An EPA rule restricting industrial uses of a popular flame retardant is causing headaches for equipment manufacturers and demonstrating how the nation’s chemicals law can upend global supply chains.
The regulation, developed during the Trump administration, bans a host of uses of the compound that can be found in forklifts, tractors, electric keyboards, and electron microscopes, among other products, called “articles.”
But the Environmental Protection Agency was besieged by industry pleas for help soon after the new administration came into office in January, so it took an unusual step. It announced in March that it wouldn’t enforce a key part of the regulation until September, and it invited more comment on the final rule.
That prompted dozens of requests from trade associations and companies such as Clark Equipment Co., Hitachi High-Tech America, Inc., and Kubota North America Corp., for up to 15 more years to find substitutes for the chemical called phenol, isopropylated phosphate (3:1), or PIP 3:1. The EPA said June 14 that it’s reviewing the feedback and determining next steps.
Meanwhile, anxious clients are calling some law firms daily awaiting any update on how the agency will respond, said Lynn L. Bergeson, managing partner of Bergeson and Campbell PC, which specializes in chemical laws. They don’t know how much longer they can ship products to U.S. and have the goods arrive before the Sept. 4 deadline when the agency may start enforcing its ban, she said.
The compliance problems triggered by the PIP 3:1 rule could arise again, attorneys say. The EPA must regulate chemicals found to pose unreasonable health or environmental risks under the 2016 Toxic Substances Control Act (TSCA) amendments.
It’s now examining 10 plastic softeners and flame retardants to decide whether single chemicals in mixtures found in commercial and industrial parts are too risky.
“There’s an excellent chance EPA could find at least one condition of use posing an unreasonable risk,” said Mark N. Duvall, who heads Beveridge and Diamond PC’s chemicals group.
The PIP 3:1 rule sparked late protests because the electronics industry and other sectors didn’t realize its impact and didn’t bring their concerns forward while the rule was under development, said Alexandra Dapolito Dunn, a partner at Baker Botts LLP who oversaw the EPA’s chemicals activities during the Trump administration.
Duvall said the headaches caused by the new PIP 3:1 rule show manufacturers of industrial, commercial, transportation, and other equipment that TSCA rules can apply to them, and they should pay attention to proposed chemical regulations before the agency finalizes them.
“Pay attention to TSCA even if you make articles,” he said.
TSCA rules that restrict a chemical in products and parts—as the PIP 3:1 rule does—affect foreign companies producing materials for the U.S. market and importers, Duvall said. A lot of manufacturing occurs outside the U.S., and many domestic companies import parts and assemble and distribute them here, so TSCA rules could apply to them, he noted.
Essentially anything that gets plugged in could have PIP 3:1 in the plastic jacketing that shields wires and cables to protect against electric shocks and fires, Duvall said. The chemical also can be used to soften plastic and as an additive in hydraulic fluid, lubricants and greases, industrial coatings, adhesives and sealants.
It takes time for companies to know whether their machine’s part contains the chemical, said James G. Votaw, a partner with Keller and Heckman LLP, who focuses on environmental, health and safety regulation.
Companies often purchase wires, cables, and other “commodity” parts from different sources based on their price, and the specific chemicals in the same product sold by different suppliers can vary, he said.
Also, materials used in electronic equipment often must be certified to meet industry standards, Dunn said. That means companies not only must find substitutes, but get the replacement certified, which adds compliance time, she said.
All of these complexities make it clear that companies should pay close attention to the EPA rulemaking process for TSCA, the attorneys say.
The PIP 3:1 rule triggered an unusual number of comments from international sources, including foreign-headquartered companies, a coalition of 11 Japanese trade associations, and even the Republic of Korea. One third of the total comments were from non-domestic sources, compared to the smattering of international comments other TSCA rules have received.
Prior to the EPA’s regulation, PIP 3:1 wasn’t restricted by any other country, so article manufacturers only recently begun the process of tracking the supply chain, wrote the Japan Electronics & Information Technology Industries Association on behalf of the coalition.
Electrical and electronic equipment will need at least a year to sift through the tens of thousands parts and equipment that might have PIP 3:1 and figure out which of the thousands of primary, secondary, and tertiary suppliers produce them, the coalition said.
More years are needed for tasks including developing and evaluating alternatives, certifying the quality and safety of those alternatives, ensuring alternatives can be used within the European Union’s regulations, getting customer approval, and coordinating with suppliers, the coalition wrote.
At least one U.S. trade association seems to have learned lessons from the problems caused by the PIP 3:1 rule.
The National Association of Manufacturers started an initiative to share information among companies that use chemicals, those that make them, and everyone in between, said Rachel Jones, the association’s vice president of energy and resources policy.
“Manufacturers are finding innovative ways to connect with each other, increase shared knowledge and have stronger visibility into what are usually not supply chains but ever evolving, multi-dimensional supply webs,” she said.
Dunn said she was encouraged by the manufacturers association’s proactive moves.
“I believe now we have a heightened awareness that should prevent this kind of surprise in the future,” she said.
It’s needed, she said, because the rulemaking phase of the amended law has only begun. The first five years of the amended TSCA law largely focused on building the infrastructure to carry the statute out, completing 10 chemical risk evaluations, and issuing the PIP 3:1 and four other rules.
Now many more chemical evaluations are underway, and regulatory actions are yet to come, Dunn said.
The EPA is evaluating the health and environmental risks of seven phthalates, chemicals used to make plastic, and three flame retardants, Duvall said. Those uses mean the chemicals could be found in parts in many different machines.
Companies need to know what chemicals the EPA already is and planning to evaluate and participate in both the risk evaluation and subsequent regulatory development, Duvall and Votaw said.
They also should explain the challenges they’ll face finding a substitute and provide that information in a way that can help the agency choose cost-effective regulatory strategies, Votaw said.
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