) use, and (6) disposal. Accordingly, companies that engage in these types of activities should pay close attention to TSCA.

Second, regular reporting and recordkeeping are essential to those regulated under TSCA. EPA utilizes this approach because the risks associated with products typically become apparent over time and are more easily discerned if records are kept and reviewed by a single entity (i.e., EPA).

Third, the federal government implements TSCA. Unlike the Clean Air Act, the Clean Water Act and other prominent federal environmental statutes, TSCA does not contemplate, nor does it permit, the delegation of federal TSCA authority to the states. Accordingly, the policies and procedures of the federal government are controlling. As a result, TSCA has not precipitated the regional variation that exists under other environmental statutes. By the same token, the federal focus also means that substantial resources are available at the federal level to implement and enforce TSCA.

Although there are a number of requirements under TSCA, certain missteps consistently trigger the most significant violations. For example, a key concept of TSCA is that one cannot manufacture or import a particular chemical substance, with minor exceptions, unless it is listed on the TSCA Inventory. The TSCA Inventory is an extensive list of chemicals (roughly 75,000) that have been approved for manufacture of import in the United States. Among other things, the Inventory provides EPA with an important tool for identifying, prioritizing, and evaluating toxic chemicals and for developing a profile of the chemical industry in the United States.

Prior to manufacture or import of a chemical substance not listed on the Inventory (a "new" chemical substance), one must submit a Premanufacture Notification (PMN) to EPA. Once EPA approves the PMN (or fails to act upon it within a prescribed amount of time), one can begin the manufacture or importation of the chemical substance. That said, within 30 days of manufacture of the initial import, one must submit a Notice of Commencement (NOC) to EPA that alerts the agency to this new activity. In addition, in the case of importation, the importer must certify that the import is either (1) compliant with TSCA or (2) not subject to TSCA.

As a result, if one imports a chemical substance in the mistaken belief that the substance is listed on the TSCA Inventory, a cascade of violations can result from this single misstep. Namely, (1) no PMN was prepared; (2) a NOC was not submitted; and (3) the import certification was incorrect. In addition to this initial cascade, the series of resulting violations often brings the spotlight of agency attention on the company in question, which may result in further allegations of noncompliance.

Similarly, a series of violations can result if one is unaware of one’s reporting obligations or duty to keep certain records and report certain information to EPA. For example, EPA just concluded its quinquennial "Inventory Update," which was targeted at the manufacture and importation of chemical substances during the 2005 calendar year. As part of this update, EPA required manufacturers and importers of chemical substances listed on the TSCA Inventory to provide basic information related to chemicals they manufacture or import. Given the infrequent and somewhat under-publicized nature of this reporting obligation, some regulated entities will inevitably fail to report. Similarly, some companies, unaware of the obligations that pertain to them, neglect to keep adequate records as to adverse health effects or neglect to report necessary information to EPA (e.g., TSCA § 8(a)). By failing to attend to these requirements, numerous violations of TSCA can start to stack up.

Penalties for TSCA violations can be mitigated, however, through the use of agency discretion and EPA's TSCA Penalty Policies. Technically speaking, EPA can assess civil penalties for violations of TSCA as high as $32,500 per day for each violation. In addition, for criminal violations of the statute, imprisonment for as much as one year can be imposed. According to EPA's existing penalty policies, however, companies subject to enforcement can often significantly reduce the penalties they face by showing the presence or absence of certain factors, such as: voluntary disclosure, culpability, past violations, and ability to pay. While the penalty policies are not binding upon EPA, they are an indicator of how EPA might exercise its enforcement discretion.

3M’s recent settlement with EPA is a good example of how TSCA violations can stack up as well as how EPA uses its enforcement discretion. After becoming the focus of EPA’s attention in the late 1990s, 3M agreed to conduct a corporate-wide TSCA compliance audit. Prior to doing so, EPA and 3M agreed to, among other things, a pre-negotiated penalty amount for each potential violation, should any be discovered. After conducting the audit, 3M, while neither admitting nor denying any of the violations, agreed to pay a $1,521,481 penalty for 244 separate violations under TSCA. These violations related to the PMN and NOC requirements discussed above, as well as numerous alleged failures to submit information to EPA as required under TSCA. It is worth noting that at the conclusion of the audit, EPA credited 3M with producing valuable, previously unreported information. Indeed, 3M and EPA continue to work together on a number of chemical issues that arose out of the audit. See, e.g., EPA’s PFOA Stewardship Program.

Another large settlement in 2006 highlights just how significant administrative penalties can be under TSCA. This settlement involved DuPont and a series of alleged violations relating to DuPont’s use of Perfluorooctanoic Acid (PFOA). Of the eight counts, seven related to DuPont’s alleged failure to provide EPA with information about the impacts of PFOA on human health, some of which DuPont possessed as early as 1981. In order to settle the allegations, DuPont agreed to pay $10.25 million – the largest civil administrative penalty EPA has ever obtained under any environmental statute. In addition, DuPont committed to conduct two Supplemental Environmental Projects. The first, valued at $5 million, is a project intended to develop more information about PFOA. The second, valued at $1.25 million, is intended to reduce the risks associated with chemical use at schools.

The 3M and DuPont settlements show how enforcement of TSCA can result in significant administrative penalties and how failure to comply with TSCA can result in numerous alleged violations. TSCA enforcement is not limited to large chemical companies, however. Instead, TSCA casts a wide net across many business sectors. For example, all one needs to do to become subject to TSCA is import a product containing a chemical on the TSCA Inventory. This low threshold is made lower still by the fact that the TSCA Inventory contains many items used on a daily basis (e.g., bleach). A good example of the long arm of TSCA is an enforcement action EPA brought against Dial Corporation in 2003. EPA assessed a fine against Dial based on the company's failure to notify EPA about solvents that were contained within finished household products that it exported to a number of countries. After feeling the sting of TSCA, Dial instituted a program to track any chemical that it exports, including those contained within finished household products.

The potential for enforcement under TSCA can fly under the corporate radar. Many manufacturers, importers and processors of chemical substances would be well served to take another look at their company's operations and reassess their TSCA compliance status. A proactive internal compliance system can help companies avoid the cascade of penalties that noncompliance with TSCA can unleash.

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