EPA’s Formaldehyde Standards: Compliance Date Moved Up to June 1, 2018

June 1, 2018, will be the initial compliance date for most companies in the composite wood product industry that are subject to EPA’s Formaldehyde Emission Standards for Composite Wood Products (the Standards). On April 4, 2018, EPA announced that regulated composite wood panels and finished goods containing such panels must be certified as compliant with either the Standards or the California Air Resources Board (CARB) Phase II standards by June 1, 2018. This announcement followed an earlier federal district court decision that vacated a September 2017 EPA rulemaking that extended the compliance deadline for most obligations under the Standards to December 12, 2018. The compliance date in dispute applies to emission limit compliance, recordkeeping, labeling, and sell-through. Other compliance dates are not affected by the lawsuit and EPA’s April 4 notice.

The Standards implement Title VI of the Toxic Substances Control Act (TSCA). EPA published the 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 CARB adopted its Airborne Toxic Control Measures to Reduce Formaldehyde from Composite Wood Products (ATCM) in 2008, Congress enacted the Formaldehyde Emission Standards for Composite Wood Products Act as Title VI to TSCA in 2010. Title VI directed EPA to promulgate a federal regulation on formaldehyde emissions from composite wood products, using the CARB ATCM emissions limits. Following some rulemaking delays, EPA proposed the Standards in 2013 and finalized them on December 12, 2016.

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, which certify the formaldehyde emissions from the products and accredit TPCs, respectively.

EPA delayed the effective date of the Standards after the presidential inauguration, which eventually took effect on May 22, 2017. Accreditation bodies and TPCs have been permitted since then to seek EPA recognition and then begin offering services. Other regulated entities will be required to meet their own obligations under the Standards beginning on June 1, 2018. 

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 December 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. Panel producers, fabricators, importers, distributors, and retailers of composite wood products and finished goods made from those products were to become subject to the Standards beginning on a certain date, referred to as the “manufactured-by” date. For imported products, the Standards regard the date of importation as the “manufactured-by” date. The December 2016 Standards set December 12, 2017, as the “manufactured-by date” (one year after publication). 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 “manufactured-by” date and some other dates with a proposed rule and direct final rule on May 24, 2017 to “prevent substantial disruption to the supply chain.” 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. The final rule extended the “manufactured-by” date to December 12, 2018 (an extra year); it extended the beginning date of import certification and the end date of the CARB certification transition period to March 22, 2019; and it extended the compliance date for laminators to assume “producer” obligations under the Standards to March 22, 2024.

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 “manufactured-by” date to December 12, 2018. 

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. The court stayed its order and directed parties to propose a new compliance date by March 9, 2018.

The parties to the litigation filed a joint stipulation and proposed order on March 9, 2018, envisioning a new June 1, 2018, initial compliance date. On March 13, 2018, the court affirmed this date by an order. The other compliance dates extended by the September 25 rule are not affected by the court order.

On April 4, 2018, EPA published a notice about the court order and the new “manufactured-by” date in the Federal Register, stating the following:

By June 1, 2018, and until March 22, 2019, regulated composite wood panels and finished products containing such composite wood panels that are manufactured (in the United States) or imported (into the United States) must be certified as compliant with either the TSCA Title VI or the California Air Resources Board (CARB) Airborne Toxic Control Measures (ATCM) Phase II emission standards, which are set at identical levels, by a third-party certifier (TPC) approved by CARB and recognized by EPA. Previously, these products were required to be TSCA Title VI compliant by December 12, 2018.

Until March 22, 2019, regulated products certified as compliant with the CARB ATCM Phase II emission standards must be labeled as compliant with either the TSCA Title VI or the CARB ATCM Phase II emission standards.

After March 22, 2019, CARB-approved TPCs must comply with additional accreditation requirements in order to remain recognized as an EPA TSCA Title VI TPC and to continue certifying products as TSCA Title VI compliant. Regulated products manufactured in or imported into the United States after March 22, 2019, may not rely on the CARB reciprocity of 40 CFR 770.15(e) and must be certified and labeled as TSCA Title VI compliant by an EPA TSCA Title VI TPC with all of the required accreditations.

The following table reflects the three different timeframes as in the original December 2016 standards, the September 2017 extension, and the April 2018 notice. For compliance purposes, companies should rely on the timeframe as announced by the April 2018 notice (the right-most column).

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 the voluntary consensus standards incorporated by reference in the Standards to specify the latest versions of those standards, including ASTM E1333-14 and D6007-14. 

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 provision, 40 C.F.R. § 770.45(f), that prohibited labeling of composite wood products as TSCA Title VI compliant prior to the “manufactured-by” date: “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. 

EPA issued a proposed rule and direct final rule on July 11, 201,7 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.” 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. Panel producers and their downstream customers must meet certain notification obligations if the composite wood products are later found to belong to a non-complying lot but have already entered into the commerce. 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.

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. A new FAQ explained 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.

CARB’s Recognition of TSCA Title VI Compliance

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

CARB will accept panels and finished goods (e.g., furniture, cabinets, and flooring) that comply with the U.S. EPA TSCA Title VI regulation and are labeled as TSCA Title VI compliant, because the CARB and TSCA Title VI formaldehyde emission standards are identical.

On March 23, 2018, CARB also released a chart comparing and contrasting the major requirements under CARB ATCM Phase II and the TSCA Title VI Standards. In the chart, CARB advised companies that “for products sold in California, if there is a difference between the CARB and U.S. EPA requirements, the more stringent requirement applies, regardless of whether it is a CARB or U.S. EPA requirement.”

What’s Next?

Regulated entities should actively prepare for compliance with the Standards as the new initial ”manufactured-by” date of June 1, 2018, quickly approaches. Entities should ensure that both they and their suppliers will be ready for compliance by this date. If feasible, compliance before that date is recommended.