Opinion ID: 4539367
Heading Depth: 4
Heading Rank: 2

Heading: Compliance Burden Rationale

Text: EPA also asserts that the exemption at § 713.7(b)(2) is based on a desire to avoid imposing an undue burden on covered importers. EPA seems to invoke three distinct kinds of costs related to compliance with the Reporting Rule: (1) the cost of actual compliance, i.e., the costs to importers of filing reports; (2) the cost of compliance determination, i.e., the burden of inquiring into the presence of mercury in one’s products to determine if the reporting requirements apply; and (3) the cost of inadvertent noncompliance, i.e., penalties for failing to file required reports. None of these burdens is unique to importers of assembled products with mercury-added components. EPA’s estimates of compliance costs distinguish 34 only between the initial reporting cycle and subsequent reporting cycles; the record contains no estimate that draws a distinction between the costs imposed on different kinds of regulated persons to support its assertion of divergent burdens. Beyond the bare assertion that compliance burdens weigh more heavily in this context, EPA fails to establish that any of these burdens apply with special force or are otherwise “undue” as applied to the importers subject to the exemption. At oral argument, EPA alternatively framed its concern for the cost of actual compliance as an effort to protect small “mom and pop” importers whose limited financial means might make compliance with the Reporting Rule particularly burdensome. Oral Argument at 33:38-36:00. Had EPA categorically exempted small businesses on this theory, we might well find such an exemption reasonable. Indeed, the TSCA instructs EPA that it “shall, to the extent feasible . . . minimize the cost of compliance with this section and the rules issued thereunder on small manufacturers and processors.” 15 U.S.C. § 2607(a)(5), (B). But EPA expressly determined during its rulemaking process that “small businesses are not exempt from reporting requirements.” Mercury; Reporting Requirements for the TSCA Mercury Inventory, 83 Fed. Reg. at 30,069. It 35 determined instead that it would fulfill its obligation to minimize compliance burdens on small entities by developing tailored reporting instructions and offering technical assistance and other specialized guidance. Furthermore, nothing in the record suggests that assembled product importers subject to the exemption in § 713.7(b)(2) are more likely to be small entities than any other class of regulated manufacturers or importers. Accordingly, we can discern no basis in the administrative record from which to conclude that the choice to excuse importers, large and small, of products with mercury-added components from all reporting requirements is rationally related to a desire to avoid imposing undue burdens on small businesses. EPA also suggests that any compliance cost imposed on an importer of assembled products is undue, because it interprets the TSCA “to only require the identification of the types of products where mercury is intentionally added.” 83 Fed. Reg. at 30,065 (emphasis in original). EPA reasons that the reports collected from manufacturers and importers of mercury-added components will provide it with sufficient information on the types of assembled products (and components included therein) that contain mercury. In other words, EPA knows that some imported watches contain mercury in their batteries because it requires reporting 36 from importers of the batteries themselves; therefore, on this theory, it is not necessary for importers of watches that contain mercury-added batteries also to report. Even if we assume (without accepting) that EPA may reasonably interpret the TSCA to permit inventories that enumerate only “types” of mercury use, and not quantities of mercury used,6 it does not follow that reporting from assembled product importers would be unnecessary to such inventories. It is entirely possible that foreign manufacturers might use mercury-added components in “types” of assembled products that domestic manufacturers do not, and export those assembled products to the United States. And if U.S. manufacturers do not independently use the mercury-added components contained within those imported assembled products, those foreign-made mercury-added components 6 While we do not find it necessary to assess the reasonableness of this interpretation of the meaning of “inventory,” we note that it appears to be inconsistent with other aspects of EPA’s interpretation of the TSCA, such as the Reporting Rule’s requirement that manufacturers report the “[a]mount of mercury” used. See 40 C.F.R. § 713.9. If the task assigned to EPA were as limited as its argument here suggests, the reporting requirements imposed on other covered importers and manufacturers would be greatly reduced. As with the desire to limit the burdens on small businesses, the purported authorization to catalogue only the types of products that contain mercury has not been applied by EPA across the board, but is brought out only in support of this particular exemption. 37 might not be imported separately, for use in products assembled in the United States. An accurate inventory of “types” of mercury use would therefore need to include information on imported assembled products with mercury-added components. Without that information, the inventory might well omit “types” of assembled products that contain mercury only in their imported forms and “types” of mercury-added components that are not produced domestically and are imported only when integrated into assembled products.7 We therefore reject the premise that reporting by assembled product importers exempted under § 713.7(b)(2) is unnecessary to EPA’s fulfillment of Congress’s mandate and thus unduly burdensome. EPA similarly fails to support its assertion that assembled product importers would be unduly burdened by the cost of determining whether they 7 Of course, the existence and number of any such products is speculative. Once again, however, EPA cites no information that would support a conclusion that such products do not exist, or that the amount of mercury that might be introduced into the United States through such products is too small to justify a reporting requirement. Its argument is entirely abstract, premised on the proposition that Congress only wanted an inventory of types of products, coupled with the conclusory assertion that reporting on imported products with mercury-added components would not further such a limited inquiry. It is thus EPA’s rationale that must be classified as speculative, and based purely on assumptions not supported by the record. 38 must report, because they are unlikely (at least as compared to other manufacturers and importers) to know whether the products they import contain mercury. EPA notes that its overall estimate of compliance costs includes the cost of compliance determination, but it does not specifically identify how much of its overall estimate is attributable to that aspect of compliance. Without record evidence that supports EPA’s theory, we cannot see how the task of determining whether one’s product contains mercury imposes anything more than a minor burden. Some regulated persons may already know that their product contains mercury, either because they added it to the product or because they were told; other regulated persons may need to inquire of the manufacturer or supplier from whom they acquire products, components, or materials whether those items contain mercury. The latter group admittedly bears a “burden” that the former group does not, but it is merely the burden of asking a question. And there is no particular reason to assume that importers of products with multiple components (say, automobiles) will find it any more difficult to ask their foreign supplier whether those products include mercury-added components than importers of products that will ultimately be used as components of larger or more complicated products here in the United States (for example, lamps used in 39 automobile headlights), who are not exempted from that burden.8 Finally, EPA suggests that the cost of inadvertent noncompliance may unduly burden importers of assembled products with mercury-added components, because the TSCA provides for both civil and criminal penalties for persons who fail to comply with reporting obligations.9 But the TSCA imposes criminal penalties for noncompliance only on persons who “knowingly or willfully violate[]” the statute, and it instructs EPA to take into account “the nature, circumstances, extent, and gravity of the violation” and the violator’s “ability to pay” and “degree of culpability,” among other factors, in administering civil penalties. See 15 U.S.C. § 2615(b)(1), (a)(1), (a)(2)(B). Thus, inadvertent violators are exempt from criminal penalties and exposed to civil penalties only inasmuch as EPA determines them to be culpable. The specter of undue penalties for inadvertent violators therefore amounts to a spurious 8 We also see no reason to assume that importers exempted under § 713.7(b)(2) are particularly unlikely to know that their products contain mercury. Many such importers may be affiliates of the foreign manufacturers who produced the mercury-added component; others may be sufficiently aware of the specifications of the products they import to know the chemicals that those products contain. 9 This rationale again assumes, without support, that importers who are exempted under § 713.7(b)(2) are particularly unlikely to know that their products contain mercury. 40 concern that EPA will itself misapply the statutory standard and impose unreasonable penalties on this particular category of importers. We cannot discern any reasoned basis for EPA to exempt importers of assembled products with mercury-added components from the Reporting Rule’s requirements. The reporting that would occur absent § 713.7(b)(2) would not be contrary to congressional intent; nor would it be duplicative, unnecessary, or unduly burdensome. We conclude that the importer exemption codified at § 713.7(b)(2) is not “supported by a reasoned explanation” and therefore does not demand deference. See Catskill Mountains, 846 F.3d at 507. We therefore grant review of this provision and set it aside.