# REGULATORY IMPACT ANALYSIS OF AMENDMENTS TO REGULATIONS FOR TSCA SECTION 5 PREMANUFACTURE NOTIFICATIONS

Prepared by

Susan Krueger Regulatory Impacts Branch Economics, Exposure and Technology Division Office of Pollution Prevention and Toxics

U.S. Environmental Protection Agency

September 9, 1994i TABLE OF CONTENTS

Page List of Tables ................................................................................................................. .............................. iii

List of Figures................................................................................................................ ............................... iv

Executive Summary .............................................................................................................. ................ ES-1

I. INTRODUCTION............................................................................................................... .................... I-1 A. Background and Scope....................................................................................................... .... I-1 B. Executive Order 12866 ...................................................................................................... ..... I-4 C. Structure of this Analysis ................................................................................................. ....... I-5

II. METHODOLOGY................................................................................................................ ........ II-1 A. Direct Costs of Compliance ................................................................................................. .. II-1 B. Quantification of Direct Societal Costs and Benefits ............................................................ II-3 C. Effects on New Chemical Introduction................................................................................... II -7 D. Health Implications of Regulatory Alternatives ...................................................................... II-7

III. CURRENT TSCA SECTION 5 PROGRAM: BASE CASE DESCRIPTION .......................................III-1 A. Current New Chemicals Program ...........................................................................................III -1 B. Baseline Submissions....................................................................................................... ......III-8 C. Industry Baseline Unit Costs............................................................................................... ....III-9 D. Baseline Government Review Unit Costs.............................................................................III-24 E. Total Baseline Costs....................................................................................................... ......III-29

IV. POLYMER EXEMPTION AMENDMENT............................................................................................IV- 1 A. Amendment Description..........................................................................................................IV-1 B. Polymers Eligible Under the Amendments .............................................................................IV-3 C. Industry Per Unit Costs.................................................................................................... .......IV-3 D. Government Per Unit Costs....................................................................................................IV-7 E. Comparison with Base Case and Sensitivity Analysis............................................................IV-8

V. PROCEDURA L AMENDMENT....................................................................................................... ......V-1 A. Amendment Description...................................................................................................... .....V-1 B. Submissions................................................................................................................ .............V-5 C. Industry Per Unit Cost..................................................................................................... .........V-7 D. Government Per Unit Cost................................................................................................... ....V-8 E. Comparison with Base Case and Sensitivity Analysis...........................................................V-11

VI. LOW VOLUME AND LOW RELEASE/LOW EXPOSURE EXEMPTIONS AMENDMENT.................VI-1 A. Amendment Description..........................................................................................................VI-1 B. Submissions............................................................................................................................VI-3 C. Industry Per Unit Costs.................................................................................................... .......VI-6 D. Government Per Unit Costs.................................................................................................. VI-10 E. Comparison with Base Case and Sensitivity Analysis..........................................................VI-14 F. Low Release/Low Exposure Exemptions..............................................................................VI-17

VII. NON-5(e) SIGNIFICANT NEW USE RULE AMENDMENT ........................................................VII-1 A. Amendment Description...................................................................................................... ...VII-1 B. Submissions................................................................................................................ ...........VII-2ii TABLE OF CONTENTS (Continued)

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C. Industry Per Unit Costs.................................................................................................... ......VII-2 D. Government Per Unit Costs.................................................................................................. .VII-3 E. Comparison with Base Case and Sensitivity Analysis...........................................................VII-3

VIII. IDENTIFICATION AND ANALYSIS OF REGULATORY OPTIONS...............................................VIII-1 A. Total Preferred Option Costs ............................................................................................... .VIII-1 B. Polymer Exemption Amendment Options.............................................................................VIII-3 C. Procedural Amendment Options...........................................................................................VIII -4 D. Low Volume Exemption and Low Release/Low Exposure Exemption Amendment Options.......................................................................................................... .....VIII-5

IX. EFFECTS OF THE AMENDMENTS ON SMALL ENTITIES ............................................................ IX-1 A. Small Entity Definition.................................................................................................... ....... IX-1 B. Number of Small Entities ...................................................................................................... IX-2 C. Regulatory Flexibility Analysis and Impacts on Small Businesses ....................................... IX-4

X. EFFECTS OF THE AMENDMENTS ON INNOVATIVE ACTIVITY .................................................... X-1 A. Overview of the Potential Effects on Innovation ................................................................... X-1 B. Summary of Important Implications ....................................................................................... X -3

REFERENCES..................................................................................................................... ..................... R-1

Appendix A. Labor Rates for Industry and Agency Cost Calculations ......................................................A-1

Appendix B. Presentation of Data Used to Calculate Time Requirements for Submission of a Full PMN Notification ......................................................................B-1iii LIST OF TABLES

Page Table ES-1. Summary of Amendments............................................................................................. E S-3

Table ES-2. Summary of Quantified Savings for Preferred Option....................................................................................................................... ... ES-6

Table ES-3. Summary of Quantified Savings Per Amendment............................................................. ES-6

Table III-1. Baseline Notices Received ........................................................................................ ..........III-10

Table III-2. Industry Costs for PMN Submissions............................................................................... ....III-11

Table III-3. Estimated Industry Labor Require ments for PMN (Rev. 1-91) Submission.........................III-13

Table III-4. Baseline Industry Unit Costs for Polymer Exemption Submissions .................................III-16

Table III-5. Estimated Industry Labor Requirements for Baseline Polymer Submission........................III-17

Table III-6. Baseline Industry Unit Costs for LVE Submissions..............................................................III -19

Table III-7. Estimated Industry Labor Requirements for Baseline LVE Submission ..............................III-21

Table III-8. Estimated Industry Labor Requirements for Baseline Bona Fide Submission ......................................................................III-22

Table III-9. Baseline Industry Unit Costs for Bona Fide Notices ............................................................III -23

Table III-10. Baseline Agency Unit Costs for PMN Review....................................................................III -25

Table III-11. Baseline Agency Unit Costs for Polymer Exemption Review.............................................III-27

Table III-12. Baseline Agency Unit Costs for Low Volume Exemption Review......................................III-28

Table III-13. Total Quantified Baseline Costs................................................................................. ........III-30

Table IV-1. Projected Polymer Exemption Submissions..........................................................................I V-4

Table IV-2. Industry Unit Costs for Amended Polymer Exemption Reporting and Recordkeeping .........IV-6

Table IV-3. Comparison of Base Case and Amended Costs for Polymer Exemption..............................IV-9

Table V-1. Estimated Industry Labor Requirements for Amended Bona Fide Submission........................................................................V-9iv LIST OF TABLES (Continued)

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Table V-2. Industry Unit Costs for Amended Bona Fide Notices ............................................................V-10

Table V-3. Comparison of Base Case and Amended Costs for Procedural Amendments .....................V-12

Table VI-1. Projected LVE Submissions ..................................................................................................VI-4 Table VI-2. Projected LoREX Exemptions ...............................................................................................VI-7

Table VI-3. Industry Unit Costs for Amended LVE Submissions..............................................................VI-8

Table VI-4. Estimated Labor Requirements for Amended LVE Submission .............................................VI-9

Table VI-5. Industry Unit Costs for LoREX Exemption Submissions .....................................................VI-11

Table VI-6. Estimated Labor Requirements for LoREX Exemption Submission................................VI-12

Table VI-7. Agency Unit Costs for Amended LVE Review.....................................................................VI-13

Table VI-8. Agency Unit Costs for LoREX Exemption Review...............................................................VI-15

Table VI-9. Comparison of Costs for Base Case and Amended LVE ....................................................VI-16

Table VI-10. Comparison of Costs for Base Case and Amended Costs for LoREX Exemption ............VI-18

Table VII-1. Amended Agency Unit Costs for PMN Review Due to the Non-5(e) SNUR Amendment.................................................................................................................................VII-4

Table VIII-1. Total Quantified Costs for Preferred Option of New Chemicals Program Amendments ...................................................................VIII-2

Table IX-1. Employee Size Category for Companies Submitting PMNs in FY89................................................................................................................. IX-3

Table IX-2. Annual Sales of Companies Submitting PMNs in FY89 ...................................................... IX-5v LIST OF FIGURES

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Figure III-1. Total Notices Received by OPPT .................................................................................. ..... III-2ES-1 EXECUTIVE SUMMARY

This analysis provides economic support for f our amendments to regulations promulgated under

the authority of Section 5 of the Toxic Substances Control Act (TSCA). TSCA Section 5 requires that

manufacturers and importers of chemicals determine if t he chemical of interest is on the TSCA Inventory

and, if it is not, submit certain information to EPA ninety days prior to first commercial manufacture or

import. EPA examines the information within the ninety days and responds to the submitter if the chemical

is determined to present an unreasonable risk to hum an health or the environment. The Agency has

developed exemptions to these reporting rules under the authority of Section 5(h)(4) of TSCA to reduce or

remove the burden of premanufacturing notification (PMN) requirements for chemical substances

determined not to pose a substantial risk. These exem ptions include an exemption for certain polymers, a

low release/low exposure exemption, and a low vo lume exemption. In addition, the Agency has

developed revisions to a procedure, called " bona fide intent to manufacture," which enables submitters to

determine if a chemical of interest is listed on the confidential portion of the TSCA Inventory.

The four amendments to the reporting rules are based on Agency knowledge and experience with

the New Chemicals Program. The amendments improve program efficiency without compromising

protection of human health or the environment. As the Agency has acquired knowledge of chemicals,

categories of chemicals that are not expected to pose a risk to human health and the environment have

been developed. In addition, methods to reduce or e liminate the exposure to chemicals which do pose a

risk to human health have been developed. The Agency al so has identified other areas within the New

Chemicals Program where other protections and efficiencies can be obtained.

The amendments include an expansion of the polymer exemption criteria with minimal reporting

requirements and certain recordkeeping provisions; the introduction of a low release/low exposure

(LoREX) exemption; an expansion of the low volume exemption; an expedited follow-up rule (generic

expansion of the non-5(e) significant new use rule (SNUR)); and several procedural PMN Rule

amendments. The four amendments are further summarized in Table ES-1.

The polymer amendment expands the current exemption by 1) allowing a greater number of

polymers to be eligible; 2) eliminating the pre-manufacture notice requirement and amending the

recordkeeping requirement; and 3) reducing the annual reporting requirements to a single letter per

submitter.ES-2 The LoREX exemption category is new to the program. It encourages pollution prevention by

permitting faster commercialization of chemical subst ances meeting stated release and exposure criteria.

This exemption is expected to reduce the number of consent orders the Agency negotiates under Section

5(e) of TSCA, as many of the companies normally subj ect to that process can take the steps necessary to

reduce or eliminate releases and exposures without t he intervention of the Agency and without waiting the

two to six months normally required to negotiate such consent orders.

The low volume amendment expands the low volume exemption to allow a greater number of

submitters to take advantage of it by increasing the volume requirement from 1,000 kg/yr to 10,000 kg/yr.

It also provides the Agency with thirty days for review, compared to 90 days for a regular submission and

21 days for the current exemption.

The non-5(e) SNUR amendment allows workplace protection and hazard communication

provisions to be included in expedited non 5(e) SNURs. This would allow elimination of the Section 5(e)

Consent Order development process for PMN cases invo lving those types of provisions, thereby reducing

theES-3 Table ES-1. Summary of Amendments

Change Expected Effect

Polymer Exemption:
- Expands criteria for eligibility

- Requires annual notification requirements

- Amends recordkeeping requirement

- Adopts the OECD international definition of "polymer" - Increased number of polymers eligible for exemption

- Increased manufacture of polymers meeting the Agency's "low risk" criteria

- Increased protection of human health and the environment

- Minimize notification and review costs

- Elimination of delay time required to comply with regulation

Procedural PMN Rule:
- Amends the "two percent" reporting rule for polymers, increasing the flexibility in polymer names

- Requires standard Chemical Abstracts nomenclature in Section 5 submissions and bona fide Inventory search requests

- Revises bona fide Inventory search procedures

- Requires multiple copies of submissions

- Requires notice of commencement form - Reduced polymer submissions

- Increased flexibility in polymer manufacturing process

- Expedited searches of the TSCA Inventory

- Increased number of correct submissions

- Decreased use of Agency resources to determine correct chemical identity and to make confidential business information (CBI) copies

- Increased protection of CBI

- Expedited Agency review of submissions

Low Volume Exemption and Low Rel ease/Low Exposure (LoREX) Exemption:
- Raises the limit eligible for exemption from 1,000 to 10,000 kg per year

- Introduces a new exemption category

- Increases the Agency review time from 21-days to 30-days

- Requires use of PMN form

- Establishes "binding" practices - Increased number of substances eligible for exemption

- Reduced delay time for agency review (in case of substances not previously eligible for exemption)

- Increased use of pollution prevention practices to reduce exposure and release

- Reduced volume of Section 5(e) consent orders

- Reduced Agency resource commitments

- Increased introduction of low-risk new chemicalsES-4 Non-5(e) Significant New Use Rule (SNUR):
- Allows Agency to use expedited rulemaking procedures to impose worker protection and hazard communication requirements for certain substances - Reduced number of Section 5(e) consent orders

- Elimination of time required to develop a Section 5(e) consent order

- Submitter can commence commercial manufacture

sooner

- Reduced use of Agency resourcesES-5 resources and time required to develop regulatory provisi ons for those PMN cases by two to six months or

more.

The procedural amendment allows for more accurate chemical review, greater protection of

confidentiality, decreased opportunities for compli ance problems, and greater flexibility for polymer

manufacturers. Specific topics included in the am endment are: a requirement to use specific

nomenclature for chemical names, a modification of the 2% rule for naming polymers, revised

requirements for TSCA Inventory search requests ( bona fides ), a requirement to submit multiple copies of

submissions, a requirement to use notice of commencement forms, and the inclusion of language to allow

future electronic submissions.

Overall, these amendments are expected to exempt a larger proportion of premanufacture notices

(PMNs) from full review; to shift certain fixed costs to PMN submitters; to reduce burdens for 5(e) consent

order development; and to streamline the PMN review process by reducing the number of submissions

requiring full review, reducing bona fide TSCA Inventory search requests, and reducing incomplete or

incorrect submissions. Industry will have greater fl exibility in their development and marketing schedules

since fewer chemicals will have to go through the full PMN process and fewer 5(e) consent orders will be

issued.

Of the options considered, EPA believes that the best option is represented by the incorporation of

all four amendments already discussed. The majority of the benefits of this option are in the form of

reduced costs as compared to the current Section 5 requirements; the savings, based on the net

quantified costs, to industry, government, and society as compared to the current regulations are listed for

three scenarios in Table ES-2.

In addition to the quantified cost reductions presented in the table, there are other cost

reductions and benefits that have not been quantified. These include increased innovation due to less

restrictive regulations, increased confidential business information protection associated with the

increased burden of proof for bona fide applications, greater industry control over the use of pollution

prevention practices, and greater industry control ov er their schedule due to the various reductions in

delay time.

The contribution to the quantified savings vary based upon the particular amendment under

consideration. Table ES-3 lists the savings, sp lit into industry and government savings, for theES-6 amendments. Although costs have been quantitative for the non-5(e) SNUR amendment, it should be

noted that the effect of the non-5(e) SNUR amendment is very dependent on industry reaction to some of

the other amendments. Overall, the non-5(e) SNUR amendment is expected to reduce the number of 5(e)

consent orders, reducing the time and resources required to develop regulatory provisions and allow

commencement of commercial manufacture of the chemical substance earlier than would be possible

under current requirements.ES-7 Table ES-2. Summary of Quantified Savings for Preferred Option ($ millions, annual)

1000 Submission Scenario 2000 Submission Scenario 3000 Submission Scenario

Low High Low High Low High

Industry 5.3 8.0 10.6 16.0 15.9 24.0

Government 0.5 0.9 1.0 1.8 1.5 2.7
Total Society 5.8 8.9 11.6 17.8 17.4 26.7

Table ES-3. Summary of Quantified Savings Per Amendment ($ million, annual)

1000 Submission Scenario 2000 Submission Scenario 3000 Submission Scenario

Low High Low High Low High

Polymer Exemption Amendment
Industry 4.7 6.8 9.4 13.5 14.2 20.3

Government 0.2 0.4 0.4 0.8 0.6 1.2

Procedural Amendment
Industry -0.2 -0.2 -0.3 -0.4 -0.5 -0.5

Government 0.1 0.1 0.1 0.2 0.2 0.2

LVE and LoREX Amendment
Industry 0.7 1.3 1.4 2.6 2.0 3.9

Government 0.2 0.2 0.3 0.4 0.5 0.6
Non 5(e) SNUR
Industry 0.1 0.1 0.1 0.2 0.2 0.3

Government 0.2 0.2 0.3 0.4 0.5 0.6I-1 I. INTRODUCTION

This document presents the regulatory impact analysis (RIA) for four

amendments to new chemical reporting requirements under the Premanufacture

Notification (PMN) program. The purpose of this analysis is to provide

objective information on the costs and benefits of the various amendments to

the reporting requirements currently in place under Section 5 of the Toxic

Substances Control Act (TSCA). This cost/benefit information is needed for

RIAs as stipulated under Executive Order (EO) 12866. This introduction

provides a brief history of the implementation of TSCA Section 5 and the PMN

program, summarizes the requirements of Executive Order 12866, and briefly

overviews the remainder of the analysis.

A. Background and Scope

Section 5(a) of TSCA requires that manufacturers and importers of new

chemicals submit information to EPA at least 90 days before such manufacture

or importation begins. Section 5(d)(1) of the Act specifies that this

submission shall include the following information, to the extent that it is

reasonably ascertainable:

! trade name, chemical identity, and molecular structure;

! proposed categories of use;

! estimates of the amount to be manufactured or imported for each proposed category of use;

! a description of the byproducts resulting from manufacture, processing, use, or disposal;

! estimates of the number of workers exposed and the duration of their exposure; and

! a description of the proposed method of disposal.I-2 In addition, the submission must contain any test data that concerns the

environmental and health effects of the new chemical, and which is in the

submitter's possession or control, as well as descriptions of any other data

concerning such effects that are known to, or reasonably ascertainable by, the

notice submitter.

Section 5(h) provides for exemptions from the information requirements

for certain new chemicals. Four primary types of exemptions are addressed in

the statute:

! test marketing exemptions;

! exemptions from the requirement to submit health and safety data;

! exemptions for research and development chemicals; and

! exemptions by rule (upon application) for chemicals that will not pose an unreasonable risk of injury to human health or the environment.

Regulations to implement Section 5 reporting requirements for new

chemical substances were first proposed on January 10, 1979 (44 FR 2242), and

were reproposed on October 16, 1979 (44 FR 59764). The final rule appeared on

May 13, 1983 (48 FR 21722) and included a final PMN form. The submission form

was revised in 1984 and again in early 1991. The 1991 form included

certification statements in accordance with certain final PMN rules

promulgated since the form was updated in 1984. It also reformatted some of

the existing questions, and added some optional sections to include space for

data on pollution prevention practices and check boxes to allow the submitter

to indicate a willingness to make certain information on the form binding.

Also in 1984, EPA published a TSCA Section 5(h)(4) rule granting

exemption from Section 5 for persons who manufacture or import certain

polymers. This rule was developed in response to petitions by the ChemicalI-3 Manufacturers Association (CMA), the Synthetic Organic Chemical Manufacturers

Association (SOCMA), and other industry groups. The final exemption rule was

published in the Federal Register of November 21, 1984 (49 FR 46066). To be

manufactured under this exemption the polymer must meet one of two criteria:

! the polymer has a number-average molecular weight greater than 1,000 MW; or

! the polymer is a polyester and is manufactured solely from one or more reactants listed in Table in 40 CFR 723.250 (e)(2).

In addition, certain classes of polymers cannot be manufactured under this

exemption. These polymers include:

! cationic polymers as defined under 40 CFR 723.250 (b)(5);

! polymers containing less than 32 percent carbon;

! polymers that do not meet the elemental limitations described in 40 CFR 723.250 (d)(3);

! biopolymers and their synthetic equivalents as defined under 40 CFR 723.50 (b)(3);

! polymers manufactured from reactants containing halogen atoms or cyano

groups;

! polymers containing reactive functional groups except under certain conditions described in 40 CFR 723.50 (d)(6); and

! polymers that degrade, decompose, or depolymerize.

Submitters applying for this exemption must submit an application 21

days prior to manufacture or import of an eligible polymer, must file a notice

of commencement (NOC), and are bound to maximum residual levels of reactants

and maximum content of low molecular weight species identified in the

exemption's application. Any increase in residual levels that exceed what was

originally reported requires submission of a PMN or another exemption

application.I-4 In 1985, EPA published a TSCA Section 5(h)(4) rule granting exemption

from Section 5 reporting requirements for persons who manufacture or import

chemical substances produced in quantities less than or equal to 1,000

kilograms per year. This rule was developed in response to petitions by CMA

and other industry groups. The final exemption rule was published in the

Federal Register on April 26, 1985 (50 FR 16477). This exemption requires

notification to EPA 21 days prior to manufacture. Only one holder per

chemical substance is allowed and the use, site of manufacture, exposure, and

release controls described in the submission are binding.

On April 4, 1982, in response to a petition from CMA and other industry

groups requesting exemptions from TSCA Section 5 reporting requirements, EPA

proposed regulations exempting site-limited intermediates (SLIs). After

receiving public comments, the Agency decided not to pursue an exemption for

SLIs at that time because it was found that it was not possible to reduce the

procedural safeguards in the rule, which industry commentors stated were

overly burdensome, and still make the required 5(h)(4) finding of no

unreasonable risk. Thus, SLIs were still subject to the full PMN reporting

process.

The Agency is currently implementing amendments that change the

eligibility and submission requirements for several exemptions from full

Section 5 PMN reporting, develop a new class of exemption (i.e., low release

and exposure chemicals including some SLIs), amend certain procedural

requirements for the submission of Section 5 notices, and amend certain

provisions of the current expedited rulemaking procedures to allow the Agency

to write Significant New Use Rules (SNURs) without requiring a Section 5(e)

Order.I-5 C. Executive Order 12866

Executive Order 12866, issued September 30, 1993, requires regulatory

impact analyses (RIAs) of major regulations and redefines the oversight role

of the Office of Management and Budget. Major regulations are defined as any

regulation that is likely to lead to a rule resulting in any of the following:

! an annual effect on the economy of $100 million or more, or adversely affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities;

! a serious inconsistency or otherwise interfering with an action taken or planned by another agency;

! materially altering the budgetary impact of entitlements, grants, user fees, or loan programs;

! raising novel legal or policy issues.

Although the direct costs of compliance with Section 5 are not likely to

trigger the $100 million annual effect criterion, substantial controversy

exists regarding the effects of Section 5 on indirect costs, including

innovation in the chemical industry.

Because the amendments are intended to reduce EPA and industry overall

costs, innovation impacts also may be reduced. EPA has chosen to prepare this

regulatory impact analysis of the TSCA Section 5 amendments to compare the

costs and benefits of the amendments with existing costs and benefits and

therefore, to provide some indication of the cost savings.I-6 E. Structure of this Analysis

In addition to the introduction, there are nine chapters included in the

RIA. The remaining chapters of this report are as follows:

! Chapter II provides a discussion of the methodology used in this analysis;

! Chapter III presents a description of the baseline against which costs of the amendments are compared;

! Chapter IV presents a description of the polymer exemption amendment, the resulting estimated changes in cost, and the benefits of the amendment;

! Chapter V presents a description of the procedural amendments, estimated effects on societal costs, and benefits of the amendment;

! Chapter VI presents a description of the low volume exemption and low release/low exposure exemption (LoREX) amendment as well as the estimates of the changes in societal costs and benefits resulting from both exemptions;

! Chapter VII discusses the non-5(e) significant new use rule amendment and its effects on societal costs and benefits;

! Chapter VIII presents an analysis of the costs of various alternative regulatory options that have been considered;

! Chapter IX discusses the impact of the amendments on small businesses;
and

! Chapter X discusses the impact of the amendments on innovation.

Two appendices provide the derivation of the labor rates and the basis for the

industry time requirements used in this analysis.II-1 II. METHODOLOGY

The methodology used to develop estimates of the costs and benefits of the amendments is

briefly described in this chapter. Of concern are both industry and government costs, which, when

aggregated, provide an estimate of overall societal co sts. Benefits are produced mostly by reductions in

costs resulting from changes to the current Section 5 regulations.

The following discussion describes what was incl uded in the analysis, how estimates were made,

and the limitations of those estimates.

A. Direct Costs of Compliance

The PMN Program imposes direct costs on submitters and EPA that are incurred in filing a PMN

submission. Direct costs are defined as the initial effects of the program; these costs are in contrast to

indirect costs, which are the secondary effects of these initial costs in the economic system. For

submitters, the sources of direct costs affected by the amendments include:

! submission costs --the direct out-of-pocket costs of compiling and submitting information under Section 5.

! delay costs --the reduction in the present value of the profit stream for the new chemical because of delayed introduction into commerce.

! cost of negotiating restrictive actions -- after the submitter has filed a Section 5 notice, it is

possible that the submitter will need to take additional actions based on EPA's review.

This analysis discusses only the costs of negotiating those actions and not the actions

themselves, which could be affected if the submission is made through the low volume

exemption or the LoREX exemption.

Additional costs attributable to compliance with TS CA Section 5, such as costs associated with

submission of confidential business information (CBI), are not discussed in this analysis because those

costs are unaffected by the amendments.

In analyses conducted previously in support of EPA's Section 5 rulemaking (ICF 1983), it was

observed that there was a great deal of uncertainty (i.e., the variance was high) regarding each of these

direct costs incurred by submitters. The PMN program has now been in effect for more than 14 years and

much of the uncertainty has been removed with regard to the costs of submission and review. Years of

historical PMN submissions have provided an objective set of data for estimating Section 5 submissionII-2 and review costs, but a great deal of uncertainty still exists concerning the magnitude of other types of

costs. This analysis only provi des quantitative analysis of submissions and review-related costs, and does

not quantify other types of costs, but discusses those costs qualitatively.

The cost estimates in this analysis focus on the incremental direct costs associated with the

amendments to the PMN program. These include both the costs that directly contribute to the PMN

impact (submission of information, delay, and restrict ive actions) and the costs to EPA of evaluating the

information submitted. * The cost estimates do not include indirect economic effects that result from

submitters incurring these direct costs. One of the major indirect economic benefits is the potential effect

on the level of innovation, which is addressed in Chapter X. Other indirect economic effects, such as price

effects, are not analyzed because of time and resource constraints.

Also not included in the estimates of direct costs are the costs of actions induced by Section 5

rules (as opposed to actions required by Section 5 ru les). The major induced action is additional testing

performed by submitters. Some submitters perform unr equired testing prior to their Section 5 submission

and include the results with their submission. This activity is not expected to be affected by the

amendments.

B. Quantification of Direct Societal Costs and Benefits

To quantify the changes in direct societal costs resulting from the amendments, estimates of the

industry compliance cost per submission and the EPA review costs per submission were developed.

These costs and benefits are then presented on a per 1,000 submission basis. Due to past fluctuations in

the number of submissions per year, estimates of the future yearly rate of submissions were not made.

1. Submission Numbers

* Throughout this analysis "PMN impact" refers to all factors (not just measurable costs) that affect a submitter's decision to proceed with commercialization of a new chemical when faced with the Section 5 regulations. For the purposes of this analysis, the present level of TSCA Section 5 costs is used as

the baseline. PMN submissions and exemptions in fiscal year 1989 (FY89) are used to analyze the

effects of the amendments. FY89 data were chosen bec ause 1989 was the first full year of data available

since user fees were instituted. Agency records indicate, however, that submitters of full PMN and

polymer exemption submissions rushed submissions to av oid the user fee. This action, in effect, createdII-3 a large volume for FY88 and a low volume for FY89. In general, however, it is felt that the distribution of

Section 5 submissions experienced in FY89 is representative.

Because recent PMN experience has been punctuated by variation in the level of submission due

to special circumstances, it was decided to avoid predi cting future submission volumes and to present final

conclusions on a per 1,000 submission basis. Scenarios using the distribution of submissions are

presented for 1,000, 2,000, and 3,000 submissions per year. In addition, to check the validity of the

distribution assumption, a sensitivity analysis was completed to incorporate FY90 and FY91 data.

2. Submission Costs

Industry submission costs in this analysis are based on estimates for the labor

requirements associated with each type of subm ission under both the baseline and amended exemption

cases. The following fully loaded labor rates were used to convert these labor requirements to 1993

dollars:

! Clerical -- $35.13 per hour;

! Technical -- $76.91 per hour; and

! Managerial -- $112.26 per hour.

The derivation of these labor rates is presented in Appendix A. Industry unit labor requirements for

preparing the information included in the full PMN form, various amended forms, and other items

submitted to the Agency were developed based on info rmation provided by the Chemical Manufacturers

Association (CMA). The derivation of the unit labor r equirements, in hours by job category, is presented in

Appendix B.

3. Delay Costs *

a. Components of Delay

Delay costs represent the present value of profits delayed as a result of the PMN

process. Delay costs are specified in profits rather than sales because, while the PMN process imposes

* This concept was used to support the original rulemaking. A more detailed discussion can be found in the "Regulatory Impact Analysis for New Chemical Reporting Alternatives Under Section 5 of TSCA," May 10, 1983 (ICF 1983).II-4 delays in revenue streams, it also imposes delays in cost streams. Therefore, the loss attributable to

delay should consider revenues net of costs.

Primary delay costs here are defined as the net present value of the profit stream before and after

delay, not profits foregone. This is an important distinction. Although PMN delay may contribute to new

chemicals losing sales to existing products, resulting in profits foregone, such losses are secondary effects

of the PMN process. The primary effect of the process is, in some instances, to delay for 90 days the

introduction of a new chemical, and thus reduce the value of a certain amount of profit. Since the value of

profit is greater today than three months from now, the decreased present value of the profit stream

represents the primary delay costs of the PMN process.

Additionally, it is easily conceivable that ther e may be seasonal or single-batch chemicals for

which demand is immediate and where the 90-day del ay alone prohibited the chemical from being

marketed. However, these are secondary effects that result from delay (and generally insignificant costs

in the scheme of the total production of the chemical i ndustry), not the primary effect of delay that is being

quantified in this RIA.

Thus, the definition of primary delay costs as a r eduction in the present value of the profit stream

is operative here. Delay costs can be broken into two components: pre-submission delay and postsubmission delay.

Pre-submission delay includes the amount of time it takes a firm to compile and submit a Section 5 notice.

Based on previous analyses, a maximum estimate fo r the pre-submission delay would be one month (ICF

1983). Such delay would not include any time for the completion of testing. Because Section 5 does not

require submitters to perform health and safety testing, any delay resulting from testing prior to submission

would not be attributable to the PMN process. If submitters develop additional health and safety data

before submitting a Section 5 notice (for whatever r eason), they do so voluntarily. Therefore, costs

attributable to delay due to voluntary testing should not be considered direct costs of the New Chemicals

Program. Post-submission delay corresponds to time lost during the PMN review period -- a maximum of

180 days (assuming 5(c) extension). Most submitters voluntarily suspend for 180 days to allow

development and review of the 5(e) Order.For both components, the delay period is defined as the time that the review period adds to the

critical path for bringing a new chemical to marke t. If the PMN review can be conducted in parallel with

other activities along the critical path (in-house devel opment, customer evaluation, etc.), delay could be

reduced to zero. If no part of the preparation of the PMN or EPA review of the PMN can be conducted in

parallel with other critical path activities, the cost of delay will approach the present value of delaying the

profit stream by 120 days (the sum of the pre-and post-submission periods for a full PMN) if no 5(c)

extension is filed. Although 5(c) actions can extend the delay on individual projects, this analysis assumes

a full 120-day delay resulting from a PMN submission. This assumption is a simplification given that

industry is now familiar with the requirements of the New Chemicals Program and in most cases has

integrated the requirements of submission and review into ongoing practice.

b. Valuation of Delay

As specified in the previous section, direct costs of PMN delays are defined as a

reduction in the present value of the profit streams associated with new chemicals. Algebraically, such a

reduction would be computed as follows: 

### PV(p)] ) r+(1 1 -[1=PD
t 

### •

where PD = present value of profits delayed t = amount of time attributable to PMN delay r = average real rate of return (specified in the same time units as t) for new chemicals PV(p) = present value (discounted at r) of profit stream associated with the average new

chemical

This formula represents the difference between the present value of the profit stream associated with a

new chemical and the present value of the same profit stream lagged "t" time periods.

For this analysis, values for t will depend on the submission being considered (120 days in the

case of a full PMN). However, values for r and PV(p) must be pre-specified. In previous analyses of PMN

delay costs, low and high annual real rates of return for new chemicals were estimated at 5 and 10

percent respectively (ICF 1983). These analyses also provided estimates for the present value of the

II-5II-6 profit stream of typical new chemicals. In 1993 dollars these estimates are $690,262 assuming the 5

percent rate of return and $585,110 assuming the 10 percent rate of return (ICF 1983, BEA 1994).

4. Review Costs

Agency review cost estimates are based on labor estimates in the New Chemicals

Program Operating Plan for 1993. The labor requirements are converted to dollars using $88,206 to

$114,662 for the average cost of a fully loaded full time equivalent (FTE) in the New Chemicals Program.

The derivation of this estimate is provided in Appendix A.

C. Effects on New Chemical Introduction

The general approach used in Chapter X to estimate the effects of the Section 5 program on new

chemical introduction is to discuss the overall effects of the New Chemicals Program on new chemical

development and the ways in which the amendments would change those effects.

D. Health Implications of Regulatory Alternatives

A discussion of the health implications for each of the amendments can be found in the individual

chapters discussing those amendments. In general , the Agency used information gathered during the

past fourteen years of the New Chemical Program's operation to determine the characteristics of a

chemical, its production, or its use which identify no or limited human health risks. This information was

used to design the amendments.

The first step in the qualitative comparison of the amendments to the current requirements was

the identification of the effects that the amendments would have on the introduction of different classes of

chemicals. The second step was the determination of the relative health effects associated with these

chemicals compared to the average new chemical.

The major limitations in this analysis arise from the necessity of predicting what the actions of EPA

and PMN submitters would be in the hypothetical situation in which alternative requirements for

submission and review are imposed. Furthermore, t he expected health effects information is based only

on EPA experience in reviewing years of PMN and exemption submissions.III-1 III. CURRENT TSCA SECTION 5 PROGRAM: BASE CASE DESCRIPTION

For the purposes of this analysis, the current level of requirements under TSCA Section 5 will be used as "the baseline" and will refer to the distribution of PMN submissions and exemptions in fiscal year 1989 (FY89) as the base year. This distribution is used to determine the baseline number of submissions in scenarios having 1000, 2000 and 3000 total submissions as described in the methodology section. The remainder of this chapter is organized as follows:

! Section A briefly describes the current requirements associated with the New Chemicals Program;

! Section B describes the submission counts that will be used as a baseline for this analysis;

! Section C provides estimates of the current Industry unit costs for each type of submission;

! Section D provides estimates of the baseli ne unit costs for Agency review of each type of submission; and

! Section E presents the total quantified baseline costs used in this analysis and discusses

some of the other unquantified costs associated with the new chemicals program.

A. Current New Chemicals Program

This section provides a brief overview of the current requirements for new chemicals under

Section 5 of TSCA. In recent years an average of nearly 2,300 new chemical substances each year were

reviewed within the New Chemicals Program of the Office of Pollution Prevention and Toxics (OPPT).

Figure III-1 presents the historical number of s ubmissions that have been reviewed each year.

Section 5 of the Toxic Substances Control Act (TSCA; Public Law 94-469) requires manufacturers

of new chemicals to provide the Environmental Protec tion Agency (EPA) with written notice of their intent

to produce such substances at least 90 days pr ior to the date when manufacturing begins. AnyIII-2 Figure III-1III-3 chemical not listed on the TSCA inventor y of existing chemicals (the "Inventory") * is considered "new" for

PMN purposes. Currently there are three exemptions to this reporting requirement: the polymer

exemption, the low volume exemption, and the test market exemption. In addition, procedures to obtain

information from the Agency ( bona fide submissions) and procedures to notify the Agency that

manufacturing of a submitted chemical has commenced (Notice of Commencement, or NOC) have been

established. The various aspects of the current New Chemicals program are discussed in the following

sections. 1. PMN Submission

New chemicals that are not eligible for one of the current exemptions must comply with

the full PMN submission requirements. The submission form requests the following information: the

chemical's common and/or trade names, identity and mole cular structure, estimated production quantities,

uses, disposal methods, workplace exposure and re lease information, and a listing of impurities and

byproducts. Any data concerning the effect of the chemical on human health or the environment, which is

in the manufacturer's possession or control, or is known or reasonably ascertainable by the manufacturer

must also be submitted. Once EPA receives the PMN, it must publish a notice of receipt in the Federal

Register and conduct its evaluation of the chemical based on the data provided and other available

information. The submitter may produce the chemical at the completion of a 90-day review period unless

that review is extended or the right to manufacture or import the chemical is denied. Reviews may be

extended for an additional 90 days for good cause.

Premanufacture notification also applies to significant new uses of existing chemicals. Should

EPA find, by rule, that a new use of an existing c hemical presents significant new exposure to humans

and/or the environment, the manufacturer or processor must report through the PMN process. The 90-day

review period also applies to this case.

* The Chemical Substance Inventory is a list of a ll chemicals that were manufactured, imported or processed for a commercial purpose since January 1, 1975. The Inventory is maintained under statutory authority of Section 8(b) of TSCA. 2. Polymers

Current regulations under TSCA include two spec ial provisions relating to submissions for

polymers: an exemption provision and the "two percent rule."

a. Polymer ExemptionIII-4 In 1984, EPA published a TSCA Section 5(h)(4) rule granting exemption from

some of the Section 5 requirements for persons who manufacture or import certain polymers. This rule

was developed in response to petitions by CMA, Synt hetic Organic Chemicals Manufacturers' Association

(SOCMA), and other industry groups. The fi nal exemption rule was published in the Federal Register of

November 21, 1984 (49 FR 46066). To be manufactured under this exemption the polymer must meet

one of two criteria:

! the polymer has a number-average molecular weight greater than 1000; or

! the polymer is a polyester and is manufactured solely from one or more reactants listed in

Table in 40 CFR 723.250 (e)(2).

In addition, certain classes of polymers cannot be m anufactured under this exemption. These polymers

include:

! cationic polymers as defined under 40 CFR 723.250 (b)(5);

! polymers containing less than 32 percent carbon;

! polymers that do not meet the elemental limitations described in 40 CFR 723.250 (d)(3);

! biopolymers and their synthetic equivalents as defined under 40 CFR 723.50 (b)(3);

! polymers manufactured from reactants containing halogen atoms or cyano groups;

! polymers containing reactive functional groups except under certain conditions described in 723.50 (d)(6); and

! polymers that degrade, decompose, or depolymerize.

Submitters taking this exemption must submit 21 days prior to manufacture or import of an eligible

polymer. They are required to keep certain records that verify their eligibility for and compliance with the

exemption. In addition, submitters must file a Notice of Commencement (NOC) within 30 days of

beginning manufacturing or import.

In the 1984 exemption, the Agency discussed its concern for potential health risks such as

developmental fibrosis of the lung or other pulmonary effects that may result upon inhalation of polymers

in particulate form. At that time, the Agency believed that such exposure to polymer particulates was

generally limited and expected to be of low concern. In early 1992, based on additional experience with

high molecular weight polymers, EPA decided that it would be inappropriate to make a "no unreasonableIII-5 risk" finding for water-absorbing polymers with molecu lar weights greater than 10,000. In addition, the

Agency also proposed restrictions to mitigate potent ial exposure to respirable particulates of water

insoluble polymers with molecular weights of 10, 000 daltons or greater. The Agency does not have

sufficient data to determine the precise molecular we ight and/or structural considerations that may

facilitate the mechanisms causing toxicity and at t hat time believed that risks from water insoluble

polymers with molecular weights as low as 10,000 at respirable concentrations as low as 0.5 mg/m 3 could

not be ruled out. The Agency also proposed an alternat ive of placing no restrictions on higher molecular

weight water insoluble particles and requested public comment.

b. Two Percent Rule

Identification of new polymers currently is based on the amounts of monomers

and other reactants used in the reaction, "as charged" to the reaction vessel, and on the dry weight of the

polymer. This approach was adopted because EPA and industry believed, at the time this approach was

developed in 1977, that it would be difficult to i dentify the exact amount of monomers or reactants

incorporated in the final polymers. All constituents of a polymer must be listed on a notification, but a

submitter may elect which constituents present at two percent or less will be incorporated into the

Inventory description of the polymer. Under the two percent rule, some minor structural changes to a

polymer are permitted without a new submission. The use of additional monomers or reactants will not

result in a "new" chemical substance if each of the additional monomers or reactants amounts to two

percent or less of the total molecular weight of the polymers. Often, however, the charged amount of an

initiator is greater than two percent. In these cases, a new submission would be required.

3. Low Volume Chemicals

In 1985, EPA published a TSCA Section 5(h)(4) rule granting exemption from Section 5

reporting requirements for persons who manufacture or import chemical substances in quantities less than

1,000 kilograms per year. This rule was developed in response to petitions by CMA and other Industry

groups. The final exemption rule was published in the Federal Register on April 26, 1985 (50 FR 16477).

Chemicals manufactured at volumes of 1,000 kg or less per 12 month period are eligible for the

currently existing low volume exemption. This exemption has a 21-day notice to EPA requirement prior toIII-6 manufacture. Only one holder per chemical substance is allowed and the site of manufacture or import,

use, volume, and all exposure and release controls described in the submission are binding on the

submitter.

4. Test Market Chemicals

TSCA Section 5(h)(1) authorizes the Administ rator to exempt a new chemical substance

from the PMN requirements when it is manufactured for test marketing purposes if the proposed test

market activity does not present an unreasonable risk to human health or the environment. This

exemption is not affected by the amendments addressed by this RIA and is not discussed further. Test

Market Exemption submissions are included in the counts provided in the baseline and amended cases for

completeness.

5. Submission Procedures

Procedures have been established to allow producers and importers of new chemical

substances to comply with TSCA.

a. Determining if a Chemical is Subject to TSCA ' 5(a)

Manufacturers and importers are responsible for determining whether a

substance is a new chemical substance under TSCA and, therefore, subject to Section 5(a) notice

requirements. Submitters are able to determine whet her chemicals are new by looking for them on the

TSCA Inventory, a list of commercially produced chemical s. Substances for which the chemical identities

are claimed to be confidential, however, are listed onl y by generic chemical name in the publicly available

Inventory and it maybe impossible, therefore for the general public to determine whether a specific

substance consistent with that generic name is really a new or existing substance under TSCA. As a

special mechanism for enabling a person to know if a given substance matches a confidential chemical

substance identity, EPA has established procedures to inform persons whether substances they intend to

manufacture or import are already included on the Inventory. Under these procedures, a person must

demonstrate a bona fide intent to manufacture or import the substance by submitting information

stipulated under 40 CFR 720.25(b)(2). A letter to EPA containing the specified information constitutes a

Notice of Bona Fide Intent to Manufacture or Import for a Commercial Purpose (a Bona Fide Notice).III-7 If approved for intent, the Chemical Inventory Section of the EPA scans the TSCA database, both

classified and unclassified sections, to determine whether the chemical is already listed on the Inventory

or whether it is a new substance.

If it is determined that the notice is for a new chemical substance, then the manufacturer is

expected to submit an exemption notice or a PMN for that substance. If the substance is found on the

Inventory, then the submitter can either commence pr oduction immediately or, in certain cases, submit a

PMN notice if alternate production pathways or quantities are preferred.

b. Notice of Commencement

If EPA takes no regulatory action on the PMN filing within the review period, the

submitter may commence commercial manufacture or importation after the review period has expired,

without further Agency approval. Within 30 days of co mmencing manufacture or importation, however, the

manufacturer or importer must file a Notice of Commencement (NOC). The NOC certifies that commercial

manufacture and/or importation actually has occurred. After receiving an NOC, EPA will add the

substance to the Inventory.

B. Baseline Submissions

As discussed in Chapter II, total costs in this analysis are based on three scenarios for the total

number of submissions (1,000, 2,000, and 3,000). The baseline distribution of these submissions is based

on the submissions received in FY89. Table III- 1 presents the number of each type of submission

received in that year based on numbers reported in the New Chemicals Program Annual Report and the

number of submissions that are in the OPPT Regul atory Impacts Branch (RIB) PMN database. The table

also presents the baseline submission numbers for the 1,000, 2,000, and 3,000 case scenarios.

In order to test the validity of the projections made using the FY89 data, the distribution presented

in Table III-1 can be compared to the distribution of submissions received in FY90 and FY91. Although

the overall number of submissions in these years va ried significantly compared to FY89, the distribution

between PMN and exemption submission agrees very well with the FY89 data set. For example,

whereas PMNs represented 69 percent of submissi ons in FY89, they accounted for 70 percent and 74

percent of submissions in FY90 and FY91, respectively . Furthermore, because these data indicate that

PMNs may account for slightly higher percent of submi ssions than is assumed in this analysis, it indicatesIII-8 that the baseline costs of the PMN program may be slightly higher and that the amendments could result

in ever greater societal savings.

C. Industry Baseline Unit Costs

Each type of submission introduced above imposes certain burdens on the submitters. This

section estimates the unit costs to industry for each type of submission under the current requirements.

These estimated costs only include direct costs to subm itters. There are additional indirect costs that are

not quantified in this analysis which may be imposed by TSCA Section 5 requirements.

1. PMN Unit Cost

The industry cost for a PMN submission has three main components: submission costs,

delay costs, and user fee costs. Table III-2 shows theIII-9 Table III-1. Baseline Notices Received

Actual Estimated

Submission Type FY89 Submissions (Percentage) 1000 Submissions

(Counts) 2000 Submissions

(Counts) 3000 Submissions

(Counts)

Premanufacture Notices 69.6 696 1,392 2,088
Polymer Exemptions 11.3 113 226 340
Low Volume Exemptions 17.2 172 345 517
Test Market Exemptions 1.8 19 37 55

TOTAL 100 1,000 2,000 3,000

Bona Fide Notices 29.7 297 593 890

Note: The number of Test Market Exemption submissions is provided for completeness. As this exemption is not changed by the amendments, no analysis of costs is provided.

Sources: RIB PMN Database 1991, OTS 1990.III-10 Table III-2. Industry Costs for PMN Submissions

Low Cost Case High Cost Case

(hours) (1993 $) (hours) (1993 $)

SUBMISSION COSTS (wage rate)

A. Clerical ($35.13/hr) 12 422 14 492

B. Technical ($76.91/hr) 67 5,153 80 6,153

C. Managerial ($112.26/hr) 16 1,796 20 2,245

Subtotal 95 $7,371 114 $8,890

DELAY COSTS $11,253 $18,921

USER FEE $2,070 $2,070

TOTAL INDUSTRY PMN UNIT COST $20,694 $29,881

Sources: ICF 1983, CMA 1991 (Appendix B), CAIR 1990 (Appendix A), BLS 1994.III-11 labor hours and costs for these three components, and the unit cost for a PMN submission.

a. Submission Costs

Section 5(d) of TSCA specifies PMN data requirements. The current reporting

form (Rev 1-91) contains sections on general submitter

information; chemical identity; production, im port, and use data; human exposure and environmental

release; industrial sites controlled by the submitter and those controlled by others; results of test data;

environmental fate data; and health and environmental effects data. Additional data elements include:

! certification statements required by user fee rule, low volume exemption, and polymer exemption;

! a request for additional information regarding uses in consumer products;

! a request for a description of protective equipment and engineering controls used to protect workers;

! expanded environmental release and disposal information;

! reformat of information on industrial sites controlled by the submitter;

! an optional page regarding pollution prevention and recycling information;

! optional boxes for submitters to indicate their willingness to be bound for certain types of

information.

Table III-3 presents estimated labor hours for the current PMN reporting form (Rev 1-91). These

estimates are based on data collected by CMA from its members in response to a request from EPA. The

CMA data are summarized in Appendix B. The esti mates include the time spent reading and becoming

familiar with the form, gathering the required info rmation and preparing the report, producing sanitized

responses for items claimed as confidentialIII-12 Table III-3. Estimated Industry Labor Requirements for PMN (Rev. 1-91) Submission (hours)

Clerical Technical Mana g erial

General Instructions 2.0-2.5 1.5-2.0 3.0-4.0

Certification 0.5 a

I. General Information

A. Submitter Information

B. Chemical Identity Info 1.5-2.0 3.0-6.0 1.0

1. Impurities 0.5

2. Synonyms 0.25

3. Trade Identification 0.25

4. Generic Chemical Name 0.5

5. By Products 0.5

C. Production, Import & Use Information 1.5 2.0-3.0

1. Production 1.0

2. Use Information 3.0

3. Hazard Information 3.0-4.0

II. Human Exposure 2.5-3.5 6.0-7.0

A. Ind. Sites Controlled by the Submitter

1. Operation Description

a. Identity 1.0

b. Type of Operation 1.0

c. Amount & Duration 2.0

d. Process Description 10.0-12.0

2. Occupational Exposure 13.0-14.0

3. Environmental Release & Disposal 9.0-10.0

B. Industrial Sites Controlled by Others 2.0 10.0-12.0 2.0-2.5

1. Operation Description

2. Worker Exposure & Environmental Release

III. List of Attachments 2.0 6.0-8.0 1.0-1.5

Physical & Chemical Properties Worksheet 0.5 1.5-2.0 0.5

TOTALS 12.0-14.0 67.0-80.0 16.0-20.0

a The chemical identification for polymer s is expected to take longer than for Class 1 substance and this range reflects the lo w for a class 1 substance and a high for a polymer.

b Certification is expected to require a general managerial/legal re view of the complete submission. Due to the inconsistency in the CMA responses, some of the labor listed under other headings including "Gener al Instructions" may be attributable to this review.

Source: CMA 1991III-13 business information, and maintaining a file of the submission. The estimates do not include the costs of

developing information that is not readily available or performing tests because TSCA does not require

submitters to develop this information.

As described above, the processing time for each of these data elements was calculated for

clerical, technical, and managerial staff. These values were then multiplied by the labor rates and

summed to estimate the baseline costs as presented in T able III-2. As the table indicates, clerical labor

accounted for 12 to 14 hours, technical labor accounted for 67 to 80 hours, and managerial labor

accounted for 16 to 20 hours, resulting in a cost of between $7,371 and $8,890 per form.

b. Delay Costs

Table III-2 also presents estimates for the cost of delay for a PMN. The estimates

are based on an estimated total delay (both pre- and post-submission) of 120 days using the methodology

described in chapter II. As the table indicates, the total delay costs are $11,253 assuming a 5 percent real

rate of return (low cost case) and $18,921 assuming a 10 percent real rate of return (high cost case).

c. User Fees

In addition to the labor and delay costs associated with PMN reporting, there is a

user fee that must be paid by Industry for each subm ission. The user fee is $2,500 per submission unless

the business qualifies as a small business in which case the user fee is $100. Companies with annual

sales less than or equal to $40 million, qualifying them as a small businesses, submitted 18 percent of

PMN submissions in FY89 (RIB PMN database). Usi ng this percentage, the average user fee paid is

estimated to be $2,070.

2. Polymer Exemption Baseline Unit Costs

The industry cost for a polymer exemption submission has four main components:

submission costs, recordkeeping costs, delay costs, and user fee costs. Table III-4 presents the

calculation of the Industry unit cost for a polymer exemption from these components that are estimated to

range between $9,112 and $13,367 per form.

a. Submission Costs

Reporting for the current polymer exem ption submission requires a submitter

identification, information on the chemical identity, production and use data, a certification that certainIII-14 procedures will be followed, and an acknowledgement statement that the polymer meets the terms of the

exemption. As shown in Table III-5, this subset of the PMN reporting requirements leads to labor

requirements for completing and submitting the form ranging from 29.5 to 40 hours.

b. Recordkeeping Costs

In addition to submission costs, polymer exemption holders must keep records for

five years from the date of commencement of manufacture. These records must include the date of

commencement, the volume of production for the first three years, and any information that would be

included in the exemption submission. These records are kept in addition to the normal records kept with

a PMN submission which are included in the estimates for submission costs. Table III-4 presents the

industry burden estimated for this recordkeeping requi rement. The estimate includes 0 to 2 hours of

technical time for system development and 1 to 2 hours of clerical time to maintain the system. These

costs amount to an industry recordkeeping burden of between $35 and $224.III-15 Table III-4. Baseline Industry Unit Costs for Polymer Exemption Submissions

Low Cost Case High Cost Case

(hours) (1993 $) (hours) (1993 $)

SUBMISSION COSTS (wage rate)

A. Clerical ($35.13/hr) 5.0 176 8.0 281

B. Technical ($76.91/hr) 20.5 1,577 26.0 2,000

C. Managerial ($112.26/hr) 4.0 449 6.0 674

Subtotal 29.5 $2,202 40.0 $2,955

RECORDKEEPING COSTS

A. Clerical ($32.80/hr) 1.0 35 2.0 70

B. Technical ($71.80/hr) 0.0 0 2.0 154

Subtotal 1.0 $35 4.0 $224

DELAY COSTS $4,805 $8,118

USER FEES $2,070 $2,070

TOTAL INDUSTRY POLYMER EXEMPTION UNIT COST $9,112 $13,367

Sources: ICF 1983, CMA 1991 (Appendix B), CAIR 1990 (Appendix A), BLS 1994.III-16 Table III-5. Estimated Industry Labor Requi rements for Baseline Polymer Submission (hours)

Clerical Technical Mana g erial

General Instructions 5.0-8.0 1.5-2.0 3.5-5.5

Certification 0.5 a

I. General Information

A. Submitter Information

B. Chemical Identity Info 4.0-6.0

1. Impurities 0.5

2. Synonyms 0.25

3. Trade Identification 0.25

4. Generic Chemical Name 0.5

5. By Products 0.5

C. Use Information

1. Use Information 3.0

2. Hazard Information 3.0-4.0

II. Operation Description 1.0

III. List of Attachments 6.0-8.0

TOTALS 5.0-8.0 20.5-26.0 4.0-6.0

a Certification is expected to require a general managerial/legal re view of the complete submission. Due to the inconsistency in the CMA responses, some of the labor listed under other headings including "Gener al Instructions" may be attributable to this review.

Source: CMA 1991, EPA-IMD 1992.III-17 c. Delay Costs

Table III-4 also presents estimates for the cost of delay for a polymer exemption

submission. The estimates are derived using the methodology described in Chapter II to convert an

estimated total delay of 51 days (30 days of pre-s ubmission delay plus 21 days of post-submission delay)

into a cost. As the table indicates, the total del ay costs for a polymer exemption submission are $4,805

assuming a 5 percent real rate of return (low cost case) and $8,118 assuming a 10 percent real rate of

return (high cost case).

d. User Fees

In addition to the labor and delay costs associated with polymer exemption

reporting, there is a user fee that must be paid by Industry for each submission. The user fee is $2,500

per submission unless the business qualifies as a small business, in which case the user fee is $100. This

analysis assumes that small and large companies submit the same proportions of polymer exemption

submissions as PMN submissions leading to an estimated average user fee of $2,070.

3. Low Volume Exemption

Industry costs associated with low volume exemptions (LVEs) that are quantified in this

analysis are composed of submission costs and delay costs. Table III-6 shows the hours and costs for

these components, and the derivation of the LVE unit cost. There is currently no user fee for this

exemption. As the table indicates, the total bas eline Industry unit cost for an LVE is between $6,930 and

$10,919.

a. Submission Costs

The information required in a low volume exemption submission includes general

submitter information; chemical identification;III-18 Table III-6. Baseline Industry Unit Costs for LVE Submissions

Low Cost Case High Cost Case
(hours) (1993 $) (hours) (1993 $)
SUBMISSION COSTS (wage rate)
A. Clerical ($35.13/hr) 5.0 176 8.0 281
B. Technical ($76.91/hr) 19.5 1,500 24.0 1,846 C. Managerial ($112.26/hr) 4.0 449 6.0 674

Subtotal 17 $2,125 24 $2,801

DELAY COSTS $4,805 $8,118

TOTAL INDUSTRY LVE UNIT COST $6,930 $10,919

Sources: ICF 1983, CMA 1991 (Appendix B), CAIR 1990 (Appendix A), BLS 1994.III-19 use; site of manufacture or import; a certification that the submitter will only manufacture the substance

under the terms of the exemption; and test data in the submitter's possession or control. Submitters also

must notify all processors and industrial users to whom it directly distributes the chemical substance that

there are use restrictions and exposure controls spec ified in the exemption application. The estimated

labor requirements for these activities are presented in Table III-7.

Based on the subset of labor requirements from the full PMN form that these data requests

represent, the labor estimates necessary for the current requirements of a LVE submission are 5 to 8

hours of clerical labor, 19.5 to 24 hours of technical labor, and 4 to 6 hours of managerial labor.

b. Delay Costs

Table III-6 also presents estimates for the cost of delay for a LVE submission.

The estimates are derived using the methodology descr ibed in Chapter II to convert an estimated total

delay of 51 days (30 days of pre-submission delay plus 21 days of post-submission delay) into a cost. As

the table indicates, the total delay costs for a LVE submission are $4,805 assuming a 5 percent real rate

of return (low cost case) and $8,118 assuming a 10 percent real rate of return (high cost case).

4. Bona Fide

Bona fide submissions require: specific chemical identification, a signed statement of

intent, a description of research and development acti vities for the chemical and its uses, an elemental

analysis, and either an x-ray diffraction pattern for i norganic substances or a mass spectrum or infrared

spectrum for organic compounds. Table III-8 presents the estimated labor requirements for these

activities. The baseline Industry unit cost per bona fide submission ranges from $833 to $1,057, as

presented in Table III-9.III-20 Table III-7. Estimated Industry Labor R equirements for Baseline LVE Submission (hours)

Clerical Technical Mana g erial

General Instructions 5.0-8.0 1.5-2.0 3.5-5.5

Certification 0.5 a

I. General Information

A. Submitter Information

B. Chemical Identity Info 3.0-4.0

1. Impurities 0.5

2. Synonyms 0.25

3. Trade Identification 0.25

4. Generic Chemical Name 0.5

5. By Products 0.5

C. Use Information

1. Use Information 3.0

2. Hazard Information 3.0-4.0

II. Operation Description 1.0

III. List of Attachments 6.0-8.0

TOTALS 5.0-8.0 19.5-24.0 4.0-6.0

a The chemical identification for polymer s is expected to take longer than for Class 1 substance and this range reflects the lo w for a class 1 substance and a high for a polymer.

b Certification is expected to require a general managerial/legal re view of the complete submission. Due to the inconsistency in the CMA responses, some of the labor listed under other headings including "Gener al Instructions" may be attributable to this review.

Source: CMA 1991, EPA-IMD 1992.Table III-8. Estimated Industry Labor Requirements for Baseline Bona Fide Submission

Technical Managerial

A. Submitter ID negligible negligible

B. Chemical ID 2 hours

C. Description of R&D 2 hours 1 hour

D. Elemental Analysis 2-3 hours

E. X-ray/infrared/or other 1 hour spectra data.

F. Signed Certification __________ 1-2 hours

TOTAL 7-8 hours 2-3 hours

Note: 2-3 hours of clerical time for all parts estimated based on proportion of total PMN requirements

a Certification managerial requirements included time for general review of submission.

Sources: CMA 1991, EPA-IMD 1992.

III-21III-22 Table III-9. Baseline Industry Unit Costs for Bona Fide Notices

Low Cost Case High Cost Case

(hours) (1993 $) (hours) (1993 $)

SUBMISSION COSTS (wage rate)

A. Clerical ($35.13/hr) 2 70 3 105

B. Technical ($76.91/h) 7 538 8 615

C. Managerial ($112.26/hr) 2 225 3 337

TOTALS 11 $833 14 $1,057

Sources: CMA 1991 (Appendix B), CAIR 1990 (Appendix A), EPA-IMD 1992, BLS 1994.III-23 D. Baseline Government Review Unit Costs

In addition to Industry costs, the other source of social costs attributable to the New Chemicals

Program is the cost to EPA of reviewing the submissions. The cost of review varies with the type of

submission. This section presents the Agency unit costs of review associated with each submission type

described above. Agency unit costs are generated using estimates of how much time each stage in the

Agency PMN review process requires. The esti mates used in this analysis are based on the 1993

operating plan. The plan specifies the number of full time equivalents (FTEs) and the number of

extramural contractor dollars that are required for each stage of the review process as well as the

expected number of cases to be handled in each stage. Note that for submissions requiring a user fee

(PMNs and polymer exemptions), the Government's net cost is reduced. These fees represent transfer

payments from Industry to Government, but are not included in Agency unit costs.

1. PMN Review

Agency costs associated with PMN review include the following: notice receipt, prenotice

consultations, CRSS meeting review, SAT, Engineering/ Exposure, Exposure/Fate, Focus meeting review,

Standard Review Functions, Case review by Division Directors, 5(e) Order Development/

Negotiation/Review, Post Order Data Review, Order Modifications, Freedom of Information Act Requests,

CBI Substantiation, New Chemical SNUR Development, and Notices of Commencement.

Table III-10 presents the unit hour requirements, unit extramural fund requirements, and the

associated range in costs for each stage of the review process. Labor costs are generated by multiplying

the hour requirements of each task by the range of t he Agency labor rate calculated in Appendix A.III-24 Table III-10. Baseline Agency Unit Costs for PMN Review

Review Step Time Required (FTEs a ) Extramural Funds (1993 dollars) Percent of Cases Requiring Review Step Low Agency Cost (1993 dollars) High Agency Cost (1993 dollars)

Prenotice Consultations 0.0024 4 41 88 114

Administrative Prescreen / Notice Receipt / User Fee 0.0024 92 100 304 367

CRSS 0.0025 268 100 489 555

SAT 0.0006 14 100 66 82

Engineering/Exposure 0.0015 56 100 188 228

Exposure/Fate 0.0008 0 100 71 92

Focus 0.0009 23 100 102 126

Standard Review Functions 0.0219 511 29 708 876

Division Directors Meeting 0.0129 113 15 188 239

Order Development /Negotiation Review 0.0171 22 5 77 99

Post Order Data Review 0.0886 0 5 391 508

Order Modifications 0.2167 0 5 956 1,242

New Chemical SNUR Development 0.0277 85 7 177 228

Notices of Commencement 0.0012 40 56 82 99

Freedom of Information Act Requests 0.0333 287 1 32 41

CBI Substantiation 0.0004 3 56 21 27

TOTAL $3,940 $4,923

Note: Hour requirements do not necessarily reflect the time a particular activity will take for any given submission. Instead they represent the average time devoted to an activity for all PMNs.

a The cost per FTE is estimated to be between $88,206 and $114,662.

Sources: OPPT 1993 Operating Plan and Appendix A.III-25 Where necessary, the costs for categories have been prorated by the percentage of total submissions to

which that cost is attributable. As Table III-10 presents, the total baseline average PMN review cost

ranges from $3,940 to $4,923.

2. Polymer Exemption Review Costs

Polymer exemptions are among the first submissions to be dropped from the new

chemical review process. Only costs associated with notice receipt, prenotice consultations, CRSS

meeting review, and other costs such as Freedom of Information Act Requests, CBI Substantiation, and

Notices of Commencement are attributable to polymer exemption submissions. Table III

B 11 presents the

unit hour requirements and the associated range in labor costs for each category. Where necessary, the

costs for categories have been prorated by the percentage of total submissions to which that cost is

attributable. As Table III-11 presents, the total r ange in polymer exemption review costs ranges from

$1,016 to $1,203.

3. Low Volume Exemption Baseline Unit Costs

Low Volume exemptions are granted or denied at the Focus meeting review. Thus, only

costs associated with notice receipt, prenotice consultations, CRSS meeting review, and other costs such

as Freedom of Information Act Requests are attributabl e to low volume exemption submissions. Table III12 presents the unit hour requirements and the associated range in labor costs for each category. Where

necessary the costs for categories have been prorated by the percentage of total submissions to which

that cost is attributable. As Table III-12 presents, the total range in low volume exemption review costs

ranges from $1,081 to $1,285.III-26 Table III-11. Baseline Agency Unit Co sts for Polymer Exemption Review

Review Step Time Required (FTEs a ) Extramural Funds (1993 dollars) Percent of Cases Requiring Review Step Low Agency Cost (1993 dollars) High Agency Cost (1993 dollars)

Prenotice Consultations 0.0024 4 41 88 114

Administrative Prescreen / Notice Receipt / User Fee 0.0024 92 100 304 367

CRSS 0.0025 268 100 489 555

Notices of Commencement 0.0012 40 56 82 99

Freedom of Information Act Requests 0.0333 287 1 32 41

CBI Substantiation 0.0004 3 56 21 27

TOTAL $1,016 $1,203

Note: Hour requirements do not necessarily reflect the time a particular activity will take for any given submission. Instead they represent the average time devoted to an activity for all PMNs.

a The cost per FTE is estimated to be between $88,206 and $114,662.

Sources: OPPT 1993 Operating Plan and Appendix A.III-27 Table III-12. Baseline Agency Unit Cost s for Low Volume Exemption Review

Review Step Time Required (FTEs a ) Extramural Funds (1993 dollars) Percent of Cases Requiring Review Step Low Agency Cost (1993 dollars) High Agency Cost (1993 dollars)

Prenotice Consultations 0.0024 4 41 88 114

Administrative Prescreen / Notice Receipt / User Fee 0.0024 92 100 304 367

CRSS 0.0025 268 100 489 555

SAT 0.0006 14 100 66 82

Focus 0.0009 23 100 102 126

Freedom of Information Act Requests 0.0333 287 1 32 41

TOTAL $1,081 $1,285

Note: Hour requirements do not necessarily reflect the time a particular activity will take for any given submission. Instead they represent the average time devoted to an activity for all PMNs.

a The cost per FTE is estimated to be between $88,206 and $114,662.

Sources: OPPT 1993 Operating Plan and Appendix A.III-28 4. Bona Fide

The Agency cost of handling bona fides was obtained from the 1993 Operating Plan.

Each bona fide is estimated to require 0.0013 FTEs of A gency time and approximately $81 in extramural

funds. Using the previously presented range in cost for an FTE of $88,206 to $114,662, the total Agency

cost per bona fide is estimated to be between $196 and $230.

E. Total Baseline Costs

This section presents the total baseline costs used in this analysis. The total quantified baseline

costs are presented in Table III-13. The numbers in the table are calculated by multiplying the unit costs

developed in the previous sections C and D with the baseline submission counts presented in section B.

In addition to the costs captured by the estimates in Table III-13, there are other costs to

submitters of preparing the PMN form and exemptions that may be affected by the amendments.

Although these costs may be significant for individual submitters, it has not been possible to quantify these

costs in such a way as to include them in the anal ysis. These unquantified costs are identified below and

are discussed in the remainder of this section:

! Secondary delay costs; and

! Industry costs of negotiating ' 5(e) consent orders.

1. Secondary Delay Costs

As discussed in chapter II the quantified costs of delay estimated in this analysis only

account for the primary delay costs. Secondary delay costs may be incurred in the case that a 120 day

delay alone may prohibit the chemical from being mark eted. This would result when the nature of the

chemical is seasonal, or when a single batch of chemicals has immediateIII-29 Table III-13. Total Quantified Baseline Costs (1993 dollars)

1000 Submission Scenario 2000 Submission Scenario 3000 Submission Scenario

Cost Element Low High Low High Low High

INDUSTRY

PMN 14,403,024 20,797,176 28,806,048 41,594,352 43,209,072 62,391,528

Polymer Exemption 1,029,656 1,510,471 2,059,312 3,020,942 3,098,080 4,544,780

LVE 1,191,960 1,878,068 2,390,850 3,767,055 3,582,810 5,645,123

Bona Fide 247,401 313,929 493,969 626,801 741,370 940,730

Subtotal $16,872,041 $24,499,644 $33,750,179 $49,009,150 $50,631,332 $73,522,161

GOVERNMENT

PMN Submission 2,742,240 3,426,408 5,484,480 6,852,816 8,226,720 10,279,224

Polymer Exemption 114,808 135,939 229,616 271,878 345,440 409,020

LVE 185,932 221,020 372,945 443,325 558,877 664,345

Bona Fide 58,212 68,310 116,228 136,390 174,440 204,700

User fees -1,674,630 -1,674,630 -3,349,260 -3,349,260 -5,025,960 -5,025,960

Subtotal $1,426,562 $2,177,047 $2,854,009 $4,355,149 $4,279,517 $6,531,329

TOTAL QUANTIFIED BASELINE COSTS $18,298,603 $26,676,691 $36,604,188 $53,364,299 $54,910,849 $80,053,490

Note: User fees are not listed separately under Industry costs because they are included in the estimated Industry unit costs.

Source: Tables III-1 through III-12.III-30 demand. While it has not been possible to quantify these costs in the baseline, it should be noted that any

changes caused by the amendments will mirror the changes in quantified delay costs in terms of their

direction and relative magnitude.

2. Industry Costs of Negotiating ' 5(e) consent orders

Because of the broad range in the types of chemicals as well as the types of controls that

may be negotiated through Section 5(e) of TSCA, it has not been possible to gather consistent data on the

costs to industry associated with the negotiation of these consent orders. Without this information, it has

not been feasible to quantify these costs in the baseline. Because the agency cost associated with

negotiating these consent orders is included in the costs developed for PMN review, changes in this

process caused by the amendments will be reflected in the quantified costs and industry costs and should

be expected to follow the direction of the Agency costs.

### Figure III-1 Total Notices Received by OPPT

Total includes PMNs, low-volume exemptions, test-market exemptions and polymer 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 0 1,000 2,000 3,000

8 323 620 909 1,379

1,272 1,771 2,223 2,329 2,993

1,537 2,738

1,867



### Fiscal YearNumber of Submissions 

### *

* exemptionsIV-1 IV. POLYMER EXEMPTION AMENDMENT

The polymer exemption amendment is discussed in this chapter according to the following

organization:

! Section A briefly describes the polymer exem ption amendment as well as alternatives that have been considered;

! Section B presents the projected number of polymer exemption submissions used in this analysis;

! Section C provides estimates of the Industr y unit costs for complying polymer exemptions under these amendments;

! Section D provides estimates for Agency unit costs; and

! Section E presents the total change in quantified costs resulting from this amendment for the three submission scenarios analyzed, and discusses the unquantified effects of the amendment.

A. Amendment Description

The amended PMN rule divides polymers eligible for exemption into three sets of eligibility criteria. In general these groups are:

(1) polymers with number average molecular weight equal to or greater than 1,000 and less than 10,000 with oligomer content less than 10 percent below molecular weight 500 and less than 25 percent below molecular weight 1,000;

(2) polymers with number average molecular weight greater than or equal to 10,000 and oligomer content less than 2 percent below molecular weight 500 and less than 5 percent below molecular weight 1,000; and

(3) polyester polymers.

Under the exemption, EPA has adopted a policy whereby manufacturers of polymers eligible for

exemptions must report to EPA annually the number of polymers commenced under the exemption during

the past year. The annual report would consist of a si ngle letter per submitter stating the company name,

the number of polymers commenced during the past year, and the name and telephone number of a

technical contact for additional information. It is im portant to note that, although companies must submit

this report once per year, they may begin manufacturing or importation of polymers that fall within the

categories covered by this exemption without notifying EPA at the time such manufacturing or importation

commences. A notice of commencement is not required because substances produced under the

polymer exemption will not be added to the TSCA Inventory. EPA has also eliminated the User Fee

previously associated with polymer exemptions.IV-2 In addition to the preferred option, the rule also describes several alternative options that have been considered. These options fall into four categories:

(1) options related to level of information provided in notifications and the timing of submissions; (2) option to consider other polymers for exemption; (3) eligibility criteria options; and (4) an option to include high cationic functional group containing polymers in the exemption.

The options in each of these categories are discussed below. The costs associated with these options are

discussed in Chapter VIII.

The first set of options requires an exemption not ice that includes certain basic information on the

polymer identity and the manufacturer, or no reporting by importers or manufacturers. The second option

is to exempt certain salts of polymers that are list ed on the TSCA Inventory. The third set of options

considered by the Agency pertain to eligibility criteria that standardize the functional group requirements at

5,000 equivalent weight, or retain the existing requirements that the submitter provide information such as

number average molecular weight and residual monomer information to verify that a submitter has met the

exemption criteria.

The fourth and final option considered by the Agency included high cationic functional groupcontaining polymers in the exemption. The option states that polymers that contain high percentages of

amine (low amine equivalent weight) in their structures would be exempt.

B. Polymers Eligible Under the Amendments

Table IV-1 presents an estimate of the number of polymers eligible for the polymer exemption. In

FY89, the number of polymer exemptions received was 174. It is assumed that all of the substances that

qualified for this exemption will continue to qualify for the exemption. In addition, it has been estimated

that 279 polymers submitted as full PMNs in FY89 woul d be eligible for the new exemption (ICF Polymer

PMN database 1990). As a result of EPA's regulatory experience with polymers and the significant

advantages that are associated with the polymer exemption compared to a PMN, this analysis assumes

that all eligible polymers would elect to use the polym er exemption instead of submitting a full PMN. Thus,

the number of FY89 submissions that would fall under the polymer exemption is estimated to be 453 (279

+ 174). This figure represents 29.5 percent of the s ubmissions received in FY89. For this analysis, 1989

is used as a representative year and the percentage of e ligible polymers in that year is considered to beIV-3 equal to the percentage of eligible polymers for each subsequent year. Therefore, this analysis projects

that 295 polymers would be eligible annually for the exemption under the 1,000 submission scenario, 589

annually for the 2,000 submission scenario and 884 annually for the 3,000 submission scenario.

C. Industry Per Unit Costs

Under the polymer exemption, there will be no pre-manufacture submission requirements.

However, an annual report will be required to inform EPA of the number of polymers commenced during

the previous year under the exemption. Each submitter is required to prepare a single letter each year

indicating the name of the company, the number of polymers commenced during the past yearIV-4 Table IV-1. Projected Polymer Exemption Submissions

______________________________________________________________________________ FY89 Polymer Exemptions 174

FY89 Polymer PMN Submissions Eligible for Amended Exemption 279

Total FY89 Submissions Qualifying for New Exemption 453

Percent of Total FY 89 submissions 30

1,000 Submission Scenario Projection 295 2,000 Submission Scenario Projection 589 3,000 Submission Scenario Projection 884

______________________________________________________________________________ Note: In total, there were 680 Polymer Submissions in FY89. Therefore, approximately 67 percent of all polymer submissions would be eligible for an exemption under the amendments.

Sources: RIB PMN Database, ICF Polymer PMN Database 1990, CCD 1991.IV-5 under the exemption, and the name and telephone number of a technical contact. For this analysis, it was

assumed that one report would be generated for each polymer . This is most likely an overestimate of the

number of reports that will be generated.

In addition, each submitter would be required to re tain records that document that the polymer

meets the eligibility requirements set forth in the exemption. Exemption holders also will be required to

keep on-site records of commencement and a certification stating compliance with the exemption criteria.

Recordkeeping requirements apply to all facilities manufacturing polymers eligible for the exemption. As

stated, retained records must demonstrate compliance with the provisions of the exemption, but the

Agency believes that most of the information that would be required for these records will be generated

during the normal manufacturing or import process, and that only minimal burden will be placed on the

facility to create and maintain these records.

The labor requirements for preparation of the annual reporting letter are presented in Table IV-2

and are estimated to be: 0.5 to 1 hour of clerical, technical, and managerial time. The requirements for

on-site record retention are also presented in Table IV -2 and are estimated to be: 1 to 2 hours of clerical

time, 1 to 2 hours of technical time, and 0 to 1 hour of managerial time. From Table IV-2, the average unit

cost per polymer can be estimated as ranging from $224 to $560.

Because the polymer exemption amendment does not require any reporting prior to

commencement of manufacture or import, there will be no delay costs attributable to regulation in the

development, production, and marketing of these substances. Thus, using the methodology described in

Chapter II, delayIV-6 Table IV-2. Industry Unit Costs for Amended Polymer Exemption Reporting and Recordkeeping (By Polymer)

Low Cost Case High Cost Case

(hours) (1993 $) (hours) (1993 $)

REPORTING COSTS

A. Clerical ($35.13/hr) 0.5 18 1.0 35

B. Technical ($76.91) 0.5 38 1.0 77

C. Managerial ($112.26/hr) 0.5 56 1.0 112

Subtotal 1.5 112 3.0 224

RECORDKEEPING COSTS

A. Clerical ($35.13/hr) 1.0 35 2.0 70

B. Technical ($76.91/hr) 1.0 77 2.0 154

C. Managerial ($112.26/hr) 0.0 0 1.0 112

Subtotal 2.0 $112 5.0 $336

DELAY COSTS $0 $0

USER FEE $0 $0

TOTAL INDUSTRY UNIT COST FOR AMENDED POLYMER EXEMPTIONS $224 $560

Sources: CMA 1991, CAIR 1990, BLS 1994, ICF Estimates.IV-7 costs are estimated to be zero for the amended polymer exemption. The annual submission policy for this

exemption and the elimination of the User Fee make direct industry labor costs for producing the annual

letter, recordkeeping, and retention of records the only costs associated with the amended polymer

exemption.

Additionally, the amended polymer exemption excludes from eligibility all water-absorbing

polymers having molecular weight of 10,000 daltons or greater and that absorb 20 times their weight in

water. It has not been possible to predict the num ber of submissions expected for these types of

polymers, but the Agency expects that there will not be a significant number of these submissions.

Finally, there may be costs associated with EPA's authority to provide "notification" of ineligibility

of an exemption upon receipt of information that leads to a finding of unreasonable risk to human health or

the environment. While the Agency can make an unr easonable risk finding and revoke an exemption, this

is an unlikely occurrence. The extreme infrequency of su ch a finding, in combination with provisions that

allow submitters to prepare and submit a full PMN without ceasing production, indicate that the costs to

industry associated with the Agency's revocation authority are not significant.

D. Government Per Unit Costs

The Agency costs associated with polymer exemptions will be virtually eliminated under the

amendments to the polymer exemption because the Agency is now receiving only a single letter from each

submitter which does not require Agency review. Therefore, there are no costs to the Agency associated

with reviewing submissions under the amended polymer exem ption. However, there are minimal costs to

the Agency associated with receiving and filing reporting letters, as well as logging reports into a

database. The labor required to complete these tasks is estimated to be 1 hour per submission (1/2 hour

for letter receipt and processing, and 1/2 hour for database entry). It is possible, however, that some

additional costs may be incurred at both the regional and federal EPA level. These costs would be

associated with monitoring and enforcement of compli ance with the polymer exemption requirements.

These costs are not quantified as part of this analysis because of uncertainty regarding the level of

compliance monitoring, the level of detected compliance violations, the distribution of enforcement duties,

and lack of information on the types of enforcement activities that will be necessary. The only quantified

significant costs to the Federal government associ ated with the amended exemption are those attributableIV-8 to receipt of submissions and to lost revenues from the elimination of User Fees that currently are

required.

E. Comparison with Base Case and Sensitivity Analysis

The total effect of the polymer exemption amendment is summarized in Table IV-3. The projected

number of polymer exemption submissions under each of the scenarios is multiplied by the unit costs

derived above. The baseline costs for these submissi ons are then subtracted to find the change in costs

resulting from the amendment. The baseline costs are composed of costs attributable to the existing

polymer exemption submissions and the current PM N submissions that become exemptions under the

amendments. As the table presents, the polymer exem ption amendment results in a total societal savings

of between $4.9 to $7.2 million in the 1,000 total submission scenario. This total results from between

$4.7 and $6.8 million in Industry savings and between $0.2 and $0.4 million in Agency savings. The 2,000

and 3,000 submission scenarios result in total savings to Industry and the AgencyIV-9 Table IV-3. Comparison of Base Case and Amended Costs for Polymer Exemption (1993 dollars)

1000 Submission Scenario 2000 Submission Scenario 3000 Submission Scenario

Cost Category Low High Low High Low High

INDUSTRY

Amendment Polymer Exemption 66,080 165,200 131,936 329,840 198,016 495,040

Baseline Polymer Exemption PMN 1,029,656 3,766,308 1,510,471 5,438,342 2,059,312 7,511,922 3,020,942 10,846,803 3,098,080 11,257,536 4,544,780 16,255,264

Increment -4,729,884 -6,783,613 -9,439,298 -13,537,905 -14,157,600 -20,305,004

GOVERNMENT

Amendment Polymer Exemption User Fees 12,390 0 16,225 0 24,738 0 32,395 0 37,128 0 48,620 0

Baseline Polymer Exemption PMN User Fees 114,808 717,080 -610,650 135,939 895,986 -610,650 229,616 1,430,220 -1,219,230 271,878 1,787,049 -1,219,230 345,440 2,143,360 -1,829,880 409,020 2,678,112 -1,829,880

Increment -208,848 -405,050 -415,868 -807,302 -621,792 -1,208,632

TOTAL INCREMENT -$4,938,732 -$7,188,663 -$9,855,166 -$14,345,207 -$14,779,392 -$21,513,636

Note: User fees are not listed separately under Industry costs because they are included in the estimated Industry unit costs. Because both polymers and PMN submissions require user fees under the baseline, the total quantity of the transfer in not affected by the polymer ame ndment. This table also does not include the costs associated with PMN submissions that are not affected by this amendment.

Source: Tables III-1, III-2, III-4 IV-1, IV-2, and IV-3.IV-10 combined of between $9.9 and $14.3 million, and between $14.8 and $21.5 million, respectively.

In addition to these quantified benefits, the polymer exemption amendment would also provide a

number of unquantified benefits. The expanded exemption criteria would provide industry with more

flexibility in manufacturing polymers and some s ubmitters may be encouraged to consider minor

adjustments in the formulation of polymeric materials t hat would qualify them for exemption status. Under

the current standards, this flexibility would not be possible. In this way, the amendments may promote the

development of safer products in order to save on reporting costs.

Additionally, the polymer definitions in t he polymer exemption amendments have been brought

into line with OECD-accepted definitions used in the international community. This definitional change will

streamline certain aspects of the submission and subsequent review process while retaining the meaning

and purpose of the 1984 exemption definition of polymer.

Another major benefit of the exemption is the re moval of a delay period in the development of

polymers meeting the exemption criteria. Previ ously, a submission was required 21 days prior to

manufacture. This 21-day delay period is eliminated under the amendments. In addition, full PMN

submissions have a 90-day post-submission delay peri od, which, under the amendment, is also eliminated

for PMN submissions that will be eligible for the revised

exemption. This elimination of delay increases the control submitters have over the development,

marketing, and production schedules of new polymers.

An additional benefit is that elimination of t he need for an Agency review of exempt polymer

submissions will allow the Agency to focus its resources on higher-risk chemicals.V-1 V. PROCEDURAL AMENDMENT

EPA is making several procedural changes to the TSCA Section 5 notification process that will

help to streamline both submitter and Agency activities. This chapter describes those initiatives and

presents industry and Agency cost estimates associated with the procedural amendments. The chapter is

divided into five sections, as follows:

! Section A briefly describes the procedural amendment as well as alternatives that have been considered;

! Section B presents the projected change in the number of submissions resulting from the procedural amendment that is used in the analysis;

! Section C provides estimates of the Industry unit costs associated with the amendment;

! Section D provides estimates of Agency unit costs for EPA review associated with the amendment; and

! Section E presents the total change in quantified costs resulting from this amendment for

the three submission scenarios analyzed, and discusses the unquantified effects of the

amendment.

A. Amendment Description

In order to achieve further efficiencies and resource savings for both EPA and submitters of

Section 5 notices, the Agency is implementing seven regulatory initiatives to reduce the administrative

costs/burdens of the TSCA Section 5 New Chemicals Program. These procedural amendments are:

(1) requiring that submitters provide the corre ct chemical identity in Section 5 notices and bona fide Inventory search notices;

(2) revising the bona fide notice requirements for requesting Inventory searches;

(3) amending the "two percent rule" for polymers to allow submitters greater flexibility in determining the amount of monomer or reactant used in the manufacture of a polymer;

(4) requiring submitters to provide multip le photocopies of Section 5 submissions;

(5) providing regulatory language to allow the electronic transmission of Section 5 submissions;

(6) implementing a standard mandatory form for notices of commencement; and

(7) notifying submitters that EPA is considering the development of requirements that all

facilities provide information about their geographic location.

The remainder of this section will provide further description of each of these amendments.V-2 1. Correct Chemical Identification

EPA is amending 40 CFR 720.45(a) of the PMN rules to require that submitters of Section

5 notices and bona fide notices provide the most currently valid Chemical Abstracts (CA) Index name or

CA preferred name that is consistent with TSCA Inv entory listings. A Chemical Abstracts Service (CAS)

Registry Number consistent with this CA name would also be required, if one exists. Failure to comply

with this chemical identification requirement would result in the notice being declared incomplete by EPA.

The chemical identification requirement could be satisfied if the submitter uses the services of CAS, or the

services of another chemical information organization, service bureau, consultant, or employee that is

capable of generating correct CA names, chemical structure diagrams or molecular formulae where

appropriate, and obtaining necessary CAS Registry Numbers.

The Agency has considered two options that w ould define how submitters would obtain this

information. In one option, submitters would be required to obtain the information directly from CAS and

the Agency would work with CAS to resolve any disagr eements regarding the identification. In the other

option, submitters could use any service or method to obtain the information, but it would then be the

submitter's responsibility to resolve any disagreements.

2. Bona Fide Submission Requirements

The Agency is amending 40 CFR 720.25 to revise certain provisions of the procedures to

establish a bona fide intent. Over the past several years, the number of bona fide notices submitted to

EPA has steadily increased. At the same time, the Agency has become aware that approximately half of

the correctly submitted bona fide notices for which EPA notified submitters that substances were not listed

in the Inventory have never been commercialized. In an attempt to reduce the chances that future bona

fide notices may be submitted without representing definite, well thought-out commercial intentions, the

amendments revise the requirements for bona fide notices.

The amendments for bona fide submissions no longer require elemental analysis data or other analytical data, except for an infrared spectrum. However, the following additional requirements are being implemented:

! the use of Chemical Abstract Ninth Collective Index nomenclature;V-3 ! more detailed information about research and product or process development activities, or alternatively, for importers who have no knowledge of these activities, information indicating the country from which the substance will be imported, how long it has been in commercial use abroad, and how it is predominantly used outside the U.S.;

! an estimate of the month and year in which a PMN will be submitted if EPA informs the submitter that the substance is not on the Inventory;

! the location of the facility at which manufacture or importation of the substance is most likely to occur;

! for substances to be manufactured in the U.S. or imported from a foreign facility of the same company/corporation, a description or process flow diagram of the most probable manufacturing process that would be used to obtain commercial amounts of the substance; and

! for imported substances, a description or process flow diagram of the most probable

method of processing or using the substance for a commercial purpose.

3. Polymer Two Percent Rule

The Agency is amending 40 CFR 720.45(a) of the PMN rule and 40 CFR 723.250(f)(2)

(iv) and 40 CFR 723.250(o)(1) of the polymer exemption rule to allow a manufacturer the option of

reporting monomers and other reactants on the basis of (a) the "amount charged" to the reaction vessel or

(b) the amount reacted and incorporated in the manufactured polymer.

Two alternatives to this amendment were considered. The first alternative was to maintain the

current "amount charged" 2 percent rule and the second was to amend the current "amount charged"

requirement to a broader designation of 5 percent charged to the reaction vessel.

4. Multiple Photocopies

This procedural amendment consists of a change in submission criteria at 40 CFR 720.40

(d)(2) that will require submitters to provide EPA with one original and two copies of Section 5 notices.

Submitters also will be required to provide one original and two copies of any test data.

An alternative to this amendment requires that s ubmitters provide an original and seven copies of

Section 5 notices for agency review, plus two additional copies of any attachments.

5. Electronic Submissions

This amendment is designed to promote the use of electronic media for data submission.

EPA is investigating the use of magnetic tape, floppy diskettes and electronic data interchange as means

to submit information. Information may be submitted electronically once EPA publishes a format forV-4 electronic submissions. Persons submitting electr onically may still complete and submit on paper the

certification and submitter identification sections of the PMN form, the list of any attachments, and all

attachments.V-5 6. Standard Notice of Commencement Form

This amendment requires all PMN submitters to use a standard one-page form to submit

a notice of commencement (NOC). This form would automatically be provided to each PMN submitter as

an attachment to EPA's "Acknowledgement of PMN Receipt" letter sent to submitters shortly after each

PMN is received. This form has been used voluntarily by many submitters over the past year. In addition

to information that submitters previously included in an NOC letter, the new NOC form requires the

following:

! complete submitter identification, including name and address of both the submitter and an authorized official and the name and phone number of a technical contact;

! generic chemical name;

! indication of whether the chemical is manufactured or imported; and

! address of the manufacturing site.

7. Designation of Geographic Location

The proposal to designate geographic coordinat es does not immediately change any of

the requirements for Section 5 submissions, but prov ides notice that the Agency is considering the

possibility of requiring submitters to provi de geographic location data (i.e., longitude and latitude

coordinates) as part of PMN submissions. This proposal is not discussed further in this analysis because

it has no immediate effect on Industry or Agency costs.

B. Submissions

Most of the procedural amendments discussed above are not expected to have an effect on the

number of submissions, but some changes are possible as a result of the bona fide , "two percent rule,"

and NOC amendments.

1. Bona Fide Submission Requirements

The number of bona fide submissions is expected to decrease moderately as a result of

the changes to the requirements for these submissions as well as changes to the exemptions. In the past,

as many as 50 percent of bona fide submissions have not been followed up by either a notice of

commencement or a PMN (OPPT-IMD 1991). The changes in bona fide reporting (i.e, an increase in theV-6 amount of information for the bona fide submission) are expected to discourage those who do not truly

intend to manufacture a chemical from making inappropriate bona fide requests. * Although it is uncertain,

EPA expects the number of bona fide submissions to decrease by about 25 percent (OPPT-IMD 1991).

Using this estimate, the projected number of bona fide submissions for the 1,000, 2,000, and 3,000

submission scenarios is 223, 445, and 668, respectively.

2. Polymer "Two" Percent Rule

As a result of the changes in the two percent rule, it is theoretically possible that some

submissions for polymers will be avoided because more small changes in composition will be allowed

without creating a "new" substance. It has not been possible to quantify the number of submissions

(either PMNs or polymer exemptions submissions) that would be avoided, however. Thus, this analysis

assumes that the total number of Section 5 notices is the same under the amendments as in the baseline

(i.e. 1,000, 2,000, or 3,000).

3. Notice of Commencement (NOC) Forms

The number of NOC forms that will be required is a function of the percentage of

chemicals for which PMNs are submitted and production is actually commenced. In 1989, 31 percent of

all chemicals for which PMNs were submitted were commenced. Therefore, it is assumed that industry

would complete 310 NOC forms in the 1,000 submission scenario, 620 in the 2,000 submission scenario,

and 930 in the 3,000 submission scenario.

C. Industry Per Unit Cost

* There may be some additional bona fide submissions resulting from changes in the polymer exemption that require monomers included in a polymer to be listed on the Inventory. These submissions may offset the expected decrease resulting from the higher cost hurdle somewhat. Several of the procedural amendments could affect Industry costs associated with Section 5

submissions. It has not been feasible, however, to quantify all the changes in cost. The remainder of this

section discusses the costs that have been quantified. The unquantified effects of the other amendments

are discussed qualitatively in Section E of this chapter.V-7 1. Correct Chemical Identification

The cost of receiving the correct chemical name directly from CAS for the purposes of a

PMN submission has been estimated to be $70 (OPPT-IMD es timate). This analysis assumes that this is

representative of determining the correct chemical ident ification regardless of the source and that this is

an additional cost under the amendments for all submissions, although in some cases companies may

already receive chemical identification from CAS and in other cases the same chemical identification may

be used for more than one submission.

2. Bona Fide Submissions

The Industry cost of supplying the amended information requirements for a bona fide

submission was estimated by comparing required info rmation elements to those requested in the full PMN

form. The estimated Industry labor requirements for an amended bona fide notice are presented in Table

V-1. The Industry unit cost for the amended bona fide would range from $1,400 to $1,625 as presented in

Table V-2.

3. Notice of Commencement (NOC) Forms

The estimated labor required for completion of the form was estimated at 0.5 hours of

clerical and 0.5 hours of managerial time for the low cost scenario, and 1.0 hours of clerical and 1.0 hours

of managerial time for the high cost scenario. Thus, the cost to industry associated with NOC forms

ranges from $22,940 to $45,570 for the 1,000 submission scenario. For the 2,000 and 3,000 submission

scenarios, these ranges are $45,880 to $91,140 and $68,820 and $136,710, respectively. These costs

reflect incremental costs above the baseline.

D. Government Per Unit Cost

Just as with Industry costs, several of the procedural amendments could affect Government costs

associated with Section 5 submissions. It has not been feasible, however, to quantify all the changes in

cost. The remainder of this section discusses the changes that have been quantified. The unquantified

effects of the other amendments are discussed qualitatively in section E of this chapter.

1. Correct Chemical Identification

The Agency costs associated with revie wing Section 5 submissions, including bona fide

submissions, are expected to be reduced as a result of the requirement for correct chemical identification.V-8 This requirement is expected to reduce the labor required by the Information Management Division (IMD)

of OPPT in the prescreening stage by about one half hour. A similar reduction in EPA contractor time,

resulting in a savings of $29 in extramural funds per submission is expected (OPPT-IMD 1991, BEA

1994). Thus the total savings perTable V-1. Estimated Industry Labor Requirements for Amended Bona Fide Submission

Technical Managerial Clerical a

A. Submitter ID negligible negligible

B. Chemical ID 2 hours ---

C. More Detailed Description 3 hours 1 hour of R&D

D. Estimate of Time to PMN; 1 hour 1 hour Production/Import Value; Site of Manufacture

E. Process Description 5-6 hours ---

F. Signed Certification b --- 2-3 hours

TOTAL 11-12 hours 4-5 hours 3-4 hours

a 3-4 hours of clerical time for all parts estimated based on proportion of total PMN requirements.

b Certification managerial requirements includes time for general review of submission.

Source: CMA 1991, EPA-IMD 1992.

V-9V-10 Table V-2. Industry Unit Costs for Amended Bona Fide Notices

Low Cost Case High Cost Case

(hours) (1993 $) (hours) (1993 $)

SUBMISSION COSTS (wage rate)

A. Clerical ($35.13/hr) 3 105 4 141

B. Technical ($76.91/hr) 11 846 12 923

C. Managerial ($112.26/hr) 4 449 5 561

TOTALS 18 $1,400 21 $1,625

Sources: CMA 1991, CAIR 1990, EPA-IMD 1992, BLS 1994.V-11 notice is estimated to be between $50 and $57. This savings is applied to all submissions, including bona

fide submissions.

E. Comparison with the Base Case and Sensitivity Analysis

The procedural amendment affects several cost components relative to the baseline. The

quantitative effects of requiring correct chemical identities, changes in bona fide submission requirements,

and preparing the NOC form are illustrated in Table V-3. The total quantified incremental costs to society

of the procedural amendment is expected to be $98,916 in the high cost case and $103,716 in the low

cost case for the 1,000 submission scenario. * Similarly, the incremental cost is between $197,224 and

$206,818 in the 2,000 submission scenario, and bet ween $296,140 and $310,534 in the 3,000 submission

scenario. These quantified costs may be outweighed, however, by the many unquantified benefits

resulting from this amendment. For example, the requi rement of correct chemical identity is expected to

reduce the number of incorrect submissions, reduci ng Agency review time as fewer submissions will

require corrective action. In addition, the use of a consistent nomenclature will also improve the ability of

Industry and the Agency to determine whether the subst ance in question is currently on the Inventory.

The change in requirements for bona fides will provide greater protection of the confidential

portion of the Inventory by increasing the probability t hat the submitter has a genuine intent to produce or

import the chemical. By the time the bona fide is submitted, the submitter should already know the

information being requested and, therefore should not incur any costs associated with developing new

information. In addition, EPA will

* Because the baseline submission costs increas e by a greater amount than the amended submission costs between the low and high scenarios, the total incremental cost to society is lower in the high labor cost scenario than in the low labor cost scenario.V-12 Table V-3. Comparison of Base Case and Amended Costs for Procedural Amendments (1993 dollars)

1000 Submission Scenario 2000 Submission Scenario 3000 Submission Scenario

Cost Category Low High Low High Low High

INDUSTRY

Procedural Amendments Bona fide submissions Chemical Identification a NOC Form a 312,200 85,610 22,940 362,375 85,610 45,570 623,000 171,150 45,880 723,125 171,150 91,140 935,200 256,760 68,820 1,085,500 256,760 136,710

Baseline Bona fide submissions 247,401 313,929 493,969 626,801 741,370 940,730

Increment 173,349 179,626 346,061 358,614 519,410 538,240

GOVERNMENT

Procedural Amendments Bona fide submissions Chemical Identification a 49,729 -61,150 57,311 -69,711 99,235 -122,250 114,365 -139,365 148,964 -183,400 171,676 -209,076

Baseline Bona fide submissions 58,212 68,310 116,228 136,390 174,440 204,700

Increment -69,633 -80,710 -139,243 -161,390 -208,876 -242,100

TOTAL INCREMENT $103,716 $98,916 $206,818 $197,224 $310,534 $296,140

a Chemical Identification and NOC Form costs shown are incremental over the baseline.

Source: Tables III-13 and V-2.V-13 be able to more quickly respond to search requests if the information in the requests is correct and

complete.

The use of a standard NOC form will ensure that all required information is reported. In the past,

a significant number of NOCs have created difficulty for the Agency because they were not recognized as

NOCs or contained confusing, missing, or unnecessary information. In the long run, the standardized form

will eliminate these problems and will result in time savings for both submitters and EPA personnel.

The remaining procedural changes also may affect the costs to both Industry and Government. In

general, however, these costs have not been quantified because they are not expected to affect overall

social costs, are expected to be small, or are expected to provide additional flexibility to submitters. For

example, the requirement for submitters to prov ide multiple photocopies shifts the burden of making

additional copies of submissions from EPA to Industry. This analysis has not attempted to estimate the

cost of producing these additional copies because the cost per submission would be fairly small and for

society as a whole the cost will be offset by a savings in Government costs. This shift allows EPA to more

quickly begin its analysis as copyi ng of confidential business information (CBI) requires specific

procedures which can be very time consuming.

The changes affecting the two percent rule and allowing electronic submissions provide additional

flexibility to Industry. The two percent rule change allows industry to make minor compositional changes,

providing more manufacturing control to the submi tter and possibly reducing the number of submissions.

One application of this flexibility would be in the use of alternate free radical initiators in the manufacturing

process without requiring a new submission.

Another part of the amendment, allowing electronic submissions, also improves the efficiency of

the review process. Once a submission format is established, electronic submissions are expected to

facilitate data transfer from submitters to the Agency, improve the accuracy of the submission, and reduce

the labor required for PMN receipt.

Finally, the amendment requiring a standardized form fo r the NOC is not expected to significantly

increase the Industry costs because Industry is current ly required to submit most of the information

required for the form. Many submitters are using this form for their notices and hence implementationV-14 costs are likely to be less than those presented in the analysis. The standardization of NOCs also will

improve the efficiency with which EPA is able to process these forms.VI-1 VI. LOW VOLUME AND LOW RELEASE/LOW EXPOSURE EXEMPTIONS AMENDMENT

The Low Volume Exemption (LVE) and the Low release/Low exposure (LoREX) Exemption

Amendment is discussed in this chapter. This section is organized as follows:

! Section A briefly describes the LVE and LoREX exemption amendment;

! Section B presents the projected number of LVE and LoREX exemption submissions used in this analysis;

! Section C provides estimates of the Industry unit costs for submitting LVEs and LoREX exemptions under these amendments;

! Section D provides estimates for Agency unit costs for EPA review of the amended LVE and LoREX exemption submissions; and

! Section E presents the total change in quantified costs resulting from this amendment for the three submission scenarios analyzed, and discusses the unquantified effects of the amendments.

A. Amendment Description

The two parts of this amendment (1) modify the current low volume exemption and (2) introduce a

new LoREX exemption.

1. Low Volume Exemption

Under this proposal the quantity of a s ubstance that may be produced annually under a

LVE would be raised to 10,000 kg. Any exemptions that are currently held for 1,000 kg will continue to be

valid. If the manufacturer wishes only to increase production, it would be necessary to reapply for an

exemption (alternately, a full PMN could be submitted). Chemicals are to be assessed as if the full 10,000

kg per year were produced, but producers may elect to be assessed at a lower level and be bound to

produce at a level no higher than that lower level. In the past, only one LVE holder was allowed per

chemical substance. This amendment allows more than one company to hold an LVE exemption for a

given substance, provided it is determined that the aggregate release and exposure will not present an

unreasonable risk. The LVE amendment will have a 30-day notification requirement to EPA prior to

manufacture instead of the current 21-day requirement.

Two alternatives to this LVE amendment were considered. One would raise the low volume

production ceiling to 5,000 kgs. The other would raise it to 25,000 kgs with a toxicity testing requirement.VI-2 2. Low Release/Low Exposure Exemption

On April 4, 1982, in response to a petition from CMA and other industry groups requesting

exemptions from TSCA Section 5 reporting requi rements, EPA proposed regulations for site-limited

intermediates (SLIs). After receiving public comm ents, the Agency decided not to pursue an exemption

for SLIs at that time because it found that it could not reduce the procedural safeguards in the rule, which

industry commentors stated were overly burdensome, and still make the required 5(h)(4) finding of no

unreasonable risk.

Instead of an SLI exemption, the current exemption covers all chemicals that have low release

and exposure (LoREX) associated with them. All new chem ical substances are eligible for this exemption

regardless of production volume. Submitters must show that there will be virtually no exposure to either

consumers or the general public. The submitter also must show that worker exposure will be adequately

controlled through the use of engineering controls and/or personal protective equipment. Submitters must

prevent all direct and indirect releases of the exempt ion substance to surface waters which will result in

surface water concentrations of the substance abov e 1 part per billion unless a higher concentration is

supported by test data. Similarly, ambient air releases from incineration must not yield concentrations

above 1 μ g/m 3 maximum annual average. Releases to landfills must not occur unless it can be

demonstrated that the substance has a negligible groundwater migration potential.

Based on nine years of operational experience under the current LVE and the enhanced technical

assessment capabilities developed in the New Chemicals Program over that time, the Agency believes

that an exemption covering low release and exposure chemicals can be developed without presenting an

unreasonable risk of injury to human health or the environment.

One alternative to the LoREX exemption that has been considered is a more narrowly defined

exemption for SLIs. The costs associated with this alternative are discussed in Chapter VIII.

B. Submissions

This section presents the projected number of submissions for the LVE and LoREX exemption

under the amendments.VI-3 1. Low Volume Exemption

Table VI-1 presents the calculations estimating the number of 10,000 kg LVEs that are

projected for the baseline and for the 1,000, 2,000, and 3,000 submission scenarios. In FY89 there were

265 LVE submissions. In addition, 84 full PMNs for substances with a maximum production volume of

1,000 kg also were received during FY89. Thus only 75.9 percent (265 ) (265 + 84)) of eligible

submissions resulted in LVE notifications. PMNs may be submitted instead of LVEs because the

manufacturer expects to produce higher quantities of the substance in the future.

Also during FY89, substances with maximum production volumes less than 10,000 kg (including

the 84 less than 1,000 kg) accounted for 278 full PMN submissions. Adding 278 to the number of 1,000

kg LVE submissions (265), the total number of submissions eligible for the LVE in FY89 was 543. If the

sameVI-4 Table VI-1. Projected LVE Submissions

______________________________________________________________________________
FY89 LVEs 265 FY89 PMNs with Maximum Volume less than 10,000 kg 278

Total FY89 Submissions Qualifying for 10,000 kg 543 exemption

Historical Percent Taking Exemption a 75.9

10,000 kg LVEs in: Baseline (FY89) 412

1,000 submissions scenario b 268

2,000 submissions scenario b 536

3,000 submissions scenario b 804

______________________________________________________________________________

a There were 84 PMN submissions in FY89 for chemicals with reported production volumes of less than 1,000 kg. Using this number along with the 265 LVE submissions received, the percentage of qualified submissions that used the LVE was 75.9 percent.

b LVEs in the 1,000, 2,000, and 3,000 submission scenarios were projected assuming that 26.8 percent of submissions are 10,000 kg LVEs. This is the FY89 ratio of 10,000 kg LVEs to total submissions (412 LVEs ) 1537 submissions).

Sources: RIB PMN Database; CCD 1991.VI-5 percentage of submissions apply for LVEs as under the current exemption requirements, the estimated

number of 10,000 kg LVEs for the baseline would be 412 (543 x 75.9 percent). * This figure represents

26.8 percent of all submissions received in FY89. Using this percentage, the projected number of LVEs

for the 1,000 scenario is 268. The projection is 536 and 804 for the 2,000 and 3,000 submission scenarios

respectively.

2. Low Release/Low Exposure Exemption

The proportion of submissions that will be eligible for the LoREX exemption has been

estimated by chemists at EPA based on a review of submissions received in fiscal year 1990 (ETD 1991).

This review found that 35 percent of PMN submissions would be eligible for the exemption. An additional

26 percent of PMN submissions would have been likel y to qualify for the LoREX exemption with minor

process or disposal changes. Based on this informati on, it is estimated that 31 percent (one-half of 35

percent plus one-fourth of 26 percent) would apply for the LoREX exemption instead of submitting PMNs

(ETD 1991).

* Assuming that both the LVE/LOREX and the Polymer Exemption amendments are adopted, some chemicals eligible for an LVE would also be eligible for the polymer exemption. This analysis assumes that manufacturers of these chemicals would submit a polymer exemption rather than an LVE. Thus, this analysis does not include these chemicals in the submission count for LVEs. Using this information, Table VI-2 presents t he projections for LoREX exemptions used in this

analysis. The number of submissions is first adjus ted to account for polymer exemptions and LVEs, and

then the projected number of LoREX exemptions is calculated. It is reasonable to assume that all eligible

polymers will choose that exemption because of the reduc ed submission requirements. This analysis also

assumes that all eligible low-volume chemicals would choose that exemption over the LoREX exemption

because of the greater familiarity with the low-volume exemption. In actuality, some low-volume

chemicals may also qualify for the LoREX exemption and may choose that route since there is no volume

ceiling. If these chemicals were to choose this ex emption, it would not change the estimates of total

Industry (or Government) costs in this analysis because the submission requirements are the same. This

assumption may tend to understate the benefits attributed to the LoREX exemption.

Using these criteria, 200 submissions in the FY89 set would become LoREX exemptions (RIB

PMN database, CCD 1991, ETD 1991). These 200 submissions represent 13 percent of all FY89

submissions (200 ) 1,537 total submissions). Using this percentage, the projected number of LoREX

exemptions is 130 for the 1,000 case, 260 for the 2,000 case, 390 for the 3,000 case.VI-6 C. Industry Per Unit Costs

1. Low Volume Exemption

The Industry unit cost for an amended LVE is composed of the submission costs and

delay costs. As presented in Table VI-2, the total industry unit cost for an LVE is estimated to range from

$13,021 to $18,428. The reporting requirements for the LVE are similar to those required for a full PMN.

The data elements requested for the full PMN form include: general information such as submitter

identification, chemical identity, and production, import and use data; human exposure and environmental

release information both for industrial sites controlled by the submitter and for industrial sites controlled by

others; and a list of attachments. The best estimate for the labor component of Industry cost for a LVE

submission is the same as the time required for submission for the current PMN. The labor requirements

to prepare the above information are presented in Table VI-4.VI-7 Table VI-2. Projected LoREX Exemptions

______________________________________________________________________________
FY89 Submissions 1537

Minus projected Polymer Exemption Submission 451

Minus projected LVEs 412

Minus Test Market Exemptions 28

Subtotal of remaining PMNs 646

Percent of PMNs qualifying for LoREX Exemption 31

Projected LoREX exemptions: FY89 200

1,000 submission scenario a 130

2,000 submission scenario a 260

3,000 submission scenario a 390

______________________________________________________________________________ Sources: RIB PMN Database, CCD 1991.

a LoREX exemptions in the 1,000, 2,000, and 3,000 submissions scenarios were projected assuming that 13 percent of total submissions are LoREX exemptions. This is the FY89 ratio of LoREX exemptions to total submissions (200 LoREX exemptions ) 1537 submissions).VI-8 Table VI-3. Industry Unit Costs for Amended LVE Submissions

Low Cost Case High Cost Case
(hours) (1993 $) (hours) (1993 $)
SUBMISSION COSTS (wage rate)
A. Clerical ($35.13/hr) 12 422 14 492
B. Technical ($76.91/hr) 67 5,153 80 6,153 C. Managerial ($112.26/hr) 16 1,796 20 2,245

Subtotal 95 $7,371 114 $8,890

DELAY COSTS $5,650 $9,538

USER FEES $0 $0

TOTAL INDUSTRY UNIT COST FOR AMENDED LVE $13,021 $18,428

Sources: CMA 1991, CAIR 1990, BLS 1994.VI-9 Table VI-4. Estimated Labor Requirements for Amended LVE Submission (hours)

Clerical Technical Mana g erial

General Instructions 2.0-2.5 1.5-2.0 3.0-4.0

Certification 0.5 a

I. General Information

A. Submitter Information

B. Chemical Identity Info 1.5-2.0 3.0-6.0 1.0

1. Impurities 0.5

2. Synonyms 0.25

3. Trade Identification 0.25

4. Generic Chemical Name 0.5

5. By Products 0.5

C. Production, Import & Use Information 1.5 2.0-3.0

1. Production 1.0

2. Use Information 3.0

3. Hazard Information 3.0-4.0

II. Human Exposure 2.5-3.5 6.0-7.0

A. Ind. Sites Controlled by the Submitter

1. Operation Description

a. Identity 1.0

b. Type of Operation 1.0

c. Amount & Duration 2.0

d. Process Description 10.0-12.0

2. Occupational Exposure b 13.0-14.0

3. Environmental Release & Disposal b 9.0-10.0

B. Industrial Sites Controlled by Others 2.0 10.0-12.0 2.0-2.5

1. Operation Description

2. Worker Exposure & Environmental Release

III. List of Attachments 2.0 6.0-8.0 1.0-1.5

Physical & Chemical Properties Worksheet 0.5 1.5-2.0 0.5

TOTALS 12.0-14.0 67.0-80.0 16.0-20.0

a Certification is expected to require a general managerial/legal re view of the complete submission. Due to the inconsistency in the CMA responses, some of the labor listed under other headings including "Gener al Instructions" may be attributable to this review.

b These requirements are optional, but the estimates were included since it is expected that most submitters will complete this section.

Source: CMA 1991VI-10 As discussed in Chapter II, delay costs represent the reduction in the present value of profits as a

result of the delayed introduction of a new chemical as a result of the reporting process. Using the

methodology discussed in Chapter II and assuming a to tal delay of 60 days including both pre- and postsubmission delays of 30 days for an LVE, the delay costs range from $5,650 to $9,538. As shown in

Table VI-3, Industry unit cost for an amended LVE submission would range from $13,021 to $18,428 per

form.

2. Low Release/Low Exposure Exemption

Table VI-5 presents the Industry unit cost for the LoREX which range from about $13,000

to almost $18,500. The reporting requirements for the LoREX exemption include all of the same

information that is required for a LVE, such as submitter identification, chemical identity, and production,

import and use data; human exposure and environmental release information both for industrial sites

controlled by the submitter and for industrial sites controlled by others; a list of attachments; and test data

including environmental fate data and health and environmental effects data. Labor hours required to

prepare this information are shown in Table VI-6. Delay costs are the same as those presented for the

LVE. Not included in this analysis are the additional delay costs experienced by those submissions which

would have been subject to a Section 5(e) order when submitting a full PMN.

D. Government Per Unit Costs

1. Low Volume Exemption

The Agency cost associated with reviewing amended LVEs will be the same as the costs

of reviewing a full PMN. Table VI-7 presents Agency unit costs for review of the amended LVE. As the

table indicates, the range in LVE review unit costs is $1,361 to $1,632.VI-11 Table VI-5. Industry Unit Costs for LoREX Exemption Submissions

Low Cost Case High Cost Case
(hours) (1993 $) (hours) (1993 $)
SUBMISSION COSTS (wage rate)
A. Clerical ($35.13/hr) 12 422 14 492
B. Technical ($76.91/hr) 67 5,153 80 6,153 C. Managerial ($112.26/hr) 16 1,796 20 2,245

Subtotal 95 $7,371 114 $8,890

DELAY COSTS $5,650 $9,538

USER FEES $0 $0

TOTAL INDUSTRY UNIT COST FOR LoREX EXEMPTION $13,021 $18,428

Sources: CMA 1991, CAIR 1990, BLS 1994.VI-12 Table VI-6. Estimated Labor Requirements for LoREX Exemption Submission (hours)

Clerical Technical Mana g erial

General Instructions 2.0-2.5 1.5-2.0 3.0-4.0

Certification 0.5 a

I. General Information

A. Submitter Information

B. Chemical Identity Info 1.5-2.0 3.0-6.0 1.0

1. Impurities 0.5

2. Synonyms 0.25

3. Trade Identification 0.25

4. Generic Chemical Name 0.5

5. By Products 0.5

C. Production, Import & Use Information 1.5 2.0-3.0

1. Production 1.0

2. Use Information 3.0

3. Hazard Information 3.0-4.0

II. Human Exposure 2.5-3.5 6.0-7.0

A. Ind. Sites Controlled by the Submitter

1. Operation Description

a. Identity 1.0

b. Type of Operation 1.0

c. Amount & Duration 2.0

d. Process Description 10.0-12.0

2. Occupational Exposure 13.0-14.0

3. Environmental Release & Disposal 9.0-10.0

B. Industrial Sites Controlled by Others 2.0 10.0-12.0 2.0-2.5

1. Operation Description

2. Worker Exposure & Environmental Release

III. List of Attachments 2.0 6.0-8.0 1.0-1.5

Physical & Chemical Properties Worksheet 0.5 1.5-2.0 0.5

TOTALS 12.0-14.0 67.0-80.0 16.0-20.0

a Certification is expected to require a general managerial/legal re view of the complete submission. Due to the inconsistency in the CMA responses, some of the labor listed under other headings including "Gener al Instructions" may be attributable to this review.

Source: CMA 1991.VI-13 Table VI-7. Agency Unit Costs for Amended LVE Review

Review Step Time Required (FTEs a ) Extramural Funds (1993 dollars) Percent of Cases Requiring Review Step Low Agency Cost (1993 dollars) High Agency Cost (1993 dollars)

Prenotice Consultations 0.0024 4 41 88 114

Administrative Prescreen / Notice Receipt / User Fee 0.0024 92 100 304 367

CRSS 0.0025 268 100 489 555

SAT 0.0006 14 100 66 82

Engineering/Exposure 0.0015 56 100 188 228

Exposure/Fate 0.0008 0 100 71 92

Focus 0.0009 23 100 102 126

Freedom of Information Act Requests 0.0333 287 1 32 41

CBI Substantiation 0.0004 3 56 21 27

TOTAL $1,361 $1,632

Note: Hour requirements do not necessarily reflect the time a particular activity will take for any given submission. Instead they represent the average time devoted to an activity for all PMNs. This table also does not reflect changes that would result in the Agency review time for LVEs that would result from other amendments.

a The cost per FTE is estimated to be between $88,206 and $114,662.

Sources: OPPT Operating Plan 1993, OTS Annual Report 1990, OPPT-IMD 1991, Kearney-Centaur 1991, OPM 1994.VI-14 2. Low Release/Low Exposure Exemption

Because there is no Agency experience with a LoREX exemption review, this analysis

assumes that these exemptions will require approximately the

same level of effort as LVEs. LoREX exemptions, therefore, are dropped from the new chemical review

process at the Focus meeting review. Only costs associated with notice receipt, prenotice consultations,

CRSS meeting review, and other costs such as Freedom of Information Act Requests, CBI Substantiation,

and Notices of Commencement are assumed to be attributable to LoREX exemption submissions. Not

included in the costs are those costs associated with the 5(e) order process to which some LoREX eligible

full PMNs would have been subject. Table VI-8 presents Agency unit costs for review of the LoREX

exemptions. From the table the range in LoREX exemption review unit costs is $1,361 to $1,632.

E. Comparison with Base Case and Sensitivity Analysis

1. Low Volume Exemption

Total Industry and Government costs for the amended LVE are calculated by multiplying the

number of projected LVEs for each submission scenario by the unit costs per submission. Incremental

costs, calculated by subtracting baseline costs from amended costs, are presented in Table VI-9 for both

Industry and Government. Baseline costs are the current LVE costs plus the costs of current PMNs that

will be eligible for the 10,000 kg LVE.

As shown in the table, based on the quantifiable costs and benefits, the amended LVE results in cost

savings for Government, but a cost increase for Industry. For the 1,000 submission case, the Agency

costs decrease by $704 in the low cost case and $57,532 in the high cost case; however, Industry's costs

increase by $311,044 in the low cost case and $192,060 in the high cost case. The quantified change in

societal cost is therefore an increase ofVI-15 Table VI-8. Agency Unit Costs for LoREX Exemption Review

Review Step Time Required (FTEs a ) Extramural Funds (1993 dollars) Percent of Cases Requiring Review Step Low Agency Cost (1993 dollars) High Agency Cost (1993 dollars)

Prenotice Consultations 0.0024 4 41 88 114

Administrative Prescreen / Notice Receipt / User Fee 0.0024 92 100 304 367

CRSS 0.0025 268 100 489 555

SAT 0.0006 14 100 66 82

Engineering/Exposure 0.0015 56 100 188 228

Exposure/Fate 0.0008 0 100 71 92

Focus 0.0009 23 100 102 126

Freedom of In formation Act Requests 0.0333 287 1 32 41

CBI Substantiation 0.0004 3 56 21 27

TOTAL $1,361 $1,632

Note: Hour requirements do not necessarily reflect the time a particular activity will take for any given submission. Instead they represent the average time devoted to an activity for all PMNs. This table also does not reflect changes that would result in the Agency review time for LVEs that would result from other amendments.

a The cost per FTE is estimated to be between $88,206 and $114,662.

Sources: OPPT Operating Plan 1993, OTS Annual Report 1990, OPPT-IMD 1991, Kearney-Centaur 1991, OPM 1994.VI-16 Table VI-9. Comparison of Costs for Base Case and Amended LVE (1993 dollars)

1000 Submissions Scenario 2000 Submission Scenario 3000 Submission Scenario

Cost Category Low High Low High Low High

INDUSTRY

Amendment LVEs 3,489,628 4,938,704 6,979,256 9,877,408 10,468,884 14,816,112

Baseline LVEs PMNs 1,191,960 1,986,624 1,878,068 2,868,576 2,390,850 3,952,554 3,767,055 5,707,271 3,582,810 5,939,178 5,645,123 8,575,847

Increment 311,044 192,060 635,852 403,082 946,896 595,142

GOVERNMENT

Amendment LVEs User fees 364,748 0 437,376 0 729,496 0 874,752 0 1,094,244 0 1,312,128 0

Baseline LVEs PMNs User fees 185,932 378,240 -198,720 221,020 472,608 -198,720 372,945 752,540 -395,370 443,325 940,293 -395,370 558,877 1,130,780 -594,090 664,345 1,412,901 -594,090

Increment -704 -57,532 -619 -113,496 -1,323 -171,028

TOTAL INCREMENT $310,340 $134,528 $635,233 $289,586 $945,573 $424,114

Note: User fees are not listed separately under Industry costs because they are included in the estimated Industry unit costs for the base case. Additionally, this table does not include the costs associated with LVEs that are not affected by this amendment.

Source: Tables III-1, III-2, III-13, VI-1, VI-5, and VI-7.VI-17 $310,340 in the low cost case and $134,528 in the high cost case. Similarly, for the 2,000 and 3,000

submission scenarios, societal costs increase by $635,233 and $945,573 in the low cost cases. In the

high cost cases, for the 2,000 and 3,000 submission scenarios, societal costs increase by $289,586 and

$424,114, respectively.

These changes in societal costs do not reflect the unquantified benefits that will result from the

exemption. Because more chemicals will be exempt from the full PMN process, EPA will be able to shift

its resources and attention to chemicals produced at levels of greater concern. The revised

information requirements will help the Agency to speed its review of low volume chemicals and avoid

delays associated with follow-up calls that have affected previous LVE submissions. * Industry will benefit

from increased flexibility to produce larger volumes and may be able to avoid resubmitting full PMNs for

chemicals covered by LVEs. Those submitters producing between 1,000 kg and 10,000 kg of a chemical

will benefit from the amended LVE because they will now be able to submit an LVE exemption in place of

a full PMN, resulting in savings of between $7,000 and $10,000 per submission. Additionally, because it

was assumed that only 76 percent of submissions eligib le for the LVE exemption would file an exemption,

it is possible that industry costs may be reduced further if a larger proportion of submitters elect to use the

LVE exemption for eligible submissions.

F. Low Release/Low Exposure Exemptions

Table IV-10 presents the change in costs to Government and Industry for the LoREX exemption

amendment. Because the LoREX exemption is not part of the current rule, however, the baseline cost for

the LoREX amendment is the cost

* These delays are not included in the delay cost estimate, which only covers the standard pre- and post-submission delays.VI-18 Table VI-10. Comparison of Costs for Base Case and Amended Costs for LoREX Exemption (1993 dollars)

1000 Submissions Scenario 2000 Submission Scenario 3000 Submission Scenario

Cost Category Low High Low High Low High

INDUSTRY

Amendment LoREX exemptions 1,692,730 2,395,640 3,385,460 4,791,280 5,078,190 7,186,920

Baseline PMNs 2,690,220 3,884,530 5,380,440 7,769,060 8,070,660 11,653,590

Increment -997,490 -1,488,890 -994,980 -2,977,780 -2,992,470 -4,466,670

GOVERNMENT

Amendment LoREX exemptions User fees 176,930 0 212,160 0 353,860 0 424,320 0 530,790 0 636,480 0

Baseline PMNs User Fees 512,200 -269,100 639,990 -269,100 1,024,400 -538,200 1,279,980 -538,200 1,536,600 -807,300 1,919,970 -807,300

Increment -66,170 -158,730 -132,340 -317,460 -198,510 -476,190

TOTAL INCREMENT -$1,063,660 -$1,647,620 -$2,127,320 -$3,295,240 -$3,190,980 -$4,942,860

Note: User fees are not listed separately under Industry costs because they are included in the estimated Industry unit costs for the base case.

Source: Tables III-1, III-2, III-13, VI-2, VI-6, and VI-8.VI-19 of the PMNs that are now eligible for LoREX exemptions. As shown in Table VI-10, the LoREX

amendment results both in savings for Government and regulatory relief for Industry. Costs to society are

reduced by approximately $1.1 million to $1.6 million for the 1,000 submission case, and $2.1 to $3.3

million and $3.2 to $4.9 million for the 2,000 and 3,000 cases, respectively.

In addition to this quantified benefit, there are addi tional unquantified benefits that would result from

LoREX exemptions. Because relatively minute amounts of these substance are released, be it in the form

of emissions, wastes, or final products, the hum an health and environmental exposure risks associated

with this type of chemical are limited. The Agency anticipates that this exemption will encourage the use

of chemical substances that would qualify and t he use of exposure controls and pollution prevention

practices. In addition, exempting these chemicals will allow the Agency to concentrate its resources on

chemicals of greater concern. Moreover, this benefit would be achieved without sacrificing EPA control

over exempted chemicals.VII-1 VII. NON-5(e) SIGNIFICANT NEW USE RULE AMENDMENT

A. Amendment Description

The Non-5(e) Significant New Use Rule Amendment authorizes the Agency to impose all of the

provisions in 40 CFR Part 721 Subpart B, incl uding worker protection and hazard communication

requirements, using expedited rulemaking procedures to promulgate "significant new use" rules (SNURs)

for substances not subject to Section 5(e) Orders. Previously, the types of activities which EPA could

designate as a significant new use by expedited rulema king without first issuing a Section 5(e) Order were

limited primarily to environmental release restricti ons. This amendment eliminates the need to develop a

Section 5(e) Order before promulgating an expedited SNUR in those cases where EPA determines that

activities described in the PMN submission will not present unreasonable risk.

Whereas a Section 5(e) Order applies only to the original PMN submitter who signs the Order, a

SNUR applies to all manufacturers and processors of the chemical substance. The reporting

requirements of a non-5(e) SNUR also apply to the original PMN submitter because, without a 5(e) Order,

the PMN submitter is not exempted by 40 CFR 721.45(i). To EPA's benefit, because only one Agency

action is required instead of two to obtain similar regulatory results, a non-5(e) SNUR is expected to be

more resource efficient than a combination of a Section 5(e) Order and a SNUR. * To industry's benefit,

avoiding the delay of waiting for issuance of a Section 5(e) Order will generally allow the submitter to

commence commercial manufacture immediately after the PMN review period. Unlike the case for the

Section 5(e) Order, production can commence prior to the publication of the SNUR. The Agency would

work with the submitter in development of the Non-5(e) SNUR terms and expects that such negotiations

would begin prior to the "Day-83" deadline for EPA to provide formal notification.

B. Submissions

This amendment is not expected to affect the pr ojected number of submissions under Section 5.

Fewer submissions will require 5(e) Orders, but because the costs of these orders are included in the

* Because EPA always promulgates SNURs for substances regulated by Section 5(e) Orders (where the substances may present an unreasonable risk) and t he efforts necessary for these activities are separate, elimination of the Section 5(e) Consent Order process will restrict regulatory burden to SNUR development.VII-2 estimated average unit costs used in this analysis, it is not practical to eliminate 5(e) costs from total

submission costs.

C. Industry Per Unit Costs

This analysis does not quantify the costs to subm itters of negotiating 5(e) Orders. It should be

noted, however, that costs will be lower for submissions eligible for non-5(e) SNURs because costs

associated with commenting on the 5(e) Consent order will not be incurred by the submitter. Additionally,

manufacture will commence sooner, thereby eliminating the delay costs.

The delay that will be avoided through use of a non-5(e) SNUR is estimated to range from two to

six months. This analysis uses an average delay of f our months (120 days) to calculate the savings to

industry associated with elimination of this delay per iod. The cost of a 120-day delay is $11,253 for the

low cost scenario and $18,921 for the high cost scenario. These savings will apply to the submissions for

which a 5(e) Order would have been required in the absence of this amendment. Because the estimated

percentage of submissions requiring 5(e) Order development is expected to decrease from 5 percent

under the baseline to 3 percent under these amendments, this cost savings is estimated to apply to 2

percent of total PMN submissions.

D. Government Per Unit Costs

Table VII-1 presents amended unit costs for PMN reviews. In addition to the non-5(e) SNUR

amendment, the table also reflects changes resulting from the LoREX exemption amendment and the

procedural amendments discussed in Chapters V and VI. As the table indicates, this amendment will

reduce Agency review costs per PMN to between $3,369 and $4,183, compared to the baseline cost of

$3,940 to $4,923.

The Non-5(e) SNUR amendment, the LoREX amendments, and the increased number of LVE

submissions will all eliminate the need for negotiated 5(e) Orders on PMNs by giving submitters and the

Agency other alternatives to achieve regulatory terms . As a result of these amendments, the percentage

of cases requiring 5(e) Order development, post-order data review, and Order modifications are estimated

to be reduced to 3 percent of total PMN submissions, instead of 5 percent as currently experienced under

the baseline (ETD 1992). It is not clear what portion of this change is attributable to the non-5(e) SNUR

amendment; the effect depends on Industry reaction to t he various regulatory options available, includingVII-3 the LoREX exemption. For example, the fewer submitters that utilize the LoREX exemption, the greater

the possibility that a non-5(e) SNUR would be used to replace the current 5(e) process.

E. Comparison with Base Case and Sensitivity Analysis

The non 5(e) SNUR, LoREX, and procedural amendments will result in savings for both Industry

and the Agency. The Industry savings have been calc ulated by multiplying the unit cost savings

associated with the use of a non-5(e) SNUR by 2 percent of the total number of PMN submissions.

Therefore,VII-4 Table VII-1. Amended Agency Unit Costs for PMN Review Due to the Non-5(e) SNUR Amendment

Review Step Time Required (FTEs a ) Extramural Funds (1993 dollars) Percent of Cases Requiring Review Step Low Agency Cost (1993 dollars) High Agency Cost (1993 dollars)

Prenotice Consultations 0.0024 4 41 88 114

Administrative Prescreen / Notice Receipt / User Fee 0.0024 92 100 304 367

CRSS 0.0025 268 100 489 555

SAT 0.0006 14 100 66 82

Engineering/Exposure 0.0015 56 100 188 228

Exposure/Fate 0.0008 0 100 71 92

Focus 0.0009 23 100 102 126

Standard Review Functions 0.0219 511 29 708 876

Division Directors Meeting 0.0129 113 15 188 239

Order Development /Negotiation Review 0.0171 22 3 46 59

Post Order Data Review 0.0886 0 3 234 305

Order Modifications 0.2167 0 3 573 745

New Chemical SNUR Development 0.0277 85 7 177 228

Notices of Commencement 0.0012 40 31 82 99

Freedom of Information Act Requests 0.0333 287 1 32 41

CBI Substantiation 0.0004 3 100 21 27

TOTAL $3,369 $4,183

Note: Hour requirements do not necessarily reflect the time a particular activity will take for any given submission. Instead they represent the average time devoted to an activity for all PMNs. This table also does not reflect changes in the Agency review time for PMNs that re sult from other amendments.

a The cost per full time equivalent (FTE) is estimated to be between $88,206 and $114,662. An FTE is equal to one person em ployed fulltime, for one year, or portions of several person's activities allocated to a certain task that sum to fulltime employment status.

Sources: OPPT 1993 Operating Plan, OTS 1990 Annual Report, OPPT-IMD 1991, Kearney-Centaur 1991, OPM 1994.VII-5 the savings to industry associated with the use of non-5(e) SNURs ranges from $64,817 to $108,985 for

the 1,000 submission scenario, $130,085 to $218,727 for the 2,000 submission scenario, and $195,127 to

$328,090 for the 3,000 submission scenario.

To calculate the estimated savings to the Agency that will result from the amendments, the

number of PMNs expected to submit under this amendment is multiplied by the amended Government unit

cost and subtracted from the same number of submissi ons times the baseline unit costs of review. This

calculation results in an estimated savings of $164,448 to $213,120 for the 1,000 submission scenario,

$330,038 to $427,720 for the 2,000 submission scenario, and $495,057 to $641,580 in the 3,000

submission scenario.VIII-1 VIII. IDENTIFICATION AND ANALYSIS OF REGULATORY OPTIONS

This chapter provides an analysis of the alternatives that were considered for each of the

amendments discussed in the previous four chapters. The costs anticipated under these alternatives are

compared to the preferred option, which is defined as the situation in which all of the amendments are

promulgated simultaneously. Because of data limitations, however, the relative costs and benefits of

many of these options compared to the preferred option are not quantifiable.

The remainder of this chapter discusses various regulatory options that may affect costs and is

structured as follows:

! section A presents a summary of the costs associated with the preferred option;

! section B compares the costs associated with alternatives to the polymer exemption to the preferred option;

! section C compares the costs associated with the procedural amendment alternatives to the preferred option;

! section D compares the costs associated with alternatives to the low volume and low

release and exposure exemptions amendment to the preferred option;

A. Total Preferred Option Costs

Table VIII-1 presents the total quantified costs for the preferred option for amendments to

notification requirements required under the TSCA Se ction 5 New Chemicals Program. As the table

indicates, the total quantified costs under these amendments are estimated to be between $13.1 and

$18.3 million for the 1,000 submission scenario, which represents a societal savings of between $5.8 and

$8.9 million annually compared to the baseline. Similarly for the 2,000 and 3,000 submission scenarios,

the total costs are estimated to be between $26.2 and $36.8 million and between $39.3 and $55.1 million,

and the societal savings are estimated to be between $11.6 and $17.8 million andVIII-2 Table VIII-1. Total Quantifi ed Costs for Preferred Option of New Chemicals Program Amendments (1993 dollars)

1000 Submission Scenario 2000 Submission Scenario 3000 Submission Scenario

Cost Element Low High Low High Low High

INDUSTRY

PMN a 5,895,055 8,496,743 11,831,047 17,052,491 17,746,571 25,578,737

Polymer Exemption 66,080 165,200 131,936 329,840 198,016 495,040

LVE 3,489,628 4,938,704 6,979,256 9,877,408 10,468,884 14,816,112

LoREX exemption 1,692,730 2,395,640 3,385,460 4,791,280 5,078,190 7,186,920

Bona Fide 312,200 362,375 623,000 723,125 935,200 1,085,500

Chemical ID Change 85,610 85,610 171,150 171,150 256,760 256,760

NOC Form 22,940 45,570 45,880 91,140 68,820 136,710

Industry Subtotal $11,564,243 $16,489,842 $23,167,729 $33,036,434 $34,752,441 $49,555,779

Industry Baseline $16,872,041 $24,499,644 $33,750,179 $49,009,150 $50,631,332 $73,522,161

Industry Increment -$5,307,798 -$8,009,802 -$10,582,450 -$15,972,716 -$15,878,891 $23,966,382

GOVERNMENT

PMN a 970,272 1,204,704 1,947,282 2,417,774 2,920,923 3,626,661

Polymer Exemption 12,390 16,225 24,738 32,395 37,128 48,620

LVE 364,748 437,376 729,496 874,752 1,094,244 1,312,128

LoREX Exemption 176,930 212,160 353,860 424,320 530,790 636,480

Bona Fide 49,729 57,311 99,235 114,365 148,964 171,676

Chemical ID Change -61,150 -69,711 -122,250 -139,365 -183,400 -209,076

Government Subtotal $1,512,919 $1,858,065 $3,032,361 $3,724,241 $4,548,649 $5,586,489

Government Baseline $1,426,562 $2,177,047 $2,854,009 $4,355,149 $4,279,517 $6,531,329

User Fee Transfer -$596,160 -$596,160 -$1,196,460 -$1,196,460 -$1,794,690 -$1,794,690

Government Increment -$509,803 -$915,142 -$1,018,108 -$1,827,368 -$1,525,558 -$2,739,530

TOTAL QUANTIFIED AMENDED COSTS $13,077,162 $18,347,907 $26,200,090 $36,760,675 $39,301,090 $55,142,268

TOTAL QUANTIFIED INCREMENT -$5,817,601 -$8,924,944 -$11,600,558 -$17,800,084 -$17,404,444 -$26,705,912

Note: User fees are not listed separately under Industry costs because they are included in the estimated Industry unit costs. Compared to the baseline the transfer is expected to decrease $610,650 in the 1,000 submission scenario, $1,219,230 in the 2,000 submission sce nario, and $1,829,880 in the 3,000 submission scenario.

a The costs given in this table for PMN submissions incl ude the savings associated with the issuance of non-5(3) SNURs.

Source: Tables III-13, IV-6, V-3, VI-11, VI-12, and Chapter VII.VIII-3 between $17.4 and $26.7 million respectively.

B. Polymer Exemption Amendment Options

Several alternatives to the preferred option for the polymer exemption amendments are

considered. The first alternative would require no reporting on the part of those commencing the

manufacture or import of polymers meeting the exemption criteria. There would be some on-site

recordkeeping requirements. Each submitter would be required to retain records that document that the

polymer meets the eligibility requirements set forth in the exemption. In addition, exemption holders would

be required to keep records of commencement and a ce rtification stating compliance with the exemption

criteria. Since most of these records would be generated during the normal manufacturing or import

process, only minimal burden would be placed on the facility to create and maintain these records. The

total savings associated with this alternative for the 1,000 submission scenario would be between

$4,938,732 and $7,188,663.

The second alternative would exempt certain sa lts of polymers that are listed on the TSCA

Inventory. This proposal has the potential to further increase the number of submissions eligible for the

polymer exemption. This would decrease costs to the submitter and to the Agency associated with the

review of the substances. Although it is known t hat the Agency reviewed 500 PMNs of salts of TSCA

Inventory-listed polymers during FY90, data has not been available on what percentage of these PMNs

are already captured in the preferred polymer exem ption scope. It therefore has not been possible to

estimate the savings that would result from this option. One other unquantified cost associated with this

alternative is the increased uncertainty associated with health and environmental effects that would result

if these polymers were eligible for exemption.

A third alternative would allow an expedited 21-day review of all polymers not meeting the

exemption criteria, which could be extended to 90 day s, if necessary. Assuming that the information

requirements for submissions under this option are the same as for a full PMN, the only change in

quantified costs resulting from this alternative w ould be reduced delay costs to industry. Using the

methodology discussed in Chapter II, the value of t he 69 days (compared to the base case) that would be

eliminated from the delay is between $6,448 and $10,803 per submission. Because the polymer

amendment is estimated to cover 67 percent of all polymers, 148 additional polymers in the 1,000VIII-4 submission scenario may receive the abbreviated review . Thus, the total savings in the 1,000 submission

scenario would be between $954,304 and $1,598,844. Data ar e not available to estimate the number of

currently exempt submissions that would have had EPA review extended to 90 days.

The Agency also considered an alternative exempti on that would require a manufacturer to notify

EPA that a polymer is being manufactured under the exemption and provide some basic information on

the manufacturing process and the chemical identity. This alternative would result in costs to the Industry

and Government for submission development and revi ew, respectively. For the 1,000 submission

scenario, compared to the preferred option, this alternative would result in $4,968,749 and $7,160,815 in

total societal savings. These costs may be offset somewhat by the decreased risk associated with

increased information provided to EPA, which has not been quantified.

C. Procedural Amendment Options

The Agency has proposed two alternatives that would define how submitters would obtain the

correct chemical identification. In one alternative, submitters would be required to obtain the information

directly from CAS and the Agency would work wit h CAS to resolve any disagreements regarding the

identification. In the other alternative, CAS regi stry numbers would be required for all non-CBI substances

regardless of whether or not the registry number already exists. It has not been possible to quantify the

difference in the costs of these two options, howev er, the estimated $70 fee identified for obtaining the

identity from CAS is expected to be similar to the cost of obtaining the identification from other sources.

Furthermore, the number of cases for which there is a disagreement regarding the correct identification is

small, indicating that additional co sts are likely to be insignificant.

As an alternative to the proposed amendment to the "two percent rule," EPA has considered

changing to a five percent rule based on the amount c harged. Although it is expected that this option

would increase the number of polymer submissions that could be avoided as well as improve industry

flexibility relative to the preferred option, uncertainty and the potential for increased risks to human health

and the environment would also increase. Data limitations have not allowed these effects to be quantified

for either this alternative or the preferred option.VIII-5 D. Low Volume Exemption and Low Release/Low Exposure Exemption Amendment Options

Two alternatives to the low volume amendment also were considered. One involved raising the

low volume production ceiling to 5,000 kgs. The other would have raised it to 25,000 kgs with a toxicity

testing requirement. Assuming the same percentage of eligible submissions elect the low volume

exemption under these alternatives as under the current exemption, the projected number of LVEs in the

1,000 total submission scenario would be 224 for the 5,000 kg exemption or 329 for the 25,000 kg

exemption (RIB PMN Database 1990). There is more uncertainty for the 25,000 kg exemption submission

projection than for either the 5,000 kg or the preferred option because the requirement for toxicity testing

may reduce the percentage of submitters electing the exemption. Assuming the same unit costs apply to

submissions under these alternatives as for the prefe rred option, the 5,000 kg exemption would result in

an increased cost of between $252,368 and $450,016 when compared to the preferred option in the 1,000

submission scenario. The change in cost for the 25,000 kg exemption compared to the preferred option

could not be calculated because no data on the costs of t he required testing are available. It is expected,

however, that the cost of this testing would result in a significant increase in the total cost for this

alternative compared to the preferred option.

One alternative to the proposed LoREX exemption that was considered is a more narrowly

defined exemption for Site Limited Intermediaries (S LIs). It was estimated that only 0.5 percent of

submissions would qualify as SLIs. Thus, the number of chemicals eligible for this exemption under the

1,000 total submission scenario is projected to be 5. As a result of the decreased number of submissions

eligible for exemption, the societal savi ngs would be reduced by $1,012,400 to $1,573,900 when

compared to the preferred option.IX-1 IX. EFFECTS OF THE AMENDMENTS ON SMALL ENTITIES

In September 1980, Congress enacted the Regulator y Flexibility Act (P.L. 96-354), requiring that

regulatory agencies consider the potential effects of regulations on small entities. According to EPA's

April 1992 guidelines for implementing the Regulatory Flexibility Act, if small entities are subject to

proposed regulatory activities, the A gency must develop and consider regul atory alternatives that would

reduce the impact on small entities.

This section focuses on the specific impacts that these amendments will have on those small

entities that would be subject to regulation and examines ways to mitigate these impacts. The first section

presents small entity definitions, and the second section presents an analysis of the number of small

entities. Following these sections is a discussion of the requirements of the Regulatory Flexibility Analysis

and a summary of the regulatory impacts on small entities.

A. Small Entity Definition

The Federal definition of "small entities" includes small businesses, small not-for-profit

organizations, and small governmental jurisdictions (USEPA 1982). No small not-for-profit organizations

and government jurisdictions will be affected by the amendments, and therefore, "small entity" has been

considered synonymous with small business for this analysis.

The current definition of small businesses under Se ction 8(a) of TSCA includes those firms whose

annual sales, when combined with the annual sales of their parent company, if applicable, are less than or

equal to $40 million, and that manufacture less than 100,000 pounds of a regulated substance per site.

Firms that generate $4 million or less in annual sales are considered small businesses regardless of

production volumes (40 CFR 704.3).

Additionally, the Office of Policy, Planning, and Evaluation of the USEPA has established

guidelines for determining small business cut-offs in implementing the Regulatory Flexibility Act (RFA).

Each 4-digit SIC code is given either a monetary or number of employees limit below which businesses

are considered to be small businesses. For SIC Major Group 28 -- Chemicals and Allied Products -- either

500, 750, or 1,000 employees is designated as the sm all business cut-off depending on the four digit SIC

code in question (13 CFR 121.601).IX-2 B. Number of Small Businesses

Although it has not been feasible to definitively establish and quantify the impact on small

businesses for the various amendments because of data limitations and limited resources available for this

analysis, the Agency feels that small firms may be affected by the amendments under some options and

definitions of small business. In order to explore this possibility, data on firm size and sales are used to

evaluate certain regulatory options that may le ssen the economic impact of the amendments on small

businesses.

As stated above, the small business cut-off for SIC Major Group 28 -- Chemicals and Allied

Products -- is based on the number of employees. Dependi ng on the 4-digit SIC code, the cut-off is either

500, 750, or 1,000 employees. It was not practical to allocate each company to a specific 4-digit SIC

code, but because there are a significant number of companies with 500 or fewer employees, the data

indicate a significant portion of the industry can be c onsidered small businesses. Table IX-1 presents the

company data for each of the 239 companies that repor ted employee size information for TSCA Section 5

submissions received in Fiscal Year 1989 (FY89). As the table indicates, 44 percent of companies

reporting employee data in 1989 had 500 orTable IX-1. Employee Size Category for Companies Submitting PMNs in FY89

Number of Number of Percentage Cumulative Percentage Cumulative Employees a Companies of Companies b Percentage of PMNs b Percentage (companies) (PMNs)

0- 500 104 44% 7% 23% 23% 501- 750 14 6% 50% 4% 27% 751-1,000 9 4% 54% 2% 29% >1,000 112 47% 100% 72% 100%

Total 239 100% 100%

a Number of Employees are for the parent company, when applicable.

b Percentages may not add to 100 because of rounding.

Source: RIB PMN Database.

IX-3IX-4 fewer employees, while 54 percent had fewer than 1,000 employees. These companies accounted for

between 23 percent and 29 percent of the Section 5 notices received that year.

Additionally, annual sales information was developed from PMN submissions for companies that

submitted TSCA Section 5 Notices in FY89. Annual sales data were available for 230 companies that

submitted at least one PMN in FY89. These compani es accounted for 95 percent of the PMNs submitted

that year. Table IX-2 shows that, of those companies for which specific figures were available, 37 percent

had annual sales equal to or below $40 million (16 percent of companies had sales less than or equal to

$4 million), while another 35 percent had sales in excess of $500 million. The firms with annual sales less

than $40 million accounted for 18 percent of the PMN submissions in 1989.

The breakdown presented in the both Tables IX-1 and IX-2 illustrates that the regulated industry

seems to be comprised of large proportions of small and large companies, with a limited number of

intermediate-sized businesses. Thus, small businesse s comprise a significant portion of the industry and

may be adversely affected by certain regulatory efforts.

C. Regulatory Flexibility Analysis and Impacts on Small Businesses

According to EPA's Guidelines, a Regulatory Flexibilit y Analysis must identify options that mitigate

the effects of the rule on the small business portion of the regulated community. In the previous section, it

has been shown that there are a significant number of entities that are small businesses. As such,

regulatory flexibility options that could lessen the im pact on this portion of the regulated community must

be examined. Unfortunately, it was not feasible to establish definitively either theTable IX-2. Annual Sales of Companies Submitting PMNs in FY89

Annual Sales a Number of Percentage of Cumulative Percentage Cumulative ($ million) Companies Companies b Percentage of PMNs b Percentage (companies) (PMNs)

0-1 16 7% 7% 1% 1% >1-4 21 9% 16% 5% 6% >4-10 14 6% 22% 3% 9% >10-20 20 9% 31% 3% 12% >20-30 4 2% 33% 3% 15% >30-40 9 4% 37% 3% 18% >40-100 16 7% 44% 5% 23% >100-500 49 21% 65% 11% 34% >500 81 35% 100% 66% 100%

Total 230 100% 100%

a Annual sales are for the parent company, when applicable.

b Percentages may not add to 100 because of rounding.

Source: RIB PMN Database.

IX-5IX-6 magnitude of the impact on small businesses, or the proportion of small businesses that would be affected

by the amendments. The Agency believes, however, that because the focus of the amendments is to offer

an increased number of exemptions and thus increase the flexibility and decrease the regulatory costs for

a significant number of new chemicals, any negat ive impacts on small businesses should be outweighed

by the cost savings associated with reduced reporting requirements.

The most important feature of the amendments that may lessen the economic impact on small

businesses is the increased flexibility that they provi de. By offering the opportunity for an exemption to a

broader range of chemicals, the amendments allow small businesses to reduce their compliance costs

through decreased submission and delay costs. It is im portant to note that none of the exemptions are

mandatory, and if a company decides that it would be better off submitting a full PMN, it is allowed to do

so, thus avoiding potential impacts of the amendments. In some cases, chemicals may be eligible for

more than one class of exemption and a company will again be able to select the submission option that it

feels is most to its advantage.X-1 X. EFFECTS OF THE AMENDMENTS ON INNOVATIVE ACTIVITY

Compared to current regulations, the amendments are likely to change reporting costs, numbers

and types of submissions, and the length of delay fo r product introductions. These changes have direct

impacts on commercialization and costs, which can spawn indirect effects, such as changes in the nature

of research, the number of new products developed, and the types of products developed.

For purposes of this rule, direct changes in t he reporting requirements may result in indirect

effects on innovation for two reasons. First, the reduced overall regulatory requirements and associated

costs of the amendments may increase the overall profitability of the industry and, thus, encourage both

capital investment and R&D for new chemicals and rela ted products. Second, by expediting or exempting

the development of specific types of new chemical s, particular portions of R&D or innovation may be

encouraged, relative to other chemical types that are not eligible for exemption.

This chapter examines the indirect or "hidden" e ffects on innovation in the chemical industry that

may be a consequence of the direct effects of changing the regulations, and t heir possible consequences

for the economy and social welfare. The chapter is divided into two sections as follows:

! Section A presents an overview of the issues covered in the chapter; and

! Section B presents selected conclusions relevant to the choice of regulatory options.

A. Overview of the Potential Effects on Innovation

The potential impacts of the amendments on innovation are briefly outlined in this section. In the

course of this outline, the methodology of the chapter is introduced.

1. Direct Effects

Overall, the direct effects of the amendments are a reduction in time and expense

associated with reporting to the federal government and reduced costs associated with shorter delays in

bringing new products to market. The direct effects of these amendments on numbers of submissions and

reporting costs are quantified in Chapters IV through VIII. Several of the provisions are aimed specifically

at reducing costs and delays for certain submissions . These include: an expanded polymer exemption, a

low release and exposure (LoREX) exemption, a more flexible polymer identification (two percent) rule,X-2 and a non-5(e) SNUR provision.

2. Potential Indirect Effects of the Amendments on Innovation

The indirect effects of the amendments on innovation could include changes in the

number of new products developed and in the raw materials and methods used to create them. Overall,

the reduced costs and delays associated with the opti ons would suggest that more chemicals would be

developed. The orientation could shift, however, to products that will be less heavily regulated.

For example, additional or expanded exemptions to regulation, such as those being implemented

by EPA (e.g., the low volume exemption, the LoREX exemption, and the polymer exemption), may steer

R&D and innovation toward safer, as opposed to cheaper, alternatives to existing chemicals.

These changes in innovation are measured relative to current reporting requirements. Thus, a

company may refrain from minor product modifications (even if these might benefit customers) to avoid

delays in commercializing the product caused by current EPA reporting requirements. To some extent,

however, the polymer exemption amendment and the amended two percent rule decrease reporting

requirements and increase flexibility, thus reducing this effect.

In certain instances, additional hurdles in produc t development may be desirable in cases in which

reporting significantly reduces risk. The amendments, however, seek to streamline the reporting process

by shifting the focus from the review of low-risk substances towards the review and management of highrisk substances. This should result in an increase in innovation, without posing an increased risk to

human health or the environment.

B. Summary of Important Implications

This chapter contains a number of implications that policy makers should consider in assessing

the impacts of each of the amendments.

(1) Given that reporting costs of any particular size are much less likely to cause an otherwise profitable project to be canceled if the project is relatively large in magnitude (with large expected returns), the innovation impact of the New Chemicals Program would tend to fall on smaller or less profitable projects. While the projects lost as a result of increased reporting costs are not likely to have provided major private benefits individually, cancellation of a large number of small projects could lead to a significant innovation cost. By exempting more low volume projects, the amended exemptions will tend to reduce this existing impact of the New Chemicals program on innovation.X-3 (2) The cases for which a valuable new product is most likely to be abandoned involve long delays in commercialization induced by the regulatory review process or a long series of reporting steps that impose significant costs at each stage. By taking the steps set forth in the amendments, delay and innovation impacts can be averted for any projects not posing potential risks to human health or the environment.

In general, the amendments will tend to mitigate any impact that the current reporting

requirements of TSCA Section 5 have on innovat ive activity. The amendments reduce the negative

effects on innovation by reducing the delays and uncerta inty that a company may face under the current

process. The increased flexibility of reporting vehicles also has a positive effect on innovation by allowing

companies to adjust product development plans more easily.