On November 13, 2018, the Acting Administrator of the U.S. Environmental Protection Agency (EPA or the “Agency”) signed an interim final rule establishing a conditional exemption from federal hazardous waste regulatory requirements under the Resource Conservation and Recovery Act (RCRA) for the collection of recalled airbag wastes (and other airbag wastes).  The interim final rule addresses certain issues regarding recalled airbags that EPA was unable to address through related guidance that the Agency issued earlier during 2017 and 2018.

Although the rule and guidance are unique in some respects to recalled airbags, they may also provide a framework for management of other recalled products that may be classified and regulated as hazardous wastes.  We summarize below EPA’s recent guidance on recalled airbags, as well as the new interim final rule, and then address their potentially broader implications for recalled products in general. 

The 2017 Guidance

Starting in November 2008, several automobile manufacturers announced recalls of various categories of airbag inflators manufactured by Takata Corporation and/or its affiliates (“Takata”).  In June 2014, the National Highway Traffic Safety Administration (NHTSA) opened a formal defect investigation into the Takata airbag inflators, which was followed in February 2015 by a Preservation Order requiring Takata to preserve the recalled inflators intact (except for those needed for testing purposes) so that they would be available for purposes of investigation and/or judicial proceedings.

On June 23, 2017, EPA issued guidance clarifying that the recalled Takata airbags being held pursuant to the 2015 Preservation Order were not solid wastes, and thus were not subject to RCRA hazardous waste regulatory requirements, because they were not “discarded” and, in fact, could not legally be discarded.  See Memorandum from Barnes Johnson, Director, Office of Resource Conservation and Recovery, EPA, to EPA Regional RCRA Division Directors, et al. (June 23, 2017) (RCRA Online #14893).  However, this guidance further stated that “[o]nce the inflators are released from the DOT Preservation Order and other legal action related to the recall that requires the inflators to be held as evidence, the recalled airbag inflators [will be] solid [and hazardous] wastes.”  Id.

The 2018 Guidance

After Takata's U.S. subsidiary, TK Holdings, Inc., filed for Chapter 11 bankruptcy and its plan for reorganization was approved, effective on April 10, 2018, the 2015 Preservation Order was amended on April 12, 2018.  Under the Amended Preservation Order, the post-bankruptcy successor to TK Holdings, Inc. (hereinafter also referred to as “Takata”) was provided a mechanism to substantially reduce the number of inflators it is required to preserve by asking NHTSA to release specific categories of inflators for disposal.  In addition, automobile manufacturers were no longer required to direct their recalled inflators to Takata, but instead were allowed to handle the inflators outside the (Amended) Preservation Order and arrange for disposal themselves.

Because the April 2018 amendment to the Preservation Order opened the door to disposal of significant quantities of the recalled airbag inflators, questions started to be raised about how the RCRA hazardous waste regulations apply to such inflators.  On July 19, 2018, EPA issued new guidance to answer these questions (and to address other airbag products that were not subject to the Takata airbag recalls).  See Memorandum from Barnes Johnson, Director, Office of Resource Conservation and Recovery, EPA, to EPA Regional RCRA Division Directors, et al. (July 19, 2018).  For purposes of the current discussion, the main conclusions of this guidance included the following:

• Unused Recalled Airbag Products.  Recalled airbag inflators and airbag modules (i.e., assemblies including both the inflator and the fabric cushion) that have never been installed in vehicles for sale (including units installed in vehicles for purposes of quality control testing only) are considered unused off-specification “commercial chemical products,” and therefore do not qualify as solid or hazardous wastes if they are destined to be legitimately reclaimed and not discarded.  (These units, as well as the used products discussed below, would clearly be solid wastes if simply discarded, for example by landfilling or incineration.)
• Used Recalled Airbag Products.  Recalled airbag inflators and modules that have been installed in vehicles for sale are considered used – even if they have not been deployed/activated through the release of gas from the inflator – and thus are generally classified as “spent materials.”  The applicable rules can be summarized as follows:
  • Used recalled airbag modules that remain installed in an automobile when the vehicle is recycled as scrap metal are considered part of the vehicle and thus are exempt from RCRA regulation as part of the recycled scrap metal (assuming the recycling of the vehicle is legitimate).
  • Used recalled airbag modules or inflators that have been deployed/activated are generally not hazardous, and thus are not subject to regulation as hazardous wastes.  (The same would be true of any unused recalled airbag products that might have been deployed/activated, for example as a result of testing.)
  • Used recalled airbag modules or inflators that have been removed from a vehicle and have not yet been deployed/activated would be classified as spent materials, and thus would be solid and hazardous wastes if destined for reclamation (or if discarded by landfilling or incineration).  Even though these units may consist primarily of metal, they cannot be classified as scrap metal that would be exempt from regulation when recycled, because they cannot be safely deployed/activated as part of the recycling process (although some non-recalled airbag modules might be).  (EPA did not discuss whether these units might qualify for two relatively new RCRA conditional exclusions applicable to spent materials destined for reclamation, known as the “generator control” exclusion and the “transfer-based” exclusion.) 
• Prohibited Reuse of Recalled Products.  The recalled units cannot be legitimately be reused for their originally intended purpose (i.e., as safety devices).  Any attempt to do so would be viewed as sham recycling, which would render the items solid and hazardous wastes.  This is true notwithstanding the general RCRA exclusion for materials that are directly reused “as is.”  See 40 C.F.R. § 261.2(e). 

EPA also took the position that when automobile salvage yards evaluate individual airbag modules to determine whether they are covered by a recall (and thus qualify as solid and hazardous wastes) or instead are not covered by a recall (such that they can be recycled as exempt scrap metal), the modules will not be deemed to be generated as wastes until they are confirmed to be recalled products. 

The New Interim Final Rule

EPA issued the 2018 interim final rule in recognition of the fact that imposing full hazardous waste regulatory requirements on recalled airbags (e.g., recalled airbags that were installed in automobiles for sale and subsequently removed without being activated/deployed) would likely slow down the recall process, resulting in greater, rather than lesser, risks to human health and the environment.  The Agency specifically noted that automobile dealers, salvage vendors, and others involved in removing/replacing recalled airbags would frequently generate sufficient volumes of recalled airbag wastes as to push them into higher generator categories (i.e., from Very Small Quantity Generator to Small or Large Quantity Generator).  According to EPA, these entities generally lack familiarity and experience with the requirements for these higher generator categories and might slow down or even stop removing airbag inflators in order to avoid the increased regulation.  The result could be a substantial increase in the number of recalled airbags continuing to be used, and an increase in the number of potential incidents involving such airbags.

In order to prevent these perverse effects, the interim final rule establishes a conditional exclusion from RCRA regulation for airbag wastes while they are in the hands of an “airbag waste handler” (i.e., a generator of airbag waste) or are being transported from such a handler to an “airbag waste collection facility” (as explained below) or to a designated facility (e.g., a permitted hazardous waste treatment, storage, or disposal facility).  The following conditions must be satisfied in order for the exemption to apply:

1. The airbag wastes must not be accumulated in quantities of more than 250 airbags (corresponding to a small truckload) or for more than 180 days;
2. The airbag wastes must be packaged in a container designed to address the associated risks and labeled “Airbag Waste – Do Not Reuse”;
3. The airbag waste must be sent directly to either an airbag collection facility in the U.S. that is under the control of a vehicle manufacturer, an authorized representative of a vehicle manufacturer, or an authorized party administering a remedy program in response to a NHTSA recall, or to a designated facility;
4. Transportation of the airbag waste must comply with applicable hazardous materials transport rules issued by the U.S. Department of Transportation; and
5. The airbag waste handler must keep detailed records of all off-site shipments and confirmations of receipt from the receiving facility.  

Because airbag waste managed in accordance with these conditions is exempt from regulation through transport to the airbag waste collection facility or designated facility, the waste first becomes subject to regulation at such facility.  In particular, the facility becomes the “generator” of the waste, subject to all applicable hazardous waste generator requirements.  If the facility sends the airbag waste to another facility, it will have to do so with a hazardous waste transporter and hazardous waste manifest, and the receiving facility for that shipment will generally be subject permitting requirements as a hazardous waste treatment, storage, or disposal facility.

Unlike most RCRA regulations, which have an effective date 6 months after publication in the Federal Register, EPA has made this rule effective immediately upon publication.  Importantly, however, that effective date applies only in the few states that do not have their own authorized RCRA hazardous waste programs (e.g., Alaska and Iowa) or that automatically adopt new RCRA hazardous waste rules (e.g., Pennsylvania and New Jersey).  In other states, the new rule does not take effect unless and until it is adopted by the state, which the states are not required to do because the rule makes the RCRA program less stringent than before.  EPA also notes that some states might informally allow compliance with the conditional exemption before formally adopting it, in which case EPA would “not generally consider such implementation a concern for purposes of enforcement.”

Potentially Broader Implications for Other Recalled Products

Although the 2017 and 2018 guidance discussed above, and the new interim final rule, are focused only on recalled airbags, they may provide a framework for management of a wide range of other recalled products that may be classified and regulated as hazardous wastes.  Among the key lessons from EPA’s recent actions on recalled airbags are the following (keeping in mind that the circumstances of individual product recalls may lead to different results):

• Recalled products will generally not be considered solid or hazardous wastes to the extent that they are being held for legitimate investigational or litigation purposes.
• Reuse of recalled products may be deemed sham recycling potentially subject to enforcement as a violation of hazardous waste regulations.
• Unused recalled products that are destined for legitimate reclamation will generally not be classified as solid or hazardous wastes.
• Used recalled products destined for reclamation will generally be viewed as spent materials and thus solid wastes, although some exemptions (e.g., the scrap metal exemption) may be available in some cases.
• For recalled products that are components of other products, the classification of the items as hazardous or non-hazardous, and the applicability of regulatory exemptions (e.g., the scrap metal exemption), may depend upon whether the item being managed is the recalled component alone or the product containing the recalled component.
• At least in some cases (e.g., the automobile salvage yards discussed in the 2018 guidance), products that must be evaluated to determine whether they are covered by a recall might not be deemed wastes until they are confirmed to be subject to the recall.
• For recalled products that are subject to regulation as hazardous wastes, EPA might be convinced that application of the normal hazardous waste regulations would be counter-productive from the perspective of human health and the environment, such that a conditional exclusion might be appropriate.

Clearly, the applicability of the hazardous waste regulations to recalled products is highly fact-dependent.  Nonetheless, there might be an opening to petition EPA for a general rule establishing a conditional exclusion for all recalled products.  The Agency’s rationale underlying the new airbag rule would appear to apply to all recalled products.  Persons who might otherwise be essential in removing the products from use and/or replacing them would likely be discouraged from playing such a beneficial role if doing so brought the full weight of the RCRA regulations on them.  In such a case, the purpose of the recall in protecting the public could be seriously undermined by the hazardous waste regulations.  It would be enormously inefficient (and a tremendous burden on EPA and the regulated community) for persons involved in each individual recall to have to separately petition EPA for relief.  Moreover, it is doubtful that adequate relief could be provided in a timely fashion, especially given the fact that state adoption of any federal relief may take considerable time. 

EPA has once before determined that a category of recalled products (i.e., recalled pesticides) should be subject to reduced requirements during accumulation, transport, and collection.  In that case, EPA made the recalled products eligible for management under the streamlined requirements for universal wastes (until they arrive at the ultimate recycling or disposal facility).  See 40 C.F.R. § 273.3.  The new interim final rule for recalled airbags operates in a similar manner, and may serve as a model for management of other recalled products, either on an individual basis or through a general rule for recalled products.

Beveridge & Diamond assists clients in a wide range of industrial sectors with solid and hazardous waste regulatory issues under RCRA, its state counterparts, international treaties, and the laws and regulations of countries around the world.  The firm has advised manufacturers, retailers, third-party logistics providers, and others on waste and transportation issues for dozens of nationwide and worldwide recalls, covering products as diverse as lithium batteries, pesticides, toys, cleaning products, electronics, beverages, and hardware implements.  For more information about EPA’s airbag guidance and interim final rule, as well as their potential implications for other recalled products, please contact Aaron Goldberg or any other members of our Waste/Recycling practice group.