61890 Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices

1 7 U.S.C. 136a(c)(2)(D) reads as follows:

Exemption--no applicant for registration who

proposes to purchase a registered pesticide from

another producer in order to formulate such

purchased pesticide into the pesticide that is

subject of the application shall be required to --

(i) submit or cite data pertaining to such

purchased product; or

(ii) offer to pay reasonable compensation

otherwise required by paragraph (l)(D) of this

subsection for the use of any such data.

40 CFR 152.85 reads as follows:

(a) FIFRA section 3(c)(2)(D) excuses an applicant

from the requirement to submit or cite data

pertaining to the safety of any ingredient (or

mixture of ingredients) contained in his product

that is derived solely from one or more EPAregistered products which the applicant purchases

from another producer.

(b) If the product contains one or more

ingredients eligible for the formulators’ exemption,

the applicant need not comply with the

requirements of §§ 152.90 through 152.96 with

respect to any data requirements pertaining to the

safety of any such ingredient, provided that he

submits to the Agency a certification statement

containing the following information . . .

(1) Identification of the applicant, and of the

product by EPA registration number or file symbol;

(2) Identification of each ingredient in the

pesticide that is eligible for the formulators’

exemption, and the EPA registration number of the

product that is the source of that ingredient;

(3) A statement that the listed ingredients meet

the requirements for the formulators’ exemption;

(4) A statement that the applicant has submitted

(either previously or with the current application)

a complete, accurate and current Statement of

Formula; and

(5) The name, title and signature of the applicant

or his authorized representative and the date of

signature.

(c) An applicant for amended registration is not

required to submit a new formulators’ exemption

statement, if the current statement in Agency files

is complete and accurate.

ENVIRONMENTAL PROTECTION

AGENCY

[OPP–68017; FRL–5755–7]

Termilind Limited; Notice and Order of

Revocation of Registrations

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Notice; Notice and Order of

Revocation of Registrations and Final

Determination Governing Sale and Use

of Existing Stocks.

SUMMARY: In March of 1996, EPA issued

registrations for two end use

napthalenaecetic acid (NAA) products,

Alphaspra 200 (EPA Registration

Number 67223-2) and Alphaspra 800

(EPA Registration Number 67223-1) to

Termilind Limited (Termilind). On

August 2, 1996, Amvac Chemical

Corporation (Amvac) filed a petition to

cancel the Termilind registrations based

upon assertedly false certifications that

Termilind would use Amvac-registered

material to formulate its products.

Amvac filed a second petition in

October of 1996 asking EPA to deny

Termilind’s application for a technical

NAA registration based upon an

assertion that Termilind

misappropriated data to support the

application. EPA has determined that

Termilind submitted misleading

materials in support of its applications

for end-use registrations, and that the

registrations would not have been

granted absent this misleading

information. On August 6, 1997, EPA

issued a Decision granting Amvac’s

petition in this regard and revoking the

end-use registrations. In that same

Decision, EPA denied Amvac’s petition

to deny Termilind’s application for

technical registration. The revocation

Decision, and a subsequent

determination concerning the sale and

distribution of existing stocks of the

revoked products, are published in this

Notice.

DATES: The revocation Decision was

effective as to Termilind on August 6,

1997. The Decision and existing stocks

determination are effective as to all

other persons on November 19, 1997.

Any person interested in requesting an

informal hearing should submit such a

request by January 20, 1998.

ADDRESSES: Request for a formal hearing

should be addressed to: Robert Perlis,

Office of General Counsel (2333),

Environmental Protection Agency, 401

M St., SW., Washington, DC 20460.

FOR FURTHER INFORMATION CONTACT: By

mail: James J. Jones, Registration

Division, Office of Pesticide Programs,

Environmental Protection Agency, 401

M St., SW., Washington, DC 20460.

Office location, telephone number, and

e-mail address: Rm. 713, 1921 Jefferson

Davis Hwy., Arlington, VA, 703-305-

5446, e-mail:jones.james@epamail.gov.

SUPPLEMENTARY INFORMATION: Unit I. of

this document contains the Agency’s

August 6, 1997 decision on the petition

to revoke the registrations, and Unit II.

consists of the Agency’s existing stocks

determination.

I. Decision on Amvac’s Petition to

Revoke Termilind Limited’s

Registrations

Petitioner Amvac Chemical Corporation

(Amvac) seeks immediate revocation of

respondent Termilind Limited’s (Termilind)

registrations for two end use

naphthaleneacetic acid (NAA) registrations,

Alphaspra 200 (EPA Registration No. 67223-

2) and Alphaspra 800 (EPA Registration No.

67223-1). Amvac also seeks revocation of

Termilind’s technical NAA registration, (EPA

Registration No. 67223-22). Amvac claims

that the end use registrations were obtained

through willful misrepresentation of the

source of technical NAA, and that the

technical registration was obtained through

the submission of data ‘‘stolen’’ or

‘‘misappropriated’’ from Amvac. Amvac

asserts, as well, that the willful nature of

Termilind’s acts authorizes summary

revocation of the subject registrations

without resort to the procedural requirements

of section 6(b), the cancellation provision of

the Federal Insecticide, Fungicide, and

Rodenticide Act (FIFRA). We grant the

petition with respect to the two end use

registrations, and deny the petition with

respect to the technical registration.

Legal Background

The sale, distribution and use of pesticides

in the United States is regulated by the

Federal Insecticide, Fungicide, and

Rodenticide Act. 7 U.S.C. 136-136y. Under

FIFRA, with certain limited exceptions, a

pesticide may not be sold or distributed

unless it is registered. Id. 136a(a),

136j(a)(1)(A). In order for a pesticide to

qualify for registration, the Environmental

Protection Agency (EPA) must determine that

it will not cause unreasonable adverse effects

on the environment when used in accordance

with widespread and commonly recognized

practice. Id. 136a(c)(5)(C)-(D). To make this

finding, EPA reviews data on product

chemistry, toxicology, and environmental

fate, among other subjects. See 40 CFR part

158 (data requirements for registration). The

data reviewed must be supplied by the

registrant; it is not generated by the Agency.

Id. Because the volume of data received and

reviewed by the Agency is extremely large,

EPA is unable to investigate each statement,

study and item of data received for potential

fraud or misrepresentation. Thus, to a great

degree, the Agency must rely on the good

faith and integrity of registrants if it is to

fulfill its mandate of protecting human health

and the environment from unreasonable risk.

A registrant can fulfill its obligation to

submit much of the data required for

registration by formulating its product with

an existing registered pesticide purchased

from another producer. See 7 U.S.C.

136a(c)(2)(D); 40 CFR 152.85 (Formulators’

exemption).1 The premise behind the

formulators’ exemption is that the purchase

price of the registered material compensates

the original registrant for the cost of data

generation. See id.

In the case of certifying eligibility for the

formulators’ exemption, good faith on the

part of applicants is critical. When an

applicant certifies that it will formulate its

product using a registered pesticide as the

active ingredient, it is excused from the

requirement of submitting data pertaining to

the safety of that ingredient. See id. Instead,

the Agency bases its risk analysis of that

ingredient on the data received from the

registrant of the original product. If the

applicant does not then use the registered

product cited, the risk assessment performed

by the Agency, and any safety finding

premised upon it, are unreliable--they may

not reflect the nature or contents of the new

product. Thus the Agency’s ability to carry

out its mandate of protecting human health

and the environment is undermined.

Regulatory History

Termilind cited Amvac Chemical Corp. of

Los Angeles California as the source of the

technical NAA active ingredient in
Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices 61891

2 Section 558(c) of the APA reads in pertinent

part:

Except in cases of willfulness or those in which

public health, interest or safety requires otherwise,

the withdrawal, suspension, revocation, or

annulment of a license is lawful only if, before the

institution of agency proceedings therefor, the

licensee has been given--

(1) notice by the agency in writing of the facts or

conduct which may warrant the action; and

(2) opportunity to demonstrate or achieve

compliance with all lawful requirements.

applications for two end use NAA

registrations submitted to EPA in September

1995. Termilind also certified to EPA that it

was eligible for the formulators’ exemption.

On the basis of that information, EPA granted

the two registrations in March of 1996.

In July 1996, EPA Region X issued a Stop

Sale, Use, or Removal Order (SSURO)

prohibiting the sale or distribution of

Termilind’s two end use NAA products.

Records obtained by EPA from an Oregon

Department of Agriculture investigation

revealed that technical NAA product had

been shipped from Seoul, South Korea by

Inchema Company, to Oregon California

Chemicals Inc. (Or-Cal), a contractor for

Termilind. EPA issued the SSURO on the

grounds that the Agency believed that ‘‘the

supplier of [NAA] for the [end use products]

is different than what was listed in

[Termilind’s] confidential statement of

formula [CSF] for these products’’ in

violation of FIFRA section 12(a)(1)(C)

(unlawful to distribute or sell pesticide

composition of which differs at time of

distribution from composition described in

CSF). 7 U.S.C. 136j(a)(1)(C). The order

remained in effect until September 23rd,

when Termilind amended the CSFs of the

two products to reflect the use of its own

technical NAA, which was registered by EPA

that same month. This matter was followed

up with a Warning Letter, mailed to

Termilind on December 16, 1996, in which

Region X confirmed the Agency’s conclusion

that a violation of FIFRA section 12(a)(1)(C)

had occurred. Id.

On August 2, 1996, Amvac submitted its

first petition for revocation, which concerned

the two Termilind end use registrations. In

the petition, Amvac claimed that the

registrations were issued based on ‘‘false

certifications to EPA. . . that Termilind’s two

products would be formulated from Amvac’s

EPA-registered technical naphthalene acetic

acid (NAA) and thus qualify for the

formulators’ exemption.’’ Amvac stated that

it was the only source of registered technical

NAA, and that although Termilind cited

Amvac as its source of technical NAA in the

registration materials submitted for two end

use products, neither Amvac nor any of its

distributors had sold any technical NAA to

Termilind. Amvac claimed, as well, that

neither it nor its distributors had discussed

sales of technical NAA with Termilind.

In early October, shortly after the SSURO

was lifted, Amvac submitted a second

petition for revocation, this one concerning

the registration of Termilind’s technical NAA

product. In that petition Amvac asserted that

‘‘Termilind willfully misappropriated

confidential business information (CBI) to

obtain the Technical Registration,’’ and

requested that the registration be revoked on

that basis.

Amvac asserts that in 1994 it entered into

an arrangement with Shin Young C-Tech Co.,

Ltd. (C-Tech), a South Korean company, and

its U.S. agent, Inchema, Inc., whereby CTech/Inchema would manufacture technical

NAA for Amvac. In its second petition,

Amvac stated that it supplied CBI to C-Tech/

Inchema for the purposes of carrying out this

business arrangement. The CBI was allegedly

the subject of a confidentiality agreement,

pursuant to which C-Tech/Inchema was

forbidden to disclose it to third parties for

any purpose. It is this CBI which Amvac

claims Termilind ‘‘misappropriated’’ and

submitted to EPA in support of a technical

NAA registration.

Amvac failed to serve copies of either

petition on Termilind, arguing in each that

the willful nature of Termilind’s conduct

warranted summary revocation, without

prior notice or an opportunity to be heard.

Amvac cited section 558 of the

Administrative Procedures Act (APA) as

authority for this proposition.2

EPA forwarded copies of the two petitions

to Robert Fisher, Termilind’s regulatory

agent. A copy of the first petition was mailed

to Mr. Fisher on September 5, 1996; a copy

of the second was sent on November 25.

Termilind did not respond to either petition.

On December 6, EPA formally invited

Termilind to respond to the allegations

contained in the two petitions and set a

deadline of December 20 for receipt of a

response.

After receiving and reviewing Termilind’s

response, EPA determined that further

development of both legal and factual issues

was warranted prior to issuing a decision.

EPA sent an identical set of questions to each

party and, again, invited them to respond.

Via the same letter EPA established a series

of procedures to govern communications

between Agency personnel and

representatives of Amvac or Termilind

concerning the merits of the ongoing dispute.

In addition to petitioning EPA to revoke

Termilind’s registrations, Amvac has also

initiated legal proceedings against Termilind

in the United States District Court for the

District of Oregon, seeking, among other

things, a preliminary injunction to enjoin

Termilind from maintaining any registrations

for products containing NAA, and to prohibit

Termilind from selling, marketing or

distributing any product containing NAA. By

order dated January 17, 1997, Amvac’s

motion was denied. The issue of whether

Termilind misappropriated CBI owned by

Amvac and submitted such in support of its

technical NAA registration is still before the

District Court.

Based on the materials submitted by both

parties in response to the questions posed by

the Agency, EPA makes the following

findings of fact:

Findings of Fact

(1) Respondent Termilind Ltd. is a person

and a registrant as defined by FIFRA. (7

U.S.C. 136(s), (y))

(2) Petitioner Amvac Chemical Corp. is a

person and a registrant as defined by FIFRA.

(7 U.S.C. 136(s), (y))

(3) Jerry Fitzsimmons is the president of

Termilind, Ltd. (Affidavit of Jerry

Fitzsimmons, November 6, 1996, at 1)

(4) J. R. Fisher is the principal of Fisher

and Associates, a regulatory agent providing

services to companies seeking registration of

products with EPA. (Affidavit of J. R. Fisher,

November 6, 1996, at 1)

(5) J. R. Fisher has been a regulatory agent

providing services to companies seeking

registration of products with the EPA since

1981. (Affidavit of J. R. Fisher, December 31,

1996, at 2)

(6) J. R. Fisher prepared and submitted the

application materials for Termilind’s end use

registrations. (Affidavit of J. R. Fisher,

December 31, 1996, at 4)

(7) Shin Young C-Tech Co., Ltd. (C-Tech)

is a South Korean company. (Affidavit of Eric

Wintemute at 4)

(8) Inchema, Inc. is the United States Agent

for C-Tech. (Affidavit of Eric Wintemute at 5)

(9) In or about July 1995, J. R. Fisher and

Jerry Fitzsimmons met with Hans Wessel and

Steve Shim of Inchema regarding the

purchase of technical NAA. (Affidavit of J. R.

Fisher, December 31, 1996, at 2)

(10) Inchema had manufactured technical

NAA for Amvac. (Affidavit of Eric

Wintemute at 5)

(11) Amvac rejected the last batch of NAA

produced by Inchema/C Tech. (Affidavit of J.

R. Fisher, November 6, 1996, at 2)

(12) Termilind was aware that the

technical NAA it purchased from Inchema/CTech had been rejected by Amvac. (Affidavit

of J. R. Fisher, November 6, 1996, at 2)

(13) Termilind cited Amvac Chemical

Corp. of Los Angeles California as the source

of the technical NAA active ingredient in its

applications for two end use NAA

registrations, submitted to EPA in September

1995. (Affidavit of J. R. Fisher, November 6,

1996, at 2; Warning Letter issued to

Termilind Ltd. by EPA Region 10, December

16, 1996) These registrations were granted in

March of 1996. (Alphaspra 800, EPA

Registration No. 67223-1 granted March 15,

1996; Alphaspra 200, EPA Registration No.

67223-2 granted March 26, 1996)

(14) Termilind certified that it was eligible

for the formulators’ exemption, 7 U.S.C.

136a(c)(2)(D); 40 CFR 152.85. (Formulators’

exemption statement submitted by

Termilind)

(15) Termilind cited Amvac’s product

labels and material safety data sheet in

applications for end use NAA registrations

submitted to EPA in September 1995.

(Affidavit of J. R. Fisher, December 31, 1996,

at 3)

(16) Termilind had Inchema/C-Tech

formulate unregistered technical NAA into

end use product for import into the United

States. These products bore Termilind’s EPA

registration number for the end use NAA

product Alphaspra 800. (Affidavit of J. R.

Fisher, November 6, 1996, at 2; affidavit of

J. R. Fisher, December 31, 1996, at 4)

(17) Termilind did not obtain samples of,

or perform any tests upon, the technical NAA

product used to formulate the Alphaspra 800.

(Affidavit of J. R. Fisher, December 31, 1996,

at 3).

(18) Under 19 CFR 12.112, ‘‘an importer

desiring to import pesticide or devices into
61892 Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices

3As the above definition notes, ‘‘wi1ful’’ behavior

encompasses conduct that is grossly negligent as

well as conduct that is intentional. Thus, even if

Termilind did not act with intent to deceive the

Agency, but was merely grossly neglectful of its

statutory duties, the outcome would be the same.

4Petitioner claims pursuant to section 558(c) of

the Administrative Procedure Act that in light of

Termilind’s willful misrepresentation, the Agency

can revoke the registrations summarily without

providing notice or opportunity for comment. As

this decision documents, the Agency has given

Termilind an opportunity to respond to Petitioner’s

allegations and to submit supplemental briefing.

Thus, the Agency has given Termilind more process

than section 558(c) requires.

the United States shall submit to the

Administrator a Notice of Arrival of

Pesticides and Devices . . . prior to the arrival

of the shipment in the United States.’’

(emphasis added). Termilind did not submit

the required Notice of Arrival of Pesticides

and Devices until 3 months after the

shipment of NAA product had arrived in the

United States from Korea. The Notice was

filed only after EPA Region X discovered

NAA product shipped from Korea in the

possession of Or-Cal, a Termilind licensee.

(Notice of Arrival submitted July 13, 1996)

(19) Termilind sold pesticide products

formulated with unregistered Inchema/CTech NAA in the United States. (Stop Sale,

Use, Or Removal Order issued to Termilind

Ltd. by EPA Region 10, July 3, 1996; Warning

Letter issued to Termilind Ltd. By EPA

Region 10, December 16, 1996)

(20) Termilind never purchased or

attempted to purchase Amvac’s registered

technical NAA from Amvac or any of its

distributors. (Petition for revocation

submitted to EPA by Amvac October 9, 1996

at 4)

Decision

I.

In its second petition, dated October 9,

1996, Amvac claims that Termilind’s

technical registration was obtained through

the submission of data ‘‘stolen’’ or

‘‘misappropriated’’ from Amvac. On that

basis, Amvac asserts that the Agency must

revoke the technical registration. We deny

this petition on jurisdictional grounds.

EPA does not have the powers of a court

of general jurisdiction. Beyond the limited

realm of data compensation, see 7 U.S.C.

136a(c)(1)(F); 40 CFR 152.99, the Agency has

neither the expertise nor the authority to

adjudicate conflicts regarding ownership of

intellectual property. As noted above, this

very matter is currently before the Federal

District Court for the District of Oregon. A

court of general jurisdiction is a more

appropriate forum for the resolution of

disputes of this nature. Accordingly, Amvac’s

second petition, seeking revocation of

Termilind’s technical registration, is denied.

II.

Amvac also seeks immediate revocation of

Termilind’s two end use registrations,

claiming that they were obtained through

willful misrepresentation of the source of the

technical NAA used as the active ingredient

in the products. But for the

misrepresentation, Amvac contends, the

registrations would not have been granted;

thus they are void ab initio. Amvac also

asserts that in light of Termilind’s willful

behavior, the Agency has inherent power to

revoke these registrations without resort to

section 6 of FIFRA. We agree.

As an initial matter, we must first address

whether Termilind’s conduct was willful.

Willful misconduct had been defined as ‘‘an

intentional misdeed or such gross neglect of

a known duty as to be the equivalent

thereof.’’ Hutto Stockyard, Inc. v. USDA, 903

F.2d 299, 304 (4th Cir. 1990 (quoting Capitol

Packing Co. v. United States, 350 F.2d 67, 78-

79 (10th Cir. 1965)); see also Capital Produce

Co. v. United States, 930 F.2d 1077, 1079 (4th

Cir. 1991). Termilind has not claimed that

the material it purchased bore an Amvac EPA

approved label identifying it as a registered

product. Termilind did not purchase the

material from Amvac or an Amvac

distributor. Moreover, Termilind conceded

that it was aware that the material had been

rejected by Amvac. Nevertheless, Termilind

identified Amvac’s registered technical NAA

as its source of active ingredient.

Furthermore, Termilind certified that it was

eligible for the formulators’ exemption. This

behavior constitutes willful

misrepresentation.

Termilind cannot plausibly claim that its

conduct was innocent. Its regulatory agent, J.

R. Fisher, had 15 years experience in

providing services to clients seeking

registration of products with the EPA; he

cannot credibly argue ignorance of the law in

Termilind’s defense. Moreover, common

sense dictates that material purchased from

a party other than the registrant or its

distributors, that is known to have been

rejected by the registrant, is not that

registrant’s registered material. Termilind

does not claim that the material it purchased

bore Amvac’s label or EPA registration

number. Under no view of the facts was it

reasonable for Termilind to represent the

product purchased from Inchema/C-Tech as

Amvac registered material. Nevertheless,

Termilind cited Amvac’s product labels and

material safety data sheet in its applications

for end use registrations. This conduct was

consistent with an intent to deceive the

Agency about the origin of its technical

material, as was Termilind’s failure to submit

a timely Notice of Arrival of Pesticides and

Devices when the NAA material arrived from

Korea. If the Notice had been filed in a timely

fashion it might have drawn attention to the

fact that Termilind, though citing Amvac

Chemical Corp. of Los Angeles, California as

its source of registered technical material,

was receiving shipments of NAA product

from Korea. We conclude that Termilind’s

misrepresentation was willful.3

We next address the Agency’s authority to

revoke a registration summarily, without

resort to section 6 of FIFRA, where the

registration was procured through willful

misrepresentation.4 As a general rule, it is

well accepted that ‘‘every tribunal, judicial or

administrative, has some power to correct its

own errors or otherwise appropriately to

modify its judgement, decree or error.’’

Alberta Gas Chemicals, Ltd. v. Celanese

Corp., 650 F.2d 9, 13 (2d Cir. 1981) (quoting

K. Davis, Administrative Law Treatise

section 18.09 at 606 (1958); Bookman v.

United States, 453 F.2d 1263, 1265 (Ct. Cl.

1972) (same); see also Trujillo v. General

Electric Co., 621 F.2d 1084, 1086 (10th Cir

1980) (Administrative agencies have inherent

authority to reconsider their decisions since

power to decide carries with it power to

reconsider) (quoting Albertson v. Federal

Communications Comm’n., 182 F.2d 397,

399 (D.C. Cir. 1950)). Moreover, the Supreme

Court and other courts have recognized that

administrative agencies have implied

authority to reconsider and correct errors,

even where the applicable statue and

regulations do not explicitly grant such

powers. Gun South Inc. v. Brady, 877 F.2d

858, 862 (11th Cir. 1989) (listing cases).

Courts have relied on this implied power in

holding that agencies have the authority to

revoke licenses improperly granted. See, e.g.

Kudla v. Mode, 537 F.Supp 87, 89-90 (E.D.

Mich. 1982) (improperly granted license

revoked where licensee had failed to pass

qualifying examination; procedural

protections afforded by statute do not attach

unless requirements for obtaining license

have been met).

More specifically, courts have recognized

that agencies have the inherent authority to

correct errors and reverse judgements

induced by fraud or misrepresentation.

Alberta Gas, 650 F.2d at 13 (‘‘It is a well

established principle that an administrative

agency may reconsider its own decisions’. .

. . It is hard to imagine a clearer case for

exercising this inherent power than when a

fraud has been perpetrated on the tribunal in

its initial proceeding’’) (citations omitted);

see also Hand v. Matchett, 957 F.2d 791, 794

(10th Cir. 1992) (self evident that university

has inherent authority to revoke improperly

awarded degree where fraud shown);

Colonial Penn Insurance Co. v. Coil, 887 F.2d

1236, 1240 (revoking insurance settlement

procured through fraud); In Re Berman, 97

S.E. 2d 232, 235 (N.C. 1957) (board has

inherent power, independent of statutory

authority, to revoke license improperly

issued due to fraud or misrepresentation);

Schireson v. Shafer, 47 A.2d 665, 667 (Pa

1946) (where license was procured by fraud

licensing authority may revoke it regardless

of fact that fraud is not specified as ground

for revocation in statute); cf Hazel-Atlas

Glass Co. V. Hartford-Empire Co., 322 U.S.

238, 246 (1943) (reversing judgment in patent

infringement suit where both Patent Office

and Court of Appeals were influenced by

fraudulent misrepresentations --‘‘Public

welfare demands that the agencies of public

justice be not so impotent that they must

always be mute and helpless victims of

deception and fraud.’’) (overruled on other

grounds). In the instant case, this rule

supports the proposition that EPA has

inherent authority to revoke Termilind’s end

use registrations. Indeed, courts have

recognized that administrative agencies, as

guardians of the public interest, have a duty

to make corrections where they have relied

on erroneous information. Green County

Planning Bd. v. Fed. Power Comm’n, 559

F.2d 1227, 1233 (2d Cir. 1976; Hudson River

Fishermen’s Ass’n v Federal Power Comm’n,

498 F.2d 827, 833 (1974); Borlem S.A.

Empreedimentos Indutriais v. U.S, 718 F.

Supp 41, 47 (CIT 1989).
Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices 61893

Termilind claims that revocation is the

equivalent of cancellation and can only be

accomplished through section 6 of FIFRA. In

essence, Termilind asserts that a registrant

that has submitted false or misleading

application materials, and thereby induced

the Agency to grant a registration

erroneously, has the same interest in the

wrongly obtained registration, and is entitled

to the same procedural protections, as a

registrant that acted in good faith to meet the

requirements for registration. We find it

implausible that Congress intended

applicants who obtained registrations

through fraud to receive the procedural

protections of section 6.

Likewise, we find Termilind’s argument

that the Agency does not have the authority

to revoke registrations obtained through

fraud or misrepresentation, because FIFRA

does not specifically describe such a

procedure, equally unpersuasive. As the legal

analysis above establishes, Agencies have

inherent authority to redress fraud or

misrepresentation. See also Chevron U.S.A. v.

Natural Resources Defense Council, 467 U.S.

837, 843. 844 (1984) (‘‘Sometimes the

legislative delegation to an agency on a

particular question is implicit rather than

explicit. In such a case, a court may not

substitute its own construction of a statutory

provision for a reasonable interpretation

made by the administrator of an agency.’’).

Moreover, this conclusion is consistent with

the Agency’s statutory duty under FIFRA to

protect man and the environment from the

unreasonable adverse effects of pesticide use.

As noted above, Congress established a

scheme in FIFRA that requires registrants to

supply the data necessary to establish and

maintain FIFRA registrations. The Agency,

therefore, must be able to rely on applicants

to act with goodwill and integrity in

submitting the required data. In order to

protect the integrity of the FIFRA process and

the safety of pesticide users and the public,

the Agency must have a swift and sure

method of responding when the submission

of fraudulent or misleading application

materials is discovered. If unscrupulous

applicants receive the same procedural

protections as honest ones, there is little

incentive to be honest. Instead, the dishonest

applicants who obtain speedy registration

through fraud or misrepresentation are

rewarded for their deception. Such an

interpretation of FIFRA is contrary to the

EPA’s mandate to protect public health and

the environment.

We wish to emphasize that the quality of

the evidence available to the Agency in this

case was critical to the outcome. Sworn

statements of the parties were included in the

record, and based on these, the Agency was

able to make the factual findings necessary to

underpin a revocation action with

confidence. The Agency is very unlikely to

take similar actions in future cases unless

allegations of misrepresentation are

supported by reliable and persuasive

evidence.

III.

As noted above, Amvac’s petition to revoke

Termilind’s technical registration is denied

on the basis that, beyond its role in resolving

data compensation disputes, the Agency has

neither the expertise nor the jurisdictional

competence to adjudicate complicated issues

regarding ownership of intellectual property

rights. Nevertheless, the Agency does intend

to go forward with a Notice of Intent to

Cancel Termilind’s technical registration, but

on alternative grounds.

Although there is no explicit fitness

criterion among the requirements for

obtaining or holding a registration under

FIFRA, as a general matter, determining the

‘‘fitness’’ of an applicant to hold a license or

registration is recognized as a legitimate end

of licensing schemes. See Payne v. Fontenot,

925 F. Supp. 414, 423 (M. D. La. 1995)

(licensing body may require certain standards

of applicant; qualifications to hold license

must have rational connection to applicant’s

fitness). Furthermore, prior to granting a

registration, the Agency is required to

determine that a pesticide will not ‘‘generally

cause unreasonable adverse effects on the

environment’’ when used in accordance with

widespread and commonly recognized

practice. 7 U.S.C. 136a(c)(5). As a practical

matter, in making such a determination the

Agency must rely on data and certified

statements submitted by the registrant. The

Agency’s ability to make an accurate finding

is therefore directly related to the reliability

of the material submitted. If the Agency

knows that a registrant has a history of

willful misrepresentation, the reliability of

the materials submitted by that applicant is

subject to question. The Agency’s ability to

make an accurate finding that the statutory

standard for registration has been met is

undermined under such circumstances. A

‘‘fitness’’ or ‘‘reliability’’ criterion can

therefore properly be implied as a component

of the ‘‘unreasonable adverse effects’’

standard. Cf. Cooley v. Fed. Energy

Regulatory Comm’n, 843 F.2d 1464, 1471

(D.C. Cir. 1988) (‘‘Nothing in [Federal Power

Act] explicitly requires a finding of fitness.’’

Commission is charged with considering all

relevant public interest factors; fitness of

licensee-applicant is public interest factor);

see also Delaware River Development Corp.,

10 F.P.C. 540, 550 (1951) (‘‘ethical and moral

fitness’’ considered in public interest

determination to grant permit); see generally

Chevron U.S.A. v. Natural Resources Defense

Council, 467 U.S. 837, 843. 844 (1984)

(‘‘Sometimes the legislative delegation to an

agency on a particular question is implicit

rather than explicit. In such a case, a court

may not substitute its own construction of a

statutory provision for a reasonable

interpretation made by the administrator of

an agency.’’).

Denial of a license on fitness grounds is not

uncommon. See, e.g. RKO General, Inc., v.

Fed. Communication Comm’n, 670 F.2d 215,

232 (D.C. Cir. 1981) (F.C.C. did not abuse its

discretion in denying license renewal for lack

of candor; ‘‘[T]he Commission must rely

heavily on the completeness and accuracy of

the submissions made to it, and its

applicants, in turn have an affirmative duty

to inform the Commission of the facts it

needs in order to fulfill its statutory

mandate.’’); see also ALRA Laboratories, Inc.,

v. Drug Enforcement Agency, 54 F.3d 450,

452 (7th. Cir 1995) (DEA did not abuse its

discretion when it denied application for

new license to manufacturer and distributor

of controlled substances where manufacturer

had not complied with recordkeeping

requirements, had shipped contaminated

products, had his inventory seized and was

closed for 6 months, and was under

indictment); Dep’t Transp. Fed. Highway

Admin. v. Interstate Commerce Comm’n, 733

F.2d 105, 113 (D.C. Cir. 1984) (I.C.C.’s order

granting certificate vacated where evidence

inadequate to establish applicant’s fitness).

The licensing body is in the best position to

make determinations regarding applicant

fitness, and its decisions are entitled to

deference. Ramanchar v. Sobol, 838 F. Supp.

100, 108 (S.D.N.Y. 1993) (licensing authority

entitled to deference in assessing risks posed

by licensee). Furthermore, when making

licensing decisions ‘‘an Agency rationally

may conclude that past performance is the

best predictor of future performance.’’ ALRA,

54 F.3d at 452; Matsun Gyogyo Co., 2 O.R.W.

349 (NOAA 1980) (past violations should be

significant factor in determining whether to

issue new permit); see also Dep’t Transp.

Fed. Highway Admin., 733 F.2d at 112

(statements of good intentions in future of

limited value in assessing what applicant’s

future conduct will be).

FIFRA itself does not limit the criteria that

the Agency may consider in making a safety

calculus. Instead, as described above, the

statute dictates that the Agency must

affirmatively find that a product will not

cause unreasonable adverse effects before a

registration may be granted. Common sense

dictates that the Agency must be permitted

to consider all relevant criteria when

performing its analysis. As the discussion

above illustrates, the integrity or reliability of

a registrant is highly germane to the Agency’s

ability to make an accurate finding; if the

Agency has reason to suspect that materials

submitted by a registrant are untrustworthy,

an affirmative safety finding cannot be made.

In this case the Agency has determined

that Termilind has submitted misleading

materials in support of its applications for

registration. The Agency is therefore unable

to rely on the veracity of unsubstantiated

materials submitted by Termilind. Under

these circumstances the Agency cannot

affirmatively find that Termilind’s technical

product will not generally cause

unreasonable adverse effects on the

environment. Accordingly, it is the Agency’s

intention to undertake a section 6

cancellation of Termilind’s technical NAA

product in separate proceedings.

Order

For the reasons discussed above, EPA

hereby revokes Termilind’s registrations for

Alphaspra 200 (EPA Registration No. 67233-

2) and Alphaspra 800 (EPA Registration No.

67223-1). Existing stocks of these products

must be used in a manner consistent with

label directions.

Dated: August 6, 1997

/s/ Lynn R. Goldman

Assistant Administrator for Prevention,

Pesticides and Toxic Substances

II. Existing Stocks Determination

On August 6, 1997, in response to a

petition filed by Amvac Chemical
61894 Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices

5 Such use need not be consistent with the terms

of the previously-approved labeling of the product.

Section 12(a)(2)(G) makes it a violation of FIFRA to

use any registered pesticide in a manner

inconsistent with its labeling; there is no similar

provision making it unlawful to use an unregistered

pesticide in a manner inconsistent with its labeling.

6 FIFRA section 2(gg) exempts from the definition

of sale or distribution only the commercial

application of registered pesticides.

Corporation (‘‘Amvac’’), EPA revoked

the registrations issued to Termilind

Limited (‘‘Termilind’’) for Alphaspra

200 (EPA Registration No. 67223–2) and

Alphaspra 800 (EPA Registration No.

67223–1) after determining that

Termilind had intentionally or willfully

misidentified in its application

materials the source material from

which it intended to formulate the two

products. In the Order attached to the

Revocation Determination, the Agency

allowed use of existing stocks of the

revoked registrations, provided that

such use is consistent with existing

label directions. The Order was silent

on the question of whether existing

stocks could be sold or distributed.

EPA subsequently issued three

clarifications addressing the existing

stocks issue. On August 18, 1997, the

Acting Associate General Counsel for

Pesticides and Toxic Substances (Kevin

Lee) explained in a letter to counsel for

Amvac that inasmuch as the Order

resulted in the termination of the

registration of the products and did not

authorize any sale or distribution of the

products, such further sale or use was

unlawful under section 3(a) of FIFRA

(which generally prohibits the sale and

distribution of unregistered pesticides).

On August 20, 1997, the Agency issued

a clarification to the Order which

specifically provided that ‘‘no person

may sell or distribute stocks of

Alphaspra 200 and Alphaspra 800.’’

This clarification was followed by a

second clarification issued on August

22, 1997, which stated that the

revocations ‘‘shall be effective for

dealers and distributors upon

publication in the Federal Register.’’

Under the terms of this last clarification,

the Agency would not consider sale or

distribution of existing stocks by dealers

and distributors to be unlawful until the

Revocation Determination was

published in the Federal Register.

On August 18, 1997, Termilind filed

a request for Reconsideration and Stay

of the Revocation Order. As part of that

request, Termilind asserted that EPA

should permit sale and distribution of

existing stocks of the revoked products

in a manner consistent with EPA’s

Statement of Policy related to existing

stocks issued in the Federal Register of

June 26, 1991 (56 FR 29362). Amvac

filed a brief response to Termilind’s

request on August 26, 1997, arguing,

without responding to any of the

specific assertions made by Termilind,

that reconsideration would not be

appropriate.

On August 29, 1997, EPA indicated in

a letter to counsel for Amvac and

Termilind that the Agency intended to

carefully consider and resolve finally

the existing stocks issues raised by the

Revocation Order. This Determination

reflects the Agency’s resolution of these

existing stocks issues.

A. Legal Authority

Under section 6(a)(1) of FIFRA, the

Administrator may permit the

continued sale and use of existing

stocks of a pesticide whose registration

is suspended or canceled under section

3, 4, or 6 of FIFRA, to such extent,

under such conditions, and for such

uses as the Administrator determines is

not inconsistent with the purposes of

FIFRA. As noted above, EPA issued a

Policy Statement in 1991 outlining the

policies that would generally be

followed in making such existing stocks

determinations. The legal issue

presented is whether section 6(a)(1) and

the Policy Statement apply to the

situation addressed in the Revocation

Determination.

The Agency concluded in its

Revocation Determination that it has the

inherent authority to correct an

erroneous registration decision induced

by fraud or willful misrepresentation,

and that such authority is inherent in

the authority to issue registrations in the

first place. The Agency’s authority to

issue pesticide registrations stems from

section 3 of FIFRA. It thus seems to

follow that the inherent authority to

revoke a registration induced by fraud

or misconduct also stems from section

3 of FIFRA. The question then becomes:

Is the revocation a ‘‘cancellation under

section 3’’ for purposes of section 6(a)(1)

of FIFRA?

The Agency has concluded that there

is no meaningful distinction between a

revocation and a cancellation, and that

the revocation of Termilind’s

registration was a cancellation under

section 3 giving the Agency authority

over the sale and use of existing stocks.

Whether the action is called a

revocation or cancellation, the defining

element of the action is the termination

of a license (or in this case, pesticide

registration) previously issued by the

Agency. Cancellation is the term used in

FIFRA for the termination of a

registration; the word ‘‘revocation’’ does

not appear in the statute in this context.

Moreover, in this particular case, the

license issued by the Agency does not

just confer something of value to the

licensee (registrant); a pesticide

registration allows a pesticide product

to enter the stream of commerce where

the interests of third parties come into

play. When a pesticide registration

terminates, for whatever reason, the

termination can have immediate

consequences for all these third parties.

Unless the Agency has determined

otherwise under section 6(a)(1) or has

issued a regulation under section 3(a) of

FIFRA, existing stocks of an

unregistered pesticide may be used by

any person with impunity, without

regard to any conditions that would

have applied to the use while the

product was still registered.5 Sale and

distribution of an unregistered

pesticide, on the other hand, is unlawful

under FIFRA unless the Agency allows

such sale or distribution pursuant to

section 6(a)(1). Such a prohibition on

sale or distribution would also apply to

commercial ‘‘for-hire’’ applications of

the unregistered product.6 A

determination that a revocation is not a

cancellation under section 3 would

leave the Agency essentially powerless

to effectively condition the use of

existing stocks (even if such conditions

were necessary to prevent unreasonable

adverse effects on the environment), and

would also leave the Agency powerless

to authorize the sale of existing stocks,

even by third parties who had no

involvement in the activities giving rise

to the revocation and even where there

are no health, safety, or environmental

reasons to disallow continued sales and

where a revocation may trigger the

otherwise unnecessary disposal of

existing stocks of the revoked product.

The Agency is declining to interpret

FIFRA in a manner that would suggest

that Congress intended to give the

Agency the authority to terminate

registrations without giving the Agency

authority to deal with the existing

stocks consequences of such

terminations. The Agency concludes

that a revocation of a registration based

upon misconduct in the inception of the

registration is a cancellation under

FIFRA section 3, and provides the

Agency authority under section 6(a)(1)

to regulate the sale, distribution, and

use of existing stocks of a revoked

product.

B. Provisions for Existing Stocks

For the reasons stated above, the

Agency concludes that it has the

authority under FIFRA section 6(a)(1) to

issue an order regulating the sale,

distribution, and use of existing stocks

of revoked products. Under that section,

such sale or use may be permitted to the

extent, and under such conditions, as
Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices 61895

7 It should also be noted that the Policy Statement

does not address the issue of what existing stocks

provisions are appropriate for situations such as the

one involving Termilind, where the Agency

concludes that a registration would not have been

issued in the first place in the absence of

misconduct by the applicant for registration.

8Indeed, Amvac’s allegations that Inchema has

misappropriated Amvac proprietary technology, as

well as Amvac’s previous use of Inchema as a

source of its own NAA and the absence of any

submittals by Amvac under section 6(a)(2) of FIFRA

discussing quality problems associated with

Inchema’s production of NAA, seem to suggest that

Amvac has no dispute with the quality of material

produced by Inchema.

9Indeed, the only difference between a risk/

benefit balancing for NAA generally and a

balancing for the existing stocks is that a ban on

existing stocks would require that the stocks be

disposed of. Legal or illegal disposal of existing

stocks could have financial and/or environmental

consequences that tip the risk/benefit balance even

further towards allowance of the use of existing

stocks.

will make the sale and use consistent

with the purposes of FIFRA.

The Agency set forth in its Policy

Statement on existing stocks the general

policies it will apply when making

decisions under section 6(a)(1). In

particular, the Agency concluded that it

will focus on two issues in making

existing stocks determinations: whether

the sale or use of existing stocks may

pose unreasonable adverse effects on the

environment, and whether the registrant

(or conceivably some other party) has

failed to comply with an obligation of

registration. As a general matter, the

Agency concluded in the Policy

Statement that existing stocks

determinations where the Agency has

significant risk concerns will be made

on a case-by-case basis, with sale and

use generally allowed only if supported

by a risk/benefit balancing. In situations

where there are no significant risk

concerns, the Policy would generally

allow non-registrants to sell, distribute,

and use existing stocks until such stocks

are exhausted (provided that all existing

label directions are met). The sale and

distribution of existing stocks by

registrants under the Policy generally

hinges upon whether (and when) the

registrant failed to comply with an

obligation of registration. The Policy is

silent on whether supplemental

distributors (under 40 CFR 152.132)

should be treated like registrants or like

other distributors of pesticide products.7

The first issue of concern under the

Policy Statement is whether the Agency

has risk concerns with the existing

stocks of the revoked products. This is

an issue that has been discussed by both

parties in various papers related to

Amvac’s Petition. The Agency

expressed a concern in its Revocation

Order related to Termilind’s technical

registration that the Agency has

difficulty finding that a product will not

result in unreasonable adverse effects on

the environment if a registrant makes

false statements to the Agency. In such

circumstances, the Agency cannot rely

on scientific data submitted by a

registrant or on the registrant’s

compliance with its obligations under

section 6(a)(2) to submit additional

adverse effects information to the

Agency. Where the Agency is unable to

rely on material submitted by a

registrant, the Agency cannot make the

affirmative findings necessary to a

determination that a product will not

cause unreasonable adverse effects on

the environment.

This particular concern with

Termilind’s registrations does not apply

with much, if any, force to the existing

stocks issue presented here. While the

source used by Termilind to

manufacture its end-use products was

not the source originally identified by

Termilind in its applications, the

identity of the source is not in dispute.

The papers filed with the Agency by

both sides provide the Agency with

ample confidence that the existing

stocks were manufactured with NAA

source material supplied by Inchema.

The question then becomes whether the

Agency has confidence that the material

supplied by Inchema was NAA of

sufficient quality to allow the Agency to

conclude that the existing stocks of

revoked material can be used without

causing unreasonable adverse effects on

the environment.

The Agency has concluded, based on

a number of factors, that there is

reasonable assurance that the Inchema

material is of sufficient quality to

resolve any possible concerns associated

with the sale, distribution, or use of

existing stocks. Sampling performed of

Termilind material did not reveal any

problems with the product. While

Amvac declined to accept the Inchema

NAA provided to Termilind, the Agency

is unaware of any allegations by Amvac

that Inchema NAA lacks sufficient

quality to support a registration.8 There

has been no material presented by

Amvac to challenge Termilind’s

assertion that Amvac’s refusal to accept

the Inchema NAA was based upon

anything other than a dispute over

price. The Agency previously accepted

the quality of Inchema NAA as a source

for Termilind’s products when it

approved amendments to Termilind’s

registrations to correctly reflect the

source of NAA used in those products.

Based on all these factors, the Agency

has no reason to suspect that the NAA

products made by Termilind differ

meaningfully in quality from other NAA

products on the market, and does not

believe that sale or use of existing stocks

of such products would result in

unreasonable adverse effects on the

environment.9

The only reason to disapprove the

sale, distribution, or use of existing

stock is to punish the misconduct that

resulted in the registration of the

products in the first place, and to deter

future such misconduct. As noted

earlier, this particular situation was not

addressed in the Policy Statement, and

the Agency has concluded that the

Policy Statement does not provide

significant guidance on how to deal

with misconduct similar to Termilind’s.

It is clear that prohibiting sale,

distribution, and/or use of existing

stocks may result in hardships on

relatively ‘‘innocent’’ third parties. On

the other hand, allowing continued sale,

distribution, or use of existing stocks

would be ‘‘unfair’’ to registrants of

competing registered products (such as

Amvac in this case) that presumably are

complying with the provisions of

FIFRA, and would tend to minimize the

repercussions to Termilind in this case

and serve as less of a disincentive for

others to include incorrect or false

information in their applications for

registration.

After considering carefully these

issues, the Agency has determined that

it is appropriate to prohibit all further

sale or distribution by any person of the

revoked products, except the

application of existing stocks by for-hire

applicators so long as the applicator

does not deliver any unapplied

pesticide to the person for whom the

application is performed. The Agency

reached this determination based

primarily on the nature of the

misconduct in this particular case and

its conclusion that the use by pesticide

registrants of source material different

than the source material identified in

the statement of formula submitted to

the Agency is a very serious matter. In

general, where the Agency revokes a

registration because of misconduct

involved in its inception, the Agency

believes it inappropriate to allow the

company involved in the misconduct to

derive any benefit from its actions. The

only way for the Agency to maximize

the likelihood that Termilind will not

profit at all from its actions is to

prohibit all sale and distribution of the

revoked products. In addition, the

Agency believes it appropriate to send

the strongest possible message to any

company that may be considering the

use of unregistered source material in its

production of registered product

notwithstanding the fact that the
61896 Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 / Notices

registration is predicated on use of a

registered source material. Put simply,

the Agency generally does not intend to

allow resale by any person of pesticide

products that were not produced in

compliance with FIFRA.

The Agency does intend to allow

continued use of the revoked products,

including use by for-hire applicators,

provided that such use is consistent

with the labeling of the products. The

Agency does not believe that a

prohibition on further use would be

realistically enforceable in the absence

of the devotion of significant resources

to such enforcement, and given the

conclusion reached on the likelihood of

no unreasonable adverse effects on the

environment, the Agency does not

believe this issue merits the expenditure

of such significant resources. The

Agency is also concerned that a

prohibition on use could lead to

unnecessary and unsupervised disposal

of revoked products by users.

The Agency recognizes that in data

suspension cases under section

3(c)(2)(B) of FIFRA, adversely affected

persons have a right to a hearing on

existing stocks issue. While no such

right is provided for revocations such as

the one involved here, the Agency

believes it appropriate in this particular

case, given the novelty of the issues and

the absence of any guidance for

revocations in the existing stocks Policy

Statement, to provide any person

adversely affected by this existing stocks

determination with an informal hearing

opportunity before the Agency if such

person wishes to seek reconsideration of

this determination. If this opportunity

for an informal hearing is pursued, the

Agency will consider all issues raised

relevant to the existing stocks

determination. Any person interested in

requesting an informal hearing should

submit such a request within 60 days,

in writing, to Robert Perlis, Office of

General Counsel (2333), Environmental

Protection Agency, 401 M St., SW.,

Washington, DC 20460. Requests should

include the nature of the person’s

objection to the determination, the

nature of the proposed changes to the

determination, and the bases for the

objections and changes.

List of Subjects

Environmental protection, Pesticides

and pests.

Dated: October 31, 1997.

Lynn R. Goldman,

Assistant Administrator for Prevention,

Pesticides and Toxic Substances.

[FR Doc. 97–30140 Filed 11-18-97; 8:45 am]

BILLING CODE 6560–50–F