United States        Office of Planning and     EPA 230/2-12/78-005
Environmental Protection    Management        December 1978
Agency          Washington, DC 20460      * ^
                            ENVIRONMENTAL
                              PROTECTION
                              AGENCY
x>EPA      Impact of TSCA
            Proposed Premanufactured^"8
            Notification Requirements

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EPA 230/2-12/78-005
 IMPACT OF TSCA PROPOSED PREMANUFACTURING

           NOTIFICATION REQUIREMENTS
                       Prepared for
               Office of Planning and Evaluation
              U.S. Environmental Protection Agency
                      December 1978


                       Prepared by
                  ARTHUR D. LITTLE, INC.
                  Cambridge, Massachusetts
                Contract No. 68-01-4717, Task 2

                 Arthur D. Little No. 81172-02

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This report is available  in limited  quantities
through the U.S. Environmental  Protection Agency,
Industry Assistance Office  (TS-799),  401  M St.,
S.W., Washington, B.C.  20460  (800-424-9065).
                                                       Arthur D Little, Inc

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                           PREFACE
The attached document is a contractor's study prepared with the
supervision and review of the Office of Planning and Evaluation
of the U.S. Environmental Protection Agency (EPA).  The purpose
of the study is to analyze the potential economic impact on the
chemicals industry of compliance with the proposed Premanufacture
Notification Requirements.  These proposed rules were prepared by
the EPA Office of Toxic Substances to implement Section 5 of the
Toxic Substances Control Act.

This report forms the basis in substance and detail for the summary
of economic impacts presented in Section IV-B of the Preamble to
the proposed regulation (40 CFR Part 720).  The study also supple-
ments the Support Document to the regulation, which EPA has issued
in conjunction with proposal of the premanufacture notification
rules and proposed form.

This report was submitted in fulfillment of Contract No. 68-01-4717,
Task 2, by Arthur D. Little, Inc.  Work was completed as of December
1978.

This report is being released and circulated at approximately the
same time as publication in the Federal Register of a notice of
proposed rulemaking under Section 5 of TSCA.  The study is not an
official EPA publication.   It will be considered along with any
comments received by EPA before or during the proposed rulemaking
proceedings in establishing final regulations.  Prior to final
promulgation of premanufacturing regulations, the accompanying study
shall have standing in any EPA proceeding or court proceeding only
to the extent that it represents the views of the contractor who
performed the study.  It cannot be cited,  referenced, or represented
in any respect in any such proceedings as a statement of EPA's views
regarding the subject industry or the economic impact of the regula-
tion.
                                                            Arthur D Little, Inc

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                            TABLE OF CONTENTS
                                                                Page No.
List of Tables
List of Figures
   I.  EXECUTIVE SUMMARY                                           1-1
       A.  PURPOSE AND SCOPE                                       1-1
       B.  MAJOR FINDINGS                                          1-2
  II.  CHARACTERIZATION OF THE CHEMICAL INDUSTRY                   II-l
       A.  INTRODUCTION                                            II-l
       B.  GENERAL CHARACTERISTICS OF THE CHEMICAL INDUSTRY        II-l
           1.  Products and Markets                                II-l
           2.  Output, Growth, and Foreign Trade                   II-2
           3.  Firms, Establishments, Employment                   II-2
           4.  Market Structure                                    II-4
           5.  Chemical Consuming Industries                       II-8
       C.  SEGMENTATION OF THE CHEMICAL INDUSTRY                   11-12
           1.  Objective of the Segmentation                       11-12
           2.  Segmentation Alternatives                           11-12
           3.  Proposed Segmentation Scheme                        11-13
           4.  Chemical Innovation in Non-Chemical Industry        11-15
               Segments
       D.  CHARACTERIZATION OF CHEMICAL INDUSTRY SEGMENTS          11-16
           1.  Industry Structure                                  11-16
           2.  Financial Characteristics                           11-21
 III.  NEW CHEMICAL DEVELOPMENT                                    III-l
       A.  INTRODUCTION                                            III-l
       B.  NUMBER OF NEW CHEMICALS                                 III-l
       C.  NEW CHEMICAL ACTIVITY BY INDUSTRY SEGMENT               111-10
       D.  RESEARCH AND DEVELOPMENT EXPENDITURES                   111-23
                                                                 Arthur D Little, Inc

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                  TABLE OF CONTENTS (continued)
                                                               Page No.

 IV.   REGULATORY REQUIREMENTS                                     IV-1
      A.   INTRODUCTION                                            IV-1
      B.   THE PREMANUFACTURE NOTIFICATION SYSTEM                  IV-1
      C.   NOTIFICATION REQUIREMENTS                               IV-2
  V.   UNIT COSTS OF PREMANUFACTORING NOTIFICATION                  V-l
      A.   INTRODUCTION                                             V-l
      B.   ASSUMPTIONS USED IN THE COST ESTIMATION                  V-l
      C.   ACTIVITIES INVOLVED IN COMPLETING THE PREMANUFACTURE     V-5
          NOTICE
      D.   COST ESTIMATING PROCEDURES                               V-5
      E.   GENERAL INFORMATION                                      V-9
      F.   RISK ASSESSMENT DATA                                     V-ll
      G.   RISK ANALYSIS AND OPTIONAL DATA                          V-14
      H.   SUMMARY                                                  V-16
 VI.   IMPACTS OF PREMANUFACTURING NOTICE REQUIREMENTS              VI-1
      A.   INTRODUCTION                                             VI-1
      B.   ECONOMIC IMPACT                                          VI-1
      C.   IMPACTED SEGMENTS                                        VI-5
      D.   ESTIMATED IMPACT OF TSCA PREMANUFACTURING NOTICE         VI-9
          COSTS ON RATE OF NEW CHEMICAL COMMERCIALIZATION
      E.   TOTAL COST OF NOTIFICATION                               VI-15
VII.   ARTHUR D. LITTLE, INC., PROJECT TEAM                         VII-1
                                                                Arthur D Little, Inc

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                            LIST OF TABLES

Table No.                                                        Page No.

  1-1          Total, Annual Cost of Premanufacturing Notifi-        1-5
               cation Related to Unit Cost of Notification

 II-1          Sales of U.S. Chemical Industry, 1964-1977            H-3

 H-2          The Fifty Largest U.S. Chemical Producers, 1976       II-5 & II-6

 II-3          Chemical Industry Concentration Ratios, 1972          II-7

 H-4          Input-Output Relationships for the U.S. Chemical      II-9
               Industry, 1967

 II-5          Major U.S. Industries Directly Dependent on           11-10
               Petrochemical Production

 II-6          Segmentation of Chemical Business Units for TSCA      11-14
               Analysis

 II-7          U.S. Chemical Industry Data, 1976                     11-17 &  11-18

 II-8          Employment Size Characterization of Chemical          11-19
               Industry Segments, 1975

 II-9          Estimated Number of Chemical Manufacturing Estab-     11-20
               lishments: Chemical Industry Sector, 1976

 11-10         Representative Annual Sales per Chemical for Small    11-22
               Firms

 11-11         Profitability of U.S. Chemical Industry, 1964-1977    11-24

 11-12         Financial Statements: U.S. Chemical Industry, 1975    11-25

 11-13         Smaller Soap and Detergent Company Financial          11-27
               Statements, 1975

 11-14         Smaller Perfume and Toilet Preparation Company        11-28
               Financial Statements, 1975

 11-15         Smaller Plastic Materials and Resins Company          11-29
               Financial Statements, 1975

 11-16         Smaller Industrial Chemical Company Financial         11-30
               Statements, 1975

 11-17         Smaller Paint and Allied Products Companies           11-31
               Financial Statements, 1975
                                                                 Arthur D Little, Inc.

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                     LIST OF TABLES (continued)

Table No.                                                           Page No.

 11-18         Profits and Fixed Assets of Smaller Companies          11-32
               Versus the Industrial Chemicals and Synthetics
               Sub-Industry

 11-19         Current Assets and Current Liabilities of Smaller      11-33
               Companies Versus the Industrial Chemicals and
               Synthetics Sub-Industry

III-l          Estimated Distribution of New Chemicals According      III-8
               to Production Volume and Use

III-2          Results of Telephone Survey of 'New' Chemical          III-ll
               Production/Sales Volume

III-3          Assumed Sales of Survey Chemicals in Tenth Year        111-12
               on the Market

III-4          Initial Classification of New Chemical Introduction
               Rates in the Chemical Industry Segments                111-14

III-5          Selected Chemical Industry Patent Activity             111-17

III-6          Annual Development of Grossly Modified Substances,     111-19
               1969-1974

III-7          Annual Development of New Substances, 1969-1974        111-20

III-8          Number of Chemical Substances Developed Annually       111-21

III-9          Distribution of 25 Selected "New" Chemicals by         111-22
               SIC Code

111-10         R&D Expenditures as Percent of Net Sales for           111-24
               Chemical Industry Segments, 1957 and 1963-1975

III-ll         1975 Chemical Industry R&D Expenditures as a Percent   111-26
               of Net Sales

111-12         Company R&D Expenditures as Percent of Net Sales for   111-27
               Chemical Industry Segments, 1957, 1963, 1967-75

111-13         Ranking of Chemical Company R&D Expenditures, 1975     111-28

111-14         Company Funds for Research and Development, by         111-30
               Industry and Size of Company: 1957 and 1963-75
                                                                  Arthur D Little, Inc

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                     LIST OF TABLES (continued)

Table No.                                                           Page No.

 V-l           Activities Required to Complete Premanufacture         V-6
               Notice Form

 V-2           Notice Form Data Requirements                          V-7

 V-3           Unit Cost of General Information                       V-10

 V-4           Unit Cost of Risk Assessment Data                      V-12

 V-5           Unit Cost of Risk Analysis and Optional Data           V-15

 V-6           Summary of Estimated Costs for Completion of           V-17
               Premanufacture Notice Form

VI-1           Percentage of Establishments with Less than 50         VI-6
               Employees for Chemical Industry Segments

VI-2           Economic Data per Establishment for High and           VI-8
               Moderate Impact Segments (1976)

VI-3           New Chemical Introduction as a Function of TSCA        VI-12
               Premanufacturing Notification Costs

VI-4           Number of New Chemicals as a Function of Reporting     VI-14
               Costs

VI-5           Total Annual Cost of Premanufacturing Notification     VI-16
               Related to the Number of Notice Forms

VI-6           Total, Annual Cost of Premanufacturing Notification    VI-18
               Related to Unit Cost of Notification
                                                                 Arthur D Little, Inc

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                            LIST OF FIGURES

Figure No.                                                           Page No.

 II-1          The U.S. Petrochemical Industry - 1976                 11-11

 II-2          Distribution of Chemical Sales Volume for Small        11-23
               Companies

III-l          Inorganic Chemical Product Ranking by Sales Value      III-5

III-2          Organic Chemical Product Ranking by Sales Value        III-6

III-3          Cumulative Percent of "New" Chemicals Having 10th      111-13
               Year Sales Volumes Less Than Indicated Amount

 V-l           Skills That May be Required to Complete EPA Pre-       V-8
               manufacture Notification Form

VI-1           Estimated New Commercial Chemical Introduction, as     VI-11
               Percent of Current Introductions, Versus TSCA
               Premanufacturing Notification Costs
                                                                 Arthur D Little, Inc

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                         I.  EXECUTIVE SUMMARY




A.  PURPOSE AND SCOPE

     The U.S. Environmental Protection Agency is proposing Premanufacturing


Notice Requirements under the authority of Section 5 of the Toxic Substances


Control Act.  This report presents a preliminary analysis of some of the


impacts of these notification requirements.


     As initially proposed, the manufacturers of a new chemical will have


to supply EPA with certain information on physical and chemical properties


of the chemical, potential worker and consumer exposure, and production


and marketing plans.  The results of available health and environmental


tests must also be supplied but no new testing is required.

     The notification requirements may have the following impacts:




     •  changes in the chemical R&D process;


     •  a reduction in the number of new chemicals introduced and a


        change in their composition;


     •  increased expenditures for regulatory compliance (testing and


        administrative activities);

     •  economic impact on the chemical industry resulting from a

        change in the flow of new chemicals;


     •  economic impact on chemical consuming industries as a result

        of a change in the flow of new chemicals;


     •  impact on the national economy, including the balance of payments.
                                  1-1
                                                                Arthur D Little, Inc.

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     This report deals only with the costs of preparing the notification




form and the potential for reducing the number of new chemicals.  The other




categories of impacts are important but are not treated here.  The impacts




on industry growth and GNP will require important analytical methodology




development in order to evaluate quantitatively.









      This report is based on available published data and estimates by the




Arthur D. Little, Inc., staff.  There are very little data available on the rate




of introduction and the composition of new chemicals, and, furthermore, what is




 available is sometimes contradictory.   In addition,  the notification re-




 quirements are  under development  and, as a result,  an acceptable notification




 submission for  different categories of chemicals has not been fully defined.




 In light of these two factors,  the impact results must be regarded as pre-




 liminary indications of impact  rather than definitive estimates.







 B.  MAJOR FINDINGS




      The major  conclusions from this analysis of the premanufacturing notice




 requirements are the following:




      1.   The Notification Form  can be divided into three major components:




 Minimum Mandatory submission; Maximum Mandatory submission; and Maximum Total




 submission.   The incremental unit cost of preparing the Notification Form




 is estimated to be $2,500 to $14,000 for the Minimum Mandatory,  $3,700 to




 $22,000 for the Maximum Mandatory, and $9,000 to $41,000 for the Mandatory




 and Optional segments of the form.   The Minimum Mandatory submission is




 intended to be  applicable to chemicals with no consumer or worker exposure
                                     1-2
Arthur D Little; Inc

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while the Maximum Mandatory estimate is applicable to chemicals with public




exposure.  In many instances, manufacturers will feel compelled to supply




the optional data and, as a result, it should be regarded as a cost of




compliance.  The costs will vary with the size of the firm, the characteristics




of the chemical, and the availability of data within the company.  EPA




standards for an acceptable submission and current data availability are




also important determinations of the magnitude of these costs.




     2.  An estimated one thousand chemicals (- 30%) are introduced for




commercial sales each year.  Of these, about 300 are believed to have sales




of more than 1,000 pounds per year.  In addition, about 2,000 chemicals are




introduced for sale solely for R&D purposes.  Small quantities of chemicals




used for R&D are exempt from the notification requirements, though a precise




definition of the exempt quantities and usage have not yet been developed by EPA.




     3.  Based on a limited sample of recently introduced commercial chemicals,




50% of these chemicals have yearly sales of less than $50,000 after being




on the market for five years.  Eighty percent have sales of less than




$150,000.  The percentages do not include chemicals which were commercially




unsuccessful,and the sample of chemicals studied may be biased towards higher




volume chemicals.




     4.  Based on the distribution of the sample of recently introduced




chemicals, 50% of chemicals currently being introduced for commercial sales




would not be introduced if the TSCA notification costs are $10,000 per




chemical.  At a unit notification cost of $40,000, 90% of the chemicals




would not be introduced.  This reduction in the rate of chemical innovation




does not reflect the number of chemicals held off the market because of




toxicity problems.









                                  1-3



                                                                 Arthur D Little, Inc

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     5.   It is not possible at this time to estimate the number of new

chemicals which will be in different categories of notification cost.  As

a result, it is not possible to definitively estimate the number of

chemicals to be introduced or the total cost to chemical producers of

the notification requirements.  The estimated range of the number of

chemicals to be introduced and their associated total notification cost

is listed on Table 1-1.  The unit costs for completing the major segments

of the Notification Form are used to establish the estimates.  If the

average cost of preparing a Notification Form is $3,700 to $22,000 (Maximum

Mandatory section), 750 to 300 forms will be submitted with a total cost

of $2.8 to $6.6 million.

     6.   Medium and small size chemical companies are likely to be more

severely impacted by the notification requirements than larger companies.

The reasons are that smaller companies are less likely to be willing to

cope with the uncertainties and costs of the notification process and will

be less able to take on the higher risks of R&D.

     7.   The impact of the TSCA Premanufacture Notice Requirements will vary

among the segments of the chemical industry and the firms in any one segment.

The role of innovation varies from segment to segment and differs from firm

to firm within a segment.  The segments potentially most highly impacted

by TSCA are:

         •  Soaps and Detergents,

         •  Surface Acting Agents, and

         •  Industrial Organic Chemicals»n.e.c.
                                  1-4
                                                                 Arthur D Little, Inc

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Also potentially highly impacted are relatively small chemical producing

firms throughout the chemical industry, but especially in the following

segments:

         •  Industrial Inorganic Chemicals, n.e.c.,

         •  Plastic Material and Resins,

         •  Synthetic Rubber,

         •  Toilet Preparations, Perfumes, and

         •  Cyclic Crudes arid Intermediates.
                                  1-6
                                                                  Arthur D Little, Inc

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              II.  CHARACTERIZATION OF THE CHEMICAL INDUSTRY






A.  INTRODUCTION




    The chemical industry in the United States is a complex industry with




many different market segments.  This chapter provides some general




characteristics of the chemical industry — products and markets, size,




growth rate, types and sizes of firms, and a brief description of the




dependence of other industries on the chemical industry.




    A segmentation of the chemical industry for the purpose of analyzing




the impact of premanufacturing regulations is proposed and discussed.




Finally, chemical industry segments are discussed in more detail in terms




of industry structure and financial performance.




B.  GENERAL CHARACTERISTICS OF THE CHEMICAL INDUSTRY




1.  Products and Markets




    The chemicals and allied products industry comprises establishments




producing basic chemicals and establishments manufacturing products by




predominantly chemical processes.   The industry manufactures 50,000 to




70,000 chemicals, which can be categorized into three basic product types:




    •  Basic chemicals, such as alkalies and chlorine, and basic industrial




       organic and inorganic chemicals which are fundamental raw materials




       for finished chemical products as well as primary raw material




       inputs to other industries.




    •  Synthetic materials, such as plastics, synthetic rubber and man-made




       fibers which are used to fabricate individual products, varying from




       packaging materials to tires and apparel products.




    •  Finished chemical products,  such as drugs, soaps, cosmetics, paints,




       agricultural products, and other chemical products.




    Basic chemicals account for more than 60% of the annual industry production







                                   n-1                         Arthur D Little Inc

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volume (as measured in pounds or tons of production).   On a value of




shipments basis, finished chemical products account for nearly half of




the industry output, basic chemicals account for about 35% and synthetic




materials 15%.




2.  Output, Growth and Foreign Trade




    During the past decade, the value of shipments of  chemicals and allied




products, currently over $100 billion, grew at nearly  10% per year, in




current dollar terms, or about 6% in real terms (Table II-l).  Over the




1977-1985 period the industry's output is generally expected to grow at




about 4-6% per year, in real terms.




    Historically, synthetic materials exhibited a higher growth rate than




basic chemicals and finished chemical products.  This  trend is expected




to continue through 1985, because of increasing use of  synthetics in




vehicles and packaging.




    Foreign trade for the chemical industry has been a significant part of




its activity.  Historically, the industry has contributed a substantial




positive balance to a declining U.S. balance of trade.  In 1976, the United




States exported more than 10% of the chemical industry's production.  Imports




account for roughly 4% of the industry's value of shipments.  The positive




net export value is currently more than $5.0 billion per year.




3.  Firms, Establishments, Employment




    The chemical industry  (excluding drugs) comprises  almost 7,000 firms




operating nearly 10,000 establishments spread throughout the United States




and employing over  70Q,000 workers.  Over 50% of the chemical firms only




process or formulate chemicals and do not manufacture chemicals.  Processors




or formulators are  not directly affected by the premanufacture regulations.




The industry  is not among  the most concentrated.  The 50 largest firms








                                      n~2                        Arthur DUtti^Inc

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                        Table  II-l
          SALES OF U.S. CHEMICAL INDUSTRY. 1964-1977
        Year                           Net  Sales
                                       ($ Million)
        1964                            36,300
        1965                            40,100
        1966                            44,500
        1967                            47,500
        1968                            52,000
        1969                            55,500
        1970                            58,100
        1971                            62,020
        1972                            69,338
        1973                            83,581
        1974                            84,928
        1975                            88,168
        1976                           101,809
        1977                           113,3891
The 1972 to 1977 five-year growth rate in sales is 10.3% per year,
in current dollars.  These statistics include the drug industry
which is not covered by TSCA.
Source:  Federal Trade Commission, Quarterly Financial Reports,
         1971-1977; Manufacturing Chemists Association, Chemical
         Industry Facts, 1964-1970.
                               II-3
                                                          Arthur D Little Inc

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(Table II-2) account for less than 60% of total output; the four largest




firms account for nearly one-fifth.




    However, some segments are more concentrated (Table II-3).  Over the




1962-1972 decade, concentration ratios remained relatively constant,




so it is expected that 1978 concentration ratios by segment would be




similar to the 1972 ratios.  Generally, the more concentrated an industry,




the easier it is to pass on cost increases as price increases.  Thus, the




TSCA premanufacturing requirements would generally have less of an impact




on the more concentrated industry segments.  Among the more concentrated




industry segments are:




    •  Alkalies and Chlorine (SIC 2812),




    •  Industrial Gases (SIC 2813),




    •  Synthetic Rubber (SIC 2822),




    •  Cellulosic Man-Made Fibers (SIC 2823),




    •  Noncellulosic Organic Fibers (SIC 28Z4),




    •  Soaps and Detergents (SIC 2841),




    •  Gum and Wood Chemicals (SIC 2861),




    •  Explosives (SIC 2892), and




    •  Carbon Black (SIC 2895) .




4.  Market Structure




    The basic chemical industry is characterized by a competitive market




structure.  The market is international and very price competitive.




    The synthetic materials  industry is also characterized by a competitive




market structure.  The market is international and very price competitive in




the large-volume synthetics..




    The finished chemicals products market is fragmented.  A large number




of small firms produce a wide variety of chemical specialties.







                                    n-4                        Arthur D Little, Inc

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                                      Table  II-2
                     THE FIFTY LARGEST U.S. CHEMICAL PRODUCERS,  1976
Company

Du Pont
Dow Chemical
Union Carbide
Monsanto
Exxon

W.R. Grace
Celanese
Allied Chemical
Shell Oil
Occidental Petroleum

Hercules
Eastman Kodak
American Cyanamid
Borden
Rohm & Haas

Standard Oil  (Ind.)
Gulf Oil
Mobil Oil
Ethyl Corp.
Stauffer Chemical

Phillips Petroleum
Texaco
PPG Industries
Diamond Shamrock
FMC

Air Products
International  Minerals
Ashland Oil
B.F. Goodrich
Ciba-Geigy

Standard Oil of Cal.
ML Industries
BASF Wyandotte
Olin
U.S. Steel
Chemical1
Sales
($ millions)
6,400
3,900
3,800
3,577
3,238
,961
,926
,738
,574
,401
1,325
1,247
1,190
1,115
1,096
1,080
1,062
1,027
1,009
1,000
990
950
804
802
801
793
780
743
695
690
685
680
675
657
648
Total
Sales
($ millions)
8,361
5,652
6,346
4,270
48,631
3,651
2,123
2,630
9,230
5,534
1,596
5,438
2,094
3,381
1,153
11,532
16,451
26,063
1,135
1,100
5,698
26,452
2,255
1,357
2.145
818
1,260
4,087
1,996
975
19,434
1.286
710
1,377
8,604
Chemical Sales1
as Percent of
Total Sales
77
69
60
84
7
54
91
66
17
25
83
23
57
33
95
9
6
4
89
91
17
4
36
59
37
97
62
18
35
71
4
53
95
48
8
Net
Income
($ millions)
459.3
612.8
441.2
366.3
2,641.0
131.9
69
126.3
705.8
183.7
106.8
650.6
135.8
112.8
(11.8)
893.0
816
942.5
69.1
113.0
411.7
869.7
151.5
140.0
80.2
63.5
135.4
136.0
15.8
-
880.1
58.8
34.9
72.6
410.3
Net
Profit
(%)
5.5
10.8
7.0
8.6
5.4
3.6
3.3
4.8
7.6
3.3
6.7
12.0
6.5
3.3
-
7.7
5.0
3.6
6.1
10.3
7.2
3.3
6.7
10.3
3.7
7.8
10.7
3.1
0.8
-
4.5
4.6
4.9
5.3
4.8
                                             II-5
                                                                                  Art hurD Little, Inc

-------
                                Table II-2 (continued)
Company

American Hoechst
Reichhold Chemicals
Mobay Chemical
Atlantic Richfield
National Distillers
Chemical1
   Sales
($ millions)

    600
    585
    545
    534
    507
  Total
  Sales
($ millions)

     745
     585
     545
    8,463
    1,504
Chemical Sales1
 as Percent of
  Total Sales

      80
     100
     100
       6
      34
   Net
  Income
($ millions)
     16.1
     20.1
    575.2
     90.3
                                                                                          Net
                                                                                         Profit
 2.7
 3.7
 6.8
 6.0
Williams Co.
Esmark
Lubrizol
Kerr-McGee
Tenneco

Goodyear Tire
Akzona
Pennwalt
Borg-Warner
Continental Oil
    481
    453
    451
    437
    437

    425
    423
    419
    399
    385
    1,003
    5,268
     451
    1,955
    6,423

    5,791
     729
     777
    1,862
    7,958
      48
       9
      100
      22
       7

       7
      58
      54
      21
       5
     61.2
     82.6
     51.0
    134.1
    383.5

    122.0
      5.6
     34.9
     81.7
    460.0
 6.1
 1.6
11.3
 6.9
 6.0

 2.1
 0.8
 4.5
 4.4
 5.8
 1. Chemical sales data include sales of drugs and pesticides which are not regulated by the Toxic Substances
   Control Act.
Source: CHEMICAL AND ENGINEERING NEWS, May 2, 1977.
                                             II-6
                                                                                   ArthurDLittlelnc

-------
                                    Table II-3
                   CHEMICAL INDUSTRY CONCENTRATION RATIOS.  1972
4 Largest
Companies
72
65
52
34
26
62
96
74
62
43
28
38
22
68
34
43
35
29
24
39
19
67
39
74
16
1 18
31
8 Largest
Companies
91
81
72
52
41
81
—
91
74
54
42
53
34
83
52
57
53
47
38
57
31
86
54
99
26
27
56
20 Largest
Companies
99
93
91
76
65
98
100
99
85
65
64
74
51
94
77
74
84
83
57
76
52
98
75
100
41
41
84
50 Large
Companie
100
98
99
93
90
100
_
100
92
78
89
91
66
99
96
92
100
99
74
89
76
99
88
_
58
59
96
SIC
Code   Industry Segment

2812   Alkalies and Chlorine
2813   Industrial Gases
2816   Inorganic Pigments
2819   Industrial Inorganics, n.e.c.

2821   Plastics Material and Resins
2822   Synthetic Rubber
2823   Cellulosic Man-made Fibers
2824   Organic Fibers, Noncellulosic

2841   Soap and Detergents
2842   Polishes & Sanitation Goods
2843   Surface Acting Agents
2844   Toilet Preparations

2851   Paints and Allied Products

2861   Gum and Wood Chemicals
2865   Cyclic Crudes & Intermediates
2869   Industrial Organics, n.e.c.

2873   Nitrogenous Fertilizers
2874   Phosphatic Fertilizers
2875   Fertilizers, Mixing Only
2879   Agricultural Chemicals, n.e.c.

2891   Adhesives and Sealants
2892   Explosives
2893   Printing Ink
2895   Carbon Black
2899   Chemical Preparations, n.e.c.

28     Chemicals and Allied Products
                               (1976)

2911   Petroleum Refining

^-Concentration ratios for the Chemical and Allied Products industry were estimated
 by Arthur D. Little, Inc., for the year 1976.   The Census does not provide concentra-:
 tion ratios for the chemical industry as a whole, but only for individual sectors.
 Using an estimated total industry sales of $100 billion in 1976 and chemical sales
 of the 50 largest firms (Table II-2), concentration ratios were computed for the
 industry as a whole.

 Source:   U.S. Department of Commerce, 1972 Census of Manufactures, Subject and
          Special Statistics, MC72(SR2), and Arthur D. Little,  Inc., estimates.
                                     H-7
                                                                     Arthur D Little Inc

-------
5.  Chemical Consuming Industries




    Many other industries depend upon chemicals for production of their




products.  For example, oxygen (SIC 2813, Industrial Gases) is critical




to steel producers using basic oxygen furnaces.  Processed uranium, a sub-




segment of Industrial Inorganic Chemicals (SIC 2819), provides materials




necessary for the nuclear electric power industry.  Table II-4 provides




an estimate of chemical industry purchases and sales to other industries




during 1967 (the most recent year for which this data is available).




    While all sectors of the chemical industry sell products to other




industries, the industrial organic chemicals segment (SIC's 2865, 2869




and 2911, sometimes referred to as the primary petrochemical industry) is




more critical to a larger number of industries than any other group of




chemical industry segments.  The 1978 U.S. Industrial Outlook estimates that




industrial organic chemicals (or petrochemicals) were essential needs for




eight major industries which had a combined value of shipments of $480




billion in 1977.



    The full network of relationships between primary petrochemical produc-



tion and the consumer is complex, but is keyed to a number of major consumer




products which either use petrochemicals directly (Table II-5) or use



industrial products based on petrochemicals (Figure II-l).  Some of the




more important consumer product groups that provide these linkages throughout




the U.S. economy are:  motor vehicles, furniture, home furnishings, soaps and




detergents, appliances, apparel, Pharmaceuticals, and boats, campers and




trailers.




    The chemical industry provides raw materials to many other industries




and chemical products to industrial, commercial and residential users.



Eventually, impacts upon the chemical industry due to premanufacturing




regulations will be indirectly felt by consumers.



                                    TT 0                         ArthurDLittle,Inc
                                    11—o

-------
                                    Table  II-4




      INPUT-OUTPUT RELATIONSHIPS FOR THE  U.S.  CHEMICAL  INDUSTRY,  1967



Chemical Industry Buys From:
Chemicals and chemical products
Other services
Transportation and trade
Petroleum and coal products
Primary and fabricated metals
Paper, painting, publishing
Imports
Electric, gas and sanitary services
Other mining
Rubber, plastics & leather
Food, feed and tobacco products
Machinery, except electrical
Stone, clay and glass products
Construction
Other
Total
Chemical Industry Sells To:
Chemicals and chemical products
Personal consumption expenditures
Textile products and apparel
Rubber, plastics, leather
Net exports
Government purchases
Other services
Agriculture, forestry, fisheries
Construction
Paper, printing, publishing
Primary and fabricated metals
Food, feed and tobacco products
Petroleum and coal products
Other manufacturing
Transportation and trade
Other
Total
1967
Value
($MM)

9,712
5,238
2,304
2,019
1,520
1,178
962
885
807
692
627
432
302
274
804
27,755

9,712
7,867
3,298
2,940
2,863
2,656
2,628
2,451
1,477
1,477
1,266
864
726
693
679
3,392
44,999

Percent


35.0
18.9
8.3
7.3
5.5
4.2
3.5
3.2
2.9
2.5
2.3
1.6
1.1
1.0
2.7
100.0

21.6
17.5
7.3
6.5
6.4
5.9
5.8
5.5
3.3
3.3
2.8
1.9
1.6
1.5
1.5
7.6
100.0
Source:  U.S. Department of Commerce, Historical Statistics of the United  States.
                                  H-9                            Arthur D Little, Inc

-------
                                Table  II-5
               MAJOR U.S. INDUSTRIES DIRECTLY DEPENDENT ON
                         PETROCHEMICAL PRODUCTION
  I.  Manufacturing

    Industrial Products
    •  Rubber Products
    •  Fabricated Plastic Products
    •  Batteries and Related Equipment
    •  Electric Lighting and Wire
    •  Fabrics, Yarn, and Tire Cord
    •  Mixed Fertilizers
    •  Paint
    •  Construction*
Consumer Products
•  Motor Vehicles
•  Appliances
•  Crops
•  Apparel
•  Pharmaceuticals
•  Home Furnishings
•  Tires
•  Phonograph Records
•  Rugs and Floor Covering
•  Furniture*
 II. Wholesale and Retail

    •  Motor Vehicle Dealers & Parts Suppliers
    •  Furniture, Home Furnishings, and
        Floor Covering Stores
    •  Electrical Goods and Appliances Stores
    •  Drug Stores
    •  Apparel and Accessory Stores
   Wholesale Che/nicals
   Paint, Coatings, Wallpaper Stores
   Sporting Goods and Hobby Shops
   Luggage and Leather Stores
   Air Conditioning and Refrigeration
    Equipment
   Wholesale Crops
 III.  Services
     •  Automotive Repair Shops
     •  Electrical and Electronic Repair Shops
•  Reupholstery and Furniture Repair
    Shops
•  Dry Cleaning Plants
'Not all sectors of each  industry are dependent  on petrochemicals  For example, we estimate
 only  10% of construction  and  60% of  furniture output  is directly dependent on petro-
 chemicals
Source:   Arthur  D. Little,  Inc., estimates
                                     11-10
                             Arthur D Little, Inc

-------
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                                    11-11
                                                                    Arthur D Little, Inc

-------
C.  SEGMENTATION OF THE CHEMICAL INDUSTRY

1.  Objective of the Segmentation

    A major objective of segmenting the chemical industry is to have

business units suitable for an economic impact analysis; that is, segments

for which new chemicals become a new component of a managed portfolio of

similar chemical products within a product line.

    Another major objective of the segmentation is to make it possible to

evaluate the impact of TSCA regulations on different R&D activities in the

chemical industry.  Research and development activities vary considerably

across industry segments.

    Another objective of the segmentation is to make it possible to evaluate

the impact of TSCA on companies of different sizes and on different types of

production (basic manufacturing versus secondary formulation).   Some

segments of the chemical industry do not generally develop new chemicals and

are not directly affected by the premanufacturing regulations.

2.  Segmentation Alternatives

    For the purpose of evaluating the impact of premanufacturing regulations,

several segmentation schemes were examined:  segmentation by type of

manufacturing activity; segmentation by value of sales or employment size

of the firm; and segmentation according to the U.S. Department  of Commerce's

Standard Industrial Classification codes for the chemical industry.

    The advantages and disadvantages of each of these segmentation schemes

are discussed in the following subsections.

a.  Segmentation by Manufacturing Activity

    A traditional three-segment approach would divide the chemical industry

as follows:
    Basic chemicals
    Chemical Intermediates
    Chemical Products
or
 11-12
            Chemical Production
            Chemical Processing
Chemical Products
                                                                ArthurDI ittlplnr

-------
    For  this study, such a three-segment approach would not be
sufficiently detailed to reflect  the impact of the regulations.  New
chemical innovation varies widely within any one of the three segments.
These three segments could better be classified as sub-industries rather
than segments.
b.  Segmentation by Size of Firm
    While a segmentation by employment or value of sales size of the firm
may be appropriate, the degree of new chemical innovation is expected to
vary considerably within a size category.  Also, within the chemical
industry, different markets are served by companies of the same size.
Hence, using this segmentation scheme it would be difficult to estimate
impacts of the regulation.  However, within any segment of the industry,
the size of the firm should be considered because R&D activities and new
chemical innovation are likely to vary with the size of the company.
c.  Segmentation by the 28 Chemical Industry 4-Digit SIC Codes
    The Standard Industrial Classification (SIC)  system disaggregates the
chemical industry in 28 segments of major product groups.  Economic data are
available at the 4-digit SIC code level, but lines of business differ within
some 4-digit SIC codes and the level of new chemical innovation differs
considerably within some 4-digit SIC codes.   A segmentation based on the
SIC code groupings is desirable because of the availability of data.
However, for this analysis, a segmentation more disaggregated than the 4-digit
SIC level is required.
3.  Proposed Segmentation Scheme
    Using the 4-digit SIC grouping as a start, a 41-segment disaggregation
has been developed (Table II-6) .  This segmentation scheme includes many
4-digit SIC codes, with some subdivision to  5- and 6-digit SIC codes, where
appropriate, because of:
                                   "-13                        Arthur D I.ittlelnr

-------
                               Table  II-6

              SEGMENTATION OF CHEMICAL BUSINESS UNITS FOR TSCA ANALYSIS
Number
SIC Code
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
2812
2813
2816
28193,4
28197
28198
28195,6,
28213
28214
2822
2823
2824
2841
2842
2843
2844
2851
2861
28651
28655
28652,3
28691
28692
286931
286933
286935
28695
2873
2874
2875
2891
2892
2893
2895
28992
28994
28991,5
  38

  39
  40
  41
 29111,2,3,4,5

 29116
 29117,8,9
 29110
Industry Sector

Alkalies and Chlorine
Industrial Gases
Inorganic Pigments
Inorganic Acids
Potassium and Sodium Compounds
Chemical Catalytic Preparations
Other Inorganic Chemicals, N.E.C.
Thermoplastic Resins and Plastics Materials
Thermosetting Resins and Plastics Materials
Synthetic Rubber
Cellulosic Man-made Fibers
Organic Fibers
Soaps, Detergents
Polishes and Sanitary Goods
Surface Acting Agents
Toilet Preparations, Perfumes
Paints and Allied Products
Gum and Wood Chemicals
Cyclic Intermediates
Cyclic Crudes
Synthetic Organic Dyes and Pigments
Miscellaneous Cyclic Chemical Products
Miscellaneous Acrylic Chemical Products
Flavor and Perfume
Rubber-Processing
Plasticizers
Synthetic Organic Chemicals, N.E.C.
Nitrogenous Fertilizers
Phosphatic Fertilizers
Mixing Fertilizers
Adhesives and  Sealants
Explosives
Printing  Ink
Carbon Black
Fatty Acids
Gelatin,  Except  Ready-to-Eat Desserts
Salt, Essential  Oils, and  Chemical  Preparations,
N.E.C.
Gasoline, Jet  Fuel,  Kerosene,  Distillate and
Residual  Fuel  Oil
Liquified Refinery  Gases
Lubricating  and  Unfinished Oils, Asphalt
Other Finished Petroleum Products,  Including
Waxes
  Source:  Arthur D. Little, Inc.
                                  11-14
                                                                  Arthur D Little, Inc

-------
     •  differences in lines of business,
     •  relative size of the 4-digit segment, and
     •  the degree of expected new chemical innovation.

Size-of-firm data by 4-digit SIC codes are available; however, these data

are generally not available at the 5-digit level.

     The 41 segments differentiate among the major chemical business activites,

though smaller product categories are still combined.  Within these 41 segments,

larger and smaller firms will probably be differentially impacted by TSCA.

4.   Chemical Innovation in Non-Chemical Industry Segments

     Some firms, primarily producing non-chemical products, also produce

relatively small amounts of chemicals, either as by-products or to be assured

a source of supply for some chemical required for other products.  Very little

information is available concerning new chemical innovation by such non-

chemical firms.  Dun & Bradstreet (D&B) does provide information on non-

primary chemical production of firms, because D&B allows for as many as six

4-digit SIC codes to be shown for each establishment.  An EPA tabulation of

D&B data on non-primary chemical production was screened to remove segments

obviously producing chemicals as by-products, and the following industry segments

were selected as possibly being involved in new chemical innovation:

     SIC    Industry Segment

     1459   Clay and related minerals
     1474   Potash soda and borate minerals
     1499   Nonmetallic minerals, n.e.c.
     2611   Pulp mills
     3111   Leather tanning
     3274   Lime
     3312   Blast furnaces, steel mills
     3624   Carbon and graphite products
     5161   Wholesale chemicals
     7391   R&D Labs

While some of these industry segments could develop innovative chemicals for

their own use or use by others, it is less common for these companies to market

such chemicals commercially.  The number of new chemicals introduced by non-

chemical industry companies is expected to be small.  For this analysis they

have been excluded.                 _T 1C
                                    IJ-15               ~        Arthur D Little Inc

-------
D.  CHARACTERIZATION OF CHEMICAL INDUSTRY SEGMENTS




1.  Industry Structure




    Chemical industry segments vary significantly in terms of value of




shipments, value added, capital expenditures, number of employees and




number of establishments (Table II-7) .




    Smaller establishments are generally less able to pass on a fixed




cost because larger competitors can spread similar fixed costs over a




larger volume of products.  Some segments have a large percentage of




small establishments (more than 70% of the establishments employ less




than 50 workers).  An employment size characterization of chemical




industry segments by establishment provides insights into the size of




establishments within 4-digit SIC codes (Table II-8).




    Many establishments in the chemical industry process or mix chemicals,




but do not manufacture or produce chemicals (i.e., where a molecular




change occurs).  The processors will not be directly regulated by the




TSCA premanufacturing regulations.  No published information was available




to determine the exact number of establishments manufacturing or producing




chemicals  (i.e., where a molecular change occurs) as distinct from the




number of  establishments simply processing chemicals (i.e., mixing or




formulating chemicals).  Since establishments processing chemicals are




unlikely to invent new chemicals, an  estimate was made of the number of




chemical manufacturing establishments that are likely to be directly impacted




by the premanufacturing testing requirements.  Overall, 4,586 of the 9,748,




or 47% of  the  establishments  in the  chemical  industry were estimated to




be chemical manufacturers by  Arthur D. Little, Inc.  (Table II-9).




     Information  from small chemical producing companies  (less than $10



million in sales) on typical annual sales per chemical  shows  tnat tne vast
                                    11-16
                                                                 Arthur D Little, Inc

-------
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11-19
Arthur D Little, Inc

-------
                                      Table I1-9
                ESTIMATED NUMBER OF CHEMICAL MANUFACTURING ESTABLISHMENTS:
                	CHEMICAL INDUSTRY SECTOR,  1976
                                                                        Number of
SIC                                     Number of     Manufacturing   Manufacturing
Code  Industry Sector                 Establishments  Establishments  Establishments
2812  Alkalies and Chlorine                 52             100               52
2813  Industrial Gases                     528             100              528
2816  Inorganic Pigments                   111              80               89
2819  Industrial Inorganic Chemicals       459              90              413

2821  Plastics Material and Resins         428              90              385
2822  Synthetic Rubber                      62              50               31
2823  Cellulosic Man-made Fibers            20              20                4
2824  Organic Fibers                        56              40               22

2841  Soaps, Detergents                    545              30              164
2842  Polishes and Sanitary Goods          934              20              187
2843  Surface Acting Agents                166              90              149
2844  Toilet Preparations, Perfumes        607              10               61

2851  Paints and Allied Products         1,477              10              148

2861  Gum, Wood Chemicals                  117              80               94
2865  Cyclic Crudes and Intermediates      169              90              152
2869  Industrial Organic Chemicals         481              90              433

2873  Nitrogenous Fertilizers              101             100              101
2874  Phosphatic Fertilizers               136             100              136
2875  Mixing Fertilizers                   565              20              113

2891  Adhesives and Sealants               467              20               93
2892  Explosives                            79              60               47
2893  Printing Ink                         418              20               84
2895  Carbon Black                          34             100               34
2899  Chemical Preparations              1,340              50              670

2911  Petroleum Refining                   396             100              396

                                         9,748              47            4,586
Source:  Arthur D. Little, Inc., estimate based on U.S. Department of Commerce,
         Bureau of the Census data.
                                          n-20                          Arthur D Little, Inc

-------
majority of chemicals has a relatively small volume of sales.  Almost 90%


of the number of chemicals sold had an annual sales value per chemical of


less than $100,000 (Table 11-10 and Figure II-2).   While the number of


companies providing information is relatively small, it is likely that


most small chemical producers produce chemicals having a relatively small


annual sales value.  Since the vast majority of chemicals sold by these


smaller chemical producers has an annual sales value of less than $100,000


per chemical, even relatively small increases in the cost of new chemical


introduction will have a major impact on the relative number of new chemicals


introduced by smaller companies.


2.  Financial Characteristics


    Over the period between 1964 and 1977, the after-tax profitability of


the chemical industry has averaged 7.1% of sales.   The range of after-tax


profit as a percent of sales over that period has  been between 5.9% and 8.4%


(Table 11-11).  Over the past seven years, the before-tax profitability of


the industry has ranged from 10.4% to 12.1% of sales, with an average of


11.2%.


    At year end 1975, long-term debt was 20.7% of  total liabilities for the


Chemical and Allied Products (SIC 28XX) as a whole and 23.6% for the


Industrial Chemicals and Synthetics (SIC 281X, 282X, 286X) sub-industry.


Most chemical production (as distinct from chemical mixing or formulation)


occurs in the Industrial Chemicals and Synthetics  sub-industry, so this


sub-industry deserves special attention.  The Industrial Chemicals and


Synthetics sub-industry is slightly less profitable, is more capital intensive


(net fixed assets are 45.6% of total assets versus 39.2% for the whole


indus.try) , has slightly more debt, and slightly less equity than the Chemicals


and Allied Products industry as a whole (Table 11-12).




                               H-27
                                                                 Arthur D Little, Inc

-------





















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   100
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    80
    60
    40
    20
                  10,000        100,000      1,000,000

                          Annual Sales Per Chemical
                                                        10,000,000
   Source:   Arthur D. Little, Inc.,  information  from small  chemical

             producing companies.
FIGURE 11-2
               DISTRIBUTION OF CHEMICAL SALES VOLUME FOR SMALL COMPANIES
                               11-23
                                                            Arthur D Little, Inc

-------
                                  Table 11-11
            PROFITABILITY OF U.S. CHEMICAL INDUSTRY  1964-1977
Year

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977
Net Sales
($ million)
36,300
40,100
44,500
47,500
52,000
55,500
58,100
62,020
69,338
83,581
84,928
88,168
101,809
113,389
Income
Before Tax
($ million)
NA
NA
NA
NA
NA
NA
NA
6,700
7,788
9,978
10,285
9,668
11,268
11,806
Income
After Tax
{$ million)
2,900
3,200
3,500
3,260
3,530
3,590
3,430
3,778
4,422
5,686
7,152
6,703
7,610
8,047
Income
After Tax as a
Percent of Sales
7.9
7.9
7.8
6.9
6.8
6.5
5.9
6.1
6.4
6.8
8.4
7.6
7.5
7.1
Source:  Federal Trade Commission, Quarterly Financial Reports, 1971-1977; Manufacturing Chemists
        Association, Chemical Industry Facts, 1964-70.
                                    11-24
Arthur D Little, Inc

-------
                                 Table 11-12
              FINANCIAL STATEMENTS:   U.S.  CHEMICAL INDUSTRY,  1975
 Income Statement
 % of Net Sales
Chemicals and Allied Products
     	 (SIC 2800)
 Industrial Chemicals
    and Synthetics
(SIC 28ix",  282X,  286X)
 Net Sales

 Expenses

 Profit before Taxes

 Profit after Taxes


 Balance Sheet
 % of Total Assets

 Assets

 Total Current Assets

 Net Fixed Assets

 Other Noncurrent Assets

    Total Assets


 Liabilities

 Total Current Liabilities

 Long-Term Debt

 Other Long-Term Liabilities

 Stockholders' Equity

    Total Liabilities

 Return on Total
 Assets (Before Tax)
                   3
 Sales/Equity Ratio
            100.0

             89.0

             11.0

              7.6
             41.9

             39.2

             18.9

            100.0
             17.8

             20.7

              5.1

             56.4

            100.0


             12.37»

              2.0
        100.0

         89.2

         10.8

          6.9
         38.3

         45.6

         16.1

        100.0
         17.0

         23.6

          6.4

         53.0

        100.0


         11.1%

          1.9
 Encompasses all segments of the chemical industry including drugs and pesticides,
 which are not regulated by TSCA, and excluding chemicals produced by refiners.
2
 Return on total assets before tax is profit before tax divided by total assets.
o
The sales/net worth ratio is total sales divided by net worth (or owners' equity).

 Source:  Robert Morris Associates, 1976.

                                        n-25                        Arthur D Little, Inc

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     The Industrial Chemicals and Synthetics sub-industry may be compared

with selected segments of the chemical industry to determine differences

between segments of the industry.  There are also differences within

segments by the size of the firm.  Tables 11-13 through 11-17 show 1975

financial statements for smaller firms within the following segments:

        Soap and Detergents (SIC 2841),
        Perfumes and Toilet Preparations (SIC 2844),
        Plastic Materials and Resins (SIC 2821),
        Industrial Chemicals (SIC 281 and 286), and
        Paint and Allied Products (SIC 2851).

     Note that only firms with less than $50 million in total assets are

included in the financial statements.  The smaller firms in these segments

are less profitable and less capital intensive than the Industrial Chemicals

and Synthetics sub-industry (SICs 281, 282 and 286), for which data are

available for firms of all sizes (Table 11-18).

     While stockholders' equity as a percentage of total assets is comparable

for the five segments and the Industrial Chemicals and Synthetics sub-industry,

smaller firms in the five segments have a much higher percentage of current

assets and current liabilities than the Industrial Chemicals and Synthetics

sub-industry as a whole, i.e., including larger firms (Table 11-19).

     Furthermore, within each segment, financial characteristics vary

considerably with the size of the firm.  For all segments, generally the smaller

firms are less profitable, have  less stockholders' equity as a percentage of

total liabilities, and have a higher percentage of both current assets and

current liabilities.

     One may conclude that smaller firms in  the chemical industry are  generally

less profitable (as measured by  profitability  as a percentage of sales)  than

larger firms and smaller firms are less strong financially than larger firms.

Note, however,  that return on total assets for smaller firms is sometimes greater

than that for larger  firms, and  sometimes smaller.


                                                                 Arthur D Little, Inc

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                                 Table 11-13


         SMALLER SOAP AND DETERGENT COMPANY FINANCIAL STATEMENTS, 1975

                                   (SIC 2841)
 Income Statement
 % of Net Sales
Asset Size:  Under     $250 M to    $1.0 MM to
             $250 M1   $1.0 MM      $10.0 MM
                           All
                          Sizes
 Net Sales

 Expenses

 Profit before Taxes
              100.0

               97.2

                2.8
100.0

 93.9

  6.1
100.0

 92.9

  7.1
                                                                      100.0

                                                                       93.6

                                                                        6.4
 Balance Sheet
 % of Total Assets

 Assets

 Total Current Assets

 Net Fixed Assets

 Other Noncurrent Assets

    Total Assets
76.7
17.2
6.1
71.3
22.7
5.9
60.9
32.6
6.5
68.6
26.4
5.0
              100.0
100.0
100.0
                                                                      100.0
Liabilities

Total Current Liabilities

Long-Term Debt

Other Long-Term Liabilities

Stockholders' Equity

     Total Liabilities

Return on Total    ?
Assets (Before Tax)  _
Sales/Net Worth Ratio
                                    50.8

                                    13.4

                                     1.4

                                    34.4
                                   100.0

                                    6.2%
                                    5.1
                         35.0

                         10.5

                          0.0

                         54.5
                        100.0

                         17.0%
                          4.6
              -32.2

               13.7

                0.1

               54.0
              100.0

               13.2%
                3.6
             29.2

             14.5

              0.0

             56.3
            100.0

             11.4%
              3.9
 M means thousands, and MM means millions.
2
 Return on total assets before tax is profit before tax divided by total assets.

 The sales/net worth ratio is total sales divided by net worth (or owners' equity).
 Source:  Robert Morris Associates, 1976.

                                    11-27
                                                                    Arthur D Little, Inc

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                                 Table 11-14



      SMALLER PERFUME & TOILET PREPARATION COMPANY FINANCIAL STATEMENTS, 1975

                                   (SIC 2844)


 Income Statement    Asset Size::   $1.0 MM^to    $10.0 MM to     All
 % of Net  Sales                     $10.0 MM      $50.0 MM       Sizes
 Net Sales

 Expenses

 Profit before Taxes
                                    100.0

                                     97.8

                                      2.2
              100.0

               88.6

               11.4
             100.0

             -J59..6.

              10.4
 Balance Sheet
 % of  Total Assets

 Assets

 Total Current Assets

 Net Fixed Assets

 Other Noncurrent Assets

    Total Assets
80.4
14.4
5.2
60.3
33.9
5.8
62.2
32.1
5.7
                                    100.0
              100.0
             100.0
 Liabilities

 Total Current Liabilities

 Long-Term Debt

 Other Long-Term Liabilities

 Stockholders' Equity

    Total Liabilities

                    2
Return on Total
Assets (Before Tax)
Sales/Net Worth Ratio
 30.4

  8.2

  0.4

 61.0

100.0


  5.4%
  3.9
 26.7

 12.3

  0.0

 61.0

100.0

 19.4%
  2.4
 27.5

 11.9

  0.0

 60.6

100.0

 13.4%
  3.7
 M means thousands, and MM means millions.
 Return on total assets before tax is profit before tax divided by total assets.
3The sales/net worth ratio is total sales divided by net worth (or owners' equity)

 Source:  Robert Morris Associates, 1976.
                                       11-28
                                                                    Arthur D Little, Inc

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                                   Table 11-15
      SMALLER PLASTIC MATERIALS  &  RESINS  COMPANY FINANCIAL STATEMENTS,  1975
(SIC 2821)
Income Statement Asset Size:
% of Net Sales
Net Sales
Expenses
Profit before Taxes
Balance Sheet
% of Total Assets
Assets
Total Current Assets
Net Fixed Assets
Other Noncurrent Assets
Total Assets
Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Stockholders' Equity
Total Liabilities
Return on Total „
Assets (Before Tax)
3
Sales/Net Worth Ratio
Under
$250 M
100.0
96.5
3.5

68.3
30.4
1.3
100.0
49.9
19.8
1.7
28.6
100.0
4.5%
7.6
$250 M to1
$1.0 MM
100.0
97.9
2.1

67.0
27.5
5.5
100.0
45.3
11.6
1.3
41.8
100.0
8.5%
6.0
$1.0 MM to
$10.0 MM
100.0
95.5
4.5

56.8
38.8
4.4
100.0
33.8
17.8
0.9
47.5
100.0
9.4%
4.5
$10 MM to
$50 MM
100.0
92.4
7.6

55.6
31.6
12.8
100.0
26.2
19.1
0.3
54.5
100.0
10.6%
3.0
All
Sizes
100.0
94.0
6.0

56.5
33.8
9.7
100.0
29.7
18.3
0.5
51.5
100.0
8.8%
4.8
 M means thousands, and MM means millions.
2Return on total assets before tax is profit before tax divided by total  assets.
3The sales/net worth ratio is total sales divided by net worth  (or owners'  equity).
 Source:  Robert Morris Associates, 1976.
                                         11-29
Arthur D Little, Inc

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                                 Table  11-16
         SMALLER INDUSTRIAL CHEMICAL COMPANY FINANCIAL STATEMENTS. 1975

Income Statement Asset Size
% of Net Sales
Net Sales
Expenses
Profit before Taxes
Balance Sheet
% of Total Assets
Assets
Total Current Assets
Net Fixed Assets
Other Noncurrent Assets
Total Assets
Liabilities
Total Current Liabilities
Long-Term Debt
Other Long-Term Liabilities
Stockholders' Equity
Total Liabilities
Return on Total „
Assets (Before Tax)
Sales/Net Worth Ratio
(SIC 281X, 286X)
: $250 M to1
$1.0 MM
100.0
95.3
4.7
65.2
27.2
7.6
100.0
37.7
10.5
0.8
51.0
100.0
11.5%
5.3

$1.0 MM to
$10.0 MM
100.0
92.8
7.2
59.0
34.2
6.8
100.0
38.9
17.5
0.2
43.4
100.0
13.2%
4.4

$10.0 MM to
$50.0 MM
100.0
90.0
10.0
61.0
32.3
6.7
100.0
27.7
17.2
1.1
54.0
100.0
19.1%
2.9

All
Sizes
100.0
90.9
9.1
60.7
32.6
6.7
100.0
30.3
17.1
0.9
51.7
100.0
13.2%
4.3
 M Means thousands, and MM means millions.
2
 Return on total assets before tax is profit before tax divided by total assets.
o
 The sales/net worth ratio is total sales divided by net worth (or owners' equity).


 Source:  Robert Morris Associates, 1976.

                                     IT_3Q                          Arthur D Little, Inc

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                                     Table 11-17
        SMALLER PAINT AND ALLIED PRODUCTS COMPANIES FINANCIAL  STATEMENTS.  1975
(SIC 2851)
Income Statement Asset Size :
% of Net Sales
Net Sales
Expenses
Profit before Taxes
balance Sheet
% of Total Assets
Assets
Total Current Assets
Net Fixed Assets
Other Noncurrent Assets
Total Assets
Liabilities
Total Current Liabilities
Long- Term Debt
Other Long-Term Liabilities
Stockholders ' Equity
Total Liabilities
Return on Total
Assets (Before Tax)
Sales/Net Worth Ratio3
Under
$250 M1
100.0
96.6
3.4
64.8
29.6
5.6
100.0
30.3
13.4
4.4
51.9
100.0
12.7%
5.3
$250 M to
$1.0 MM
100.0
96.6
3.4
69.4
21.4
9.2
100.0
36.1
13.4
0.4
50.1
100.0
7.0%
4.9
$1.0 MM to
$10.0 MM
100.0
96.4
3.6
67.2
26.1
6.7
100.0
31.6
10.9
1.0
56.5
100.0
7.9%
4.2
$10.0 MM to
$50 MM
100.0
94.9
5.1
64.3
28.7
7.0
100.0
24.2
13.4
3.0
59.4
100.0
8.7%
3.0
All
Sizes
100.0
95.4
3.6
65.4
27.6
7.0
100.0
26.8
12.7
2.3
58.2
100.0
8.2%
4.5
 M means thousands, and MM means millions.
2
 Return on total assets before tax is profit before tax divided by total assets.
o
 The sales/net worth ratio is total sales divided by net worth (or owners'  equity).
 Source:  Robert Morris Associates, 1976.

                                    11-31
                                                                        Arthur D Little, Inc

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                                Table 11-18
          PROFITS AND FIXED ASSETS OF SMALLER COMPANIES VERSUS THE
              INDUSTRIAL CHEMICALS AND SYNTHETICS SUB-INDUSTRY
Segment

Smaller Companies Only

Soaps

Perfumes, etc.

Plastics, etc.

Industrial Chemicals

Paints
Before Tax Profit      Net Fixed Assets
 as a % of Sales    as a % of Total Assets
6.4
10.4
6.0
9.1
4.6
26.4
32.1
33.8
32.6
27.6
All Companies

Industrial Chemicals and
Synthetics Sub-Industry
       10.8
45.6
Source:  Small company information - Robert Morris Associates, 1976.

         Industrial Chemicals and Synthetics Sub-Industry information -
         Federal Trade Commission.
                                    11-32
                                                                  Arthur D Little, Inc

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                                Table 11-19
         CURRENT ASSETS AND CURRENT LIABILITIES OF SMALLER COMPANIES
         VERSUS THE INDUSTRIAL CHEMICALS AND SYNTHETICS SUB-INDUSTRY
                               Current Assets as    Current Liabilities as a
Segment                       a % of Total Assets    % of Total Liabilities

Smaller Companies Only

Soaps                                 68.6                   29.2

Perfumes, etc.                        62.2                   27.5

Plastics, etc.                        56.5                   29.7

Industrial Chemicals                  60.7                   30.3

Paints                                65.4                   36.8


All Companies

Industrial Chemicals and
Synthetics Sub-Industry               38.3                   17.0
Source:  Small company information - Robert Morris Associates, 1976.

         Industrial Chemicals and Synthetics Sub-Industry information -
         Federal Trade Commission.
                                    11-33
                                                                  Arthur D Little, Inc

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                    III.  NEW CHEMICAL DEVELOPMENT


A.  INTRODUCTION

    The chemical industry will be affected by TSCA premanufacturing notice

requirements because the added costs of introducing a new chemical may reduce

the number of chemicals introduced.  This chapter discusses new chemical

development activities.  The discussion is divided into three parts:

          •  Number of new chemicals,

          •  New chemical activity by industry segment, and

          •  Research and development expenditures.

Estimates were based on available data.  This approach led to serious data

limitations because much of the required information is not collected.

B.  NUMBER OF NEW CHEMICALS

     An estimated 3000 new chemicals are available for commercial purchase

each year.  Of these, only about 300 are produced in quantities greater than

1000 Ibs.  Of the remaining 2700 new chemicals, about three-quarters  (2000)

are used almost exclusively for R&D purposes, and the rest can be regarded

as purchased for commercial consumption in quantities smaller than 1000 Ibs.,

though some portion of this may also be for R&D.  These estimates are based on

consideration of the results of a survey of chemical producers by the Manufact-
                          *
uring Chemists Association, and firms that prepare buyers' guides or chemical

directories, and on the number of new chemical patents issued.

     Although there are a number of estimates of the number of new chemicals

introduced annually, very little quantitative data are available.  Such

information has not been required in the past.  Furthermore, the lack of an

economic-based classification system for new chemicals has led to considerable

confusion concerning the economic significance of new chemicals in terms

of their annual sales values.
*S_tudy of the Potential Economic Impacts of the Proposed Toxic Substances
 Control Act as illustrated by Senate Bill S. 776, Foster D. Snell, Inc.,
 February 20, 1975.

                                   III-l

                                                                 Arthur D Little, Inc

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     As with most other products, chemicals tend to follow the product life


cycle concept.  In other words, most chemicals go through the following stages


of development:


          •  embryonic


          •  growth,


          •  mature, and


          •  aging, as illustrated below.



                             Chemical Life Cycle
       •U
       S
       o
       (-1
       bO
                                                                   aging
       O
       >
                                 time
As an example, some of today's important commodity chemicals, such as


various resins and plastics, were in the embryonic stage in the 1930's.  After


45 years these chemicals are entering the mature stage.


     By definition, all truly "new" chemicals begin in the embryonic stage—


usually in the research labs of a university or chemical manufacturer.   This


is when the new chemical will first appear in either the technical research
                                   III-2
Arthur D Little, Inc

-------
literature or the patent literature and thus be included in the Chemical


Abstract Service Registry of Chemicals.  The latest, 9th Collective Index

to Chemical Abstracts contains 7.4 million entries in the Chemical Substances


Index.  New substances are currently being added at a rate of about 350,000


per year.  However, this number does not represent only the new chemicals

developed, but includes chemicals, drugs, pesticides and some mixtures that


are "discovered" by the Chemical Abstracts Service in reviewing both old


and new chemical literature worldwide.  Some of these substances may have been


manufactured in only milligram quantities.


     The EPA Inventory of Chemicals consists of chemicals that have been


manufactured, imported, or processed for commercial purposes in the United


States since January 1, 1975.  The number of chemicals on this list will not


be known until some time in 1979, but the total is expected to be between


50,000 and 70,000 unique chemical substances.  Because any chemical in the


Inventory escapes classification as a "new" chemical, and thus is exempt


from TSCA premanufacturing notification requirements, there was a strong


incentive for chemical manufacturers to list every eligible chemical.


As a result, most chemicals in the Inventory sell in extremely small


quantities, relative to such "articles of commerce" as chlorine, sulfuric

acid, polyethylene, and oxygen.


     As one indication of the market differential between the large-volume

commodity chemicals and most of the chemicals in the Inventory, the following


comparisons are useful:
                                 III-3
                                                                 Arthur D Little, Inc

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           •   According to a preliminary analysis  by  EPA,  about

              half  the Inventory chemicals  sell  in quantities  of  under

              10,000 pounds per  year.

           •   This  10,000 pound  quantity is a million times smaller

              than  the individual annual production volumes of the too

              15 industrial chemicals.

           •   Fewer than 600 of  the chemicals in the  Inventory have

              annual sales greater than $1  million.

           •   Only  5000 to 10,000 achieve sales  volumes high enough to

              be listed in the most complete directories of commercial

              chemicals.   The remainder are too  small to be included.

      Graphic indications of the sales  value ranking  of the largest-volume

 inorganic and organic chemicals are given in Figures III-l and 11.1-2^

 respectively.  The sales values of the largest-volume chemicals  drop  off

 rapidly,  dropping  below $1 million in  annual sales at the 59th largest-volume

 inorganic chemical and the 460th largest-volume organic chemical.*

      Assuming that there are 60,000 chemicals in the Inventory,  only

 one chemical in 116 has annual  sales greater than $1 million, and only

 one in 85 has annual sales above $100,000.

      The  population of existing chemicals provides the framework for

estimating the  characteristics of new  chemicals.  First, new  chemicals are

usually in an embryonic stage of development.  Second, relatively  few chemicals,

whether "new" or "old" ever achieve annual sales volumes above $100,000.

     On the basis of interviews with the publishers of several leading
  It should be noted that the figures for organics do not include interplant
  transfers.
                                                                Arthur D Little, Inc

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      1000
       100
      I
      Q.
        10
      o
      Q
        1.0
        0.1
                      10         20         30          40
                                         Ranking
            Note: Inorganic Includes Interplant Transfers.
            Source: U S. Dept. of Commerce - Current Industrial Reports.
50
           60
FIGURE 111-1   INORGANIC CHEMICAL PRODUCT RANKING BY SALES VALUE
                                   III-5
                                                                                Arthur D Little, Inc

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.E e
«_f 4)

il
It
6 E
                                                                                              8
                                                                                                  n
                                                                                                  y
                                                                                                  6
                                                                                                  c

                                                                                                  0>

                                                                                                  I




                                                                                                  I
CO
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m
                                                                                                         I
                                                                                                         oc
                                                                                                         a
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                                                                                                         oc
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                                                                                                         o
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                     sa|eg jonpojj iBDjiuaqo - sje||OQ
                                      III-6
                                                                                       Arthur DUttleJnc

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commercial directories it appears that about three percent of the chemicals




listed in a directory are new each year.  The most complete directory has




about 10,000 entries.  A commercial chemical is normally defined as one with




a minimum sales level of either $1,000 or 1000 Ibs. per year.  About 300 new




chemicals meeting one of these criteria are introduced annually.  This




definition excludes a large number of new chemicals (perhaps another 700) that




sell in volumes of under 1000 Ibs.




     The total number of new chemicals available for purchase each year




in relatively small quantities is probably about 3000.  Many of these are




purchased only for R&D purposes.  This estimate is based on consideration




of the Snell report, the annual number of new chemical patents issued, and




a limited number of interviews with industry observers and representatives.




For example, one manufacturer of R&D chemicals adds about 1000 new titles




to his catalog every year.




     As provided for in the Toxic Substances Control Act, small quantities




of chemicals used for R&D purposes are exempt from regulation under Section 5.




Because a final definition of R&D chemicals has not been written at this time,




it is difficult to classify chemicals as being either 'R&D' or 'commercial'




chemicals.   In order to come to some conclusions concerning potential impacts




it has been necessary to make a number of assumptions.




     For purposes of this analysis it is assumed that the number of new




commercial chemicals introduced each year is about 1000.  The assumed




classification of new chemicals is shown in Table III-l.  It must be understood




that very little information is available on this specific subject and that




these estimates are presented solely for purposes of this preliminary analysis




of TSCA premanufacturing notification impacts.  As will be shown below and




in Chapter VI, even these order-of-magnitude estimates allow several important




conclusions to be drawn.




                                    III-7





                                                                 Arthur D Little, Inc

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             TABLE III-l  ESTIMATED DISTRIBUTION OF
              NEW CHEMICALS ACCORDING TO PRODUCTION
                         VOLUME AND USE&
                      (Numbers of Chemicals)
    Sales
Use
Under 1000 Lbs
Over 1000 Lbs     Total
R&D
   2000
                  2000
Commercial
    700
    300
1000
Total
   2700
    300
3000
 a.   Estimates are subject to at least a + 3,0% uncertainty.
Source:  Arthur D. Little,  Inc., estimates.
                              III-8
                                                            Arthur D Little, Inc

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     Data were not available for commercial chemicals sold in quantities




smaller than 1000 Ibs. per year, but it is assumed that few, if any, manu-




facturers would find it profitable to supply chemicals having an annual sales




value less than $1,000.  This sales level or 1000 Ibs. annual sales are often




used as indicators of emerging commercial importance.  At the lowest extreme,




many new R&D chemicals sell in annual quantities of only a few pounds and a




few hundred dollars, or less.  Almost no regulatory cost can be borne at




this level.




     In order  to determine several characteristics of new chemicals  that




are  required for this  analysis, 25 "new" chemicals were selected  for study  on




the  basis  of being  added  to  the Chemical Week  "Buyers' Guide" between  1973  and 1978.





 This represents an extremely small sample  of the estimated  5000 new chemicals




 introduced in this five-year period  that would have  been subject to premanufacturing




 notification requirements.   The sample is  also somewhat  biased  because the




 Chemical Week Buyers'  Guide  is oriented toward the industrial segments of the




 chemical industry.  This bias implies a higher sales volumes than will be




 achieved by all of the 1000  new commercial chemicals currently introduced




 each year.
                                   III-9



                                                                    Arthur D Little, Inc

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     The results of telephone discussions with the manufacturers of the 25




chemicals are presented in Table III-2.  As indicated in the Table, 11 of the




25 chemicals were either no longer manufactured or were sold only for R&D purposes.




Most of the 14 sold commercially were introduced in the mid-to late 1960's.




Although two of these chemicals were still sold mainly for R&D purposes 10-12




years later, most of them achieved sales volumes of $10,000-400,000 annually by




1977.  In order to place these chemicals on a consistent basis for purposes of




the impact analysis, the sales values have been "normalized" to a 10th year sales




figure.  This has been done by assuming linear growth during this 10-year




period (Table III-3).




     The projected sales after 10 years can be translated into a figure relating




the cumulation percentage of these chemicals achieving various levels of annual




sales.  These values are shown on Figure III-3.  Fifty percent of the chemicals




have sales of less than $85 ,000 after ten years on the market, while 80% have




sales of less than $300,000.  The estimating procedure implies that the sales




after five years would be half of those shown on the figure.  The assumption of




a constant increment of annual growth is not an accurate representation of the




likely sales history of these chemicals.  However, most of them have been on




the market long enough to justify a limited extrapolation of data, where no




other information is available.  In spite of the limitations of the approach,




the results provide useful indications of the sales distribution of a small




sample of new chemicals.




C.  NEW CHEMICAL ACTIVITY BY INDUSTRY SEGMENT




     A preliminary classification of the 41 chemical industry segments according




to anticipated new chemical development activity is presented in Table III-4.




The classification information was developed on the basis of three key inputs:




1) patent activity,  2) survey information from a 1975 study  prepared for the




Manufacturing Chemists Association, and 3) Arthur D. Little, Inc. estimates.  The




classification is on the basis of numbers of chemicals developed since this relates




directly to TSCA costs.





                                        111-10                     Arthur D Little, Inc

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                                 TABLE III-2

                   RESULTS OF TELEPHONE SURVEY OF  'NEW[ CHEMICAL
                   	PRODUCTION/SALES VOLUME
1977 Sales
Chemical Manufacturer Estimate
No . No .
Pound s
Dollars
Estimated
Value Per
Pound
First Year
of Sale
       1
       2

       3
       4
       5

       6
       7
       8

       9
      10
      11
      12
      13
      14
      15
      16

      17-25
1
1
1

1
1
1
1
1
1
1
1
                                    (thousands) (dollars)
                          1,000,000
                       650
                                                  .65
   225
   150
 n.a.

 n.a.
100,000
  5,800
 n.a.
 n.a.
65,000
   400
 1,000
  24
 116
n.a.

  10
 155
 119
n.a.
  10
 520
  24
  45
 107
 775
 n.a.

 n.a.
 1.55
20.50
 n.a.
 n.a.
    8
  60
  45
                                        1965,1978
2
1
1
1
1
n.a.
85,000
46,000,000
n.a.
n.a.
150
404
11,040
n.a.
n.a.
n.a.
4.75
.24
n.a.
n.a.
1969
1950' s
1950's
1968
1968
1967
1965
1958

n.a.
1968
1972
1968
n.a.
1967
1975
n.a.
                                         Notes


                                         reinitiated
                                         manufacture

                                         will cease
                                         manufacture
production
discontinued
mainly R&D
      it
production
discontinued
No longer manufactured, or sold only for R&D purposes.
1.  A new chemical for purposes of this survey was defined as one newly listed in
    the Chemical Week Buyers'  Guide between 1973 and 1978.  R&D sales of the chemicals
    were excluded.
Source ;  Arthur D. Little, Inc., industry interviews.
                                        III-ll
                                                                     Arthur D Little, Inc

-------
                               TABLE III-3
               ASSUMED SALES OF SURVEY CHEMICALS IN TENTH
               	YEAR ON THE MARKET	
                             (thousand dollars)
                      Year of             Assumed 10th
Chemical No.        Introduction           Year Sales

    1                  1965                  367
    1                  1969                  267
    2                  1955                   67
    6                  1967                   17
    7                  1965                   83
   10                  1968                  200
   11                  1972                  833
   13                  1966                    8
   14                  1967                  183
   16                  1966                   50
    17-25     No longer manufactured, or sold only for R&D purposes
 a.  Linear growth has been assumed for the first ten years
Source:  Arthur D. Little, lac., estimates based on Table  III-2,
                                    111-12                        Arthur D Little, Inc

-------
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-------
TABLE III-4 INITIAL CLASSIFICATION OF NEW CHEMICAL INTRODUCTION RATES
                        IN THE CHEMICAL INDUSTRY SEGMENTS
               New Chemical
Segment
Number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
Introduction
Code
D
D
D
D
C
A
B
B
B
B
D
B
A
D
A
B
C
D
C
C
B
B
B
A
C
C
A
D
D
D
C
D
D
D
C
D
D
D
D
C
C
New Chemical Introduction

SIC Code
2812
2813
2816
28193,4
28197
28198
28195,6,9
28213
28214
2822
2823
2824
2841
2842
2843
2844
2851
2861
28651
28655
28652,3
28691
28692
286931
286933
286935
28695
2873
2874
2875
2891
2892
2893
2895
28992
28994
28991,5
29111,2,3,4,5
29116
29117,8,9
29110
Code
                                              Industry Segment

                                              Alkalies and Chlorine
                                              Industrial Gases
                                              Inorganic Pigments
                                              Inorganic Acids
                                              Potassium and Sodium Compounds
                                              Chemical Catalytic Preparations
                                              Other Inorganic Chemicals, N.E.C.
                                              Thermoplastic Resins and Plastics
                                                Materials
                                              Thermosetting Resins and Plastics
                                                Materials
                                              Synthetic Rubber
                                              Cellulosic Man-made Fibers
                                              Organic Fibers
                                              Soaps,Detergents
                                              Polishes and Sanitary Goods
                                              Surface Acting Agents
                                              Toilet Preparations, Perfumes
                                              Paints and Allied Products
                                              Gum and Wood Chemicals
                                              Cyclic Intermediates
                                              Cyclic Crudes
                                              Synthetic Organic Dyes and Pigments
                                              Miscellaneous Cyclic Chemical Products
                                              Miscellaneous Acyclic Chemical Products
                                              Flavor and Perfume
                                              Rubber-Processing
                                              Plasticizers
                                              Synthetic Organic Chemicals, N.E.C.
                                              Nitrogenous Fertilizers
                                              Phosphatic Fertilizers
                                              Mixing Fertilizers
                                              Adhesives and Sealants
                                              Explosives
                                              Printing Ink
                                              Carbon Black
                                              Fatty Acids
                                              Gelatin, Except Ready-to-Eat Desserts
                                              Salt, Essential Oils, and  Chemical
                                                 Preparations, N.E.C.
                                              Gasoline, Jet Fuel, Kerosene, Distillate
                                                 and Residual Fuel Oil
                                              Liquified Refinery Gases
                                              Lubricating and Unfinished Oils,  Asphalt
                                              Other Finished Petroleum  Products,
                                                 Including Waxes

                                                         Total No. of Segments per Code
     A = relatively large number of new chemicals expected
     B = relatively moderate number of new chemicals expected
     C = rplatively small number of new chemicals expected
     D = almost no new chemicals expected

     Source:  Arthur D. Little,  Inc. estimate.
                                           TTT-U
 5
 9
10
17
  Arthur D Little, Inc

-------
     The results of this classification show that five of the 41 segments




tend to be heavily involved in the development of new chemicals:




     •  28198      Chemical Catalytic Preparations




     •  2841   .    Soaps and Detergents




     •  2843       Surface Active Agents




     •  286931     Flavor and Perfume




     •  28695      Synthetic Organic Chemicals, N.E.C.




     In addition, new chemical introduction is moderately important for nine




of the 41 segments:




     •  28195,6.9  Other Inorganic Chemicals, N.E.C.




     •  28213      Thermoplastic Resins and Plastics Materials




     •  28214      Thermosetting Resins and Plastics Materials




     •  2822       Synthetic Rubber




     •  2824       Organic Fibers




     •  2844       Toilet Preparations, Perfumes




     •  28652,3    Synthetic Organic Dyes and Pigments




     •  28691      Miscellaneous Cyclic Chemical Products




     •  28692      Miscellaneous Acyclic Chemical Products




     Support for this classification comes from a variety of sources, as




noted previously for numbers of new chemicals.  Each of these sources is




discussed below.




1.  Patent Activity




     Although patent activity in certain segments of the chemical industry is




by no means a direct indication of the importance of new chemical development




to that segment,  the number of new patents issued may be correlated to some




extent with new chemical development.  A brief discussion of U.S. chemical




industry patent activity is therefore relevant to the classification problem.
                                     111-15
                                                                   Arthur D Little, Inc

-------
     The U.S. Patent Office has three major categories for classifying patents:


"chemical," "electrical" and "mechanical."  Until the 1930s chemical patents


accounted for less than five percent of the patents issued annually.  Since


then the percentage of patents issued in this category has climbed to about


one-fourth of the annual total.



     A limited analysis of patents issued in 1973 reveals the following


information:


     •  About 20,000 chemical patents were issued,



     •  When drugs, pesticides and other non-TSCA-related patents are



        eliminated, the number shrinks to about 1,500,



     •  Of these TSCA-related patents, about 400 were assigned to individuals,



        foreign companies, or the U.S. government.


Thus, some 1100 patents of U.S.  companies would be potentially affected by TSCA



premanufacturing notification requirements, at the point—perhaps many years


later—where the new chemical would be commercialized.  These numbers must be



qualified, however,  First, not all patented compounds are introduced commercially,


and second, not all new chemicals are patented.  Nevertheless, the numbers


serve as an order-of-magnitude indication of the minimum numbers of new chemicals



discovered annually.


     In order to establish a relative scale of the importance of new chemical


development activities in the 41 industry segments,  1977 chemical patent  data


 was related to  the SIC system upon which the segmentation scheme was



based.  Individual patents from 80 standard patent classes were assigned to



individual 3- or 4-digit SIC categories.  In some cases no clear assignment



could be made and, a perfect mapping was not possible.  The results of this



effort are presented in Table 1II-5.  As indicated in the table, the greatest


chemical patent activity is in SIC 286, Industrial Organic Chemicals.
                                       111-16                      A  ,   ...   ,  .
                                                                   Arthur D Little, Inc

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2.  The Snell Survey




     According to the Snell survey SICs 282 (Plastics, etc.), 284 (Soaps, etc.)




and 286 (Industrial Organics) dominate the new chemical development process,




together accounting for 78% of the substances achieving commercial success




in the 1969-1974 period (see Table III-6).




     A similar profile of "new Substances" is presented in Table III-7.




Again, SICs 284 and 286 dominate the new chemical development process, together




accounting for 85% of the substances achieving commercial success in the 1969-




1974 period.




     The rate of "new" industrial organic chemical development by small




(under $30 million in 1972 sales) chemical companies was far higher than the




industry average,  This seems to be in general agreement with information




developed later in the "Research and Development Expenditure"  Section.




Specifically, analysis of data describing the R&D activities of various




industries and industry segments, indicates that the level of company funding




of R&D falls off much more slowly as a function of company size than is the




case in other industries.




3.  Industry Estimates




     A final input to the industry classification was a series of discussions




with industry experts at Arthur D. Little and with a limited number of industry




representatives.  The discussions with industry representatives focused on




the sample of 25 "new" commercial chemicals described earlier.  When these




chemicals are classified according to SIC code, the importance of certain




segments to new chemical development is apparent.  The results of this




classification are presented in Table III-9.  Most of the chemicals  (about  70%)




fell into SIC 286, Industrial Organic Chemicals; about 15% fell into SIC 281,




Industrial Inorganic Chemicals.  The remainder  (about 15%) fell into SIC 283,




Drugs, which is not covered by TSCA.








                                   111-18                           Arthur D Little, Inc

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                                                                        Arthur D Little, Inc

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                                                                             111-21
                                                                                                                               Arthur D Little, Inc

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             TABLE III- '9  DISTRIBUTION OF 25 SELECTED
                    "NEW" CHEMICALS BY SIC CODE
SIC Code                Number of Chemicals        Percent of  Total

  2869                          12                       48

  2865                           5                       20

  2819                           4                       16

  2833a                          3                       12

  28313                          1                        4
               Totals           25                       100
a.  Not covered by TSCA.

Source:  Arthur D. Little, Inc., based  on  random  selection of
         new chemicals appearing between 1973  and  1978  in
         Chemical Week "Buyers' Guide."
                              111-22

                                                           Arthur D Little, Inc

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D.  RESEARCH AND DEVELOPMENT EXPENDITURES


     An analysis of industry R&D expenditures is another approach to the


problem of measuring the importance of new chemical development—either


for the chemical industry as a whole, or for specific segments of the


industry.  The chemical industry is a major participant in U.S. R&D


activity.  Since one important goal of R&D is the development of new


chemicals and/or products, one may reasonably draw the conclusion that new


chemicals and/or products are of proportionate high importance to the


industry.


     Chemical industry funds for R&D have ranged from a high of 4.6% of net


sales in 1967 to a low of 3.4% in 1974 as indicated in Table 111-10. Although


there was a slight increase in 1975, a general downward trend in R&D


expenditures as a percent of net sales seems to be the rule, not only for


the chemical industry, but for most other manufacturing industries as well.


     Most of the data available concerning chemical industry R&D activities


have been compiled by the National Science Foundation.  These data are


generally available for manufacturing companies for the period 1957-1975


in a report* released by NSF in 1977.


     In terms of total R&D funds as a percent of net sales, the chemical


industry, compared with other manufacturing industries, is mid-range, having


a 3.6% R&D funding rate in 1975.  Industries such as Food, Textiles, and


Primary Metals rank significantly lower (under 1%), while Office, Computing,


and Accounting Machines rank significantly higher (10.9%).
 Research and Development in Industry, 1975, National Science Foundation,
 Washington, D.C., released November, 1977.
                                   111-23
                                                                Arthur D Little, Inc.

-------
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     For the chemical industry as a whole 1975 R&D activities can be




further broken down into three product groups as indicated in Table




III-ll.  The highest relative R&D spending activity is in SIC 283, which




is exempt from regulation by TSCA.  Furthermore, companies in SICs 281 and




282 make twice as high an investment in R&D as the companies in SICs 284




through 289.  To the extent that R&D spending is directly linked to the rate




of new chemical development or the development of significant new uses of




existing chemicals, this means that the companies in SICs 281 and 282 will




be most affected by TSCA premanufacturing notification requirements.  On




the other hand, this R&D funding pattern may simply reflect the lower




profit potential associated with developing new chemicals in SIC 284 through




289, in which case companies in these classifications will be most affected




by TSCA premanufacturing notification requirements.  A new chemical in




these classifications may typically have a much lower dollar sales volume




and thus be less able to absorb TSCA costs.




     A slightly different perspective of chemical industry R&D activity




emerges when "company," as opposed to "total," R&D funding rates are reviewed,




as is done in Table 111-12.  Total R&D funding includes both federal and




company funding.  The most significant difference to be noted is the




relatively high ratio of company to total R&D funds for the chemical industry




(3.3/3.6=92%).  For industries that rank higher than the chemical industry




in terms of total R&D funding, the ratio of company to total R&D funds is




much lower, indicating that the chemical industry has historically been




among  the least dependent on federal R&D funding.




     R&D funds as a percent of set sales do not drop off significantly




among  the top 20 chemical companies as shown in Table 111-13.  On the other




hand,  this same measure of R&D activity drops off by a factor of three or more




when moving from the four largest company R&D programs to the next four




programs in Office, Computing, and Accounting Machines or Electrical Equipment





                                        5                       Arthur D Little, Inc

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 TABLE III-ll  1975 CHEMICAL INDUSTRY R&D EXPENDITURES AS A  PERCENT
                              OF NET SALES
Industry                  SIC Code            1975 R&D  Expenditures
                                                 (% of net  sales)

Industrial Chemicals      281-82                      3.6

Drugs and Medicines       283                         7.5

Other Chemicals           284-89                      1.8
                                                       3.6
Source:  Arthur D. Little, Inc., estimates.
                                   111-26
                                                                Arthur D Little, Inc

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                                                           111-27
  Arthur D Little, Inc

-------
     TABLE II1-13 RANKING OF CHEMICAL  COMPANY  RGD  EXPENDITURES,  1975
                      (Ranked by Size of R&D Program)
          Industry

Chemicals and Allied Products

Industrial Chemicals

Drugs and Medicines

Other Chemicals

Machinery

Office Computing and
 Accounting Mach.

All Industry
        R&D Funds  as  Percent of Net Sales
           First 4    Next 4     Next 12
SIC Code  Companies  Companies  Companies
28
281-82
283
284-89
35
357

5.0
5.0
10.8
2.7
9.9
13.8
9.7
4.3
4.3
6.3
0.9
6.2
2.9
9.6
5.4
2.2
6.3
2.5
3.0
3.6
11.2
 Source:  Research and Development in Industry, 1975 National Science Foundation,
         Washington,  D.C., released in November, 1977.
                                      111-28
                                                                     Arthur D Little, Inc

-------
and Communication.  It should be noted that these data are for company-




funded R&D programs, not total R&D.  This is important because it




demonstrated a broad base of R&D activity by comparison to other industries.




In other words, the importance of innovation goes beyond the top few




companies in the industry.




     Chemical industry R&D funds, at $2.4 billion, were the second-largest




(after Electrical Equipment and Communication, $3.0 billion) of any industry




recorded in 1975 (Table 111-14).  The chemical industry accounted for 167,




of company R&D funds spent in 1975.
                                                                  Arthur D Little, Inc

-------
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Motor vehicles and motor vehicles
Other transportation equipment
Aircraft and missiles 	
Professional and scientific instrum
Scientific and mechanical meas
instruments 	
Optical, surgical, photographic
other instruments 	
Other manufacturing industries .
Nonmanufacturing industries . .




§ ^
P ol
B CX ...
Distribution by size ofc
(based on number of em
Less than 1 ,000 	
1 ,000 to 4,999 	
5,000 to 9,999 	
10,000 to 24,999 	
25,000 or more 	
her electrical equipment group.
National Science Foundation.
I Science Foundation
1 Included in the 01
'Estimated by the
jrroui metals and products group for 1957-65. SOURCE' Nationa
1 See table 1 , footnote 1 .
'Not separately available but included in total.
'SIC codes 3391 and 3399 included in the nonf
4 Data not tabulated at this level prior to 1972.
                                                             111-30

-------
                      IV.  REGULATORY REQUIREMENTS









A.  INTRODUCTION




     This chapter describes the premanufacture notification system, with




particular emphasis on the role of  the proposed regulation.   Specific  data




reporting requirements are discussed in Chapter V.







B.  THE PREMANUFACTURE NOTIFICATION SYSTEM




     Section 8(b) of  the Toxic Substances Control Act  (TSCA)  requires  the




Environmental Protection Agency (EPA) to publish an "inventory" of chemical




substances manufactured or imported into the United States.   The Agency is




in the process of compiling this list and intends to publish  it in 1979.




     Effective 30 days after the publication of the inventory, any person




who intends to manufacture (or import) a new chemical  substance, defined as




one not listed on the inventory, must notify EPA at least 90  days before




commencing production.  Persons intending to manufacture a chemical for a




"significant new use" (yet to be defined by EPA) must  also submit a notifi-




cation to EPA.  This  report deals only with the new chemical  notification




requirements.




     Upon receipt of  the premanufacture notice, the Agency has 90 days in




which to complete its review.   Under Section 5(c) of TSCA, EPA may extend




this period to 180 days for good cause.




     During the review period, EPA may take action under Section 5(e) or




5(f) regulating the production or use of the chemical  substance.  In the




event that the Agency has insufficient data upon which to make "a reasoned




evaluation of risk",  Section 5(e)  authorizes EPA to restrict  the manufacture,










                                  IV-1




                                                                Arthur D Little, Inc

-------
processing, distribution, use or disposal of the chemical pending develop-


ment of the necessary data.  If the chemical may present an "unreasonable


risk to human health or the environment", Section 5(f) gives the Agency the


authority to regulate in any way necessary to eliminate any unreasonable


risk, including a ban if necessary.


     EPA will not "approve" or "certify" chemicals.  If regulatory action


has not been taken upon the expiration of the premanufacture review period,


the manufacturer is free to begin commercial production.



C.  NOTIFICATION REQUIREMENTS


     The proposed rules require manufacturers to complete the premanufacture


notification form, which describes in detail the date EPA considers essen-


tial to the premanufacture review.


     The notification form is divided into the following segments:


     Mandatory Data


     General Information


         A.  Manufacturer Identification


         B.  Chemical Industry


         C.  Marketing Data


         D.  Schematic Flow Diagram


     Risk Assessment Data


         A.  Chemical Properties, Fate Characteristics, and Effects Data


         B.  Exposure from Manufacture


         C.  Exposure from Processing Operations


         D.  Exposure from Cor.sumer Use
                                  IV-2
                                                                 Arthur D Little Inc

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     Optional Data
     Risk Analysis and Optional Data
         A.  Risk Analysis
         B.  Structure Relationships
         C.  Industrial Hygiene and Environmental Safeguards
         D.  Engineered Safeguards
         E.  Industrial Process and Use Restriction Data
         F.  Economics, Benefits, and Other Non-Risk Factors

     Some of the questions on the notice form are "open ended" by the very
nature of the subject matter.  (For example, "List the identity ... of
those impurities which may be reasonably anticipated to be present in the
chemical substance . . .")  In completing the form, manufacturers are
required to answer questions to the degree that data are "known or reasonably
ascertainable" to them.  This is defined in the proposed rules as "all
information that a reasonable person similarly situated might be expected
to possess, control, or know, or could obtain without unreasonable burden

or cost."  It is likely that this criteria will be interpreted by EPA to
relate to both the size of the firm and the potential profitability of the
chemical.
     The proposed rules do not require manufacturers to perform health and
safety testing on new chemicals unless:
     •  a Section 4 test rule has been promulgated for a category of
        chemicals of which the new chemical is a member; or
     •  the new chemical appears on a list of chemicals EPA publishes
        under Section 5(b)(4) of TSCA.
However, submitters must report data on any health and safety tests they
have performed,  or are otherwise in their "possession or control".

                                IV-3
                                                                Arthur D Little, Inc

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              V.  UNIT COSTS OF PREMANUFACTURING NOTIFICATION







A.  INTRODUCTION




    Among the direct and early costs to the chemical industry in comply-




ing with the requirements of the Toxic Substances Control Act (TSCA) are




those incurred in connection with completing and submitting Premanufac-v




ture Notice Forms to the Environmental Protection Agency as indicated  in




Section 5 of the Act.  This chapter makes a preliminary assessment of




these costs, based on a number of assumptions and scenarios (Section B).




The estimated costs are the result of an initial probe designed to gen-




erate order-of-magnitude values that would be of use to the Agency at




this time.




B.  ASSUMPTIONS USED IN THE COST ESTIMATION




    According to the Proposed Rules for Premanufacture Notification for




New Chemical Substances, Part 720, those who submit a Premanufacture




Notice must provide the information requested in the form "insofar as




such information is known to or reasonably ascertainable by him."  Since




this criterion of "reasonably ascertainable" information has been defined




by the Agency in a very broad manner (Part 720.23b (2)), one of the major




uncertainties in the estimates generated is the extent of information




that will ultimately be required to satisfy this criterion.  Because a




rigorous definition of "reasonably ascertainable" may not be possible,




most guidance concerning the amount and quality of information to be sub-




mitted on the forms will be contained in the instructions to the Pre-




manuf acture Notice Form.   These instructions have not,  as yet, been




issued.
                                     V-l




                                                               Arthur D Little, Inc

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    The estimates of the cost of preparing the Notice form are based




on our view of the likely response of a prudent firm.  It is probable




that a firm will submit the form with the expectation that it will be




acceptable both in terms of the sufficiency and nature of the data sup-




plied.  The costs and increased market risks of a six-month delay in




manufacturing approval (or a longer delay in litigation) will be a large




incentive for firms to try to satisfy EPA expectations with the initial




notification.  The estimated costs of completing the notification form




reflect this assumption.




    Some additional assumptions have been made with respect to what the




Agency might consider "reasonably ascertainable" information.  Among the




factors that could influence this evaluation are:




    •  Company size,




    •  Uses of chemicals, and




    •  Distribution and fate of chemicals.




    These factors have a direct relationship to the administrative costs




of submitting a Premanufacture Notice.




    Company size would appear to have a predominant influence on the




amount and quality of data available and on the information EPA will re-




quire to be reported.  The existence of substantial research arms in larger




companies would mean that rather extensive chemical characterization and




test data might be available and would require reporting in the Premanu-




facture Notice.  As the size and, thus, the capabilities of a chemical




company become smaller, it is expected that the magnitude of information




will decrease, as will the ease of assembling this information.
                                   V-2



                                                                 Arthur D Little, Inc

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    How a chemical is used will also have a marked influence on the types
of information that will be generated and on the costs of collecting and
reducing the information to a format that is compatible with the Premanu-

facture Notice Form.  At the simplest level, one can assume a single chem-

ical used as an intermediate in a closed system by the company that manu-

factured it.  Under this scenario, a substantial fraction of the form will
not be relevant, and the time and materials required for its completion
would be expected to be modest.  At the other end of the spectrum, one can

assume that a chemical is used as an important component of some consumer
product that is not formulated and sold by the company that manufactures the

chemical.  In such a case, the necessity for acquisition of information from

secondary users could present a logistic and administrative task of sub-
stantial magnitude and cost.

    Under the initial notification requirements, the results of any chem-
ical property determinations and health and environmental testing that

has been done will have to be submitted, but no new testing will have to
be undertaken.  Although the costs of testing have not been included in
the unit cost estimates reported here, the costs of preparing the data

for submission to the Agency have been included.  If the Agency determines
that additional tests are necessary, it has the authority under Section 5e
of the Act to seek the performance of those tests through court action.
Some, and perhaps many, firms can be expected to do testing they would not

otherwise do, to avoid the delays of a 5e action, or will do testing as a

result of a 5e legal proceeding.  The costs of performing these tests have
not been included in this analysis.

    The ranges of estimates given in the following section reflect some

of these uncertainties.  The lower estimate is likely to apply to the
following:

                                    V-3
                                                               Arthur D Little, Inc

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(1) Chemicals not expected to have significant health/environmental
    effects or expected to have only low exposure;
(2) Chemicals for which much of the required data are already avail-
    able on file and accessible; and/or
(3) Chemicals with limited distribution and use.
The upper estimate is likely to apply to:
(1) Chemicals expected to have potential adverse health/environmental
    effects and significant worker/public exposure;
(2) Chemicals requiring extensive engineering/market analysis and test
    data evaluation; and/or
(3) Chemicals with widespread distribution and use.
The following factors have a bearing on the notification costs:
(1) Learning curve - At the outset, the time required for companies
    to complete the Premanufacture Notification Form will reflect
    their unfamiliarity with the form itself and with the responses
    from the Agency to the submitted forms.  The time estimates pro-
    posed reflect an early locus on the learning curve.  It is ex-
    pected that the administrative costs will decrease with time as
    companies become familiar with the Notice Form and Data Format
    Forms and may find Lt to their advantage to arrange their own
    data collecting and recovery protocols to fit with Agency re-
    quirements.
(2) Data required by other agencies - No estimation was made to deter-
    mine whether data developed for other Federal agencies or for the
    satisfaction of state or local requirements would also be appro-
    priate for use  in completion of the Notice Form.  Although similar
                                V-4
                                                           Arthur D Little, Inc

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        data may be required by other agencies, it is expected that the




        diversity of format and different needs of these organizations in




        comparison to the requirements of EPA will necessitate a unique




        effort to complete a satisfactory Notice Form.




    (3) Small-volume manufacturers - In the estimation of the administra-




        tive time and costs, it was assumed, at a minimum, that the chemi-




        cal companies considered had at least a modest level of knowledge,




        expertise and sophistication.  However, the small-volume manufac-




        turers may not have this level of expertise to enable them to




        develop "reasonably ascertainable" information; thus, their costs




        would be correspondingly low.  With the expectation that the Agency




        may consider these small-volume manufacturers separately and may




        require only an abbreviated Notice Form with resulting lower costs,




        the anticipated responses of such manufacturers were not included




        in the estimates.




C.  ACTIVITIES INVOLVED IN COMPLETING THE PREMANDFACTURE NOTICE




    Activities required to complete the premanufacture notification form




can be categorized as data development, data collection/compilation,




administration, and management review/control (Table V-l).  The data re-




quirements as specified in the Notice Form are listed in Table V-2, and




the specialized areas of expertise that may be required to complete the




form are shown in Figure V-l.




D.  COST ESTIMATING PROCEDURES




    Because of time and resource limitations, a categorized estimation




procedure was used rather than a detailed line item accounting procedure.




The following factors are central to an understanding of the procedures




used to obtain the time and cost estimates and to interpret them.







                                     V-5




                                                              Arthur D Little, Inc

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                                TABLE V-l
         ACTIVITIES REQUIRED TO COMPLETE PREMANUFACTURE NOTICE FORM
DATA DEVELOPMENT
        testing/monitoring
        engineering estimates
     -  market analysis

DATA COLLECTION/COMPILATION
     -  manual retrieval from files
        literature review
        computer searches

ADMINISTRATION
     -  preparation of notice forms

PROFESSIONAL SUPERVISION AND MANAGEMENT REVIEW/CONTROL
        initial determination of technical requirements
        review of technical accuracy and completeness of form
     -  legal review of prepared form (including confidentiality)
     -  management review and approval
     -  monitoring of EPA review
(Additional activities would be involved if additional data are requested
or the notice is considered invalid.)
                                    V-6
                                                               Arthur D Little, Inc.

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                                TABLE V-2
                      NOTICE FORM DATA REQUIREMENTS

SECTION
Part I - General Information
A.  Corporate Identification
B.  Chemical Identity
C.  Marketing Data - Production Volume
D.  Federal Register Notice
E.  Process Flow Diagram
Part II - Risk Assessment Data
A.  Chemical Properties, Environmental Fate Characteristics, and Human and
    Ecological Effects Data
B.  Exposure from Manufacture
    1. Worker Exposure
    2. Environmental Release
    3. Disposal
    4. By-products, Co-products, Feedstocks and Intermediates
    5. Transport
C.  Exposure from Processing Operations
    1. Worker Exposure
    2. Environmental Release
    3. Disposal
D.  Exposure from Consumer Use
Part III - Risk Analysis and Optional Data
A.  Risk Analysis
B.  Structure Relationships
C.  Industrial Hygiene and Environmental Safeguards
D.  Engineered Safeguards
E.  Industrial Process and Use Restriction Data
F.  Process Chemistry
G.  Economics, Benefits and Other Non-Risk Factors
                                    V-7
                                                               Arthur D Little, Inc

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                                          FIGURE V-l




         SKILLS  THAT MAY BE REQUIRED TO COMPLETE EPA PREMANUFACTURE  NOTIFICATION FORM











PART
A.
B.
C.
D.
E.
PART
A.
B.





C.




D.
PART





"*





I - GENERAL INFORMATION
Manufacturer Identification
Chemical Identity
Marketing Data
Federal Register Notice
Schematic Flow Diagram
II - RISK ASSESSMENT DATA
Test Data
Exposure from Manufacture
1. Worker Exposure
2. Environmental Release
3. Disposal
4. By-products, etc.
5. Transportation
Exposure from Processing
Operations
1 . Worker Exposure
2 . Environmental Release
3. Disposal
Exposure from Consumer Use
III - RISK ANALYSIS AND OPTIONAL
w
M
H
 pr^ ^E ^C pTj
<2 iJ co g u

X X
X
X X
XX XX
X

X X

X
X
X
X
X X


X
X
X
X X X X



CO

W
W
2
M
o
£5
w




X
X



X
X
X
X
X


X
X
X
X

STS
AL HYGIENISTS
TAL SCIENTISTS
ANS
M 2 S3 M
BO W U
M 2 M
^ H § H
O  H 
-------
    (1) The staff time and costs required to complete each major
        section of the Notice Form were estimated by professionals
        familiar with the relevant areas and were based on an over-
        view of the data and information requirements and not on a
        detailed analysis of the Notice Form on a line-by-line basis.
    (2) This method of estimation results in uncertainties that may
        yield variations of 50% or more in the given numbers.  Thus,
        the values shown on the tables may give the impression of a pre-
        ciseness that is not intended.  When used elsewhere in the
        report, the unit cost estimates have been rounded to two signi-
        ficant figures although these values have an error range of
        ±50%.
    (3) The estimated costs are the result of the assumed average hour-
        ly rates (Clerical/Administrative - $10/hr; Professional/
        Technical - $25/hr; Managerial/Legal - $50/hr) multiplied by
        the estimated time requirements in hours.
    The uncertainty of the cost estimates introduced by the estimating pro-
cedure is magnified by uncertainty, at this time, as to how the regulations
will be interpreted.
E.  GENERAL INFORMATION
    The unit costs of completing the General Information section of the
Premanufacturing Notice Form are estimated to range from about $800 to
$2,900 per chemical (Table V-3).
    Section A is concerned with administrative information that can be
supplied by appropriate administrative aides in most companies.  In very
small operations, this section (or possibly the entire form) may be com-
pleted by the owner or manager of the operation.

                                    V-9
                                                               Arthur D Little, Inc

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                                     TABLE V-3
                          UNIT COST OF GENERAL INFORMATION
Information Required
  to Complete Form
	Time Requirements (hours)	

                Mid-Level
                Business
Administrative    and        Legal/
 and Clerical   Technical  Managerial
                        Costs ($)
                                                    (1)
Section A

Manufacturer Identi-
 fication

Section B

Chemical Identity

Section C

Marketing Data

Section D

Federal Register Notice

Section E

Schematic Flow Diagram

     TOTAL
      2-4
      2-4
      2-4
      2-8
4-8
4-16        2-4
4-16        2-4
4-40
      9-21       16-80
2-4
            7-13
                                               60
              120-240
              220-640
              220-640
220-1,280

840-2,860
 (1) Assumed:  $10/hour  for administrative and  clerical
              $25/hour  for mid-level  business  and  technical
              $50/hour  for managerial
Source:  Arthur D. Little,  Inc.,  estimates.
                                         V-10
                                                                     Arthur D Little, Inc

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    Section B requires information on chemical identity that will be


supplied by members of the scientific staff of an organization, inas-


much as the data are highly technical.  With the requirement for name


and CAS number identification, literature resource (library) personnel


may also be involved in the completion of this section.


    Section C requires the submission of marketing and production data


with input from appropriate personnel.  The information in this section


will, in many instances, be highly speculative.


    Section D concerns the Federal Register Notice that is required by


TSCA for all submitters of the Section 5e Premanufacture Notification


Form.


    Section E requires a description of manufacturing and processing


operations presented as schematic flow diagrams.  Although the specific


criteria for this diagram are not yet completed by the Agency, it is


assumed that professional and technical inputs will be required to pre-


pare this section.


    The estimated time to complete Part I includes 9-21 hours of clerical


effort, 16-80 hours of mid-level business or technical effort, and 7-13


hours of managerial effort.


F.  RISK ASSESSMENT DATA


    The costs of completing the Risk Assessment part of the Premanufac-


ture Notice Form are estimated to be about $2,900 to $19,000 (Table V-4).


    Section A is concerned with chemical properties, fate characteristics


and effects data.  Although the Agency has chosen not to issue guidance


with respect to testing procedures at this time, Part 720.23 of the pro-


posed rules sets forth in detail the requirement for submission of test
                                    V-ll
                                                               Arthur D Little, Inc

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                                    TABLE V-4
                        UNIT COST OF RISK ASSESSMENT DATA
Information Required
 to Complete Form
   Time Requirements (hours)
                       Administrative
            Mid-Level
            Business
              and
Section A

Chemical Properties
Fate Characteristics
Effects Data

Section B

Exposure from Manufac-
ture
10-80
10-40
16-120
20-200
             Legal/
                        and Clerical    Technical   Managerial
8-20
4-20
                         Costs ($)
                                               (1)
900-4,800
800-6,400
Section C

Exposure from Processing
Operations

Section D
10-40
10-200
5-20
600-6,400*
Exposure from Consumer
Use                         10-20        10-40         5-10

          TOTAL             40-L80       56-560       22-70
                                         600-1,700**

                                       2,900-19,300
 (1) Assumed:  $10/hour for administrative and clerical
              $25/hour for mid-Level business and technical
              $50/hour for managerial

 *The upper estimates in this category are extremely uncertain and are dependent
 on  the sales and use patterns of chemicals, which vary widely.

 **This category could be zero for chemicals not having any general population
 exposure.  The fraction of these in comparison to the total has not been
 estimated.
 Source:  Arthur D. Little, Inc., estimates.
                                       V-12
                                                                   Arthur D Little, Inc

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data in the possession or control of the submitter "regardless of their




age, quality or results."  Because the Agency has not as yet published




the document Formats for Data Submitted under the Toxic Substances Control




Act, the cost estimates for the preparation of the available test data and




its presentation in the designated format must be viewed as uncertain and




preliminary.




    The data required by Sections B and C cover several levels of chemical




exposure, including worker exposure, environmental release, disposal, by-




products and transport.  The data available to complete each of these areas




will be highly variable depending on the specific nature of the chemical




and the strategy behind its manufacture.  For example, a chemical that is




being manufactured for a limited market with the hope that a large and




diversified distribution will ultimately be developed may not have a large




body of information associated with it in the subject areas required by the




Premanufacture Notice Form.  In contrast, for a chemical which has a large




planned market of known buyers and uses, there will very likely be a com-




plete dossier on disposal, by-products and transportation.  For worker




exposure and environmental release, planned values and expected charac-




terizations may be available.  However, the specifics of these types of




information may require actual plant operation which may not begin until




the Premanufacture Notice is submitted and found to be acceptable.




    Another item that will affect the administrative costs is whether the




Exposure from Processing Operations section will be completed by the




manufacturer submitting notice or by the customer who will process the




chemical substance.  Clearly, the former option will be substantially more
                                    V-13





                                                               Arthur D Little, Inc

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costly to the initial manufacturer.  In any case, completion of this




section will entail costs associated with introduction of a new chemical.




    The estimated cost to complete Part II requires 40-180 hours of cleri-




cal effort, 56-560 hours of mid-level effort, and 22-70 hours of managerial




effort.




G.  RISK ANALYSIS AND OPTIONAL DATA




    This portion of the Risk Analysis section of the notification form




deals with secondary factors that can affect the human and environmental




risk from chemicals or that may reduce the need for data required under




Part II.  While this part is designated as optional, certain portions of




it will almost certainly be completed and submitted, given the broad spec-




trum of chemicals that may be introduced into commerce and the diverse




use and distribution patterns of these chemicals.




    The estimated cost to compete Part III of the Premanufacture Notifi-




cation Form is $5,600 to $20,000 (Table V-5).  These estimates are based




on the assumption that a chemical company will make a thorough and detailed




effort in considering the different issues raised by Part III.  Many




applicants will undoubtedly choose to be extremely selective in their con-




sideration of the issues, and some may choose not to respond to all,




thereby resulting in a potentially wide range of administrative costs.




The estimates include 65-230 hours of clerical effort, 84-452 hours of




mid-level effort and 55-120 hours of managerial effort.
                                    V-14




                                                               Arthur D Little, Inc

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                                     TABLE V-5
                    UNIT COST OF RISK ANALYSIS AND OPTIONAL  DATA
Information Required
 to Complete Form
	Time Requirements  (hours)	

                Mid-Level
                Business
Administrative    and         Legal/
 and Clerical   Technical   Managerial
Section A

Rick Analysis             10-20

Section B

Structure Relation-
  ships                   10-20

Section C

Industrial Hygiene
and Environmental
Safeguards                10-40

Section D

Engineered Safeguards     10-40

Section E

Industrial Process and
Use Restriction Data       5-10

Section F

Process Chemistry

Section G

Economics, Benefits and
Other Non-Risk Factors    20-100
        TOTAL
   65-230
                  10-80
                  10-40
                  20-100
                  20-100
                   4-16
                   4-16
                  16-100
84-452
             10-20
              5-10
             10-20
             10-20
             20-50
55-120
                             Costs  (_$)
                                                         (D
                  850-3,200
                  600-1,700
                1,100-3,900
                1,100-3,900
                               150-500
                               150-500
1,600-6,000*

5,550-19,700
(1) Assumed:  $10/hour for administrative and clerical
              $25/hour for mid-level business and technical
              $50/hour for managerial
*Because of the broad spectrum of types of information considered under this
category, there is an extraordinarily high level of uncertainty.
Source:  Arthur D. Little, Inc., estimates.

                                          V-15
                                                                    Arthur D Little, Inc

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H.  SUMMARY




    The total cost to complete the Minimal Mandatory portions of the Pre-




manufacture Notice Form is estimated to range from $2,500 to $14,000




(Table V-6).   This estimate is based on the assumption that Section II.C.,




Exposure from Processing Operations, and Section II.D., Exposure from




Consumer Use, will not be required in some cases because of the nature




of the chemical for which the notice form is being submitted.  In general,




this would apply to chemical intermediates and captive products that would




be produced in only one location and would not result in exposure to the




general population.




    As additional portions of the notice form are completed as required by




individual situations (e.g., manufacture at secondary sites; general expo-




sure via a consumer product, etc.), the costs to complete all of the manda-




tory sections might range from $4,000 to $20,000.




    It is expected that large-volume manufacturers  of chemicals with public




exposure would complete the "optional" portion of the notice form (Part III -




Risk Analysis and Optional Data) and that the total cost of preparing the




Notification Form may, in some cases, exceed $40,000.
                                   V-16



                                                               Arthur D Little, Inc

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                                TABLE V-6
                SUMMARY OF ESTIMATED COSTS FOR COMPLETION
                      OF PREMANUFACTURE NOTICE FORM
NOTICE FORM SECTIONS                              ESTIMATED COST RANGE  ($)

Mandatory Information

  Part I:   General Information                          840-2,860

  Part II:  Risk Assessment Data

    Section A:  Physical, and Chemical Properties,
      Environmental Fate Characterists, and
      Effects Data                                       900-4,800

    Section B:  Chemical Exposure from Manufac-
      ture                                               800-6,400

      SUBTOTAL I                                       2,540-14,060
      (Minimum Mandatory Form)

    Section C:  Exposure from Processing
      Operations                                         600-6,400

      SUBTOTAL II                                      3,140-20,460

    Section D:  Exposure from Consumer Use               600-1,700

      SUBTOTAL III                                     3,740-22,160
      (Maximum Mandatory Form)

Optional Information

  Part III:  Risk Analysis and Optional Data           5,550-19,700

          TOTAL COSTS - COMPLETE FORM
          MANDATORY AND OPTIONAL PARTS                 9,290-41,860


Source:   Arthur D. Little, Inc., estimates.
                                    V-17
                                                               Arthur D Little, Inc.

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         VI.  IMPACTS OF PREMANUFACTURING NOTICE REQUIREMENTS


A.  INTRODUCTION
     TSCA premanufacturing notice requirements could have important impacts
on the chemical industry.  Preliminary conclusions have been drawn concerning
the costs of preparing notice forms and the segments of the industry likely
to be most affected, and a crude estimate has been made of the potential
reduction in new chemical introductions.  No costs for health and environ-
mental testing have been included in this analysis.
     The economic impacts of a reduced flow of new chemicals on the chemical
producing and the chemical consuming industries have not been evaluated.  A
general characterization of the types of economic impacts that could poten-
tially result from the notification requirements is presented in the following
section.

B.  ECONOMIC IMPACT
     The premanufacturing notice requirements of TSCA have the potential for
far-reaching impacts on the U.S. chemical industry and chemical consuming
industries.   Effects are likely to be seen in the following areas:

     •  changes in the chemical R&D process;
     •  reduction in the number of new chemicals introduced and a change
        in their composition;
     •  economic impact  on the chemical industry in the form of reduced
        growth resulting from  a reduction in the flow of new chemicals;
                                  VI-1
                                                                Arthur D Little, Inc

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     •  economic impact on chemical consuming industries as a result of




        a reduction in the flow of new chemicals;




     •  impact on the national economy, including the rate of GNP growth




        and the balance of payments.





     The following sections of this chapter report the results of a preli-




minary analysis of the costs of preparing the TSCA premanufacturing notification




form and of a possible reduction in the introduction of new chemicals.  Other




types of impacts have not been evaluated, although potential impacts in other




areas could be of far greater importance over the longer term.  While the




economic impacts have not been quantitatively evaluated, some qualitative




comments about them can be made.




     It is difficult to generalize about the chemical industry, but two




characteristics underlie the potential for economic impacts:




     •  Most chemicals begin their commercial life at low sales volumes;




        therefore, R&D expenditures have to be justified on the basis of




        low-to-moderate revenues over the first five to ten years on the




        market.




     •  Chemicals compete both with each other and with non-chemicals in




        their major use categories.  Especially over the longer term, there




        is a significant elasticity of demand for most chemicals because




        substitutes of some type are available.  As a result, the manufacturer




        of a new chemical may not have great latitude in pricing.





     These two characteristics combine to produce the potential that even




modest notification costs could reduce the number of chemicals introduced.
                                 VI-2




                                                                 Arthur D Little, Inc

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Over time, this reduction could affect the economic performance of the more




innovative chemical industry segments and the firms in those segments.




     The markets in which the new chemicals would have competed will be




served by other chemicals or such non-chemicals as metals, forest products,




natural fibers, etc.  Had the new chemical been commercially successful, it




might have provided better performance or lower cost.  Its absence may mean




the customer is being served at higher cost or is receiving poorer performance.




     The effect of the notification requirements on the industry segments




will probably be a lower return on investment in R&D.  In time, this may




be reflected in a lower growth rate for the segment, as chemicals produced




by other segments or non-chemicals retain or take over market share.  The




U.S. trade balance may also oe affected in time because product exports




generally follow successful marketing in the United States.




     The role of medium-size and smaller firms in the chemical industry could




be changed by the premanufacturing notice requirements.  The effect of the




notice requirements will be to raise the barriers to entry of new products




while leaving the costs of existing products unchanged.  In some segments




of the chemical industry, medium-size companies have relatively high rates of




new chemical introduction.  If the notification costs are high, medium and




small companies may be more restricted in introducing a new chemical than a




larger company.  The larger company may have quicker access to a larger




market and may be willing to invest for a longer-term return.  The larger




company may also be more willing to make a larger investment in a new chemical




with a large market potential because the consequences of failure are less




likely to be catastrophic for the company.
                                 VI-3





                                                                 Arthur D Little, Inc

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     Consequently, the viability of some medium and small companies in the
chemical industry may be threatened over the longer term.  Some may be
acquired and others may reduce their R&D activities and confine themselves
to manufacturing existing chemicals.  Greater concentration in the industry
may result.  This has generally been the effect of higher barriers to new
product introduction in the drug and pesticide industries.
     The magnitude of these economic impacts depends on the cost of notifi-
cation and the degree of uncertainty that manufacture of the chemicals will
be allowed by EPA.
                                 VI-4
                                                                 Arthur D Little, Inc

-------
 C.   IMPACTED  SEGMENTS

     The TSCA  premanufacturing regulations will have a relatively high  impact

 on  small  chemical manufacturing companies  (as opposed to chemical mixing,

 formulating,  or processing companies) that develop new chemicals.  Chemical

 mixing, formulating, or processing  companies do not generally produce  new

 chemicals and so are not directly impacted by the TSCA premanufacturing

 regulations.  Innovative new chemical development is moderate to high  in the

 following chemical industry segments:

     SIC                                        Share of Establishments With
     Code        Segment                           Less Than 50 Employees

     2819        Industrial Inorganic Chemicals             62
     2821        Plastics Material  and Resins               56
     2822        Synthetic Rubber                           50
     2824        Organic Fibers                             16
     2841        Soap, Detergents                           83
     2843        Surface Acting Agents                      77
     2844        Toilet Preparations, Perfumes              79
     2865        Cyclic Crudes and  Intermediates            49
     2869        Industrial Organic Chemicals               51

     With the exception of Organic Fibers, all of the segments listed above have

 a relatively high percentage (greater than 49%) of establishments with fewer

 than 50 employees, indicating a relatively high proportion of small companies.

     Table VI-1 provides a complete listing of chemical industry segments likely

 to experience a relatively high impact by showing the expected number of new

 chemicals versus employment size of establishment for chemical industry segments.

 Those segments having a relatively large number of new chemicals expected to

 be developed and a high percentage of relatively small establishments are

more likely to experience a relatively high impact.

     Comparisons of each industry segment having a moderate to high level of

new chemical innovation with chemical industry averages are useful in character-

izing economic impact.   Three segments—Soaps and Detergents,  Surface Acting

Agents, and Toilet Preparations and Perfumes—have a high percentage of small
                                                                   Arthur D Little, Inc
                                   VI-5

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-------
establishments; the average establishment in these segments is much smaller than


the average for the chemical industry.  One segment, Industrial Inorganic

Chemicals, has establishment averages very similar to the industry's, but


this segment includes a small number of very large establishments producing


commodity chemicals as well as a large number of very small producers.  The


other five segments include establishments that are generally larger than the


industry average.  Small establishments within these (TSCA) segments are likely

to experience a relatively high impact from the regulations.  Table VI-2 shows


value of shipments, number of employees, and capital expenditures, per


establishment, for each of the segments that have a moderate or high level

of new chemical innovation.


     While the impact of TSCA will vary among firms within any one sector

depending on the importance of new chemical innovation for any particular firm,


the segments most highly affected appear to be:


     •  Soaps and Detergents,


     •  Surface Acting Agents, and


     •  Industrial Organic Chemicals, n.e.c.

Also highly affected are relatively small chemical producing firms throughout

the chemical industry, but especially in the following segments:

     •  Industrial Inorganic Chemicals, n.e.c.,

     •  Plastic Material and Resins,

     •  Synthetic Rubber,


     •  Toilet Preparations, Perfumes, and


     •  Cyclic Crudes and Intermediates.
                                   VI-7
                                                                   Arthur D Little, Inc

-------
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D.  ESTIMATED IMPACT OF TSCA PREMANUFACTURE NOTICE COSTS ON RATE OF
    NEW CHEMICAL COMMERCIALIZATION	

    The rate at which new chemicals are commercialized is dependent on the

same risk/return balance which is at the base of all rational, economically-

driven business decisions.

    A new chemical is introduced because the firm expects to profit, either

directly or indirectly, from the introduction.  The basis of this expectation

is that the chemical (or an associated product, in the case of captive use

of the chemical) will have some distinct features which will allow it to be

sold at a price, in quantities, and for a length of time which will allow the

company to pay its operating costs, recoup its investment (in R&D, in plant

and equipment and in other areas), and achieve a level of return on its

investment which is attractive vis-a-vis other investment opportunities.

Anything which increases the cost of introducing a new chemical has the effect

of raising the hurdle of success by raising the level (or certainty) of

returns required to maintain the same rate of return on investment (ROI).

    Because the TSCA Premanufacture Notification Requirements will raise the

cost of introducing a new chemical but will presumably have little effect

on the level or certainty of returns, it is logical to expect that relatively

fewer new chemicals will be commercialized with the premanufacture notice

requirements in effect.  This is true even without considering the more

direct effect of the premanufacturing review by EPA which will be to eliminate

some chemicals from consideration because of proven or suspected toxic effects.

The reduced number of chemicals will, in turn, further increase the investment

cost for new chemicals because a reduced number of 'successful' chemicals will

be, in effect, supporting the R&D investments in a correspondingly increased

number of 'unsuccessful' chemicals.
                                  VI-9
                                                                  Arthur D Little, Inc

-------
    Because information and experience are unavailable concerning the
numbers of chemicals which will be screened out of the new chemical development
process by TSCA Section 5 tests, this analysis takes another approach and
focuses on the level of notification costs which may reasonably be expected to
be supportable by the chemicals which are successfully commercialized.  It is
important to realize that because of the approach taken, in which the testing
costs of 'unsuccessful' chemicals are not considered, the number of successful
new chemicals may be overstated.
    To relate TSCA Section 5 compliance costs to numbers of new chemicals, it
was necessary to develop data concerning representative sales levels achieved
by a sample of relatively new chemicals and to make some basic assumptions
about the profitability of these chemicals and the amount of profit which
would be sacrificed to cover Section 5 costs.  For purposes of this analysis,
it was assumed that the maximum supportable testing cost was equivalent to about

two percent of the chemical's gross sales value during its first ten years on the
market.  This is roughly equivalent to sacrificing'one-third of profits during
this period, assuming a normal industry profit ratio of about six percent on sales.
     By using these assumptions and the results of the limited industry analysis
which identified what are assumed to be typical sales levels for relatively
new chemicals, it was possible to develop Figure Vl-1 and Table VI-3,which
relate TSCA Section 5 notification costs to numbers of new commercial chemicals.
As shown in the table, TSCA Section 5 costs of about $40,000 would be expected
to reduce the number of new chemicals per year by about  90%.  Assuming that
1000 chemicals are introduced yearly in the absence of TSCA notification
reauirements, about 100 would be introduced if the average cost of notification
is $40,000.
1.  See Chapter III for a presentation of the basic data.
                                   VI-10
                                                                  Arthur D Little, Inc

-------
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                                                                   VI-ll

-------
                                 TABLE  VI-3




                 NEW CHEMICAL  INTRODUCTION AS  A FUNCTION


                OF TSCA PREMANUFACTURING  NOTIFICATION COSTS
                   TSCA Costs              No. of New Commercial Chemicals




                   $   0                             1,000(a)




                    5,000                              700




                   10,000                              500




                   20,000                              30°




                   40,000                              100
(a)
   Annual rate of commercial chemical introduction in the absence of TSCA

   notification requirements is estimated to be 1000 + 30%.
Source:  Arthur D.  Little, Inc., estimates.
                                   VI-12

                                                                   Arthur D Little, Inc

-------
     Because  the TSCA  Section  5  administrative  cost  information  developed

as part of  this report  is presented as  a  range  of values  at  three  different

levels of reporting, it is appropriate  to present the  estimated  number  of

new commercial chemicals data  in the  same fashion.   This  is  done in  Table

VI-4.    If  one assumes  that the  weighted  average of  the notification cost  for

all new chemicals  falls in the range  of $3,700  to $22,000 (Maximum Mandatory

data), then the number of new  commercial chemicals introduced annually would

be predicted  to fall from a level of  about 1,000 today to a  number somewhere

between 300 and 750.

    A more  rigorous analysis of  the likely change in the  chemical  introduc-

tion rate would require a classification  of the currently introduced chemicals

by their cost of notification.    From this classification,  an estimate

could be made of the likelihood  that  chemicals  in each category  would be

introduced.  This data is not available now and the  average  cost approach

has been used.
                                 VI-13
                                                                   Arthur D Little, Inc

-------
       TABLE VI-4. NUMBER OF NEW CHEMICALS AS A FUNCTION OF REPORTING COSTS
Notification Form Segments   Cumulative Unit Cost

 None                                0

 Minimal Mandatory               2,500 - 14,000

 Maximum Mandatory               3,700 - 22,000

 Maximum Total                    9,000 - 41,000
Number of New Chemicals

      1,000 a

     800  -  400

     750  -  300

     550  -  100
 a.   Annual  rate of  commercial  chemical introduction in the absence of
     TSCA notification requirements is 1,000 + 30%.
 Source:  Arthur D. Little, Inc., estimates.
                               VI-14
                                                                  Arthur D Little, Inc

-------
E.  TOTAL COST OF NOTIFICATION

     The total annual cost of premanufacturing notification to chemical

producers is a function of the number of notification forms submitted each

year and the average cost of preparing the forms.  The number of forms

submitted is in turn a function of the average preparation cost.  If the

average cost is $10,000, about 500 forms will be submitted and the total

cost of their preparation will be about $5 million.

     Table VI- 5 lists the total annual cost of notification if 1,000, 600,

300, or 100 forms are submitted.  The total cost ranges are differentiated

by the ranges in the expected unit costs of the major sections of the

notification form. For example, the Maximum Mandatory portion of the form has

a unit cost of preparation of $3,700 to $22,000.  If 300 notices are sub-

mitted with preparation costs in this range, the total cost of preparation

will be $1.1 to $6.6 million.

     There will be a wide variability in the actual cost of preparing indi-

vidual notification forms.  For example, notices for chemicals with a

projected use as a totally enclosed intermediate may have a notification

cost of $2,500, while a chemical with wide public exposure may have a noti-

fication cost in excess of $40,000.  It is not possible at this time to

estimate numbers of chemicals likely to fall in different unit cost of

notification categories.  As a result, it is not possible to make a defini-

tive estimate of the number of forms to be submitted or of the actual, total,

annual cost of notification.

     Table VI-5 presents a full spectrum of potential total notification

costs.  The table does not take into account the likely number of notice

forms to be submitted at different average unit notification costs.  For
                              VI-15
                                                                 Arthur D Little, Inc

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                                                                          Arthur D Little, Inc

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each unit notification cost range, there is a corresponding range of the




number of notification forms likely to be submitted.  The ranges of poten-




tial submittals can be translated into total notification costs.  These




values are shown on Table VI-6.




     If the average cost of notification is in the $3,700 to $22,000 range,




which is representative of the unit cost for the  Maximum Mandatory  portion of




the Notice Form, 750 to 300 notices are likely to be submitted.   Two




hundred and  fifty to 700 chemicals would not be  introduced and no notifi-




cation submitted.  At the 750 to 300 rate, the total annual cost of




notification would be in the $2.8 to $6.6 million range.




     These estimates are based on the assumption  that approximately 1,000




chemicals are being introduced commercially each year in the absence of the




notification requirements.  Relatively little data is available to firmly




establish the chemical introduction rate.  Its value is more completely




expressed as 1,000 - 30%.  The notification cost estimates are also subject




to this variation.
                                 VI-17



                                                                 Arthur D Little, Inc

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8
CO
VI-18
                                    Arthur D Little, Inc

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       VII.  ARTHUR D. LITTLE. INC.. PROJECT  TEAM
Richard Williams
Alice McHugh
               Fiona Blair
               Kirkor Bozdogan
               John Delahanty
               Glenn DeSouza
               Katherine Neill
               Joanne Perwak
               Paul Sanderson
               Roger Shamel
               Douglas Shooter
               Andrew Sivak
               Alfred Wechsler
Project Director
Project Coordinator
                         VI I-1
                                                          Arthur D Little, Inc

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