The composite wood product industry may face an earlier compliance deadline under EPA’s Formaldehyde Emission Standards for Composite Wood Products (Standards) than the deadline currently set by EPA.[1]  On February 16, 2018, a federal district court vacated a September 2017 EPA rulemaking that extended the compliance deadline for most obligations under the Standards to December 12, 2018.[2]    The compliance date in dispute applies to emission limit compliance, recordkeeping, labeling, and sell-through.  Under the court’s order, the parties in the lawsuit must propose a new compliance timeframe by March 9, 2018, or else the court will set one itself.

The Standards implement Title VI of the Toxic Substances Control Act (TSCA).  EPA published final Standards on December 12, 2016.  Since then, it has made several changes to the Standards.  This alert provides a background of the Standards and a collection of major regulatory changes up to date.

Background

After the California Air Resources Board (CARB) adopted its Airborne Toxic Control Measures to Reduce Formaldehyde from Composite Wood Products (ATCM) in 2007, Congress enacted the Formaldehyde Emission Standards for Composite Wood Products Act as Title VI to TSCA in 2010.[3]   Title VI directed EPA to promulgate a federal regulation on formaldehyde emissions from composite wood products, using the CARB ATCM emissions limits.[4]  

Following some rulemaking delays, EPA proposed the Standards in 2013 and finalized them on December 12, 2016.[5]  In summary, the Standards impose emission limits for composite wood products in the form of panels or incorporated into component parts or finished goods.  Along with the emission limits are a suite of supply chain obligations, including testing, certification, recordkeeping, reporting, labeling, non-complying lot notification and disposition, and others.  Panel producers, importers, fabricators of component parts and finished goods, laminators, distributors, and retailers are all subject to the Standards.  Separately, to facilitate the emission limit control, the Standards include accreditation and certification rules that apply to third-party certifiers (TPCs) and accreditation bodies (ABs), which certify the formaldehyde emissions from the products and accredit TPCs, respectively.

EPA delayed the effective date of the Standards after the presidential inauguration,[6] which eventually took effect on May 22, 2017.  Accreditation and certification services have been permitted since then.[7]  However, other regulated entities are not yet subject to the Standards until certain future compliance dates. 

Compliance Dates:  Extension and Litigation

The recent case, Sierra Club v. Pruitt, challenged EPA’s extension of the initial compliance date under the Standards.  The 2016 final Standards originally designated three compliance dates, on the first, second, and seventh anniversaries of the publication date of the Standards in the Federal Register.[8]  The Standards also crafted a two-year transition period for EPA’s recognition of certification by TPCs approved by CARB.

Asserting that regulated entities would need adequate time “to proceed with establishing business relationships with TPCs in order to certify composite wood products for use by downstream entities,” EPA proposed to extend the compliance dates and the end-date of CARB certification transition period with a proposed rule and direct final rule on May 24, 2017 to “prevent substantial disruption to the supply chain.”[9]  EPA later received adverse comments on the action.  It therefore withdrew the direct final rule on July 6, 2017 and finalized a revised compliance date extension timeframe on September 25, 2017:

On October 31, 2017, two environmental organizations sued EPA in the federal district court for the Northern District of California, challenging EPA’s year-long extension of the primary compliance date to December 12, 2018.[11]  

The district court sided with the environmental organizations in its February 16, 2018 order.  After reviewing the language of the 2010 legislation and the legislative history, the court found that Title VI requires that the emission limits take effect 180 days following the promulgation of the Standards.  It found that EPA’s extension of the “manufactured-by” date to December 12, 2018 was contrary to this requirement.  The court rejected EPA’s argument that the environmental groups did not present the challenge during the rulemaking process, reasoning that EPA had otherwise received sufficient challenges to the extension and that, regardless, EPA should have examined its own statutory authority and not delayed the compliance date beyond its scope of authorization.

To provide a remedy, the court stayed its order until March 9, 2018 to give the parties an opportunity to recommend a compliance date to the court, or else to brief when each believes the new compliance date should be.

Voluntary Consensus Standards Update and Correlation Rule

Another recent development under the Standards was the Correlation Rule, which EPA published on February 7, 2018.  As background, the original version of the Standards published on December 12, 2016 inadvertently created a technical obstacle for panel producers to obtain certification that their panels meet the emissions limits.  Testing for compliance with the emission limits requires correlation with either the large-chamber test method, ASTM E1333, or the small-chamber test method, ASTM D6007.  CARB allows either test method to be used.  The 2016 final EPA rule limited the ability to use the small-chamber test.  The small-chamber test method is used much more frequently.  The February 2018 amendments removed the technical obstacle to using the small chamber test method, thus facilitating the ability to get panels certified as TSCA Title VI compliant.

EPA issued a proposed rule and direct final rule on October 25, 2017 to address this technical issue.  It subsequently received one adverse comment, withdrew the direct final rule on December 8, 2017, and finalized the Correlation Rule on February 7, 2018.  The Correlation Rule revised the Standards.

In the same rule, EPA also updated the references to a number voluntary consensus standards to specify the latest versions of those standards, including ASTM E1333 and D6007. 

Other Changes:  Early Labeling Relief and Non-complying Lot Notification

EPA also made changes in two other subjects under the Standards in 2017.  First, EPA allowed companies to label their products as TSCA Title VI compliant before the manufactured-by date.  Second, EPA took the position that downstream entities would not be subject to the non-complying lot notification requirement if a non-complying panel had been incorporated into a component part or a finished good. 

Labeling relief.  The original version for the Standards included a section 770.45(f) that prohibited labeling of composite wood products as TSCA Title VI compliant prior to the manufactured-by date (originally, December 12, 2017): “Composite wood products and finished goods made entirely of composite wood products manufactured before the manufactured-by date must not be labeled as TSCA Title VI compliant.”  This provision prohibited voluntary labeling of products before the manufactured-by date.  Such prohibition would have created compliance problems because products had to be labeled beginning on the manufactured-by date.[12]

EPA issued a proposed rule and direct final rule on July 11, 2017 to delete section 770.45(f).  It contended that “the risk of unintentional supply chain disruption is substantial” around the manufactured-by date, but such risk would be, “through prompt regulatory action, avoidable.”[13]   EPA received no adverse comments on the action.  The direct final rule went into effect on August 25, 2017, and voluntary labeling is currently permissible. 

Non-complying lot obligations.  Section 770.22 governs the obligations of regulated entities  with respect to the lots of composite wood products that are shown by test to be non-compliant with the emission standards.  Under the Standards, panels are permitted to be shipped downstream before the test results are available.[14]  Then panel producers and the downstream entities must meet their notification obligations if the composite wood products are later found to belong to a non-complying lot but have already entered into the commerce.[15]  Panel producers in addition have to take actions to properly dispose of or retest the panels in order to prevent further distribution of such products.[16]

The notification requirement caused concerns from downstream entities, including fabricators, importers, distributors, and retailers.  Section 770.22(f) states that “[f]abricators, importers, distributors, or retailers who are notified that they have received composite wood products belonging to a non-complying lot and who have further distributed the composite wood products are responsible for notifying the purchasers of the composite wood products in accordance with paragraph (d)(1) of this section.”  Section 770.22(d)(1) requires panel producers to provide notices downstream “within 72 hours of the time that the panel producer is made aware of the failing test result.”  The language of section 770.22(f) thus led to confusion on whether downstream entities would still need to notify their customers if the non-complying panels had already been incorporated into component parts or finished goods, in which non-compliant materials could not be distinguished from compliant materials. 

To address these concerns, EPA updated its frequently asked questions for regulated entities (FAQs) on June 7, 2017.[17]   A new FAQ explains that 770.22(f) notifications are only required while composite wood products are in the form of panels.  Once panels are incorporated into component parts or finished goods, notification will not be required even if the fabricator later learns that the panels failed an emissions test.[18]

CARB’s recognition of TSCA Title VI compliance

Regulated entities whose products are distributed in California may also be interested in a notice on September 29, 2017 from CARB on its Composite Wood Products ATCM webpage.[19]  The notice states that:

CARB will accept products labeled as being compliant with the U.S. EPA TSCA Title VI regulation as being compliant with CARB’s formaldehyde emission standards, because the standards are identical. CARB staff plans to provide additional guidance regarding how the U.S. EPA and CARB regulations interact.

At this moment no further guidance is available from CARB.

What’s Next?

Regulated entities should actively prepare for the compliance with the standards.  The federal court’s February 16 order suggests that the compliance date for emission limit, certification, recordkeeping and reporting, and labeling will come earlier than December 12, 2018. 

Beveridge & Diamond’s Chemicals, Products & Nanotechnology Practice Group provides strategic, business-focused advice to the global chemicals industry.  We work with large and small chemical companies from industries including basic and specialty chemicals, pharmaceuticals, electronics, crop protection, food contact materials and additives, wood products, and consumer products, and have substantial experience representing clients whose products and activities are subject to EPA’s broad chemical regulatory authority under TSCA and state chemical restrictions.  For more information, please contact Mark Duvall.

[1] 40 C.F.R. pt. 770.

[2] Order Re Cross-Motions for Summary Judgment, Sierra Club v. Pruitt, 3:17-cv-06293 (N.D. Cal. Feb. 16, 2018).

[3] TSCA § 601, Pub. L. 111-199 (July 7, 2010), 15 U.S.C. § 2697.

[4] TSCA § 601(d).

[5] For more information on the Standards, see an earlier B&D alert. 

[6] The Standards were initially scheduled to take effect on February 10, 2017.  EPA postponed twice the effective date of the Standards on January 26, 2017 and March 20, 2017.  

[7] 40 C.F.R. § 770.2(b), (c).

[8] The first deadline applies to most obligations under the Standards.  The second applies to import certification.  By the third deadline, non-exempt laminators must comply with the obligations applicable to ordinary composite wood product producers (in addition to the requirements for fabricators of component parts or finished goods, which laminators will be subject to after the first deadline).

[9] 82 Fed. Reg. 23735, 23736 (May 24, 2017) (compliance date extension direct final rule). 

[10] In the direct final rule and proposed rule published in May 2017, this date was set on March 22, 2018.  EPA changed the date to December 12, 2018 in the September final rule.

[11] See Complaint, Sierra Club v. Pruitt, 3:17-cv-06293 (N.D. Cal. Oct. 31, 2017).

[12] 40 C.F.R. § 770.2(e).

[13] 82 Fed. Reg. 31922, 31923 (July 11, 2017) (labeling relief direct final rule).

[14] 40 C.F.R. § 770.20(a).

[15] 40 C.F.R. § 770.22(d).

[16] 40 C.F.R. § 770.22(d)(2).

[17] EPA, Regulated Stakeholder Frequently Asked Questions to Implement the Formaldehyde Standards for Composite Wood Products Act.

[18] FAQ 18.

[19] See CARB, Status of U.S. EPA Formaldehyde Regulation, (last updated Sept. 29, 2017).

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