*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During Review ***

1 

1 EO12866_RIN2070-AJ92_Formaldehyde-Imp_NPRM_IRFA_2012-01-27.docx

2 

3 Initial Regulatory Flexibility Analysis for 

4 Formaldehyde Emission Standards for Composite Wood Products 

5 Proposed Rule; RIN 2070-AJ92 

6 

7 

8 U.S. Environmental Protection Agency, Office of Pollution Prevention and Toxics 

9 January 2012 

10 

11 

12 Pursuant to section 603 of the Regulatory Flexibility Act (RFA) (5 U.S.C. § 601 et seq.), EPA has 

13 prepared this initial regulatory flexibility analysis for the “Formaldehyde Emission Standards for 

14 Composite Wood Products” proposed rule. 

15 

16 1. Need For the Rule

17 

18 TSCA section 601(d) directs EPA to promulgate regulations to implement the formaldehyde 

19 standards for composite wood products described in TSCA section 601(b)(2). EPA is issuing a proposed 

20 rule under TSCA Title VI to implement the statutory formaldehyde emission standards for hardwood 

21 plywood, medium-density fiberboard, and particleboard sold, supplied, offered for sale, or manufactured 

22 (including imported) in the United States. As directed by the statute, this proposal includes provisions 

23 relating to, among other things, laminated products, products made with no-added formaldehyde resins, 

24 testing requirements, product labeling, chain of custody documentation and other recordkeeping 

25 requirements, and product inventory sell-through provisions, including a product stockpiling prohibition. 

26 

27 2. Objectives and Legal Basis for the Rule 

28 

29 The legal basis for the rule is TSCA section 601(d), which provides authority for the 

30 Administrator to “promulgate regulations to implement the standards required under subsection (b) in a 

31 manner that ensures compliance with the emission standards described in subsection (b)(2).” Therefore, 

32 the central objective of this proposal is to ensure compliance with the TSCA Title VI formaldehyde 

33 emission standards. 

34 

35 3. Description and Number of Small Entities to Which the Rule Will Apply

36 

37 The proposed rule potentially affects small manufacturers (including importers), fabricators, 

38 distributors, and retailers of composite wood products. These may include, but are not limited to, entities 

39 in the following industries: 

40 

41 • Hardwood Veneer and Plywood Manufacturing (NAICS code 321211); 

42 • Reconstituted Wood Product Manufacturing (NAICS code 321219); 

43 • All Other Miscellaneous Wood Product Manufacturing (NAICS code 321999); 

44 • Furniture and Related Product Manufacturing (NAICS code 337); 

45 • Miscellaneous Manufacturing (NAICS code 339); 

46 • Merchant Wholesalers, Durable Goods (NAICS code 423); 

47 • Merchant Wholesalers, Nondurable Goods (NAICS code 424); and 

48 • Retail Trade (NAICS Sector 44 and 45). 

49 

50 This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities 

51 likely to be affected by this action. Other types of entities could also be affected. 

52 
*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During Review ***

2 

53 For purposes of assessing the impacts of the rule on small entities, small entity is defined as: (1) a 

54 small business as defined by the Small Business Administration’s (SBA) regulations at 13 CFR 121.201; 

55 (2) a small governmental jurisdiction that is a government of a city, county, town, school district or 

56 special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit 

57 enterprise which is independently owned and operated and is not dominant in its field. 

58 

59 EPA estimates that the rule will affect approximately 879,000 small entities. 

60 

61 4. Projected Compliance Requirements, Classes of Small Entities Subject to the Compliance 

62 Requirements, and Professional Skills Needed to Comply

63 

64 A. Projected Compliance Requirements

65 

66 This proposal implements the statutory formaldehyde emission standards for hardwood plywood, 

67 medium-density fiberboard, and particleboard sold, supplied, offered for sale, or manufactured (including 

68 imported) in the United States. As directed by the statute, this proposal includes provisions relating to, 

69 among other things, laminated products, products made with no-added formaldehyde resins, testing 

70 requirements, product labeling, chain of custody documentation and other recordkeeping requirements, 

71 and product inventory sell-through provisions, including a product stockpiling prohibition. This proposal 

72 would establish requirements for manufacturers (including importers), fabricators, distributors, and 

73 retailers of composite wood products. The regulatory provisions in this proposal are designed to ensure 

74 compliance with the TSCA Title VI formaldehyde emission standards while aligning, where practical, 

75 with the regulatory requirements under the California Air Resources Board’s (CARB) Airborne Toxic 

76 Control Measure (ATCM) to reduce formaldehyde emissions from composite wood products. By 

77 aligning itself with the existing CARB requirements, EPA seeks to avoid differing or duplicative 

78 regulatory requirements that would result in an increased burden on the regulated community. 

79 

80 B. Classes of Small Entities Subject to the Compliance Requirements

81 

82 Small entities include small businesses, small organizations, and small governmental 

83 jurisdictions. The small entities that are potentially directly regulated by this rule are small businesses 

84 that are manufacturers (including importers), fabricators, distributors, or retailers of composite wood 

85 products. No small governments or small organizations are expected to be directly regulated by the rule. 

86 

87 C. Professional Skills Needed to Comply

88 

89 Each panel producer must designate a person as quality control manager with adequate 

90 experience and/or training to be responsible for formaldehyde emission quality control. EPA has not 

91 proposed criteria for determining whether an individual’s experience or training are appropriate for this 

92 position, but experience in the wood products industry or a degree in chemistry or a related field might 

93 provide the skills needed to comply with the requirements. 

94 

95 A panel producer must be able to follow sampling and handling procedures for the material that is 

96 to be tested. However, those procedures must be described in the facility’s quality control manual, and 

97 specified skills should not be needed to follow the written procedures. 

98 

99 Each panel producer must also designate a quality control facility for conducting quality control 

100 formaldehyde testing, and the quality control facility must have quality control employees with adequate 

101 experience and/or training to conduct accurate chemical quantitative analytical tests. But instead of 

102 performing these functions themselves, panel producers have the option of hiring an accredited third party 

103 certifier (TPC) or a contract laboratory to fulfill these requirements. 

104 
*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During Review ***

3 

105 To obtain product certification, a panel producer must apply to an accredited TPC, and must 

106 provide information and notifications to the TPC. Finally, manufacturers, fabricators, distributors, or 

107 retailers of composite wood products must maintain records, and may need to request information from 

108 their suppliers and provide information to their customers. None of these activities requires any special 

109 skills. 

110 

111 5. Other Federal Rules that may Duplicate, Overlap, or Conflict with the Rule 

112 

113 The U.S. Department of Housing and Urban Development (HUD) has regulations governing 

114 formaldehyde emission levels from plywood and particleboard materials installed in manufactured homes. 

115 (See 24 CFR 3280.308.) However, TSCA Title VI establishes specific formaldehyde emission standards 

116 for hardwood plywood, particleboard, and medium-density fiberboard and does not provide EPA with the 

117 authority to modify these standards. Furthermore, the Formaldehyde Standards for Composite Wood 

118 Products Act, which includes TSCA Title VI, directs HUD to revise their regulations to ensure that they 

119 reflect the emission standards in TSCA Title VI. And the HUD regulations do not deal with the other 

120 elements addressed in these implementing regulations (where EPA does have the authority to make 

121 determinations) such as laminated products, products made with no-added formaldehyde resins, testing 

122 requirements, chain of custody documentation, and product inventory sell-through provisions. Therefore, 

123 the regulatory provisions of this proposal for which EPA has flexibility in implementing the statute do not 

124 duplicate, overlap, or conflict with any other Federal rules. 

125 

126 6. Potential Economic Impacts on Small Entities 

127 

128 Of the nearly 879,000 small firms affected by the rule, approximately 851,000 (about 97 percent) 

129 are expected to have costs impacts that are less than one percent of their revenues, 23,000 firms (about 3 

130 percent) are expected to experience impacts at levels between one and three percent of their revenue, and 

131 4,000 firms (less than 1 percent) are expected to incur costs exceeding three percent of their revenues. 

132 

133 Many of the firms with cost impacts above 1 percent of their revenues are fabricators, 

134 wholesalers, and retailers with annualized costs less than $250 (i.e., they are firms with annual revenues 

135 below $25,000). These firms account for 92 percent of the firms with cost impacts that are between 1 and 

136 3 percent and 42 percent of the firms with cost impacts that exceed 3 percent. 

137 

138 7. Minimization of Economic Impacts on Small Entities Consistent with Statutory Objectives, 

139 and Consideration of Alternatives

140 

141 A. Small Business Advocacy Review Panel 

142 

143 As required by section 609(b) of the RFA, as amended by the Small Business Regulatory 

144 Enforcement Fairness Act (SBREFA), EPA conducted outreach to small entities and convened a Small 

145 Business Advocacy Review Panel on February 3, 2011 to obtain advice and recommendations of 

146 representatives of the small entities that potentially would be subject to the rule's requirements. The Panel 

147 solicited input on all aspects of these proposed regulations and on the framework for the third-party 

148 certification program under TSCA Title VI. Seventeen potentially-impacted small entities served as 

149 small-entity representatives (SERs) to the Panel, representing a broad range of small entities from diverse 

150 geographic locations, and five trade associations. The Panel concluded its deliberations on April 4, 2011. 

151 

152 Consistent with the RFA/SBREFA requirements, the Panel evaluated the assembled materials and 

153 small-entity comments on issues related to elements of the IRFA. It is important to note that the Panel’s 

154 findings and discussion were based on the information available at the time the final report was prepared. 

155 EPA has continued to conduct analyses relevant to the proposed rule, and additional information may be 

156 developed from public comment on the proposed rule. 
*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During Review ***

4 

157 

158 The Panel’s most significant findings and recommendations on the TSCA Title VI implementing 

159 regulations are summarized below. 

160 

161 1. In general. The Panel recommended that EPA adopt regulatory requirements that are 

162 consistent with the CARB ATCM wherever possible. EPA agrees with this recommendation and has 

163 tried throughout this proposal to remain consistent with CARB where it is practical to do so. 

164 

165 2. Manufactured-by dates and stockpiling. The Panel generally agreed with those SERs that 

166 recommended that EPA propose to establish the manufactured-by date at 180 days after promulgation of 

167 the final rule and make the reference period for determining whether stockpiling has occurred the 12 

168 month period prior to promulgation of the final rule. 

169 

170 EPA is proposing to establish the manufactured-by date at 1 year after promulgation of the final 

171 rule. This is primarily to allow for development of the third-party certification infrastructure and to give 

172 panel producers who are not already complying with the CARB ATCM adequate time before the 

173 manufactured-by date to select an accredited third-party certifier, develop a quality control manual, and 

174 complete the initial testing to qualify for product certification. 

175 

176 EPA is proposing to establish the stockpiling reference period, or base period, as the calendar 

177 year 2009 because, under TSCA Title VI, the base period must end before the statute was enacted. 

178 

179 3. Quality control and compliance testing. The Panel recommended that EPA consider CARB’s 

180 method of establishing equivalency and carefully evaluate any alternative test method permitted. EPA is 

181 proposing to use CARB’s method of establishing equivalency between test methods and EPA is also 

182 proposing to recognize those alternative test methods that CARB has approved. 

183 

184 The Panel further recommended that EPA provide clear direction on product decertification and 

185 recertification procedures and the recall of noncompliant products. In response to these 

186 recommendations, EPA has proposed specific provisions on what actions are required and allowed in the 

187 event of a failed test result. EPA has also proposed to require panel producers to hold lots selected for 

188 testing until the test results are received. 

189 

190 4. Labeling and recordkeeping. The Panel generally recommended that labeling and record 

191 keeping provisions should be closely harmonized with CARB’s requirements, including allowing panels 

192 to be labeled by bundle, rather than individually. The Panel did recognize that subtle differences between 

193 the TSCA Title VI implementing regulations and the CARB ATCM may make identical labels 

194 impossible. EPA is proposing labeling requirements that are virtually identical to CARB’s, except that 

195 the labels must say that the products are TSCA Title VI compliant instead of CARB compliant. EPA’s 

196 proposed recordkeeping and chain-of custody documentation requirements are also virtually identical to 

197 CARB’s. 

198 

199 5. Laminated products and engineered veneer. The Panel recommended that EPA continue to 

200 seek available information, and exempt those laminated products that can be exempted consistent with the 

201 direction given in TSCA Title VI. The Panel further recommended that EPA work with small businesses, 

202 especially those laminating on a made-to-order basis, to design a testing scheme that is practical for those 

203 businesses, and at the same time, is calculated to ensure compliance with the emissions standards. The 

204 Panel also recommended that EPA consider basing the number and frequency of required quality control 

205 tests on production volume, thereby requiring fewer tests for smaller producers. EPA has incorporated all 

206 of these recommendations into this proposal, by proposing to exempt laminated products that are made 

207 with certified platforms and NAF resins, and by proposing to allow for quality control testing frequency 

208 based on production volume for hardwood plywood producers. 
*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During Review ***

5 

209 

210 6. Definitions. The Panel recommended that EPA develop a definition of “hardboard” that takes 

211 the revised ANSI standard into account while ensuring that similar products are similarly regulated under 

212 TSCA Title VI. While a revised ANSI standard for “hardboard” has yet to be finalized, EPA believes that 

213 its proposed definition takes into account both widespread industry usage of the term and the intent of the 

214 statute. 

215 

216 Recognizing that TSCA Title VI was not intended to apply to structural plywood, the Panel also 

217 recommended that EPA develop a clear definition for “interior use” in order to eliminate confusion in the 

218 regulated community. According to the Panel, the definition should be based on the intent of the statute 

219 and consider how the hardwood plywood is likely to be used and stored once incorporated into a finished 

220 good. EPA has proposed a definition of “intended for interior use” that includes these considerations. 

221 

222 While the SERs differed in their advice on the definition of the term “panel,” the SBAR Panel 

223 recommended that EPA reduce uncertainty in the regulated community by including in its regulation a 

224 clear definition of “panel” that is based on the intent of the statute, and considers trade usage and the 

225 limitations of current test methods. Again, EPA is proposing a definition that takes these factors into 

226 account. 

227 

228 B. Alternatives considered 

229 

230 The Economic Analysis for the proposed rule examined a number of alternative 

231 analytical options. Among the alternatives based on the formaldehyde emissions standards set in 

232 Title VI of TSCA, EPA analyzed different options for how laminated products might be included 

233 in the definition of hardwood plywood, and for the rule’s chain of custody and recordkeeping 

234 requirements. These alternatives would have applied to both small and large entities, but given 

235 the number of small entities in the affected industries, these alternatives would largely affect 

236 small entities. 

237 

238 EPA is proposing the option with the lowest total cost among these options. This will 

239 minimize any significant economic impact on small entities. The Economic Analysis included 

240 two options for the definition of hardwood plywood that had higher total costs than the proposed 

241 rule (because they did not include the proposed rule’s reduced recordkeeping requirements for 

242 firms that are not manufacturers under TSCA) but that were less burdensome to certain 

243 laminated product producers. Specifically, one of the alternative options would have excluded 

244 all laminated products from the definition of hardwood plywood, and the second would have 

245 excluded all laminated products other than architectural panels and custom plywood from the 

246 definition of hardwood plywood. Both alternative options would apply regardless of the types of 

247 resins used in making the laminated products exempted from the definition of hardwood 

248 plywood. 

249 

250 Because eligibility for the exemptions for laminated products in the alternative options 

251 was not based on the type of resins used to attach a wood veneer to a platform, currently 

252 available information indicates that these options would have allowed laminated products that 

253 exceed the formaldehyde emission standards to be exempted from the definition of hardwood 

254 plywood. Therefore, EPA has concluded that such alternative options are not consistent with 

255 TSCA Title VI’s statutory mandate that EPA promulgate regulations in a manner that ensures 

256 compliance with the emission standards in TSCA section 601(b)(2). 

257