REGULATORY IMPACT ANALYSIS FOR NEW
CHEMICAL REPORTING ALTERNATIVES
UNDER SECTION 5 OF TSCA
by
Robert C. Dresser
Stuart L. Fribush
William M. Mendez
Contract No. 68-01-6287
Task Order No. 11
Project Officers
Mark A. Luttner
Michael H. Shapiro
Economics and Technology Division
Office of Toxic Substances
Washington, D.C. 20460
OFFICE OF PESTICIDES AND TOXIC SUBSTANCES
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
ICF Incorporated
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DISCLAIMER
This document has been reviewed and approved for
publication by the Office of Toxic Substances, Office of
Pesticides and Toxic Substances, U.S. Environmental
Protection Agency. The use of trade names or commercial
products does not constitute Agency endorsement or
recommendation for use.
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PREFACE
The attached document is a contractor’s study done with the supervision
and review of the Office of Pesticides and Toxic Substances of the U.S.
Environmental Protection Agency (EPA). This study provides support for EPA s
final new chemical reporting requirements under section 5 of the Toxic
Substances Control Act (TSCA).
This report is being released concurrent with publication in the Federal
Register of the final rule establishing premanufacture notice requirements
and review procedures for new chemicals under section 5 of TSCA. The
classification of this rule as “major” under Executive Order 12291 required
that EPA prepare this Regulatory Impacts Analysis. The Analysis has been
extensively reviewed within EPA and the Office of Management and Budget. The
Analysis is based largely on previous assessments of the economic effects of
the proposed rule and on the Agency’s experience with the premanufacture
notification program which has operated on an interim basis since July 1979.
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TABLE OF CONTENTS
PAGE
EXECUTIVE SUMMARY 1
I. INTRODUCTION AND APPROACH 7
A. Background and Scope 7
1. Brief History of Rulemaking Under TSCA
Section 7 7
2. Executive Order 12291 10
3. Purpose of This Analysis 11
B— General Approach 11
1. Direct Costs of Compliance 11
2. Effects on New Chemical Introduction 13
3. Health Implications of Regulatory Alternatives 14
II. DATA SOURCES 16
A. Relevant Previous Analyses 16
1. Impact of TSCA Proposed Premanufacturing
Notification Requirement 16
2. Estimated Cost for Preparation and Submission
of Reproposed Premanufacture Notice
Form 18
3. Economic Analysis of Proposed Section 5
Requirements 19
4. Premanufacture Notification Under the Toxic
Substances Control Act 21
5. Cost Estimation of the Section 5 Notification
Form Proposed by the Chemical Manufacturers
Association 23
6. The Impact of TSCA Regulations on the Chemical
Industry: A Pilot Survey 23
7. A critique of the EPA "Economic Impact Analysis
of Proposed Section 5 Notice Requirements 25
8. Impact of the Toxic Substances Control Act on
Innovation in the Chemical Specialties
Manufacturing Industry 26
9. Economic Impact Analysis of TSCA Section 5(h)(4)
Exemptions: Low Volume, Site-Limited
Intermediates, and Polymers 28
10. Summary of Previous Analysis 31
B. Description of the PMN Sample 31
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TABLE OF CONTENTS
(continued)
PAGE
III. IDENTIFICATION AND ANALYSIS OF PRIMARY ECONOMIC EFFECTS
ASSOCIATED WITH THE PMN PROCESS 33
A. Scope 33
1. Non-trade Materials 34
2. Testing Costs 36
3. Uncertainty 37
4. Developmental Materials 38
5. Summary 39
B. Direct Filing Costs 39
1. Labor Hours Estimates 42
a. Amount and Types of Information 42
b. Efficiency of Labor 43
c. Characteristics of the Firm 43
2. Summary 44
C. Direct Cost of Delay 45
1. Components of Direct Delay Costs 45
2. Valuation of Delay 48
D. Confidentiality 50
1. Types of Confidentiality Costs and Methods of
Measuring Those Costs 50
a. Cost 1: Out of Pocket Expenditures by
Regulated Parties 50
b. Cost 2: Disclosure of Trade Secrets 51
c. Cost 3: Uncertainty about EPA Decisions 53
2. Factors that Affect Confidentiality Costs 53
3. Comparison to Previous Analysis 56
E. Expected Cost of EPA-Induced Restrictions 57
1. Toxicological Testing 58
2. Withdrawal 58
3. Labeling 60
4. Material Safety Data Sheet 61
5. Reformulation 61
F. Cost to EPA 61
1. Estimated Cost for Review 62
2. Wide Variation in Actual Costs 64
3. Cost to EPA to Review Exemption Notices 66
4. Summary 66
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TABLE OF CONTENTS
(continued)
PAGE
IV. IDENTIFICATION AND ANALYSIS OF REGULATORY OPTIONS 68
A. Background 69
B. Analysis of Costs of the EPA79 Form 71
1. EPA79 Form Filing Costs 72
2. Confidentiality Costs of the EPA79 Form 72
a. Out-of-Pocket Expenditures by Submitters 75
b. Disclosure of Trade Secrets 81
c. Uncertainty 81
d. Summary 82
3. Direct Delay Costs for the EPA79 Form 82
4. Expected Cost of Additional Restrictions for
the EPA79 Form 86
5. Summary of EPA79 Form 89
C. Analysis of Costs of the CMA79 Form 89
1. Differences Between EPA79 and CMA79 Form 90
a. Submitters Identification 90
b. Identity 90
c. Production and Marketing Data 90
d. Other General Information 91
e. Industrial Sites Controlled by Submitter 91
f. Industrial Site Controlled by Others 92
g. Consumer and CommerciaL User Exposure 92
h. List of Attachments and Federal
Register Notice 92
2. Form Filing Costs of the CMA Proposal 92
3. Confidentiality Costs of the CMA Proposal 92
4. Delay 96
5. Restrictive EPA Actions 96
6. Summary 96
D. Analysis of Costs of the EPA82 Form 97
1. Differences Between the EPA82 Form and the
CMA79 Form 97
a. Submitter’s Information 97
b. Chemical Identity 97
c. Production and Marketing Data 97
d. Other General Information 97
e. Industrial Sites Controlled by Submitter 98
f. Industrial Sites Controlled by Others 99
g. Consumer and Commercial User Exposure 99
h. List of Attachments and Federal
Register Notice 99
2. Form Filing Costs for the EPA82 Form 99
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TABLE OF CONTENTS
(continued)
PAGE
IV. IDENTIFICATION AND ANALYSIS OF REGULATORY OPTIONS (cont’d)
D. Analysis of Costs of the EPA82 Form (cont’d)
3. Confidentiality Cost for the Proposed EPA82
Requirements 101
4. Delay Costs for the EPA82 Form 101
5. Costs of Restrictive Actions for the EPA82
Form 101
6. Summary of Costs for the EPA82 Form 102
E. Comparison of Costs of the Alternatives 102
F. Effects of Proposed Exemptions Program on
Section 5 Program Costs 103
1. Cost of Exemption Notices 106
2. Total Annual Cost of Exemption Alternatives 108
3. Exemption Options and Delay Costs 111
4. Effect of Exemptions on Confidentiality and
Restrictive Actions 113
5. Cost Savings from Exemptions 113
G. Cost to Government 113
H. Other Costs 115
1. Indirect Costs - 115
2. Distributional Costs 117
I. Chapter Summary 117
V. INNOVATION EFFECTS 119
A. Background 120
B. The CSMA Study 123
C. The NERA Study 126
D. The ADL Study 129
E. Conclusions 132
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TABLE OF CONTENTS
(continued)
PAGE
VI. SMALL BUSINESS EFFECTS 134
A. Introduction 134
B. Review of Previous Analyses 135
1. The CSMA Study 135
2. The NERA Study 141
3. ICF Study 144
4. ADL Study 146
5. Summary of Previous Studies 147
C. Estimated Cost to Small Business and Impact Analysis 148
1. Definition of Small Business 148
2. Estimate of Impact on Small Business 150
3. Estimate of Impact on Typical New Chemical
Introduced by Small Business 152
D. Effects of Proposed Exemption Rules on Small Business 155
E. Summary of Small Business Effects 162
VII. HEALTH IMPLICATIONS OF REGULATORY ACTIONS RESULTING FROM
ALTERNATIVE PNN REPORTING FORMS 164
A. Introduction 164
B. Overview of the ICB PMN Study 164
1. Factors Critical to Identification of Risk 166
2. Sources of Data on Critical Factors 167
3. Potential for Different Regulatory Outcomes
Given Use of Alternative PMN Forms 168
C. Case Studies 171
1. PrINA 171
a. Regulatory History 171
b. Human Exposure and Environmental Release 172
c. Toxic Properties 173
d. Health Implications of Alternative
Regulatory Action 184
2. PMN B 176
a. Regulatory History 176
b. Human Exposure and Environmental Release 177
c. Toxic Properties 177
d. Health Implications of Alternative
Regulatory Action 178
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TABLE OF CONTENTS
(continued)
PAGE
Vu. HEALTH IMPLICATIONS OF REGULATORY ACTIONS RESULTING FROM
ALTERNATIVE PMN REPORTING FORMS (cont’d)
C. Case Studies (cont’d)
3. PMN C 179
a. Regulatory History 179
b. Human Exposure and Environmental Release 179
c. Toxic Properties 181
d. Health Implications of Alternative
Regulatory Action 181
4. PMN D 184
a. Regulatory History 184
b. Human Exposure and Environmental Release 185
c. Toxic Properties 185
d. Health Implications of Alternative
Regulatory Action 185
5. PMN E 187
a. Regulatory History 187
b. Human Exposure and Environmental Release 187
c. Toxic Properties 187
d. Health Implications of Alternative
Regulatory Action 188
D. Summary of Analysis of Alternative PMN Forms 188
VIII. IMPACT OF THE FINAL FORM 193
A. Development of a FINAL Form 193
B. Analysis of Costs of the FINAL Form 196
1. Differences Between the FINAL Form and
EPA79 Form 196
a. Submitter Information 196
b. Chemical Identity 196
c. Production and Marketing Data 196
d. Other General Information 197
e. Industrial Sites Controlled by Submitter 197
f. Industrial Sites Controlled by Other 198
g. Consumer and Commercial Use Exposure 198
h. List of Attachments and Federal Register
Notice 198
2. Form Filing Costs for the FINAL Form 198
3. Confidentiality Cost for the Proposal
FINAL Form Requirements 199
4. Delay Cost for the FINAL Form 201
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TABLE OF CONTENTS
(continued)
VIII. IMPACT OF THE FINAL FORM (cont t d)
5. Costs of Restrictive Actions for the
FINAL Form
6. Summary of Costs for the FINAL Form
C. Small Business Impact
1. Estimate of FINAL Form Impact on Small
Business
2. Estimate of Impact Per New Chemical
Benefits from the FINAL Form
Conclusions
B - DERIVATION OF FORMULA FOR DETERMINING PRESENT
VALUE OF PROFITS DELAYED
C - DESCRIPTION OF REVIEW PROCEDURE
D - COMPARISON OF FOUR REPORTING FORMS
PAGE
201
201
201
202
203
204
206
208
213
213
213
215
218
218
219
219
220
D.
E.
B IBLI OGRAPHY
APPENDIX A - UNIT COSTS OF LABOR
A. Cost of Required Labor
B. Sources of Data
C. Calculation of ICP Estimates of Managerial and
Clerical Rates
1. 1978 Rates
2. 1981 Rates
D. Calculation of ICF Estimates for Technical Rates
1. 1981 Rates
2. 1978 Rates
E. Conclusion 221
APPENDIX
APPENDIX
APPENDIX
223
224
227
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TABLE OF CONTENTS
(continued)
PAGE
APPENDIX E - R&D SPENDING ON NEW CHEMICAL PRODUCTS 234
A. Definitions, Data, and Approach 234
1. Definitions 235
2. Data Sources 236
a. National Science Foundation Series
(NSF 1981) 237
b. McGraw-Hil). Series (McGraw-Hill 1981) 238
c. National Economic Research Associates
(NERA) Data (NERA 1981) 239
d. The Parmaceutical Manufacturers
Association Series (PMA) 240
e. Chemical Specialties Manufacturers
Association Data (Heiden and
Pittaway 1982) 240
3. Estimation Approach 242
B. Estimates of New Product R&D Expenditures by
the Chemical Industry 243
1. Trend in Total R&D Expenditures 244
2. R&D Expenditures in Current Dollars 245
3. R&D Expenditures in Constant Dollars 247
4. New Product Spending by SIC 28 252
5. Industry Data on New Product R&D 253
6. Interpreting Industry Data 257
7. Determining the Proportion of New Product
R&D/SIC 28 262
C. Comparison of Pre- and Post-TSCA Periods 267
1. Fitting a Trend Line 268
2. Estimating Representative Average R&D Spending 270
3. Conclusions 272
4. Transition Phase 273
APPENDIX F - HEALTH EFFECTS OF EPA REGULATORY ACTIONS CONCERNING
NINE PMN CHEMICALS 275
A. PMNs F, G, and H 275
B. PMN I 276
C. PMNJ 277
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TABLE OF CONTENTS
(continued)
PAGE
APPENDIX F - HEALTH EFFECTS OF EPA REGULATORY ACTIONS CONCERNING
NINE PMN CHEMICALS (cont’d)
D. PMNs K, L, and M 279
E. PMN N 280
F. Summary and Discussion 281
APPENDIX G - SAMPLE OF EPA79, CMA79, EPA82, AND FINAL FORMS 284
APPENDIX H - ANALYSIS OF THE TEST-MARKETING EXEMPTION 332
PROVISION OF THE PMN RULE
A. Introduction 332
B. Characteristics of the Test Marketing Exemptions 335
C. Costs 340
1. Filing Costs 340
2. Confidentiality Cost for ThE Applications 34.7
3. Delay Costs for ThE Applications 349
4. Restrictive Action Costs 351
D. Health Benefits of the ThE Program 353
1. ThEA - 353
2. TNEB 354
3. TMEC 354
4. TMED 355
E. Conclusions 356
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TABLE OF EXHIBITS
PAGE
ES-i Direct Costs of Regulatory Options 4
111-1 Estimates of Direct PMN Filing Costs 41
111-2 Sample Values of Reduction in Present Value 50
111-3 In-House Person-Months by Activity for PMN Review 63
111-4 Number of PMNs Involved in Each Activity, Annual Costs,
and Cost/PMN 64
111-5 EPA Cost to Process Different Types of PMNs 65
111-6 Cost Per Notice to Review PMN and Exemption Notices 67
IV-i EPA79 Form: ADL Estimates of Labor Requirements 73
IV-2 Estimated Confidentiality Process Hours 75
IV-3 RRS Estimates of Costs of Submission, Firm Labor Rates 79
IV-4 Annual Costs of Actions 89
IV-5 Total Annual Cost of EPA79 Form 89
IV-6 Estimated Labor Requirements for CMA79 Form 93
IV-7 Total Annual Costs of the CMA79 Form 96
IV-8 Estimated Labor Requirements for EPA82 100
IV-9 Total Annual Costs of the EPA82 Form 102
IV-lO Comparison of Industry Costs of Alternatives 102
IV-11 Cost of Exemption Notices 107
IV-12 Number of Notices Received Annually 110
IV-13 Annual Form-Filing Cost of EPA82 Form With and
Without Exemptions 110
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TABLE OF EXHIBITS
(continued)
PAGE
IV-14 Annual Delay Costs With and Without Section 5
Exemptions 112
IV-15 Direct Costs of Regulatory Options 118
IV-16 Annual Costs of Alternative Forms with Exemptions
in Place 118
V-l Net Present Value of Profits for Ten Chemicals 132
VI-l New Substances Produced by Ingredient Suppliers in
the RRS Survey as a Function of Firm size 137
VI -2 Average Present Value of Profit Targets per Innovation
for Ingredient Suppliers in Four Size Classes 139
VI-3 Average Rejection Rate per Ingredient Innovation
Associated with PMN Requirements by Discount
Rate (12, 15, and 20) and Size Class of Reporting
Firm 139
VI-4 Estimated Average Percentage of Ingredient Sales
Accounted for by Products not in Existence Five
Years Ago, by Overall Firm Sales Size 140
VI-5 TSCA Cost per Million Dollars of Domestic Sales,
by Company Size, as Indicated by CNA 142
VI-6 Impact of Total PMN Cost to Small Business Measured
as a Percentage of Rates and Profits 152
VI-7 Derivation of Present Value of Profits for Each of
the Alternative Profit Margins, for a New
Chemical by a Firm with Annual Sales Less Than
$30 Million 153
VI-8 Derivation of Present Value of Profits Margins for
a New Chemical by a Firm with Annual Sales Less
Than $100 Million 154
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TABLE OF EXHIBITS
(continued)
PAGE
VI-9 PMN Cost as a Percent of Present Value of Expected
Profits 154
VI-lO Estimates of Exemption Parameters by Size Class 157
VI-li Estimates of PMN Submissions and Potential Exemption
by Size Class 158
VI-12 Exemption Savings for Firms with Less Than $30
Million Annual Sales 160
VI-13 Exemption Savings for Firms with Less Than $100
Million Annual Sales 161
VI-14 Costs of Section 5 Program to Small Business 168
VII-l Summary of Probabilities for Different Regulatory
Action for Selected PMNs 170
VII-2 Summary of Results 189
VIII-1 Estimated Labor Requirements for FINAL Form 200
VIII-2 Total Annual Industry Costs of the FINAL Form 201
VIII-3 Impact of Total Final Form Cost to Small
Business Measured As A Percentage of Sales
and Profits 203
VIII-4 PMN Costs As A Percent Value of Expected Profits 204
VIII-5 Probabilities of Regulatory Actions Using EPA82 and
FINAL Forms As Compared to EPA79 Form 205
VIII-6 Comparison of Annual Industry Costs 206
A-i RRS Survey Results: Chemical Firm Overhead 216
A-2 Summary of ICF Labor Cost Estimates for Managerial
and Clerical Categories, 1978 218
A-3 Summary of ICF Labor Cost Estimates for Managerial
and Administrative Categories, 1981 219
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TABLE OF EXHIBITS
(continued)
PAGE
A-4 Costs of an Industry R&D Scientist or Engineer in
the Chemical Industry 220
A-5 Comparison of Hourly Labor Costs Using Different
Methodologies and Data Sources 222
A-6 Chemical Industry Labor Rates, December 1981 222
E-]. Current R&D Expenditures, Actual to 1981 and Projected
to 1984 246
E-2 Real R&D Expenditues, Actual 1981 and Project to 1984 248
E-3 Current R&D Expenditures as a Percent of Current Sales 250
E-4 Current R&D Expenditures as a Percent of Other
Current Capital Investment 251
E-5 Allocation of All Industry R&D Spending, by Type 254
E-6 Allocation of Chemical Industry R&D Spending, by Type 256
E-7 Product Innovations by Chemical Specialty
Manufacturing Firms - 259
E-8 Proportion of R&D Spent on New Projects by the
Chemical Industry 263
E -9 Real (1981 Dollars) New Product Spending by the
Chemical Industry 264
E-1O Distribution of R&D Spending in the Drugs and
Medicines Segment 266
E-11 .Real (1981 Dollars) New Product Spending by the
Chemical Industry Excluding Drugs and Medicines 267
E-12 Trend Analysis of Real New Product R&D Spending by
the Chemical Industry 269
E-13 Adjusted Real New Product Spending by the Chemical
Industry (Excluding Drugs and Medicines) 271
E-14 Adjusted Real New Product Spending by the Chemical
Industry Before and After Section 5 272
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TABLE OF EXHIBITS
(continued)
PAGE
H-i Distribution of Production Volumes 336
H-2 Distribution of Firm Sizes 336
H-3 Distribution of Uses 337
H-4 EPA Actions on the Applications in Sample 338
H-5 Labor Requirements for the Applications 344
H-6 Filing Costs for TME Applications 347
H-7 Annual Costs to Industry of ThE Program 357
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EXECUTIVE SUNHARY
Section 5(a)(1)(A) of the Toxic Substances Control Act (TSCA) requires
manufacturers and importers of new chemicals to provide the Environmental
Protection Agency (EPA) with notice of their intent to manufacture or import
such substances at least 90 days prior to when actual manufacturing or import
begins. Any chemical not listed on the TSCA Chemical Substances Inventory is
considered “new” for premanufacture notice (PMN) purposes. iis report
presents the results of analysis of the regulatory impact of several
alternative information requirements. The analysis was used by the Agency to
help guide decision-making as to what the final reporting requirements should
be. Indeed, this report represents the written record of this analysis. The
careful review of three alternatives resulted in the Agency modifying one of
the forms to create a fourth alternative -- the FINAL form. This form and
accompanying instructions and regulations will replace the reporting
guidelines for the new chemical review program, which has operated on an
interim basis since 1979.
The premanufacture notification and review processes are statutory
requirements of TSCA. However, TSCA does not require either that specific PMN
requirements and processes be stated in a rule or that the information be
provided in a particular form. Based on the experience developed during the
first several years of operation, the Agency has determined that issuance of a
final PMN rule and form is in the best interests of all concerned parties.
The final rule sets out the information which the Agency has determined is
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necessary to determine whether the commercial introduction of newly developed
chemicals will present an unreasonable risk to human health or the
environment. By requiring the use of a final form, the Agency will be better
able to conduct complete reviews within the statutory 90-day period. In
addition, companies will benefit to the extent that they will be aware of all
information requirements from the start; thus, uncertainty will be reduced to
a significant extent.
Over the past five years the Agency considered many alternatives for the
PMN rule. Three alternatives were considered initially in this analysis. As
a result of analysis performed in support of this study, and other analyses, a
fourth form was developed. The four forms are differentiated by the scope of
the information requested. They are:
• EPA79 Form . The EPA79 form (an interim proposal
developed by EPA in 1979) requires submitters to provide
the most information. The major areas for which
information is sought are: submitter’s identity, chemical
identity, generic names, production and marketing data,
transport, risk assessment, detection methods, human
exposure and environmental release at sites controlled by
the submitter and at sites controlled by other firms
manufacturing the chemical, consumer and commercial use
exposure, physical and chemical properties, health and
environmental effects data, confidentiality attachment, a
Federal Register notice, and any other information the
submitter volunteers. This form should cost $l, 600 U to
$14,600 to complete.
• CMA79 Form . The Chemical Manufacturers Association
developed a proposed PMN form based on the principle that
section 5(d) of TSCA provides an all-inclusive list of the
information that a P!IN is to contain. This form contains
mandatory and optional parts. Mandatory parts include
submitter’s identity chemical identity, production and
use data, Federal Register notice, list of health and
UThese estimates are different from previously reported estimates
because they have been increased to reflect labor costs in December 1981.
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environmental data, and information in the submitter’s
possession regarding industrial sites not controlled by
the submitter. Optional parts include risk assessment
information (risk analysis, related chemicals, general
industrial hygiene program, specific safeguards, process
chemistry, transport data, and additional risk-relevant
informat on) and additional information on worker
exposure and environmental releases. The mandatory
portion of the form should cost between $1,300 and $6,400
to complete.
• EPA82 Form . The information sought under this form
includes: submitter’s identity; chemical name; identity
and molecular structure; simplified production and
marketing data; simplified flow diagram; and simplified
iorker exposure, release, and disposal estimates (relative
to the October 1979 proposal). It is estimated to cost
$1,200 to $6,200 to complete.
• FINAL Form . This form is very similar to the EPA82
form. It adds information about worker activity, exposure,
general information about sites controlled by others, and
clarifies other sections. It is estimated to cost $1,300
to $7,500 to complete.
The analysis reported here draws on many previous analyses and a data
base of approximately 500 PNN submissions to estimate the health effects and
economic impacts of the alternative reporting requirements. Using these data
four costs which firms incur were computed. These costs are:
• Direct filing costs - i.e., the cost of gathering the needed
data, completing a PNN submission and filing it with EPA.
• Confidentiality - firms may choose to claim that data
contained in a PMN are confidential. If the claim must be
substantiated, the cost of completing a PMN is increased.
• Delay - the TSCA-imposed 90-day PMN review period may delay
sales of a chemical if a ready market exists or may cause a
sales loss if a prospective customer purchases an alternative
product.
• Cost of EPA-Induced Restrictions - During the PMN review EPA
often suggests that actions be taken to reduce the possible
health hazard. The cost of these voluntary actions is a cost
of the reporting requirement.
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$1, 620-$ 13 , 140
$1,580
$1,055- $1,843
$2,605- $4,038
$6,859-$20,601
$1,170— $5,760
$321
$1,055- $1,843
$2,308- $3,578
$4, 854-$ 11,502
$1,080- $5,380
$330
$1,055- $1,843
$2,373- $3,679
$4, 838-$ 11, 432
$1,170— $6,7!
$330
$1,055— $1,t
$2,605- $4,0:
$5, 160-$12,9
*Assumes 900 new PMN chemicals per year
As shown by the Exhibit, the annual real resource costs of the program using
the FINAL form are $12.1 to $19.9 million with almost $7 million being government
review costs. These costs are close to the costs of the EPA82 and CMA79 form and
considerably less than the cost of the EPA79 form.
Taken together, these costs reduce the expected rate of return on new chemical
substances and increase the economic risk incurred by manufacturers. Since many
new chemicals are produced and sold in small quantities and must be
price-competitive with existing products, the result may be a depressing impact on
the rate of new chemical innovation, an adverse effect of potentially major
significance.
The total annual cost to industry and EPA of each of the options is presented
in Exhibit ES-i.
EXHIBIT ES-i
ANNUAL COSTS OF REGULATORY OPTIIONS*
(Thousands of 1981 Dollars)
EPA79 CNA79 EPA82 FINAL
Total Industry Costs
Form Filing Costs
Confidentiality Costs
Delay Costs
Restrictive Actions
Total
Total EPA Costs
Review
Total Costs
$6,955 $6,955 $6,955 $6,953
$13,815—$27,556 $11,809—$i8,437 $ll,793—$i8,387 $l2,1l5—$19,9:
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EPA has engaged in efforts to exempt certain types of chemicals from the
standard PMN process. These efforts have resulted in one final and two
proposed PMN exemption rules. As a supplement to the analysis, the cost
savings from the photographic exemption and the proposed low volume,
site-limited intermediate, and polymer exemptions have been determined. On
average an exemption notice costs about one-twentieth of the cost of a PMN.
Thus, the total cost to industry of the PMN program would decline by 21-29
percent to between $4.1 and $9.2 million. The exemptions would also reduce
EPA’s review costs by about $2 million.
The benefits of the alternative forms are primarily the benefits of
having sufficient information to make correct decisions. Based on an EPA
analysis of previous situations in which the Agency encouraged voluntary
control actions by submitters, it appears that the EPA79 form is more likely
to provide sufficient information for regulatory decisions than either the
EPA82 or CMA79 form. The FINAL form is designed to ensure the same outcomes
for hazardous chemicals as the EPA79 form.
The innovation effects of the PMN program appear to be selective. Based
on data from several industry commissioned surveys and data in confidential
P1114 files, it appears that since the program became effective, there has been
no statistically significant change in the number of new chemicals introduced
by the largest companies; but there may have been a decline from small
companies. Although the decline in new product introduction by small
companies is of concern, the decline, by two estimates, reduces total industry
profits derived from new chemicals by less than five percent (the uncertainty
about the estimate is much greater than five percent).
As with most regulatory programs, the small business effects of the
section 5 program are of potential concern. However, regulatory costs to
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firms with less than $30 million in annual sales are estimated to be $340
thousand to $790 thousand. This represents less than 1% of sales for these
companies and between 0.9 and 2.1% of their profits. For firms under $100
million in annual sales, costs are estimated to be $639 thousand to $1,486
thousand. This represents less than 0.1% of sales and 0.3-0.6% of profits for
these firms. The proposed exemption rules are expected to result in a savings
of 11. to 35% for firms under $30 million in annual sales. For firms under
$100 million, the exemption related savings are estimated to be in the range
of 11 to 33%.
To conclude, the FINAL form should cost industry about $5,160 to $12,960
thousand annually, and it should cost EPA $6,955 thousand per year (variable
review costs) to run the program. The kinds of benefits achieved since the
program began in 1979 (i.e., adverse human health effects avoided) should
continued to be realized when the FINAL form is adopted. The Agency believes
that the FINAL form will achieve the maximum net benefits to society from the
PMN program.
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CHAPTER I
INTRODUCTION AND APPROACH
This chapter is presented in two sections. Section A presents the
background and scope for this analysis including a brief history of the
implementation of section 5 of the Toxic Substances Control Act (TSCA), the
requirements of Executive Order 12291, and the purpose of this analysis.
Section B briefly describes the general approach of this analysis and points
out its strengths and limitations.
A. BACKGROUND AND SCOPE
1. Brief History of Rulemaking Under TSCA Section 5
Section 5(a) of TSCA requires that manufacturers and importers of
new chemicals submit information to EPA at least 90 days before such
manufacture or importing begins. Section 5(d)(1) specifies that this
submission shall include the following information, to the extent that is
reasonably ascertainable:
• trade name, chemical identity, and molecular
structure;
• proposed categories of use;
• estimates of the amount to be manufactured or
imported for each propos ed category of use;
• a description of the byproducts resulting from
manufacture, processing, use, or disposal;
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• estimates of the number of workers exposed and the
duration of their exposure; and
• a description of the proposed method of disposal.
In addition, the submission must contain any test data concerning the
environmental and health effects of the new chemical in the submitter’s
possession or control, and descriptions of any other data concerning such
effects that are known to or reasonably ascertainable by the notice submitter.
Section 5(h) provides for exemptions from the information requirements
for certain new chemicals. Four primary types of exemptions are addressed in
the statute:
• test-marketing exemptions;
• exemption from the requirement to submit health and
safety data;
• exemptions for research and development chemicals;
and
• exemption by rule (upon -application) for chemicals
not posing an unreasonable risk.
Regulations to implement section 5 reporting requirements for new
chemical substances were first proposed on January 10, 1979 (44 FR 2242).
Included in the proposed rules were detailed notice forms. Comments were
received in response to this proposal, and the regulations were ultimately
reproposed October 16, 1979 (44 59764). Section 5 is currently being
administered under an EPA interim policy initially announced on January 10,
1979 and modified on May 15, 1979 and November 7, 1980. This policy does not
require completion of a specific notice form, although submitters may use the
form included in the 1979 EPA interim policy (herein referred to as EPA79),
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the form suggested by the Chemical 1anufacturers Association in comments to
the January 1979 proposal (herein referred to as CMA79), or any other format.
During the past four years the Agency has considered, analyzed,
evaluated, and dismissed many possible information requirements. In 1980 the
Agency evaluated a set of information requirements that were known as the
“minimum guidance, t ’ (see ICF 1980) but after analysis rejected this
alternative. In early 1981 a “final form” similar to the EPA79 form was
analyzed. It too was found deficient. During 1980 and 1981 over 1,000 PMNs
were submitted to EPA under the interim policy and much was learned about the
kinds of information needed to assess the risks posed by them. After
substantial data analysis of PMNs, a form was develc’ped in the spring of 1982
that was considered to be potentially optimal.
This paper reports the results of an analysis of the spring of 1982
(EPA82) form’s costs and benefits. It compared EPA82 to CMA79 and EPA79, and
in the final chapter reports on modifications to EPA82 made as a result of
this and concomitant analyses performed during the summer and fall of 1982.
These analyses and modifications resulted in the development of the FINAL
premanufacture notification form.
As mentioned above, four regulatory alternatives for reporting
requirements were considered. These included: (1) the EPA79 information
requirement, (2) the proposed CMA79 information requirement, (3) the EPA82
information requirement, and (4) the FINAL form. (All four of these
alternatives are described in subsquent chapters.) The first three reporting
alternatives have been analyzed in light of two PMN exemption scenarios. The
first exemption scenario is the pre-1982 situation, in which no exemption
rules had been promulgated. The second exemption scenario includes all of the
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recently-developed exemption rules, which represent a reduced reporting burden
for low volume chemicals, site-limited intermediates, polymers, and
photographic chemicals (the instant photograhic chemical rule is now final).
The proposed ex rnption rules are described in Chapter IV.
2. Executive Order 12291
Executive Order 12291, issued February 17, 1981, requires regulatory
impact analyses (RIAs) of major regulations and expands the oversight role of
the Office of Management and Budget. Major regulations are defined as any
regulation that is likely to result in any of the following:
• an annual effect on the economy of $100 million or
more;
• a major increase in costs or prices for consumers,
industries, or governments;
• significant adverse effects on competition,
employment, investment, productivity, innovation, or
international trade.
Although the direct costs of compliance with section 5 are not likely to
trigger the $100 million annual effect criterion, substantial controversy
exists regarding the effects of section 5 on innovation in the chemical
industry. 2 Therefore, EPA has chosen to prepare a regulatory impact analysis
of section 5 requirements to address these concerns. In this analysis
alternative approaches for implementing the requirements of this section are
considered. For each feasible alternative, costs and benefits are analyzed.
2 - 1 For further information, please refer to CWPS 1981, Heiden and
Pittaway 1982, NERA 1981, and CMA 1981.
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3. Purpose of This Analysis
The purpose of this analysis is to provide objective information on
the costs and benefits of the various reporting alternatives under
consideration for implementing section 5 of TSCA. This information is needed
for regulatory impact analysis under EO 12291. The specific information
provided is as follows:
• direct costs imposed by section 5 rules under each
of the regulatory options (Chapters III and IV);
• effects of the regulatory alternatives on
innovation (Chapter V) and small business (Chapter
VI); and
• an assessment of the benefits of each regulatory
option, specified in terms of the number of chemicals
identified as capable of posing human health or
environmental risk under each option and their
relative health and environmental risks (Chapter VII).
• a discussion and analysis of the FINAL information
requirement developed after considering the analysis
performed in Chapters 1-Vu (Chapter VIII).
B. GENERAL APPROACH
The general approach used in this analysis for estimating costs,
innovation effects, and benefits is briefly explained in this section. For
each of these three types of effects, the section explains: (1) what was
included in the analysis, (2) how estimates were made, and (3) limitations.
1. Direct Costs of Compliance
The PMN program imposes direct costs on submitters and EPA that are
incurred in filing a PMN submission. For submitters, these direct costs
include:
• submission costs--the direct out-of-pocket costs
of compiling and submitting information under
section 5.
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• delay costs--the reduction in the present value of
the profit stream for the new chemical because of
delayed introduction into commerce.
• confidentiality costs--costs associated with
maintaining the integrity of confidential business
information, including out-of-pocket costs for
substantiating confidentiality claims and the costs
of disclosure.
• cost of restrictive actions--after the submitter
has filed a section 5 notice, it is possible that the
submitter will have to take additional actions based
on EPA’s review.
In analyses conducted previously in support of EPA’s section 5 rulemaking (ICF
1980), it was observed that there was a great deal of uncertainty (i.e., the
variance was high) regarding each of these four direct costs incurred by
submitters. This was true because submitters were not sure how EPA would
implement the program, and thus it was not possible for submitters to build
PMN costs into their decisions to market new chemicals with much confidence.
However, the PMN program has been in effect for about three years and much of
this uncertainty has been removed. Three years worth of historical PMN
submissions also provide an objective data base for estimating section 5
costs. In this analysis, it was possible to use historical PMN submissions to
provide estimates of the actual costs incurred by submitters. In addition,
other analyses have been conducted which help clarify these costs (NERA 1981
and CMA 1981). (Chapter II provides detailed explanations of the nine main
data sources used.) Thus, direct costs can now be estimated with far greater
confidence. The estimates of direct costs to submitters appearing in Chapter
IV reflect this greater confidence.
Throughout this analysis we refer to the “PMN impact.” This term means
all factors (not just measurable costs) that affect a submitter’s decision to
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proceed to commercialize a new chemical when faced with the section 5
regulations.
The cost estimates in Chapter IV focus on the direct costs associated
with the PMN program. These are the costs which directly contribute to the
PMN impact: submission of information, delay, confidentiality and restrictive
actions. The direct cost estimates of Chapter IV do not include indirect
economic effects that result from submitters having to incur these direct
costs. The major indirect economic effect is reduced innovation, which is
addressed in Chapter V. Time and resource constraints prohibited the detailed
analysis of other indirect economic effects such as price effects, employment
effects, international trade effects, and concentr.ation effects. However,
indirect effects are clearly a function of direct effects. Therefore,
concentrating available analytical resources on developing the best possible
estimates of direct costs, innovation effects, and changes in health and
environmental risk helps ensure the selection of the least burdensome
alternative which meets regulatory objectives.
Also not included in the estimates of direct costs are costs of actions
induced by section 5 rules (as opposed to actions required by section 5
rules). The major induced actions are additional testing performed by
submitters. These costs have not been included in the estimates of direct
costs of the PNN program because section 5 requires no testing.
Costs to EPA have been included in the direct cost estimates of Chapter
IV. These include the costs of evaluating the information submitted,
including the costs associated with processing confidentiality claims.
2. Effects on New Chemical Introduction
The general approach used to estimate the effects of the section 5
program on new chemical introduction was to hypothesize the steps in the
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research and development process where the section 5 program might have an
effect and then to review recent studies to determine whether these effects
are taking place. In addition, we explore the effect of submission costs on
the profitability of new chemicals and the resulting likelihood of development
of such chemicals given the burden imposed by PMN costs.
3. Health Implications of Regulatory Alternatives
Chapter VII compares the reporting alternatives in terms of
differences in the magnitude of health effects associated with newly-
introduced chemicals which may be introduced if any one of the three
alternatives are routinely used. The first step in this analysis was to
identify those chemicals that potentially would have adverse health effects
and which would be treated differently under the different alternatives.
Clearly, chemicals which were not expected to be harmful would not be expected
to produce adverse health effects under any alternative. A set of
approximately 70 chemicals was identified for which EPA had expressed concern
about health or environmental effects.
The second step was to determine the health effects associated with these
chemicals. Then it was necessary to determine the change in health effects
based on the different approach EPA would have taken to regulate (or not
regulate) the chemical. Expected results for these chemicals are provided in
Chapter VII.
The major limitations in this analysis arise from the necessity of
predicting what the actions of EPA and PMN submitters would have been in the
hypothetical situation in which an alternative form was submitted. This
analysis was based on a review of PMN submissions conducted by EPA personnel.
While this review is believed to be accurate and reasonable in its findings,
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it is conjectural in nature and does not account for possible changes in
submitter strategy that might have occurred had an alternative form been
used. Finally, the health effects analysis is based solely on exposure and
toxicity data from PMN files.
In the next chapter data sources are explained. This chapter is followed
by two chapters developing the economic costs of the alternatives. Chapter V
explores the innovation effects, Chapter VI the small business effects, and
Chapter VII the incremental benefits of the alternative forms. Chapter VIII
discusses the FINAL form that was developed after reviewing this analysis.
This is followed by a bibliography and seven appendices that augment the
analysis presented in the Chapters.
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CHAPTER II
DATA SOURCES
Data for the cost analysis (Chapters III end IV) come from two primary
sources: (1) results of previous relevant analyses and (2) a sample of
approximately 500 PMN chemicals. The previous analyses used for this study
are listed in Section A, along with brief annotations of each study’s purpose,
method, and findings. Section B briefly describes the sample of PMN chemicals
used for this analysis.
Data for the innovation analysis in Chapter V come from (1) the cost
analysis in Chapter IV, (2) a study commissioned by the Chemical Specialty
Manufacturers’ Association (Heiden and Pittaway 1981), and (3) previous ICF
work for OPTS under Contracts 68-01-5878 and 68-01-6287. The health effects
analysis in Chapter VI was based on data from PMN submissions and
toxicological literature.
A. RELEVANT PREVIOUS ANALYSES
This section briefly summarizes the nine previous analyses which proved
useful in providing relevant data for this study. They are presented in
chronological order. Brief discussions of the purpose, method, and findings
are provided for each analysis.
1. Impact of TSCA Proposed Premanufacturing Notification Requirements
Prepared by : Arthur D. Little (December 1978)
Prepared for : Office of Planning and Evaluation
U.S. Environmental Protection Agency
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Pi pose : The purpose of this report (ADL 1978) was to analyze the costs
and economic effects associated with a form consistent with the proposed
Premanufacturing Notice Requirements of January 10, 1979 (44 FR 2242). The
report deals only with the direct out-of-pocket costs of submitting th
information and the potential for reducing the number of new chemicals
introduced into commerce as a result of these costs. Not included in the
analysis were delay costs, confidentiality costs or uncertainty costs,
although the possible existence of these costs was recognized.
Method : The report was based on available data on the composition and
introduction rate for new chemicals. This included data from patent files,
trade industry buyers guides, and interviews with chemical industry
personnel. Costs per submission appear to have been based on estimates
provided by Arthur D. Little personnel with chemical industry experience.
j ns: Costs of compliance were expected to fall into three ranges:
minimum mandatory submission, maximum mandatory submission and maximum total
submission. The maximum mandatory submission includes all information
required under this option. The minimum mandatory submission excludes some of
this information, that may not be required in all cases because of the nature
of the new chemical. The maximum total submission includes certain optional
information. Costs were expected to vary from firm to firm, depending on size
of the firm, characteristics of the new chemical, and availability of data
within the firm. Small firms were likely to be affected to a greater extent
by the notification requirements due to the inability to take risks that a
larger company could more easily absorb.
The average cost of submission was stated to be the maximum mandatory
submission. This was estimated to be $3,700 to $42,000 per submission. Based
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on the ADL estimate of 1,000 new chemicals introduced for commercial sales
each year prior to the initiation of the section 5 program, it was estimated
that 750 new chemicals would be introduced if the submission costs were $3,700
per chemical, but only 300 new chemicals would be introduced if submission
costs were $42,000 per chemical. An important aspect of this analysis was
that it assumed companies could not pass submission costs through to customers
via higher product prices.
It was observed that the effects of the section 5 rules would vary not
only by firm size but also by segment of the chemical industry. The segments
most affected were expected to be Soaps and Detergents, Surfactants, and
Industrial Organic Chemicals.
2. Estimated Costs for Preparation and Submission of Reproposed
Premanufacture Notice Form
Prepared by : Arthur D. Little, Inc. (September 1979)
Prepared for : Office of Toxic Substances
U. S. Environmental -Protection Agency
Purpose : The purpose of this report (ADL 1979) was to estimate direct
costs of preparation and submission of the EPA79 information requirement.
These costs covered only the initial preparation of the PMN, including
submission costs and confidentiality costs, and did not consider supplemental
reporting costs, delay costs, or uncertainty costs. ADL also estimated costs
of the CNA79 information requirement in its comments on the January 1979 EPA
proposal.
Method : The analysis was based on discussions with EPA staff on the
nature of the information requirement and instructions. Chemical marketing,
chemical and environmental engineering, chemistry, data analysis, and
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toxicology considerations were examined by ADL staff experts in order to
establish a system that would enable estimates to be made regarding time to
prepare the submission. Interviews with chemical companies were carried out
to verify ADL findings on direct costs. These interviews lent additional
credence to the original cost estimates.
The cost of complying with the EPA79 Premanufacturing Notice
was estimated to be in the range of $2,055-$15,325 per chemical, including
confidentiality costs. The submission costs alone were estimated to be in the
range of $l,155-$8,925, and confidentiality costs were estimated to be
$900-$6,400. The range in cost was attributable to differing amounts of time
and professional expertise required to provide the information. These in turn
depended on the nature of the chemical, the amount of data that could be
easily collected, and company specific factors such as in-house research
capability.
ADL supplied cost estimates for the CMA79 (Chemical Manufacturers
Association) alternative information requirement. For the mandatory sections,
the cost was estimated to be from $955 to $5,500.
No new estimates for the number of new chemicals requiring PtIN
submissions were presented.
3. Economic Analysis of Proposed Section 5 Notice Requirements
Prepared by : ICY Incorporated (September 1980)
Prepared for : U.S. Environmental Protection Agency
Purpose : The purpose of this report (ICF 1980) was to examine the costs
of several regulatory alternatives for implementing section 5. ICY examined
the costs of preparing section 5 notices under three different program
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alternatives. Costs identified included out-of-pocket costs, delay costs, and
uncertainty costs associated with the ultimate disposition of the section 5
submission. Economic effects on the chemical industry were examined as were
economic effects on the economy as a whole.
Method : First a baseline of the chemical industry was created, based on
the economic behavior of important chemical industry segments in the absence
of section 5 rules. Next, the types of costs imposed by section 5 were
identified and quantified as much as possible, based on data available at that
time. Section 5 rules were expected to produce the following types of costs:
direct out-of-pocket costs associated with completing reporting requirements
costs associated with the delay in the introduction of new chemicals,
uncertainty regarding possible additional out-of-pocket costs and/or delay
costs, possible trade secret disclosure, and costs associated with possible
restrictive action by EPA. Although only the direct out-of-pocket costs could
be quantified based on data available at that time, the other costs were
expected to dominate the out-of-pocket costs.
The costs due to these factors were examined on four levels: individual
chemicals, individual companies, industry segments, and the U.S. economy as a
whole. Estimates were quantified wherever possible, but the less direct the
economic effect, the more difficult it was to achieve meaningful
quantification.
The segments of the chemical industry most likely to be affected by the
notice requirements were catalysts, surfactants, cyclic intermediates, rubber
processing chemicals, plasticizers, synthetic organic chemicals, adhesives and
sealants, industrial inorganic chemicals, and plastics and resins. The
economic impact of the notice requirements was said to depend more on EPA’s
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use of the information provided than on the administrative costs of reviewing
submissions. Smaller companies could suffer more because of the notice
requirements since they were expected to have fewer resources to divert to
non-production activities. Small companies that produce low volume chemicals
could face higher direct costs relative to the profit generated.
Another likely effect of these regulations was noted to be a reduction in
new chemicals introduced into the market. Companies might also shift
innovation over to “safer” areas of chemical innovation. (By “safer”, ICF, in
1980, meant chemicals with lower toxicity and lower exposure. Another aspect
of “safer” noted by the CStIA in 1981 is the shift to greater emphasis on
development of chemicals at customer request rather than for the general
market).
The out-of-pocket costs per submission were estimated by ICF to be as
follows:
minimum guidance: 3 $l,000 - $7,500
EPA79(Oct. 16, 1979) $1,200 - $8,900
EPA proposal (Jan. 10, 1979) $3,700 - $42,000
Associated with all three options is the cost of claiming confidentiality of
$900 - $6,400. Other costs such as delay and uncertainty could not be
quantified but were expected to exceed the out-of-pocket costs.
4. Pre-Manufacture Notification Under the Toxic Substances Control Act
Prepared by : Council on Wage and Price Stability, March 13, 1981
3 This was a set of information requirements which in mid-1980 the
Agency considered to be the minimum statutorily allowed.
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Prepared for : Office of Pesticides and Toxic Substances
U.S. Environmental Protection Agency
Purpose : The purpose of this report (CWPS 1981) was to bring to the
attention of EPA the possibility that the Premanufacture Notice program might
have significant detrimental impacts on innovation and productivity in the
chemical industry. The effect of cumulative regulatory burden was examined in
order to get an idea of the cost over time, since immediate effects would not
be as noticeable. This is because the success of a new chemical may not be
realized until several years after it has been on the market. CWPS also
expressed concern that not enough work had been done to assess the benefits o
section 5 rules.
Findings : This document was a critique of the PMN program as of
December, 1980. Special attention was given to cost effectiveness, because
CWPS felt this aspect of toxic chemical regulation had never been sufficiently
addressed. CWPS felt that benefits should be examined in parallel with the
analysis of chemical risks in order to justify the regulatory impact on
innovation. Although CWPS recognized the difficulty in quantifying health and
environmental effects attributable to the section 5 program, concern was
nevertheless expressed that benefits should be quantified to the maximum
extent possible.
Regarding costs, no criticisms were made of the estimates of direct
filing costs. However, delay and uncertainty costs were seen to be major
costs far outweighing the costs associated with submission of the PMN form.
An important economic effect mentioned was the potential for reduced
innovation due to higher costs of successfully developing a new chemical.
CWPS suggested that EPA examine a broader range of alternatives for
reducing the environmental and health hazards associated with all chemicals.
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The possibility of a shift in priorities was raised, from regulating new
chemicals, to regulating hazards of existing chemicals. CWPS strongly
recommended that EPA evaluate the mix of controls over new and existing
chemicals. It was suggested that EPA consider whether it might be more
cost-effective to give greater attention to regulating existing chemical
hazards rather than promulgating more stringent regulations for new chemicals.
5. Cost Estimation of the Section 5 Notification Form Proposed by the
Chemical Manufacturers Association
Prepared by : ICF Incorporated (July 1981)
Prepared for : U.S. Environmental Protection Agency
Purpose : The purpose of this analysis (ICY 1981) was to estimate the
direct costs of submission for the alternative PMN form proposed by the
Chemical Manufacturers Association.
Method : ICY used the well-established costing method of estimating
labor requirements and applying labor rates to determine submission costs.
The CMA79 information requirement has two parts, a mandatory
portion and an optional portion. It was determined that the CNA79 requirement
would have cost $1,250 - $5,930 for the mandatory portion, and $0 - $13,859
for the optional portion, for a total cost of $1,250 - $19,789. These costs
are summarized below:
Mandatory Optional Total Cost
CMA $1,250 - $5,930 $0 - $13,859 $1,250 - $19,879
/
6. The Impact of TSCA Regulations on the Chemical Industry: A Pilot Survey
Prepared by : National Economic Research Associates, Inc. (NERA)
(January 20, 1981)
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Prepared for : The Chemical Manufacturers Association
Purpose : The purpose of this study (NERA 1981) was to determine the
feasibility of using a survey method to evaluate the direct cost of TSCA
regulations as they evolve and to develop data and an analytic framework for
determining direct and indirect economic effects of future proposed
regulations.
Method : NERA developed an industry survey with two objectives in mind.
The first objective was to ascertain the costs to industry of TSCA
regulations. The second objective was to develop a model that could evaluate
economic effects of interim regulations. These costs are based on data for a
sample of 36 firms representing 14.7% of total domestic chemical sales.
ns: For the period 1977-1979, total direct TSCA costs were
estimated to be about $300 million. These included not only costs of section
5, but also an y costs related to testing rules, PCB disposal and recycling,
section 8(a) inventory reporting, and reporting imminent hazards. About 25
percent of these costs were for health and environmental testing of new
chemicals. Another 25 percent was for submission costs, 17 percent for
increased product review, and the remaining 33 percent was for legal review
and costs of following legislative and regulatory activities. TSCA-related
expenditures, directed toward increasing the health, safety, and environmental
quality of chemials in commerce, totaled $1.1 billion. About $800 million of
this was for health and environmental testing. $700 million of these costs
would have occurred even without TSCA.
With respect to new chemical substances, NERA estimated that 1,700 new
chemicals are introduced annually (the 90 percent confidence interval was
450-3000). Other NERA findings about new chemicals included: a new chemical
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takes an average of three years to develop, has a 40.3 percent chance of
successful commercialization, incurs average research costs of $225,900, and
earns an average pre-tax rate of return of 37.8 percent.
7. A Critique of the EPA “Economic Impact Analysis of Proposed Section 5
Notice Requirements”
Prepared by : Regulatory Research Service (RRS), (March 1981)
Prepared for : Chemical Manufacturers Association
Purpose : The purpose of this critique (CMA 1981) was to review the ICF
analysis of the proposed section 5 notice requirements under TSCA and to
provide additional data on costs of section 5 rules.
Method : The RRS critique deals with two major areas of the ICF
analysis: (1) cost analysis of the PMN process; and (2) evaluation of
effects, especially on innovation. Additional information was provided based
on a sample of PMN chemicals and a survey of 37 CMA member firms.
Findings : -
• Cost Issues--RRS stated that ICT had not adequately covered some cost
categories. These included uncertainty costs, overhead costs, costs of
PMNs required for intermediates that never see commercialization, and
economic costs of submitting PMNs for developmental chemicals that will
be commercialized later. Other costs would include PMNs for commercial
failures and general uncertainty costs. Based on data from the industry
survey and the sample of PMNs, these costs were estimated as follows:
Average filing costs were $7,548 per PMN filed, and a figure of
$4,500 was estimated for additional costs. Thus a cost estimate of
$12,000 per PMN submission was given as the total cost of PMN per new
chemical.
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Impact Analysis--In the executive summary, RRS stated that innovation
had declined between 70 and 90 percent as a result of the PNN process.
The analysis simply compared earlier estimates of the number of new intro-
ductions with the number of PMNs being commercialized. After removing
PMNs on intermediates and PMNs on developmental materials from the 470
PMNs reviewed by RRS only 294 are “valid.” This number was compared to
previous estimates (2220 from the Snell report, 1700 from NERA, and 1000
from ADL). Innovation decline was presumed to be wholly attributable to
the cost of PMN filing, including delay and uncertainty costs.
8. Impact of the Toxic Substances Control Act on Innovation in the Chemical
Specialties Manufacturing Industry
Prepared by : Regulatory Research Service (January 1982)
Prepared for : Chemical Specialties Manufacturers Association (CSMA)
Purpose : The purpose of this analysis (Heiden & Pittaway 1982) was to
determine the impact to date of TSCA on innovation in chemical specialties
manufacturing and to define the nature of such impact. A second objective was
to create a baseline that could track the effect of TSCA on innovation over
time.
Method : The approach used to collect data for this analysis was a mail
survey combined with a series of interviews with representatives from a sample
of member CSMA firms. The study was limited to the 198 member firms who were
identified as either ingredient suppliers or product manufacturers. Mail
questionnaires were sent to all members (69/198 responded) that fit the
description of ingredient suppliers or product manufacturers. The complete
study consisted of 100 firms, 50 that responded to the questionnaire, 19 that
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responded to the questionnaire and had field interviews, and. 31 that had only
field interviews.
The survey was designed to collect three kinds of data: (1) economic
background; (2) new product development five years prior to and after TSCA P 1N
implementation; and (3) decisions made to undertake or reject innovation.
Findings : This analysis reported that innovation appears to have
declined since 1979 for ingredient suppliers. This was the first year of
implementation of TSCA pre-manufacturing notice requirements, although decline
due to TSCA couldn’t be totally separated out from other causes.
Small business firms were noted to have much greater dependence for
continued sales on new product innovation. There was a 38% reduction in the
relatively risky area of general market innovation, and only a 14% reduction
in innovation in the less risky area of customer requests.
Product manufacturers had not yet experienced any reduction in
innovation, possibly because the effect in this area would be due to the
significant new use rules which had not been proposed at the time the analysis
was conducted (1981). Thus, for product manufacturers, the innovation data
can be considered as a baseline against which future TSCA effects can be
measured.
When added to direct filing costs, non-requirement induced actions such
as health and safety testing become substantial costs which, when balanced
against the expected return from new substance reduces the incentive to
innovate. Because these costs are fixed, they are particularly burdensome to
small firms, i.e., those below 2OO million in annual sales.
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9. Economic Impact Analyses of TSCA Section 5(h)(4) Exemptions: Low
Volume, Site-Limited Intermediates, and Polymers
Prepared by : Regulatory Impacts Branch
Economics and Technology Division (March - May 1982)
Prepared for : Office of Pesticides and Toxic Substances
U.S. Environmental Protection Agency
Purpose : The purpose of these reports (Ng 1982, Warhit 1982, Luttner
1982) was to determine the extent of relief that would be provided by EPA’s
proposed exemptions for certain low volume chemicals, site-limited
intermediates, and polymers. Three exemption analyses were’developed: low
volume chemicals (Ng 1982), site-limited intermediates (Warhit 1982), and
polymers (Luttner 1982). Under section 5(h)(4) of TSCA, new chemicals may be
exempted by rule from the reporting requirements of section 5 if the substance
is determined to present no unreasonable risk of injury to health or the
environment. EPA has proposed to exempt certain new chemicals if production
does not exceed 10,000 kg per year, certain new site-limited intermediates
manufactured in any quantity, and polymers that meet certain EPA
requirements. (Details of EPA’s proposed exemptions are presented in Section
IV F of this report.) Each of the economic analyses considered several
options, and the proposed exemptions were based on those options that appeared
to meet regulatory objectives for the least burden.
Method : In the economic analyses, exemption options were evaluated
using a sample of about 500 PMNs. Thus, chemicals and firms which might be
affected under the alternative exemption options were characterized. Firms
were assumed to incur several types of costs: direct filing costs,
confidentiality costs, delay costs, and uncertainty costs. These costs reduce
the expected rate of return on a new chemical and increase the economic risk
to a firm.
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Exemption options were presented arid economic analyses were undertaken to
evaluate the savings to EPA and to industry.
Findings : After considering all of the alternatives for each of the
three types of exemptions, the following exemptions were proposed (these are
explained in detail in Section IV F):
• Low Volume : Chemicals with annual production volume (or import
volume) less than or equal to 10,000 kg are potentially eligible for
exemption. EPA would review exemption requests within 14 days and may
refuse to grant an exemption.
• Site-Limited Intermediates : The site-limited intermediate exemption
is similar to the low volume exemption. Manufacturers must sub nit an
exemption notification and a qualified expert, employed by the
manufacturer, must review the chemical. EPA has 14 days to act on
exemption requests.
• Polymers : The polymer exemption is much more complex than the other
two exemptions and involves fulfilling certain technical criteria. If
all of the criteria are met and the polymer has a number average
molecular weight over 1,000 g then the polymer would be eligible for a 14
day notice.
A polymer would be eligible for a zero day exemption notice (exempt from
all PMN requirements) if it met one or more of the following requirements:
1) Polyesters made from a specified list of monomers.
2) Polymers with number average molecular weight of 20,000 or
greater.
3) Polymers with certain number average molecular weight and
polydispersity values.
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Chemicals Used in or for the Manufacture or Processing of Instant
Photographic or Peel-apart Film Articles : EPA exempts manufacturers of
instant photographic and peel-apart film articles who manufacture and
process new chemical substances used ir or for the manufacture or
processing of these articles from the premanufacture notice requirements
of TSCA section 5. Under same circumstances the companies may
manufacture and process a new chemical substance for use in or for these
articles immediately upon submission of an exemption notice.
Distribution in commerce of the photographic articles is not permitted
until the manufacturer complies with the premanufacture notification
requirements of TSCA section 5(a)(].)(A) and the review period has ended
without EPA taking any action to prevent distribution or use.
Cost Savings : The cost savings for the proposed low volume exemption
were estimated to be from $195,000 to $1,802,000 for the chemical industry or
$700 - $6,000 for each exemption notice. EPA cost savings were estimated to
be $802,000 or $3,000 for each exemption notice (Ng 1982, p. xi).
The cost savings for the proposed site-limited intermediate exemption
were estimated to be from $35,000 to $370,000 for the industry or from $400 to
$7,050 for each exemption notice. EPA cost savings were estimated to be
$148,000 or $2,800 for each exemption notice (Warhit 1982, p. vii and x).
The cost savings for the proposed polymer exemption were estimated to be
from $190,000 to $1,410,000 for the industry or from $500 to $3,700 for each
exemption notice. EPA cost savings were estimated to be $410,000 (Luttner
1982, p. vii).
These estimates of savings were based on the number of new chemicals
annually qualifying for the various types of exemptions. For each eligible
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chemical, savings were calculated based on the expected direct cost of filing
a PMN under the EPA79 less the cost of filing the least costly exemption
application for which the chemical was eligible.
10. Summary of Previous Analyses
These nine studies were utilized in developing the analyses presented in
this report. In addition, comments received by EPA in response to previous
section 5 regulatory proposals were utilized as general background. The other
major data source was a sample of approximately 500 PMNs. This sample is
described below in section B.
B. DESCRIPTION OF THE PMN SAMPLE
In order to estimate important parameters needed for this analysis, a
sample of approximately 500 PMNs was selected. This sample was drawn from a
time interval representative of a steady state of PMN submission and had the
following characteristics: -
• 19% of the sample chemicals were intermediates
— 10% were site-limited intermediates
— 9% were others
• 42% had annual first-year maximum production volume
of 10,000 kg or less
— 20% had first-year production volume <1,000 kg
— 22% had first year production volume between
1,000 and 10,000 kg
• 49% of the sample were polymers
• 10% of the sample were used in photographic
applications
• 64% of the sample qualified for some type of
exemption (based on the exemption alternatives
presented in Chapter IV)
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• 6% needed additional information or were subject to
some type of restriction (e.g., regulation by 5(e) or
5(f), request to change a label, a reformulation or a
change of process) or were voluntarily acted on by
the companies.
Other characteristics of the sample are presented in Chapter IV, as they
need to be introduced.
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CHAPTER III
IDENTIFICATION AND ANALYSIS OF
PRIMARY ECONOMIC EFFECTS ASSOCIATED WITH THE PMN PROCESS
This chapter reviews relevant portions of previous studies of the costs
of the section 5 notification program, identifies which costs contribute to
the primary economic effects discussed in Chapter II, and explains the data
and techniques used in Chapter IV to compute costs. Section A reviews and
contrasts the “costs” identified in previous studies concluding that four
measurable costs contribute directly to the effect. Sections B through E
discuss each of these four cost components.
A. SCOPE
Analyses of the costs incurred by chemical firms to fulfill PMN
requirements have been made by several organizations, including two EPA
contractors (Arthur D. Little, Inc. and ICP Incorporated) and a Chemical
Manufacturers Association (CMA) contractor (Regulatory Research Service).
These analyses included evaluations of the original PuN form proposed by EPA
(published in January 1979), the “reproposal,” published in October 1979, a
set of information points required under a minimum guidance scheme which did
not include a form (this scheme was derived by ICP as an optional reporting
system in its October 1980 report), and a form proposed by the Chemical
Manufacturers Association (this was also analyzed by ICF and ADL).
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The estimates developed in the several PMN reporting cost analyses varied
widely due to three major factors: 1) differences with respect to assumed
data requirements; 2) differences with respect to the types of costs
associated with the PMN process; and 3) differences in assumed unit costs for
the various types of costs.
All of the analyses recognized the direct out-of-pocket costs associated
with the PMN process, i.e., “direct filing costs.” ICF, ADL, and RRS also
attempted to evaluate confidentiality assertion and substantiation costs. ICF
analyzed two other categories of costs: 1) delay costs, and 2) uncertainty
costs. The Regulatory Research Service (CMA 1981, p. XV) analysis concurred
with ICF’s statement of cost types and concluded that four additional cost
factors must be included in an analysis of PMN cost impacts. These were: 1)
non-trade materials costs (PMNs filed on materials not produced for direct
sale or trade); 2) developmental materials economic costs (PMNs filed on
materials which do not become successful. commercially); 3) cost of testing
conducted due to an implied or perceived “need”; and 4) a miscellaneous
category of non-labor direct costs which includes, among others, the
post-submission costs of communications. Of the many costs derived above, ICP
believes that only direct filing costs, delay costs, confidentiality costs,
and costs due to actions required by EPA during its review of the PMN should
be measured. In the following paragraphs, the reasons for dismissing the
other costs are presented.
1. Non-trade Materials
We have not examined the marginal costs of submitting PMNs on
non-trade materials (intermediates used to produce other chemicals) because
analysis of the PMN data base indicated that the costs of •filing the
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additional PMNs for intermediates to a final product PNN are very low
exclusive of additional health and safety testing (which is not, of course,
specifically required by the statute). ICF reviewed a random sample of about
twenty end-product PuNs that had approximately 50 intermediates associated
with them to determine the extent of changes between the end-product and the
intermediate PHNs. The only two information items to change significantly
among the intermediates and the end-product were the chemical identity and
health and safety data. In the vast majority of PMNs examined, there was the
possibility that the company had performed separate health and safety tests on
each P 1N chemical; however, this majority is deceiving in that it is due to
the distortion caused by a single company (which accounts for 2/3 of all
intermediates in the sample). This company appears to perform this testing
routinely in its new chemical development process.
When the information supplied about the final product and the
intermediates is compared, strikingly similar information appears in many
places. Exposure-at-the-manufacturer’s-sites, manufacturers-identity, and
exposure-at-others’-sites (when supplied) changed very little. For example,
information about exposures at manufacturers’ sites often were the same among
intermediates and final products except for number of workers exposed. The
cost of supplying this incremental information is not large enough to warrant
analys is.
The only item that consistently differred was chemical identity. Thus,
the marginal cost of an intermediate PMN generally was the cost to provide
chemical identity and the cost of typing the form. As explained in Chapter
IV, Section B, the cost of providing chemical identity information is two
technical hours and the cost of typing the form is 5 clerical hours for an
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incremental cost of $188. This estimate is much less than the $2,279 estimate
based on the assumption that the intermediates require a completely
independent PMN submission (C 1A 1981, P. 111-55).
2. Testin Costs
Testing of new chemicals is not required as part of the
Premanufacture Notification process under section 5 of the Toxic Substances
Control Act. The only references to testing in section 5 are section 5(d)(1)
and section 5(b)(l)(A). Section 5(b)(1)(A) states that a manufacturer of a
new chemical subject to a section 4 test rule must submit the test data
specified in the rule as part of the premanufacture notice required under
section 5. At this time, EPA is exploring ways to apply section 4 test rules
to categories of chemical substances as authorized by section 26(c). Once
category test rules are in effect, a new chemical substance which is a member
of a defined category will be subject to the testing requirements as provided
by section 5(b)(1)(A). The EPA has recently proposed test rules affecting
categories of chemicals. However, none of these test rules is final yet.
Section 5(d)(1) requires the submission of test data in the possession or
control of the person submitting the notice which are related to the effects
on health or the environment from the manufacturing, processing, distribution
in commerce, use, and disposal of the new chemical substance. This section
does not require testing but if tests have been performed the results must be
submitted.
In previous analyses of the cost of the section 5 premanufacture
notification program only the costs of reporting the results of tests have
been analyzed. These costs, between $300-$l,700, have been included in the
costs of filing PMNs (ADL 1979). An additional cost element which has not
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been utilized in this filing cost analysis, is the cost of the tests
themselves.
CMA and other affected parties have argued that although the law is clear
that testing is not required, many companies are performing tests they would
not otherwise perform, because they believe the Agency will find fault with
their premanufacture notice if test data are not submitted. Therefore, CHA
argues that the costs of testing should be included in the cost of the
program. Although the costs of such testing cannot be counted as a direct
component of the PtIN impact (since testing is not required by TSCA), such
costs could be important induced effects of the section 5 rules; particularly
given that many ingredient suppliers surveyed by CSMA view PMNs as requiring
incremental testing costs, sometimes in significant amounts (CMA 1981). In
Chapter IV, we discuss testing costs in the context of actions undertaken at
EPA’s request. The cost of tests are analyzed for those cases where, during
the PMN process, EPA recommended testing as a source of additional data to aid
their evaluation of risks.
3. Uncertainty
Uncertainty concerning the PMN process takes many forms. In
previous analyses (ICP 1980, Heiden and Pitaway 1982) the kinds of uncertainty
factors addressed included:
• uncertainty regarding the length of delay
• uncertainty regarding total direct costs of filing
• possible trade secret disclosure
• possible regulatory or volmitary restrictive actions
None of these factors were quantified in previous analyses because no
data existed to evaluate them. Because the program has been in place for
three years and a track record exists regarding length of delay, trade secret
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disclosure, and restrictive actions, it is possible to compute a minimum
estimate of the cost of these uncertainties.
The manifestation of these uncertainties is the record of the Agency in
implementing the section 5 program. For example, if EPA has revealed trade
secrets then the extent of damage due to trade secret disclosure can be used
as a proxy for the degree of uncertainty faced by manufacturers. Likewise,
EPA’s use of extension authority to extend the ninety day period is a measure
of the extent of the length of delay uncertainty. Additionally, based on
conversations with EPA staff and review of the telephone records of over 700
PMNs in EPA files, it appears that EPA’s practice of orally requesting
additional information on a regular basis may be a measure of the uncertainty
associated with direct filing costs. Finally, uncertainty regarding possible
restrictive actions is directly measurable by the frequency and magnitude of
cost imposed by EPA when it has taken specific action on a chemical. Because
uncertainty manifests itself this way, it can be measured within the context
of direct filing costs, costs of protecting confidential business information,
and cost of delay.
4. Developmental Materials
In (CMA 1981) Heiden and Pittaway identified the cost of submitting
PNNs on developmental materials as an additional cost to be computed. They
noted that this cost was a behavioral response (CMA 1981, p. 111-55) not a
requirement of the program. As mentioned above, this analysis considers the
direct costs of the regulation not the induced costs. Therefore, the costs of
PMNs for developmental materials is not of concern here. Indirectly we do
address this cost, however, because we estimate the annual costs of the
program without removing developmental materials. That is, we assumed that
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some portion of the PMNs that are not commercialized are developmental
materials.
5. Summary
The ability to dismiss non-trade matefials costs, to measure testing
costs through explicit EPA requests, and to measure uncertainty through actual
experience with the program reduces the cost categories to be analyzed to four:
• direct filing costs,
• delay costs,
• confidentiality costs, and
• expected costs of EPA-induced restrictions (labels,
tests, withdrawals).
The approaches to computing the costs of each category are presented in
Chapter III, Sections B through E.
B. DIRECT FILING COSTS -
As previously stated, the actual out-of-pocket costs incurred by firms to
collect the necessary data, complete a PMN form, and file it with EPA have
been the subject of several analyses. The seven costs estimates prepared to
date are presented in Exhibit Ill-i below.
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EXHIBIT 111—1
ESTIMATES OF DIRECT PMN FILING COSTS
(Dollars)
(1978, p. V-17)
(1979, p. 38)
(1979, p. 64)*
(1980, p. A-25)
(1981c, p. viii, x)**
(1981, p.4)***
(1981, Dresser Memo)
Basis
January 1979 proposal
EPA79 form
CMA79 form
Minimum Guidance Scheme
Critique of ICF Analysis
CMA79 form
Actual Data Supplied on PMNs
Estimated
Cost Per PMN
$3,700 - $42,000
$1,200 - $8,900
$995 - $5,550
$1,000 - $7,900
$6,375
$1,110 - $5,320
$1,200 - $7,900
*Maxidatory portion only. Optional portions may cost from $0 to $11,500.
**Mean total filing costs less confidentiality costs, ir cluding cost of
PMNs on chemicals that are not commercially successful.
***Mandatory portion only. An optional portion may cost from $0 to
Estinlate Source
ADL
ADL
ADL
ICF
CMA
ICF
I CF
$12,490.
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A possible source of inaccuracy in the first few estimates prepared for
EPA is that they assumed PMN submitters would complete certain portions of
given forms or would be required to provide certain data. riost of the
estimates were therefore predictive rather than being based on analysis of
PMNs actually submitted to EPA by firms. RRS obtained their estimates by
asking firms in their survey what their costs had been for submitting PNNs and
found their pre-submission filing costs to be $5,427 (labor costs of $4,270
and overhead charges of $1,157). By adjusting for chemicals unsuccessful in
customer testing they raised this estimate to $6,375.
In order to produce a more accurate estimate of actual pre-submission PMN
costs, ICF conducted an analysis of the cost of PMN submission based on actual
data received in a sample of about 500 PMN submissions received during 1980
and 1981. The analysis identified which pieces of information in the EPA79
form were provided by PMN submitters. Form sections were considered complete
if one item in the section was supplied. The estimated hours needed to
complete each section for which information was supplied were summed and
multiplied by the appropriate labor rates and/or other inputs needed to
complete the submission. The cost estimates contain an upward bias to the
extent that form sections were considered complete even if only one item was
provided within the section. However, this must be offset against a downward
bias because some submitters provide data not requested in the EPA79 form and
because the data base did not gather information about transport or consumer
use/exposure. This analysis concluded that the net impact of these factors
was an upward bias in the cost of completing the forms. Overall the average
cost of the typical PMN, based on actual PNN submissions in the data base,
ranged from about $1,200 to $7,900, assuming October 1980 labor rates.
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In the remainder of this section, approaches for estimating labor hours
are provided in section 1, while costs for required labor are discussed in
section 2 below.
1. Labor Hours Estimates
All cost estimates to complete the PMN have depended on two critical
factors--labor hours required and costs of labor. The amount of labor hours
required depends on three factors:
• the amount and type of information to be submitted,
• the efficiency at which employees fill out
requested information,
• characteristics of the firm.
a. Amount and Type of Information
The amount and type of information requested by a form and
likely to be completed by a firm varies a great deal depending on: properties
of the new chemical substance, characteristics of the manufacturer, and the
manufacturer’s production plans. Some examples of this variability follow:
Example 1 . Suppose that a form has a separate section for
which information is to be supplied only with regard to
production of the new chemical a: sites not controlled by the
submitter. If the submitter expects to be the only
producer of the new chemical, then no information would be
supplied for this section. On the other hand, if the submitter
expects other firms to also produce the new chemical, it may
have a great deal of information to provide. In the first
instance virtually no labor would be necessary, while in the
second instance a substantial amount of labor could be required.
“Submitter” refers to the firm that is submitting the section 5
notice.
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Example 2 . A section 5 notification form is likely to request
information on worker exposure to the new chemical. If the new
chemical is manufactured in a completely enclosed system, there
may be virtually no worker exposure, and the manufacturer would
have little to report. However, a different manufacturing
process could expose several employees in several different
situations. In this case the submitter would provide a great
deal of information. This problem would be compounded in those
cases where the submitter had not finalized its production
process; i.e., when the optimal system could be identified only
after production of the substance in commercial quantities had
begun.
Example 3 . A form might request the submitter to provide any
analyses that the firm performed of the possible health and
environmental risks of the new chemical substance. Therefore,
if the firm conducted such analyses it would submit them as
part of the information requested in the form. If no such
analyses were conducted, the firm would have nothing to submit.
b. Efficiency of Labor
The time required for a person to perform a duty varies
depending on that person’s efficiency. Learning curve effects should reduce
hour requirements for any given firm after the first few PMNs are submitted,
thereby resulting in costs closer to the low end of range estimates provided
in previous analyses. Although this point may seem obvious, failure to take
into account learning curve effects may cause ICF’s (and ADL’s) estimates of
labor requirements to be higher than actual requirements in the long-run.
c. Characteristics of the Firm
The labor needed to provide information may vary considerably based
on the size, resources and organization of the firm. For example:
Example 1 . If a firm is small, then a top-level manager could
also be a chemist who is familiar with the technical aspects of
the manufacturing process. As a result, he or she might fill
out the technical information requested by the form. Thus,
smaller firms are more inclined to use higher level personnel
to fill out information (ADL 1979, p. 14).
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Example 2 . The firm may as normal practice conduct risk
assessments. Suppose an industrial hygienist conducted an
analysis of the health risks that may result from occupational
exposure to the new chemical, and that after this analysis was
performed the firm then begins to complete a section 5 notice.
In this case, much information on occupational exposure would
be available for submission. On the other hand, if the firm
did not conduct risk assessments routinely, such an analysis
would not be conducted, and so the firm would have less
information to provide on occupational exposure.
Example 3 . More than one branch of the firm may be involved
in submitting the section 5 notice, e.g., a research and
development branch may provide data on chemical properties, a
marketing or planning branch may supply production information,
a government-regulations branch may manage the submission,
etc. Suppose the management of the firm is organized in a
relativel3 hierarchical structure. In this situation, when
different branches coordinate efforts to submit the form there
may be a minimum of confusion. If the branches are more
autonomous, however, there may be more coordination required.
The more coordination required, the more labor will be required
to fill out the form (ADL 1979, p. 12-13).
2. Summary
Because of these factors--amount and types of information,
efficiency of labor, and characteristics of the firm--required labor for a
particular form may vary considerably among different companies and different
chemicals. Thus, range estimates are needed to account for the variability of
these requirements. Our approach consisted of the following steps:
1. Estimate labor hours for each of the general categories of
labor: clerical, technical, and managerial (ADL 1978, p.
V-9 to V-15);
2. Estimate the maximum and minimum possible hours to compute
a range of hours (e.g, 5-10 technical hours) for each of
these categories; and
3. Multiply these hour estimates by average industry labor
cost per hour for each category.
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Hour input estimates vary by reporting rule alternative, while cost per
hour does not. In Appendix A, per-hour labor costs (as of December 1981) are
estimated. Hour input requirements are developed in Chapter IV, Section B.
C. DIRECT COST OF DELAY
In this section the direct costs of delay are explained. Section 1
presents the two components of direct delay costs: pre-submission delay and
post-submission delay. Section 2 presents a general approach for valuing both
of these delay components.
1. Components of Direct Delay Costs
For this analysis the primary cost of delay is defined as the
present value of profits delayed because of the PMN process. Delay costs are
specified in profits rather than sales because while PMN imposes delays in
revenue streams, it also imposes delays in cost streams. Therefore, the loss
due to delay should consider revenues net of costs--i.e., profits.
Primary delay costs here are defined as the net present value of the
profit stream before and after delay, not profits foregone. This is an
important distinction. Although PMN delay may contribute to new chemicals
losing sales to existing products, thereby resulting in profits foregone, such
losses are secondary effects of PMN. The primary effect of PMN is, in some
instances, to delay for three-months the introduction and thus reduce the
value of a certain amount of profit. Since the value of profit is greater
today than three months from now, the decreased present value of the profit
stream represents the primary delay cost of PMN. To be sure, it is
conceivable that there may rarely be seasonal or single-batch chemicals for
which demand is immediate and where the 90 day-delay alone prohibited the
chemical from being marketed. But thesa are secondary effects that result
1._c —
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from delay (and generally insignificant costs in the scheme of the total
production of the chemical industry), not the primary effect of delay. (In
this part of the RIA we are measuring primary effects.)
Thus, the definition of primary delay costs as a reduction in the present
value of the profit stream is operative here. Delay costs can be broken into
two components: pre-submission delay and post-submission delay.
Pre-submission delay would include the amount of time it takes a firm to
compile and submit a section 5 notice. At the present time, based on data
from a sample of 37 CNA member firms, a maximum estimate for the
pre-submission delay interval would be one month (CMA 1981, p. 111-37). Such
delay would not include any time for the completion of testing. However,
because section 5 does not require submitters to perform health and safety
testing, any delay due to testing prior to submission of a PMN would not be
attributable to the PMN process. If submitters feel they need to develop
additional health and safety data before submitting a section 5 notice (for
whatever reason) they do so voluntarily. Therefore, costs attributable to
delay due to voluntary increased testing should not be considered direct costs
of the PMN program.
Post-submission delay would correspond to time lost due to the PMN
review period -- a maximum of 180 days (assuming the maximum 5(c) extension).
For both components, the delay period is defined as the time which the
review period adds to the critical path for bringing a new chemical to
market. If the PMN review can be conducted in parallel with other activities
along the critical path (in-house development, customer evaluation, etc.),
delay is zero. If no part of the preparation of the PMN or EPA review of the
PMN can be conducted in parallel with other critical path activities, the cost
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of delay will approach the present value of delaying the profit stream by 120
days (the sum of the pre- and post-submission periods) if no 5(c) extension is
filed).
A worst-case scenario would assume PMN review always adds at least 90
days to the critical path. It is possible that the delay period could exceed
90 days depending upon the extent to which section 5(c) actions are pursued,
thereby extending the review period for up to an additional 90 days. Since
October 1, 1980, 11 5(c) actions have been taken. This represents .8 percent
of PMNs filed to date. For purposes of this analysis, maximum delay will be
assumed to be 120 days for 99.2 percent of all PMNs and 210 days (120 days
plus an additional 90 days resulting from 5(c) actions) for .8 percent of
PMNs. In essence, the worst-case scenario assumes that PMN review can never
be conducted in parallel with other activities along the critical path.
At the other extreme, a best-case scenario of the delay period can be
developed by assuming that all activities can be conducted in parallel with
other activities along the critical path to the maximum extent possible. In
this case, the company plans its PMN submission timing so that the normal
90-day review period expires before or at the same time it wishes to commence
marketing the chemical. Thus no days are added to the critical path, except
for the very small number of PMNs (0.8%) subject to a section 5(c) action..
CMA (1981) in its critique of previous economic analyses argued that the
delay imposed on larger projects of which the new chemical was a part should
also be computed as a direct cost of the PMN program. We do not believe that
this is correct. First of all, the larger and more complicated the project,
the less likely that P1*1 review will add to the critical path. Second, if
there are delays in larger projects due to P1*4 review, they would most likely
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occur only in the transitional period as the firm first implements PMN
procedures. As industry becomes more familiar with the requirements of PMN,
section 5 reviews can be integrated into on-going practice, thereby minimizing
the probability that P 1N will contribute to the delay of larger projects.
2. Valuation of Delay
As specified in section 1, direct costs of PMN delays are defined as
a reduction in the present value of the profit streams associated with new
chemicals. Algebraically, such a reduction would be computed as follows:
I 1
PDI 1- I PV(p)
I t I
I (l+r) I
where
PD = present value of profits delayed due to PMN delay
t = amount of time (probably in months) attributable to PMN delay
r = average real rate of return (specified in the same time units as t)
for new chemicals
PV(p) = present value (discounted at r) of profit stream associated with the
average new chemical.
This formula represents the difference between the present value of the profit
stream associated with the average new chemical and the present value of the
same profit stream lagged “t” time periods. Appendix B contains the
derivation of this formula.
To develop an appreciation of the maximum direct delay cost imposed by
PMN, consider the above formula when t is 7 months (1 month for pre-subrnission
delay and 6 months for post-submission delay). Assuming that the maximum real
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rate of return for new chemicals would be 10% annually (or approximately 0.83%
monthly), the formula above reduces to the following:
1
Percent profit lost = 1. - = 5.6%
(1. 0083)
Thus, when the real rate of return is 10% annually, the cost of delaying the
profit stream seven months exceeds 5% of the present value of the original
profit stream for the new chemical. Exhibit 111-2 provides some sample
calculations for percent of the present value of the profit stream lost for
other values of time delay and real rate of return.
EXHIBIT 111-2
SAMPLE VALUES OF REDUCTIONS IN PRESENT VALUE
(expressed as percent of profits)
Time Delay Annual Real
Due to P h1Ns on Rate of Return
New Chemicals 5% 10%
1 month 0.4% 0.8%
2 months 0.8% 1.6%
3 months 1.2% 2.4%
4 months 1.6% 3.2%
It should be remembered that the above estimates provide an upper bound
for the delay costs. Real rates of return may be less than 10% and the time
lag due to section 5 delays is usually less than seven months. Quantification
of delay effects under the three regulatory alternatives is provided in
Chapter IV. Chapter IV also contains estimates of the present value of the
profit streams associated with the average new chemical when reasonable
assumptions about the discount rate, chemical life cycle, and stream of
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profits are made. In Chapter IV we also compute a best guess estimate of
delay costs based on commencement of manufacture notices received to date.
D. CONFIDENTIALITY
This section presents methods for estimating the relative costs to
regulated parties and to EPA of options for the confidential treatment of
section 5 notice information. Section 1 outlines the factors that affect
confidentiality costs. Section 2 discusses the type of confidentiality costs
incurred by regulated parties and society and discusses ways of measuring
those costs. Section 3 compares the analysis of confidentiality costs in this
section to the analyses of confidentiality costs presented previously by ICF
(ICF 1980) and by RRS (CMA 1981).
1. Types of Confidentiality Costs and Methods of Measuring Those Costs
There are three different types of confidentiality costs incurred by
regulated parties. These three types are:
• Cost 1: Out-of-pocket expenditures by submitters
due to procedural and administrative requirements.
• Cost 2: Disclosure of trade secrets due to the
amount and nature of cost information made public.
• Cost 3: Uncertainty about what kinds of
information EPA will require and how much of that
information might be disclosed.
A more detailed description and method of measuring each of these costs is
provided as follows:
a. Cost 1: Out-of-Pocket Expenditures by Regulated Parties .
These are the procedural or administrative costs which the
submitter must absorb in complying with the confidentiality requirements of
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section 5. The largest component is the labor time required to complete forms
and to furnish information (i.e., generic information) required by EPA’s
confidentiality procedures. These costs include the actual time required to
fill out the forms (i.e., the pureJy procedural tasks), time spent in
consultation with EPA representatives, and time spent on internal consultation.
Data on hours required for substantiating confidentiality for the EPA79
form and the CNA79 form are available from ADL (1979) and CNA (1981). These
data can be used with ICF’s labor rate estimates (see Chapter III, Section B)
to provide monetary estimates of out-of-pocket expenditures for each option.
b. Cost 2: Disclosure of Trade Secrets .
EPA’s confidentiality p licy will affect the probability that
trade secrets will be disclosed. Trade secrets are a very important factor in
the chemical industry and are sometimes critical to the new chemical
introduction process. This is particularly true because the demand for many
chemicals is very price-elastic. Because many substitutes for a new substance
may exist, there may be little difference between the successful new chemical
and the chemical which fails. Every competitive advantage, therefore, becomes
significant to the individual firm. The possession of a trade secret by an
individual firm may provide a significant competitive advantage.
Trade secrets are not limited only to the identity of a new chemical.
The process by which a chemical is manufactured could be far more significant
than its identity. A manufacturer’s identity and location may reveal
information about the potential market for the new chemical to a competitor.
Therefore, the information required in the notice may include many items that
the submitter would not otherwise reveal.
The distinction between what will and will not lead to the disclosure of
confidenti.ii business information (CBI) directly or indirectly may frequently
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be a point of contention between EPA and the submitter. The cost of
potentially reduced or destroyed competitive advantage must be included in the
evaluation of confidentiality issues and options.
There are several ways in which trade secrets might be disclosed to com-
petitors. The confidentiality rules may be such that the firm is not permitted
to claim confidentiality for items whose disclosure would reveal trade secrets.
EPA may deny claims of confidentiality and disclose the information to the
public, thereby revealing trade secrets to potential competitors. Finalay,
confidential information may be inadvertently disclosed by EPA.
The only threat of trade secret disclosure from the first source is from
disclosure of chemical identity as part of a health and safety study. Except
for this item, a submitter can claim confidentiality for any item in a PMN
submission. The costs of disclosure from this source cannot be estimated
quantitatively. However, the importance of this problem is roughly measured
here by determining how often chemical identity is claimed confidential in a
submission which includes health and safety data. The relative costs of the
reporting alternatives are assessed by determining whether this issue is
treated differently under any of the three forms.
Disclosure of trade secrets from the second source, EPA ’s denial of
confidentiality claims, should be virtually nonexistent under any of the
options. Denial of confidentiality claims has been a very infrequent event
under TSCA. Thus far, only about a dozen submissions have been affected, and
90 percent of the claims in those submissions were approved. In addition,
according to Jim Nelson of the Office of General Counsel (April 1982), all of
the denials occurred during the first six months of the program.
The costs of disclosure from the third source, inadvertant disclosure of
confidential information, also cannot be estimated quantitatively. However,
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the importance of this problem is estimated by surveying the public files for
confidentiality breaches. In the course of its study, the Regulatory Research
Service for CMA (C 1A 1981, p. 111-28) surveyed the public files for
confidentiality breaches, and discovered confidentiality breaches in about 5
percent of the files reviewed.
c. Cost 3: Uncertainty About EPA Decisions .
The submitter cannot ignore the potentially adverse situations
which may arise from an unfavorable (in the submitter’s view) determination by
EPA concerning the confidentiality claims asserted. Therefore, preparations
may have to be made for each such situation or at least for the most likely
situations. Such preparations divert some of the submitter’s resources that
could be used for other purposes if this contingency planning or preparation
were not required.
The costs of uncertainty about EPA decisions on confidentiality cannot be
quantitatively measured. However, an indication of whether uncertainty is
high or low under interim policies is obtained by examining the records on EPA
denials of confidentiality. If denial of confidentiality has been frequent,
uncertainty about the status of confidential claims is likely to be high. If
denial has been infrequent, uncertainty is likely to be low. Submitter
uncertainty about EPA decisions on confidentiality should be virtually
nonexistent under any of the confidentiality options. As discussed above EPA
has not denied a confidentiality claim since six months after the start of the
PMN program. Thus uncertainty will almost certainly be low.
2. Factors That Affect Confidentiality Costs
The costs of confidentiality are affected by several elements of the
PMN reporting form. These elements are:
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• The number of items for which confidentiality must
be substantiated;
• The amount of substantiation required per item
declared confidential;
• The timing of substantiation;
• The requirements for generic masking; and
• The disclosure of chemical identity as part of a
health and safety study.
Each of these elements and its influence on costs is discussed in greater
detail below. The effects of the element on the costs identified above are
given only in terms of the direction of the effects. Estimates of the
magnitude of the costs are presented in Chapter tV.
The number of items for which confidentiality must be substantiated
refers to the fact that EPA may require substantiation for some claims of
confidentiality, but in other cases may accept the submitter’s assertion
without substantiation. The greater the number of items that require
substantiation rather than assertion, the greater the out-of-pocket
expenditures by both EPA and the submitter, and the greater the cost of
uncertainty. Disclosure of items which might reveal trade secrets is also
likely to be greater if more items require substantiation. Because the cost
of confidentiality assertion is greater if substantiation is required, a
substantiation requirement could tend to inhibit confidentiality claims,
thereby increasing disclosure of items which might provide useful information
to competitors.
The amount of substantiation required for each item declared confidential
refers to the volume and detail of information that must be presented to
substantiate a claim of confidentiality. At one extreme, substantiation might
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consist of answers to a long series of specific questions about each item for
which confidentiality is claimed. Alternatively, substantiation might consist
of a shorter, more general statement encompassing several items or all items
for which confidentiality is claimed. The effects of increasing the amount of
substantiation on costs are in the same direction (i.e., positive or negative)
as the effects of requiring substantiation rather than assertion.
The timing of substantiation refers to whether substantiation is required
at the time of submission, or can be postponed until an FOIA request is made
for the material. If substantiation is not required until an FOIA request is
made, out-of-pocket expenditures by EPA and submitter will be reduced to the
extent that not all submissions are subject to FOIA requests. (ICF’s review of
PNN files showed that about 17 percent were subject to FOIA requests.) Even
if substantiation was eventually required for all submissions, out-of-pocket
expenditures by EPA and submitters would still be reduced, because the
expenditures required for substantiation would be postponed and because the
requests might be specific to certain items in the submission. If
substantiation is not initially required, uncertainty would be reduced because
EPA would not be able to deny confidentiality until an FOIA request was made.
The requirements for generic masking refers to the requirement that
submitters supply generic information to the public if certain items of
information are held confidential. For example, if the exact location of the
submitter is held confidential, the submitter might be required to supply
information on the geographic area in which the firm is located. Another
example is the requirement that the submitter provide generic chemical names
to EPA if confidentiality is claimed for chemical identity. The requirement
for generic information adds to the out-of-pocket expenditures of both
submitters and EPA.
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The disclosure of chemical identity as part of a health and safety study
refers to one option being considered by EPA, which would disclose the
specific chemical identity of a confidential new substance after the
commencement of manufacture if a heal’h and safety study on that chemical is
part of the submission. Disclosure of the identity of the substance as part
of a health and safety study leads to the disclosure of trade secrets if the
identity is held to be confidential and the identity is not masked.
3. Comparison to Previous Analysis
In a previous analysis of confidentiality costs, ICF addressed the
three costs identified above to submitters (ICF 1980 Part II, pp. 115-140).
In discussing the options, all the factors identified above were taken into
account, except the number of items for which confidentiality must be
substantiated.
In its critique of the ICF analysis, RRS stated that ICF considered all
aspects of confidentiality costs (CMA 1981, p. 111-20). However, RRS
contended that ICF did not use the best data available for estimating those
costs (CMA 1981, p. 111-21). Specifically, RRS suggested that ICF could have
improved its analysis by taking the following steps:
• analyze the confidentiality claims made in PMN
filings to determine the amount of effort expended by
regulated parties in making confidentiality claims;
• survey the public files for breaches of
confidentiality; and
• survey submitters on the costs of confidentiality
claims.
Since the completion of the previous ICP study, ICF has analyzed the
confidentiality claims made by submitters. Although ICF has not conducted a
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survey of submitters, the survey conducted by RRS has been used in this
analysis. These estimates are presented in Chapter IV, Section D.
E. EXPECTED COSTS OF EPA-INDUCED RESTRICTIONS
Beyond direct form-filing costs, delay costs, and confidentiality costs,
submitters are concerned over the possibility of incurring additional costs
because of some EPA action taken in response to a PMN submission. This
section defines these costs and suggests an approach for quantification. The
actual estimates are provided in Chapter IV, Section E.
In 27 cases, notice submitters have taken some action to gather data or
to reduce the risk from production or use of new chemical substance as a
result of the section 5 process. In 15 other cases, submitters have withdrawn
notices and cancelled plans for introducing new substances as a result of the
section 5 process. In each case the action was taken voluntarily in the sense
that the submitter was not legally compelled to take action. But in each
case, the action was taken to forestall EPA from placing restrictions on
production of the chemical. In some of the 15 cases in which the notice was
withdrawn, EPA formally had begun section 5(e) proceedings to obtain
additional information (e.g., the Agency had begun to draft the notices)
before commercial introduction of the chemical, and in the rest of these 15
cases, section 5(e) action was planned by EPA but not yet initiated. In the
other 27 cases, the submitters’ actions were taken to alleviate concerns
expressed by EPA, and to forestall possible future legal action. Even though
the actions were in some sense voluntary, they probably would not have been
taken as soon, if at all, in the absence of section 5. Therefore, the costs
of these actions are costs of the section 5 process to submitters and reflect
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the concerns of submitters with costs imposed by EPA actions taken in response
to a PMN submission.
Five types of actions were taken by these 42 submitters.Sj
• toxicological tests were conducted on 15 substances;
• 15 substances were withdrawn;
• labels were developed for 9 substances;
• Material Safety Data Sheets (MSDS) were developed
for 9 substances; and
• 3 substances were reformulated.
In the remainder of this section, methods for measuring the costs of each of
these actions are developed.
1. Toxicological Testing
Estimates of the cost of toxicological testing can be obtained from
a 1979 survey of toxicological testing labs (Enviro Control 1980). These
estimates, updated to 1981 dollars, are used to estimate the costs to
regulated parties of the toxicological testing induced by section 5.
2. Withdrawal
The cost of withdrawal is the value of profits foregone and this can
be measured in two ways. When specific chemical information is available, the
net present value of the expected profits based on price sales, and margin
data can be computed. When specific chemical data is not available it is
possible to estimate the maximum net present value of profits from estimates
5 The total below sums to more than 42, because more than one action
was taken for several substances.
6 The costs discussed here refer to the costs of the actions
themselves, not the costs of any negotiations leading up to those actions.
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of research and development spending on new products. In the subsequent
paragraph values based on both approaches are developed.
For a specific chemical affected by EPA action, the foregone profits can
be estimated using the following algorithm and data provided in the PMN:
• for each year of foregone production, estimate the
annual production volume, and selling price, and return
on sales (based on market analysis);
• for each year, compute foregone profits as the product
of production volume, price, and return on sales;
• discount the stream of profits using an appropriate
discount rate (based on the submitters cost of
capital) ;
• sum the discounted profit stream to obtain the
present discounted value of profits foregone as a
result of withdrawal.
Estimates of expected first, second, and third year production volume are
obtained from the section 5 notice for each substance, and can be used as
estimates of actual production volume for these. In the absence of additional
information, production volumes after the third year are assumed to be equal
to expected third year production volume. This procedure underestimates
future production volume for some chemicals which are much more successful
than anticipated, but overestimates future production for other chemicals,
which fail to become commercially viable.
CSMA (Heiden & Pittaway 1982) asked companies what their expected profits
per new chemical were for a set of recently introduced chemicals. Using the
7J 1 f real prices are used, a “real” discount rate is appropriate. If
nominal prices are used, a nominal discount rate is appropriate.
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results of their very limited survey, ICF found that the average was $438,500
in net present value terms with a standard deviation of more than $474,OOO.’-
ICF used NERA data to derive an estimate of $560,400 per new chemical.
From Table 6.1 of NERA’s study (NERA 1981), we obtained R&D costs of 225.9
thousand dollars per successful chemical. Because successful chemicals must
cover the cost of R&D costs of all new chemicals (including those that fail)
we divided by the ratio of R&D costs on all ventures to R&D costs on
successful ventures (1/.403) to obtain R&D cost to be covered by the average
new chemical of $560,400. Based on the assumption that the profits from R&D
over time, adjusted for the time value of money, must at least equal the
amount invested in the new chemical (otherwise no one would invest in R&D), we
concluded that $560,400 is another reasonable estimate of the minimum expected
profits per new chemical innovation.
We have used the estimate of $438,500 to $560,400 in Chapter IV as an
average value for profits foregone due to withdrawal.
3. in
The cost of labeling depends on whether an alteration to an existing
label is required or a new label must be created. If the submitter had already
planned to label the product, and the section 5 process causes that label to be
altered, the cost of labeling is virtually nonexistent. 9 If the section 5
process causes a product to be labeled that would otherwise not have been
labeled, new plates for the label must be prepared, and the labels themselves
‘ Derived by taking the average of the minimum expecled profits and
maximum expect profits at a 15 percent discount rate from Exhibit B-Ill for
the 38 surveyed innovations.
statement assumes that at the time the change is made, the
plates for the label have not been prepared.
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prepared from the plates. Estimates of the cost of preparing plates and labels
can be obtained from a previous ICF study (ICF n.d.). The total cost of label-
ing for each product equals the initial cost of the plates, plus the present
discounted value of the stream of label preparation costs. This method is
used to estimate the costs of label changes made due to section 5 actions.
4. Material Safety Data Sheets (MSDS )
The cost of preparing an MSDS has been estimated by the Occupational
Safety and Health Administration (ICF n.d.), and this estimate is used for the
cost of the MSDS changes caused by the section 5 process. Use of this figure
will result in an overestimate of the costs of the section 5. process, because
in some cases only marginal changes in existing MSDS were required.
Unfortunately no acceptable method for estimating the marginal effect exists.
5. Reformulation
Reformulations are very specific to particular chemicals and
chemical process. Without specific chemicals to analyze it is not possible to
accurately estimate reformulation costs. Therefore, we have not provided
estimates of the cost here. We do provide an estimate of the number of
reforinulat ions expected annually.
F. COST TO EPA
Section 5, like any regulation, not only imposes costs on industry but
also imposes costs in the form of government resources used to implement it.
I this case these costs take the form of personnel and overhead cost to
process and review the PMNs. These government costs contribute to either
higher taxes or higher deficits which detract from economic growth and
therefore represent real resource costs. In this section estimates of the
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costs to process a single PMN and a single exemption form are presented.
These estimates were developed by EPA staff in the course of preparing the
exemption analyses. Appendix C provides a description of EPA’s PMN review
procedures The costs of the reviews are discussed as follows.
1. Estimated Cost Per Review
Just as labor cost, labor overhead, and labor hours drive estimates
of the industry cost to complete the form so too does the amount of government
labor, its associated overhead, and the hours required drive estimates of the
cost to government to review PtlNs. In addition government contracts resources
(extramural funds) devoted to the process must be added to the cost per review.
In Appendix D to “Economic Impact Analysis of TSCA section 5(h)(4)
Exemptions: Low Volume Chemicals” (L’4g 1982), Ng estimated the average staff
salary at $35,000 per year, excluding overhead, in 1981. Government benefits
and overhead were estimated at 50 percent. Finally an adjustment was made for
the annual cost for the number of direct person-months a government employee
worked annually (10.4). Thus a cost per direct person month of $5,050 or
$29.13 per hour was obtained 10 .
This cost of labor must be multiplied by the amount of labor necessary to
review PMNs to arrive at a cost per PMN. In Appendix D, Ng also provided
Agency budget data that showed the number of person-months annually devoted to
each activity. Exhibit 111-3 shows how this breaks out among the four
activities.
10 These costs, derived in 1981 from EPA 1982 budget planning
documents, do not include certain management, policy, and clerical staff costs
associated with the program. Also, not reflected in this estimate are the
rent, utilities, and other physical property costs of the program.
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EXHIBIT 111-3
IN-HOUSE PERSON-MONTHS BY ACTIVITY FOR PMN REVIEW*
Document Control and In-House Tracking 110.2
Initial Review 391.9
Detailed Review 280.4
Section 5 Control Actions (5(c), 5(e)) 8.0
Total 790.5
Variable cost only.
At present 64 percent (502.1 out of 790.5 person-months) of Agency PMN-devoted
resources go toward tracking and control and toward initial review of
chemicals. Thirty-six percent is devoted to scrutinizing those chemicals that
potentially pose significant human health and environmental effects. Because
an average PMN review cost is needed for this analysis, the total
person-months divided by the number of PMNs received annually can be used to
develop Agency cost to review an average PMN. Thus, assuming 8OO1 PMNs
per year and 790.5 person-months expended on the PMN process annually, it
takes .988 person-months per PtIN. Multiplying this by a cost per person-month
of $5,050 comes to $4,989/PMN of Agency personnel resources.
PMN review may require significant extramural costs along with Agency
personnel costs. Annual extramural Funds for initial review total $1,109,000;
for detailed review, $1,024,000; for section 5 controls $28,000; and for
in-house tracking $30,000. No extramural funds are used for document
control. In total $2,191,000 are spent extramurally on the PMN process.
Dividing this by 800 PMNs comes to $2,739 per PMN.
11 For consistency with PMN exemption analysis 800 PMNs is used here.
In performing the cost analysis in Chapter IV we assume 900 PMNs annually.
The 800 estimate was the Agency’s expectation at the time of the exemption
analysis. Currently 900 is their estimate.
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Altogether Agency personnel costs plus extramural costs total an average
of $7,728 per PMN ($4,989 + $2,739).
2. Wide Variation in Actual Cost
The average cost shown above can be misleading because the range of
potential cost to review a PMN is very large, and is primarily a function of
the potential hazard posed by the PMN chemical. Although all PNNs are subject
to document control, in-house tracking, and initial rev.Lew costs, only five
percent of PNNs require detailed reviews; and only .25 percent of PMNs are
subject to section 5 control actions. This means that the “typical” PrIN
review does not incur detailed review and section 5 control costs. However,
the relatively few “problem” chemicals require tremendous resources to review.
To estimate the typical costs and the problem chemical costs, we multiply
the percentages in each category by the number of PMNs submitted annually, and
then match the number of PMNs to the activities. By dividing the counts into
the cost of the activity we obtain cost per PMN for that activity.
EXHIBIT 111-4
NUMBER OF PMNs INVOLVED IN EACH
ACTIVITY, ANNUAL COSTS, AND COST/PMN
Total Cost*
(personnel
plus Cost/
PMNs extramural) PMN
Document Control and In-house Tracking 800 $586,510 $733
Initial Review 800 $3,088,095 $3,860
Detailed Review 40 $2,440,020 $61,000
Section 5 Control Actions 2 $68,400 $32,200
$6,183,025
*Variable cost only.
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As shown in Exhibit 111-5, the cost per PMN for the typical chemical is
only $ 4 , 593 •12J For a chemical that undergoes detailed review and does not
have section 5 control action taken against it, the cost is $65,593. For the
acted-upon chemical the total cost is $99,793. Thus the range of potential
cost to government is $4,593 to $99,793 per PMN. In subsequent analysis,
these different estimates will be used to estimate government savings
associated with different programs.
EXHIBIT 111-5
EPA COST TO PROCESS DIFFERENT TYPES OF F! 1Ns*
(1981 Dollars)
Section 5
Detailed Review Controlled
Typical Chemical Chemical Chemical
Document Control!
In-house Tracking $733 $733 $733
Initial Review $3,860 $3,860 $3,860
Detailed Review $61,000 $61,000
Section 5 Control Action _____ ______ $34,200
Total $4,593 $65,593 $99,793
Annual Number
of PMNs 760 38 2
*Variable cost only.
2 -’There is evidence to suggest that the document control, in-house
tracking, and initial review activities require less expensive labor than the
detailed review and section 5 control activities. This aspect of the analysis
was not pursued because data were insufficient to develop labor cost specific
to activities.
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3. Cost to EPA to Review Exemption Notices
In Appendix E of “Economic Impact Analysis of TSCA section 5(h)(4)
Exemptions: Polymers” (Luttner 1982), Luttner found that the average costs to
review a 14-day exemption notice was $1,483. The average cost to review a
zero-day notice was $640. For purposes of this analysis we assume that the
review of a photographic exemption requires labor equal that need for a 14-day
polymer ($1,483).
These estimates were developed on the basis of an exemption review
process that included that following activities:
• log-in and tracking
• inventory check (14-day review only)
• literature review
• SAT/PERT 3 review
• disposition decision
Based on recent EPA experience processing PMNs, Ng estimated the
person-months/notice to perform each activity at .11, .04, .02, .15, and .07
respectively (Ng 1982 Appendix E). It was assumed that a zero-day review
would not include a literature review, SAT/PERT review, or inventory check;
but a 14-day review would include all activities. Ng also assumed average
salaries for each step that amount to $26,385 for a 14-day review, and $20,182
for a zero-day notice. In Chapter IV, these estimates will be used to compute
the savings to EPA of alternative regulatory programs.
4. Summary
The Agency estimated the cost of reviewing PMNs and proposed
exemption notices in its analyses of exemption alternatives. This section
presented those estimates, adjusting the PuN review costs for the type of
PMN. The estimated costs to review the various forms were:
1 -’SAT is the acronym for Structure-Activity Team. PERT stands for
Preliminary Exposure Review Team.
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EXHIBIT 111-6
COST PER NOTICE TO REVIEW PMN
AND EXEMPTION NOTICES*
(1981 Dollars)
Typical PMN $4,593
Detailed Review PMN $65,593
Section 5 Control Action PMN $99,793
Average PNN $7,728
Zero-day exemption notice $640
14-day exemption notice $1,483
*Variable cost only.
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CHAPTER IV
IDENTIFICATION AND ANALYSIS OF REGULATORY OPTIONS
This chapter provides estimates of the direct costs of compliance for
each of the regulatory options. It is organized as follows:
A. Background
B. Analysis of Costs of the EPA79 form
C. Analysis of Costs of the CMA79 form
D. Analysis of Costs of the EPA82 form
E. Comparison of Costs of Alternatives
F. Effects of Proposed Exemptions Policies on Program Costs
G. Cost to Government
H. Other Costs
I. Chapter Summary
For each regulatory option, the annual costs identified in Chapter III
(form-filing costs, confidentiality costs, delays costs, and costs of
restrictive action) are computed in Sections B, C, and D. The three
regulatory options are compared in Section E. Section F addresses the effects
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of an exemption program, such as the one recently proposed.” The costs to
the federal government of administering the PMN program are discussed in
Section G, and other costs are discussed in Section H. Finally, a chapter
summary is provided in Section I.
A. BACKGROUND
Section 5(a)(l)(A) of the Toxic Substances Control Act (TSCA; Public Law
94-469) requires manufacturers of new chemicals to provide the Environmental
Protection Agency (EPA) with written notice of their intent to produce such
substances at least 90 days prior to when actual manufacturing begins. Any
chemical not listed on an inv ntory of existing chemicals (the “Inventory”)’ 5
is considered “new” for premanufacture notice (PMN) purposes. The PMN program,
which became effective July 1, 1979, involves the submission of information on
new chemicals to EPA. TSCA requires the submitters to supply the chemical’s
1 ” The policy being analyzed embodies the regulatory provisions of the
following final and proposed regulations:
Premanufacturing Notification: Exemption of Chemicals Used in or for the
Manufacturing or Processing of Instant Photographic and Peel-Apart Film
Articles. (47 FR, 24308).
Premanufacturing Notification: Proposed Exemption for Site-Limited
Intermediate Chemical Substances and Chemical Substances Manufactured in
Quantities of 10,000 Kg or less. (47 FR, 33896).
Premanufacturing Notification: Proposed Exemption for Polymers. (47 FR
33924), August 4, 1982.
See also: Ng 1982, Warhit 1982, and Luttner 1982.
‘ 5 The Chemical Substance Inventory is a list of all chemicals that
were manufactured, imported or processed for a commercial purpose since
January 1, 1975. The Inventory is maintained under statutory authority of
section 8(b) of TSCA.
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common/trade name, identity and molecular structure, estimated production
quantities, uses, disposal methods, workplace exposure and release
information, and a listing of impurities and byproducts. Data concerning the
effect of the chemical on human health or the environment in the
manufacturer’s control or reasonably ascertainable by the manufacturer must
also be submitted. Once EPA receives the P 1N, it must publish notice of
receipt in the Federal Register and conduct its evaluation of the chemical
based on the data provided and other available information. The submitter may
produce the chemical at the end of the 90-day review period unless EPA takes
acti n to regulate the substance or orders the review period extended for an
additional 90 days for good cause.
Prernanufacture notification also applies to significant new uses of
existing chemicals. Should EPA find, by rule, that a new use of an existing
chemical presents significant new exposure to humans and/or the environment,
the manufacturer or processor must report through the PMN process. The 90-day
review period also applies in this case.
Section 5(d)(l) of TSCA specifies PMN data requirements. EPA proposed a
set of regulations interpreting these requirements in January 1979 and issued
a reproposal (EPA79) in October 1979. Both proposals included a PMN form that
notice submitters would be required to complete. In response to the January
1979 proposal, the Chemical Manufacturers Association (CMA) also issued
suggested PMN requirements. EPA is now in the process of developing a EPA82
form. Firms are not now required to use any of the proposed or suggested
forms. In practice, PMN submissions to date include a wide range of informa-
tion and there is a considerable amount of post-submission communication
between EPA and chemical firms to obtain additional data for Agency review
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purposes. Appendix D compares the three reporting options which are addressed
in this analysis.
EPA has recently projected the rate of PMN submissions for the next few
years based on historical experience and other relevant information (Luttner
and Shapiro 1982). Historical PMN submissions have been as follows: 281
submissions for fiscal year (FY) 1980, 580 submissions for FY 81, and 408 for
the first six months of FY 1982. Using a linear regression based on quarterly
data, the projected annual rate of PMN submissions for FY 1982 is 900. It is
this rate which has been assumed for estimating annual costs associated with
all three regulatory options. Although it may be possible that the rate of
PMN submissions could vary with the regulatory options, the constant rate of
900 per year has been assumed here for two reasons:
• no historical data exists regarding how the rate of
PMN submissions would change (if at all) with the
regulatory options;
• any prospective estimates would necessarily be
speculative on an individual PMN basis.
However, the analysis of Section F (Exemptions Analysis) concentrates on
estimating how the rate of PMN submissions will change under various
exemptions policies. This analysis was based on characteristics of historical
PMN submissions.
B. ANALYSIS OF COSTS OF THE EPA79 FORM
The EPA79 form requires submitters to provide the most information of any
option analyzed here. The specific information required is listed in Appendix
D. Appendix G provides a copy of this form. As shown in Appendix D, the
major areas for which information is sought are: submitter’s identity,
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chemical identity, generic names, production and marketing data, transport,
risk assessment, detection methods, human exposure and environmental release
at sites controlled by the submitter and at sites controlled by other firms
manufacturing the chemical, consumer and commercial use exposure,
confidentiality attachment, and a federal register notice. Physical and
chemical properties and health and environmental effects data would be
submitted as test data. The submitter is free to provide any other
information.
1. EPA79 Form Filing Costs
Appendix G provides a copy of the proposed EPA79 form. Exhibit IV-l
shows the hours estimated in previous EPA-commissioned analyses to complete
each section of the EPA79 form (ADL 1979). Using the labor rates developed in
Appendix A of $17/hour clerical, $43/hour technical and $67/ hour managerial,
the EPA79 form costs $l,800-$l4,600 (December 1981 labor rates) to complete.
The total annual cost to submit 900 PMNs would be $1,620,000 to $13,140,000.
The range of costs is quite wide because hours estimates for several of
the items on the form were large. As mentioned in Chapter III, these
estimates have a large range because the potential submitters vary greatly in
their style of operations, efficiency, and approach to completing the forms.
2. Confidentiality Costs of the EPA79 Form
This section presents estimates of the costs of the confidentiality
under the EPA79 form in each of three cost categories identified in Chapter
III: out-of-pocket expenditures by submitters, disclosure of trade secrets,
and uncertainty. In some cases, quantitative estimates of the costs are
made. In other cases, limitations in the available data permit only
qualitative estimates of costs to be made.
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EXHIBIT IV-l
EPA79 FORM: ADL ESTIMATES OF LABOR REQUIREMENTS
Labor Requirements (Hours)
Section of Notice Clerical Technical Managerial
I. General Information 2-10
A. Manufacturer Identification 1-8
B. Chemical Identity
1. Class I Chemical Substance a/ 1-4 0
2. Class II Chemical Substance a! 1-4 0
3. Polymers a/ 1-5 0
4. Impurities 1-8 0
C. Generic Names 0-4 0-1
D. Production and Marketing Data 1-2
1. Production Volume 1-4
2. Category of Use 1-8
3-4. Previous Manufacture and
Hazardous Warnings 1
5. Customers 0-8
E. Transport - 1 0
F. Risk Assessment 0-16 0-2
G. Detection Methods 1-4 0
II. Human Exposure and Environmental Release 4-20
A. Industrial Sites Controlled
by the Submitter 2-6
1. Process Information 1-4
2. Block Diagram 1-24
3. Occupational Exposure
3.1-3.2 Identity of Site and Occu-
pational Exposure at Site 2-16
3.3-3.5 Direct Exposure, Physical
State, and Other Substances 2-16
4. Environmental Release and Disposal 1-12
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EXHIBIT IV-l (continued)
EPA79 FORM: ADL ESTIMATES OF LABOR REQUIREMENTS
Labor Requirements (Hours)
Section of Notice Clerical Technical Managerial
B. Industrial Sites Controlled by
Others 0-2
1. Process Information--Identity
of Site 0-2
2. Process Description 0-14
3. Occupational Exposure 0-20
4. Environmental Release arid
Disposal 0-8
C. Consumer and Commercial User Exposure 0-2
1. Table--Route, Frequency and
Number Exposed 0-16
2. Exposure Levels 0-4
3. Product Aspect Affecting
Consumer Exposure 0-4
4. Byproducts of Use 0-4
III. List of Attachments 1-8
A. Physical and Chemical Properties
Data - 4-16 1-4
B. Health and Environmental Effects
Data 8-40 2-8
C-D. Notice Attachments, Confidentiality
Attachments and Voluntary
Attachments 0 0.
IV. Federal Register Notice 1-2 1-8 1-2
Total 8-40 27-267 8-37
“Every chemical is either in Class I, Class II, or is a polymer and
therefore, only one of subsections I.B.l, I.B.2, and I.B.3 will be submitted.
Thus, only one of these subsections was chosen because it reflects both the
minimum and the maximum possible labor requirements needed for a chemical
substance.
Source: ADL 1979, pp. 32-38.
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a. Out-of-pocket expenditures by submitters .
Estimates of the cost of asserting and substantiating
confidentiality have been made by Arthur D. Little, Inc. (ADL 1979) and by
Regulatory Research Service (CMA 1981). ADL estimated the cost of
confidentiality for the EPA79 form by estimating, on the basis of its
knowledge of the chemical industry, how many hours of clerical, technical, and
managerial labor it would take to assert and substantiate claims of confidenti-
ality. ADL divided the substantiation process into four stages. Those stages
and the labor hours associated with them are shown in Exhibit IV-2.
EXHIBIT IV-2
ESTIMATED CONFIDENTIALITY PROCESS HOURS
Hours
Strategy Development 2 - 24
Substantiation Development 12 - 100
Form Preparation 2 - 16
Review 2 - 20
Total 18 - 160
Source: ADL 1979, p. 52.
The first stage, strategy development , involves determining which
elements of information on the PuN form to claim as confidential, including
categories of claims and linkages. The time required for this stage was
estimated as 2-24 hours. The second stage, substantiation development ,
involves developing responses to questions or requirements in each EPA
category claimed confidential, determining the appropriate linkages, and
obtaining certification of the claims by corporate management. The time
required for this stage was estimated as 12-100 hours. The third stage, form
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preparation , involves preparing sanitized attachments, and making annotations
on the complete PMN form to indicate confidentiality assertions. The time
required for this stage was estimated as 2-16 hours. The fourth stage,
review , involves reviewing the completed PMN form and “sanitized” attachments
with in-house staff. The time required for this stage was estimated to take
2-20 hours. The total hours required for assertion and substantiation of
confidentiality were estimated to be in the range of 18-160 hours.
ADL did not divide these hours into clerical, technical, and managerial
hours, as it did when costing the form. Instead, it applied an average labor
rate of $50 per hour to the low end of the range and on average labor rate of
$40 per hour to the high end of th range, resulting in a cost estimate of
$900-6,400. The difference in the hourly rates reflect a higher management
content in the 18 hour estimate, and a higher proportion of technical and
staff participation in the 160-hour estimate.
RRS conducted a survey of (CHA 1981) notice submitters in 1980 which
gathered information on, among other things, the costs of asserting and
substantiating confidentiality. Based on a sample of 112 submissions for
which usable information on confidentiality costs was obtained, RRS calculated
the mean cost of asserting and substantiating confidentiality at $1,137 (at
the labor rates used by the firms themselves) or $1,333 (at average labor
rates). RRS found statistically significant differences in confidentiality
costs among firms of different sizes and product segments, but costs did not
differ by type of form used.
The estimates of confidentiality costs used here are based on the RRS
data rather than the ADL data for several reasons. The ADL data indicate a
range of possible costs, depending on factors such as the importance of
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confidentiality to a submitter’s competitive strategy. In order to obtain an
estimate of mean cost from that range, it is necessary to know how submitters
are distributed over that range. The use of the RRS data obviates that
problem. It should be noted that the RRS and ADL estimates seem to be in
rough agreement. It is true that the RRS estimate falls close to the bottom
of the ADL range, but the RRS estimate includes those submitters who made no
confidentiality claims, about 16 percent of the total. In addition, the
highest cost reported in the RRS survey, $5,320, is relatively close to the
top of the range estimated by ADL.
The RRS estimate of mean confidentiality costs for submitters, after
several adjustments (described below) is taken to be the estimate of
confidentiality costs of the EPA79 form. Although this form had not been
adopted at the time that the survey was taken, it had been proposed, and
analysis of a sample of about 500 PMN submissions reveals that the vast
majority of the submitters in the sample used the proposed form. This does
not necessarily mean that submitters devoted as much care to substantiating
confidentiality as they would have if the EPA79 form had become final. In
fact, examination of the submissions suggests that current substantiations
often are not as extensive as contemplated under the EPA79 form. On the other
hand, confidentiality costs should decline as submitters gain more
experience. This argument is also supported by an examination of the notices,
which reveals that firms often use an identical substantiation for several
notices. Without any basis for estimating the relative magnitude of these
counteracting effects, it is assumed that they roughly cancel each other out.
RRS estimated confidentiality costs at the labor rate actually used by
the firms rather than the average labor rates used here. Average labor rate
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costs, not used by RRS, are useful for prospective analyses; but if an
estimate of the resources actually spent by submitters is desired, the firms’
own labor rates should be used. This analysis is a prospective one so that
average costs are more appropriate here.
The RRS estimate of $1,133 per submission must undergo three adjustments
before it can be used in this analysis. The three adjustments are:
• the incorporation of post-submission labor costs
and other direct costs;
• a correction for size bias in the RRS sample; and
• a correction for inflation between the time of the
survey and the present.
In its report, RRS stated that its estimate understates confidentiality
costs because post-submission confidentiality labor costs were not estimated
separately from other post-submission costs, and therefore could not be
incorporated into the estimate of confidentiality costs. In addition, some of
the non-labor costs involve confidentiality, and must also be added to
confidentiality labor costs to estimate the full costs of confidentiality. In
order to incorporate these costs, it is assumed that post-submission labor
costs and other direct costs (both pre-submission and post-submission) are
divided between confidentiality costs and costs of completing the form in
proportion to the division of pre-submission labor costs between those two
categories. As shown in Exhibit IV-3, the sum of the average post-submission
labor costs, pre-submission other direct costs, and post-submission other
direct costs is $1,659. Allocating this between form submission costs (78.5%
of the total) and confidentiality costs (21.5% of the total) means that an
additional $358 should be added to the $1,133 in confidentiality costs, for a
total of $1,491.
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EXHIBIT IV-3
RRS ESTIMATES OF COSTS OF SUBMISSION,
FIRM LABOR RATES
(1980 Dollars)
Type of Cost Amount
Post-Submission Labor Costs $ 440
Other Pre-Submission Costs 1,157
Other Post-Submission Costs 62
Subtotal $1,659
Form Submission Labor Costs 4,134
Confidentiality Labor Costs 1,133
Total $6,926 _a’
!“This figure differs from the figure of $6,954 given for total PMN
cost on Exhibit 3-2 of the RRS report. No explanation for the difference
between the two figures could be uncovered.
Source: ClIA 1981.
Although data on “other” costs from the RRS survey (CHA 1981) have been
incorporated here without alteration, it is -likely that the estimates in the
RRS survey significantly overestimate the actual level of “other” costs under
any of the options. Examination of the RRS data reveals that a dispropor-
tionate share of the costs identified in the survey was incurred by a few
submitters. For example, just over 40 percent of the pre-submission “other”
costs were incurred by 2 of the 112 submissions, and another 37 percent by
another 6 submissions. If these eight submissions are removed, mean
pre-submission “other” costs equal $276 rather than $1,157. With post-
submission “other” costs, the situation is even more extreme. One submission
accounts for over 57 percent of total post-submission “other” costs. Without
that submission, the mean for “other” post-submission costs equal $26, rather
than $62.
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RRS identified other costs as “the cost of hiring special consultants;
cost of travel to EPA to deal with. special problems raised by the submission;
telephone costs, etc.” It is likely that the bulk of the “other” costs are
accounted for by the first two categories, but these costs should
substantially diminish with the passage of time. Nevertheless, these costs
have been fully incorporated in the ICF estimates.
The above estimate must also be corrected for the size bias in the RRS
survey. As RRS stated, the size distribution of firms in the survey is
different than the size distribution of submitters. Because PMN costs differ
by size of firm, average cost for the population will differ from average cost
for the sample. Using the procedure described in Appendix A of the RRS report
(CMA 1981) to adjust the estimate of $1,491 results in an adjusted estimate of
$1,471 for confidentiality costs.
The final adjustment takes account of inflation since the RRS survey was
completed. The survey was mailed on December 10, 1980. Although the dates of
the notices surveyed are not known, it is assumed that the firms are referring
to costs incurred in mid-1980. Because the cost estimates developed here
refer to December 1981, the above estimate must be adjusted for inflation
between mid-1980 and December 1981.
ICY has developed inflation rates for clerical, technical, and managerial
hours, but they cannot be used directly because the costs are not separated
into those components. An overall inflation rate of 12.5 percent per year is
consistent with the ICY labor rate inflation estimates. Using this inflation
estimate, between mid-1980 and December 1981 costs increased by 19.3 percent.
Therefore, the estimate of confidentiality costs per submission under the
EPA79 form in December 1981 dollars is $1755 ($1471 times 1.193).
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The EPA79 form requires all substantiation to be provided with the
initial submission. Thus, the full cost estimate of $1755 is incurred. For
900 PMNs annually the cost would be $1,579,500.
b. Disclosure of Trade Secrets .
Under the EPA79 form chemical identity may be disclosed as part
of health and safety study. Although quantitative estimates of the cost of
disclosure from this source cannot be made, some idea of the importance of
this problem can be determined by examining the number of submissions which
contain health and safety studias, and for which chemical identity is
claimed confidential. Of the approximately 500 submissions in the ICF data
base, chemical identity was claimed confidential for 70 percent. Of this
proportion, 57 percent included either health or environmental data.
Therefore, 40 percent of all submissions are potentially affected by the
disclosure of chemical identity as part of a health and safety study.
As discussed in Chapter III, disclosure of trade secrets because of EPA’s
denial of confidentiality claims and because of confidentiality breaches should
be extremely infrequent and should not be affected by the choice of form.
c. Uncertainty .
As discussed in Chapter III, submitter uncertainty about EPA
decisions on confidentiality should be virtually nonexistent under any of the
confidentiality options, because EPA has not denied a confidentiality claim
since six months after the start of the PHN program. Denial of confidenti-
ality claims, and uncertainty about the denial, should be virtually
nonexistent under any option.
1 ’ The definition of “health and safety study” under TSCA includes
ecological and environmental studies as well.
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d. Summary .
Total confidentiality costs under the EPA79 are expected to be
$1755 per PMN. Assuming 900 PMNs per year, the total quantifiable cost of
confidenliality of the EPA79 form would be $1,579,500.
3. Direct Delay Costs for the EPA79 FORM
Chapter III, Section C introduced the concept of pre-submission and
post-submission delay costs. The direct cost of delay was defined as the
present value of profits delayed because of the PMN process. Although it is
recognized that the PMN effect (and in some cases primarily the delay
component) may lead to sales foregone , these are indirect economic effects
that result from the entire PMN impact, and are not addressed in this
section. The purpose of Chapter IV is to estimate the size of the direct PMN
effect under various options. As with any market adjustment (regulatory or
non-regulatory), the change will produce ripples throughout the economy. For
PMN, these indirect effects are related to sales foregone resulting from
reduced innovation. These are addressed in Chapter V.
In Chapter III, Section C, the following formula for assessing the
present value of profits delayed was presented:
1
I 1 I
PDI 1- I •PV(p)
I ti
L_ (l+r) 1
where
PD = present value of profits delayed due to PMN delay
t amount of time attributable to PMN delay
r = average real rate of return (specified in the same time units as t)
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PV(p) = present value of profit stream associated with the average new
chemical.
In the ensuing analysis, values for t will depend upon the options being
considered. However values for r and PV(p) must be pre-specified. One
estimate for r can be derived from historical returns on stocks and bonds on
the theory that real returns (i.e., returns after inflation) on new chemicals
must be at least equal to the real returns on these corporate financing
vehicles. One noted source has calculated a 52-year average of real returns
on stocks and bonds as 6.4 percent and 1.5 percent respectively (Ibbotson and
Sinquefield 1979, p. 23). When these returns are weighted by the historical
capital structure for the chemical industry (70 percent equity, 30 percent
debt) (Value Line 1981), the minimum real rate of return for new chemicals
would be 5 percent. Of course, because new chemicals would probably require a
real rate of return higher than 5 percent, the ensuing analysis is also
performed with a 10 percent real return. In general, the value of delay will
be directly proportional to the real rate of return assumed.
In Chapter III two values for the present value of the profit stream were
determined. One was based on CSMA data (Heiden and Pittaway 1982); the other
on ICP manipulation of NERA/CMA data. Based on the NERA/CSMA data, when
discounted at a 5 percent real rate of return (1.5 percent nominal), the
present value of the profit stream of the “average” new chemical was $438,500
(in 1981 dollars). Using this same data a net present value (NPV) of $371.7
thousand is obtained at a 10 percent real rate (20 percent nominal). Based on
CMA data the NPV would be $560,400 at the average discount rate of the
chemical industry overall.
In this analysis, values for t are based on a sample of 500 PMNs, as
explained previously. Those chemicals which were intermediates associated
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with other PMN chemicals must be subtracted out because there would not be any
delay for these chemicals--PMN review would be conducted in parallel with
reviews for the final chemical. Also to be subtracted out are those chemicals
for rjhjch PtIN review was never completed because the chemical was withdrawn.
There can be no profit streams associated with these chemicals. (Later the
costs associated with these losses are discussed.) Based on the sample data,
11 percent of PMN chemicals are in the first category and .75 percent of PNN
chemicals are in the second. This leaves 88.25 percent of the PMN chemicals
possibly incurring delay.
The estimates of delay costs in this section czill be based on 5 percent
and 10 percent real rates of return, profit stream present values of $438,500
at 5% (Heiden and Pittaway 1982) and $371,700 at 10% and $560,400 (NERA 1981)
(1981 dollars), and values for t derived in Chapter III and number of PMN
chemicals from EPA projections of 900 per year.
In theory, pre-submission delays will vary with reporting options. The
more stringent the form and the greater the depth of information which must be
provided, the longer the pre-submission delay. One source, based on a survey
of 37 firms, estimated average pre-submission delay as one month under the
EPA79 (CMA 1981, p. 111-37). With the CMA79 or EPA82 form, presubmission
delay could presumably be less, because these reporting requirements are less
comprehensive. However, it is not entirely clear that pre-submission delay
would be reduced under these options because many of the most time-consuming
requirements (i.e., searching for data an health and environmental effects)
remain the same. Therefore, in order to ensure that pre-submission delays are
not underestimated for any option, pre-submission delays are set at one month
under all three reporting options. With a real rate of return of 5 percent
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and a present value of profits at $438,500, pre-submission delay is valued at
$1805 per chemical. At a real rate of return of 10 percent, using the NPV of
the profit stream of $371,700 the appropriate per-chemical pre-submission
delay would be $3,072. Using the $560,400 estimate and a 5 percent real
return 17 the delay would cost $2,325.
Assuming a submission rate of 900 PMNs per year, annualized
pre-submission delay would be valued at the maximum at between $1,624,500 and
$2,764,800 regardless of the reporting option chosen.
Post-submission delay will also not change with reporting option. As
explained in Chapter III, Section C, post-submission delay will depend on the
extent to which PMN review adds to the critical path for commercialization.
At a maximum, PMN review will always add 90 days to the critical path for 99.2
percent of chemicals and 180 days to .8% of chemicals. Assuming a 5 percent
real rate of return the cost is .992 x 900 chemicals x .8825 x .012 x
$438,500 or $4,145,900, plus .008 x 900 x .8825 x .012 x 438,500 or
$33,400, for a total of $4,179,300. Assuming a 10 percent real rate of return,
the cost is $7,380,500. These two estimates bound post-submission delay.
Together, the pre-submission and post-submission delay cost total
$5,803,800 assuming a 5 percent real rate of return, and $10,145,300 assuming
a 10 percent real rate of return.
These estimates assumed that every PMN other than those that were
withdrawn as well as intermediates, experienced delay. In reality not all
chemicals will experience delay. At the extreme (possibly when firms learn to
incorporate the PMN review into their product introduction process) delay
‘ 1 Pive percent is closer to the chemical industry real average
discount rate than 10 percent.
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costs are zero. Obviously, this estimate is as inaccurate as the maximum
estimates.
Because no data about the percent of products for which the PMN is on the
critical path exists, we heve created a best guess estimate of the percent
based on commencement of manufacture letters. Out of all commencement of
manufacture letters received, 39.5 percent are postmarked within 30 days of
the end of the PMN review period. Another 31 percant come in between 30 and
90 days after expiration of the review period. However, the Agency is
receiving commencement of manufacture notices from only 46 percent of the PMNs
submitted. If we assume that all Pt’IN chemicals that commenced manufacture
within 30 days after the review period ended were delayed by the process, then
total delay costs would be between $1,054,500 (.46 x .395 x 5,803,800) and
$1,843,400 (.46 x .395 x $10,145,300).
4. Expected Cost of Additional Restrictions for the EPA79 Form
The cost savings analyzed here are the costs of actions taken by
submitters as a result of the PMN process. As discussed in Chapter III,
Section E, these actions include toxicological testing, withdrawal, labeling,
development of a Material Safety Data Sheet, and reformulation.
To ensure consistency with the rest of the reporting rule analysis, the
sample of approximately 500 notices developed by ICF is used in this
analysis. As a result of the PMN process, one or more of the above-mentioned
actions was taken for 2.3 percent of the substances in the sample. This
translates to 20 chemicals, based on an annual submission rate of 900
chemicals. Based on the mix of actions required of actual PMNs, seven
toxicity tests (four skin irritation, three skin sensitization), seven
withdrawals, four labels, four material safety data sheets, and one
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reformulation would result. (More than one action has been taken in some
cases. 1 Uj
Costs of the acute toxicology tests in 1979 dollars are $200-$l,000 for
skin irritation tests and S400-$l0,000 for the skin sensitization tests (Enviro
Control l 980 ) .19J To update these estimates to account for inflation since
1979, the yearly inflation rate of 12.5 percent is used. This inflation rate
implies that toxicological testing costs should Shave increased by 26.6 percent
between 1979 and 1981, making the costs $253-$1266 for the skin irritation
test and $506-$12,660 for the skin sensitization test in 1981 dollars.
Using the $371,700 to $560,400 range estimate of the lost profits per
innovation (see Chapter III) we find that seven withdrawals could cost indus-
try $2,601,900 to $3,992,800 annually. Even though we use these numbers here,
it is important to recognize that the 90 percent confidence interval about the
$438,500 estimate is from $0 to close to $1,500,000. Unfortunately it is not
possible to estimate the uncertainty surrounding the $560,400 estimate.
The substance(s) for which labels were developed typically were small
volume products. Maximum projected production volume was 40 pounds in the
first year, 50 pounds in the second, and 60 pounds in the third. The
substances were shipped in solution, at a concentration of 0.1 percent.
Assuming that the solution weighs 8 pounds per gallon, 91 drums would be
shipped in the first year, 114 the second year, and 136 the third year for
each chemical requiring labeling. Because the actual costs of labels are
1$J Often a MSDS and a label were requested. Occasionally, a label and
a test were sought.
19 The cost ranges given here are the low and high quotations from a
survey of 12 testing labs.
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approximately 2 cents per label, the cost of labels for all of these drums is
only $2 the first year, $3 the second year, and $3 the third year. The cost
of making the plates for the label, adjusted for inflation, is $135-506 (ICF
(n.d.)). Therefore, the total direct cost per labeled PMN equals $137-$508
the first year, $3 the second year, and $3 the third year. Assuming that
production continues at the third year rate for the indefinite future, that
the price of labeling increases at the general rate of inflation, and that the
“real” discount rate equals 10 percent, the present discounted values of
direct labeling equals $192-$563 per chemical. However, it should be
remembered that indirect economic effects such as reduced demand may result
from the labeling requirement. Although these are certainly important, they
are not addressed in this analysis of the direct costs associated with the PMN
effect.
Costs for material safety data sheets (MSDS) can be estimated from
previous analyses. Based on a draft regulatory impact analysis done for OSHA,
an MSDS has been estimated to cost $21.20 (OSHA 1982).
Reformulations can cost almost nothing; or they can cost thousands of
dollars. Because there is a high variance associated with the cost of
reformulation, a “mean” value would be misleading, and since we anticipate
only one reformulation per year, we have not costed them here.
In summary, under the EPA79 form 20 chemicals can be expected to be
affected annually. As shown in Exhibit IV-4 the total annual cost of these
actions would be $3,072,882-4,038,180.
00 —
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EXHIBIT IV-4
ANNUAL COSTS OF ACTIONS
(1981 Dollars)
Number & Type Unit Cost Total Cost
4 Skin Irritation $253 - $1,266 $1,012 - $5,064
3 Skin Sensitization $506 - $12,660 $1,518 - $37,980
7 withdrawn $371,700 - $560,400 $2,601,900 - $3,992,800
4 Labels $192 - $563 $768 - $2,252
4 MSDS $21 $84
1 Reformulation N/A N/A
Total $2,605,291 - $4,038,180
5. Summary Cost of EPA79 Form
The total annual industry cost of the EPA79 form is the sum of the
four elements discussed above: Exhibit IV-5 shows that the total cost of the
EPA79 form is at least $6.9 million to $20.6 million. If the non-quantifiable
costs (cost of withdrawn PMNs, fears of confidentiality leaks, and costs of
reformulation) were added to this, the costs would be even greater.
EXHIBIT IV-5
TOTAL ANNUAL INDUSTRY COST OF EPA79 FORM
(Thousands of 1981 Dollars)
$1,620 - $13,140
$1,580 - $1,580
$1,055 - $1,843
Restrictive Actions $2,605 - $4,038
Total $6,860 - $20,601
C. ANALYSIS OF COSTS OF THE CMA79 FORM
The Chemical Manufacturers Association has developed a proposed PMN form
based on the principle that section 5(a)(1) of TSCA provides an all-inclusive
Form Filing
Confidentiality
Delay
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list of the information that a PtIN is to contain (CMA 1979, P. 260). This
form contains mandatory and optional parts. Mandatory parts include
submitter’s identity, chemical identity, production and use data, Federal
Register notice, list of health and environmental data, and information in the
submitter’s possession regarding industrial sites not controlled by the
submitter. Optional parts include risk assessment information (risk analysis,
related chemicals, general industrial hygiene progiarn, specific safeguards,
process chemistry, transport data, and additional risk-relevant information)
and additional information on work exposure and environmental releases.
1. Differences Between EPA79 Form and CMA79 Form
Differences between the EPA79 form and the CMA79 form are briefly
explained below. These differences are examined more fully in Appendix D,
which compares all three proposed reporting options.
a. Submitter’s Identification .
The C11A79 form identifies, the submitting company and the
technical contact. However, it does not require identification of the parent
company, expected manufacture commencement date, or prenotice communication
information.
b. Identity .
The CMA79 form requires virtually the same information as the
EPA79 form with two exceptions: no minimum average molecular weight is
required for polymers and no information on approaches to controlling the
concentration of impurities is required (although the maximum concentration of
impurities is required).
c. Production and Marketing Data .
The CMA79 form requires estimates of the first three years
typical productim volume; but unlike the EPA79, does not require maximum and
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minimum estimates. Use data would be somewhat simplified, with requirements
only for identification of use categories and the percentage of anticipated
annual production which would be devoted to each use category. No further
breakdowns by function or application would be requ 4 .red. Information on
whether the substance has been manufactured before would be optional, as would
be the requirement to provide a copy of a hazard warning (if any).
Information on the number of customers committed to purchase and the percent
of production involved would not be required.
d. Other General Information .
Under the CMA79 form, information on transport, risk assessment,
and detection methods is optional.
e. Industrial Sites Controlled by Submitter .
The CMA79 form requires identity of the site of manufacture.
It does not require specification of the site type or a block diagram.
Information on hours operated and amount manufactured, processed, or used
would be optional. Required occupational exposure includes number of workers
exposed, the route of exposure, and identification of other substances to
which workers may be exposed. More detailed information about the specific
operations where exposure could take place or physical states of the substance
during exposure would not be required.
Required environmental release and disposal information would include
identification of method of disposal, and indication of “minimal” release
quantities where appropriate. CAS Registry numbers of byproducts would also
be required. However, all other information on environmental release and
disposal would be optional.
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f. Industrial Site Controlled by Others .
The C1A79 form contains no mandatory customer contact
provisions. However, based on data already in the submitter’s possession, the
submitter would be required to provide the same types of information about
sites controlled by others as for the submitter’s own sites.
g. Consumer and Commercial User Exposure .
Under the CMA79 form, almost all information on consumer and
commercial work exposure would be optional. Information on byproducts formed
from each category of use would not be required.
h. List of Attachments and Federal Register Notice .
Data on physical/chemical properties would not be required. A
Federal Register notice would be required, but it would not include the
identity of the manufacturer.
As this content comparison shows the CHA proposal contained considerably
less mandatory information than the EPA79 form, and its cost is lower as well.
2. Form-Filing Costs of the CMA Proposal
Appendix G includes is a copy of the CMA79 form. Its cost is
estimated by ICF to be between $].,300-$6,400 for mandatory information.
Exhibit IV-6 shows the ICF estimate of hours required for each section. A
complete analysis of this form can be found in ICF’s report to EPA “Estimated
Costs to Complete the CMA Proposed Form,” July 1981. Assuming 900 PMNs
annually, total form filing costs are $1,170,000 to $5,760,000.
3. Confidentiality Costs of CMA Proposal
The EPA79 form required that all substantiation of confidential
claims must be provided with the initial submission. However, the CNA79 form
call for substantiation of confidential claims only when an FOIA request is
- 92 -
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EXHIBIT IV-6
ESTIMATED LABOR REQUIREMENTS FOR CMA79 FORM
PART OF FORM TECHNICAL MANAGERIAL
I. General Information
A. Submitter Identity 0-0 1-8’
B. Chemical Identity
1. Class I Chemical Substance 1-4 0-0
2. Class II Chemical Substance 1-4 0-0
3. Polymers 1-4 0-0
4. Impurities 1-6 0-0
5. Chemical Identity
Claimed Confidential 0-4 0-1
C. Production and Categories of
Use Information 1-2
1. Production Volume 1-3
2. Production by Use Category 1-5
D. Federal Register Notice 1-4 0-1
E. List of Attachments 0-1 0-0
II. Risk Assessment Data
A. Chemical Properties, Environ-
mental Characteristics, and
Human and Ecological Effects
Data
1. Test Data on Physical/
Chemical Properties 4-16 1-4
2. Test Data on Health and
Environmental Effects 8-40 2-8
B. Occupational Exposure,
Disposal, By-Products 1-2
1. Industrial Sites Con-
trolled by the Submitter
a. Occupational Exposure 1-4
b. Disposal of Chemical
Substance 1-4
c. By-Products 0-3
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EXHIBIT IV-6 (continued)
ESTIMATED LABOR REQUIREMENTS FOR CMA79 FORM
PART OF FORM TECHNICAL MANAGERIAL
2. Industrial Sites Not
Controlled by Submitter
a. Workplace Exposure 0-4
b. Disposal of Chemical
Substance 0-4
Subtotal--Mandatory Portion a/ 21-102 6-26
Plus Clerical Hours: 6-17
a/Includes legal review and final managerial sign-off.
- 94 -
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filed (except for generic masking of chemical identity). Therefore, the total
cost of submission depends on the frequency with which FOIA requests are
filed. An examination of the record of FOIA requests reveals that FOIA
requests were made on 17.7 percent of a sample of notices from 1981.
Therefore, it is assumed that substantiation will be required for 17.7 percent
of all notices submitted. Because almost all the FOIA requests were filed
within 6 months after the submission of the notice, it is assumed that costs
of substantiation do not increase between the time of submission and the time
of he FOIA request.
Not all of the cost of substantiation is delayed until an FOIA request is
made, however. With the CMA79 form, a single generic chemical identity plus a
generic use is required, and under this option a single generic chemical use
is assumed for purpose of the analysis. We estimate that the cost of
developing one generic chemical identity is $80, and the cost of developing a
generic use is $ 28 .20J Chemical identity is . claimed confidential and a
generic name is required for 70 percent of the notices in the ICF sample.
“Use” is claimed confidential in 45 percent of the ICF sample. Therefore, the
cost per submission of providing a generic name is $56 ($80 x .7), and the
expected cost of providing a generic use is $13 ($28 x .45). Because the
total expected cost of confidentiality per submission is $1755, the expected
confidentiality costs less these two items is $1686 ($1755 less $69).
our analysis of the cost of the EPA79 form, we determined that
completing the proportion of the form that called for the provision of up to
three generic chemical identities would take 0-4 technical hours and 0-1
managerial hours. It is assumed that provision of three generic names would
take the maximum amount of time, and that provision of one generic name would
take one-third of the maximum time estimate. The cost of providing a generic
use was not previously estimated by ICF. The estimate used here was based on
a comparison of the difficulty of deriving a generic use to the difficulty of
deriving a generic name.
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The CMA79 form requires that a generic name for the PMN substance be
provided at the time of submission, and the rest must be provided only if an
FOIA request is made. In other words, an expected cost of $56 is incurred at
the time of submission, and a cost of $1699 is incurred 17.7 percent of the
time. Therefore, expected confidentiality costs per submission equal $357.
For 900 PMNs, total cost is $321,300.
Disclosure of trade secrets and uncertainty would be very small under
this option and no different from the EPA79 form.
4. Delay
Delay costs would riot change with the CMA79 form. Like the EPA79
proposal, delay costs would range from $1,054,500 to $1,843,400.
5. Restrictive EPA Actions
Analysis led to the conclusion that there would probably be a change
in the number of PMNs “caught” (i.e., subjected to one or more actions to
protect human health or the environrnentj if the CMA79 form was used. The cost
would be from $2,308,000 to 3,578,000 annually. This result is based on the
information shown in Exhibit VII-2; adjusting the EPA79 restrictive action
costs to reflect the probability of actions being taken using the CMA79 form.
6. Summary
Total annual costs to industry of the CNA79 form are shown below in
Exhibit IV-7.
E UiIBIT IV-7
TOTAL ANNUAL COSTS OF THE CMA79 PORN
(1981 Dollars)
Cost of Forms $1,170,000 - $ 5,760,000
Confidentiality $321,000 $321,000
Delay 1,055,000 - $1,843,000
Restrictive Actions $2,308,000 - $3,578,000
Total $4,854,000 - $11,502,000
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D. ANALYSIS OF COSTS OF THE EPA82 FORM
The information sought under this proposed form includes: submitter’s
identity; chemical name; identity and molecular structure; simplified
production and marketing data; simplified flow diagram; and simplified worker
exposure, release, and disposal estimates (relative to the EPA79 form).
1. Differences Between the EPA82 Form and EPA79 Form
Differences between the EPA82 form and the -EPA79 form are explained
below. These differences are highlighted in Appendix D.
a. Submitter’s Information .
The EPA82 form would require the same information as the EPA79
form except that the parent company and expected manufacture commencement date
are not required.
b. Chemical Identity .
The EPA82 form would require basically the same information as
the EPA79 form, with the addition of molecul.ar weight distribution and
distribution of low-weight species.
c. Production and Marketing Data .
EPA would not request maximum and minimum production volumes
for each of the first three years of production. Estimates of the number of
customers for each category of use and descriptions of categories not
contributing to production estimates but actively explored would not be
required. These changes reduce the information reported to what is needed to
identify specific information requirements for detailed review.
d. Other General Information .
Sections on transport methods and detection methods would be
eliminated since they are rarely used even for detailed review. Space for
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providing a risk assessment would be eliminated since EPA interprets this as a
health arid safety study which would be received as part of test data.
e. Industrial Sites Controlled by Submitter .
EPA would riot require identity of site, amount manufactured or
processed, reactions and side reactions for each chemical conversion,
identification and weight of all materials entering and leaving each operation
and conversion, methods of transfer, whether system is open or closed to the
workplace, or points of release of the new substances or byproducts. Such
information would be requested for detailed review, if needed.
EPA would riot require submitters to identify operations in which workers
may be exposed and routes of exposure. Such information can be derived from
the flow diagram and professional judgment. EPA would also not require
identity of site, estimates of materials entering and leaving each operation
and conversion, methods of transfer, whether system is open or closed, or
points of release of the new substances or byproducts. Such information may
only be needed for detailed review.
Also a list of substances, other than the new substance, that are likely
to occur in the workplace would not be required. This information would be
requested during detailed review, if needed.
For releases, EPA would not require identity of site, estimates of the
amount of new substance released, or effluent stream flow rate.
Thus, the required information for sites controlled by the submitter
includes: (1) process information on site type and hours operated; (2)
process description; (3) number of employees exposed, duration and route of
exposure, and physical states during exposure; and (4) duration and control
approaches for environmental releases.
- 98 -
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f. Industrial Sites Controlled by Others .
The new form would not contain customer contact provisions and
no information on industrial sites controlled by others would be requested for
initial review.
g. Consumer and Commercial User Exposure .
No consumer and commercial user exposure information would be
required, but the submitter would have the option of providing demographic
data.
ii. List of Attachments and Federal Register Notice .
No data on physical/chemical properties would be required.
However, other requirements for notice attachments remain as under the EPA79
form. A Federal Register notice would not be required.
2. Form-Filing Costs for the EPA82 Form
The EPA82 form represents a decrease in hours and costs from
previous proposals. Using the labor rates discussed in Chapter III and hours
estimates derived from the estimates of the labor hours necessary to complete
the EPA79 form as shown in Exhibit IV-8, it should cost between $1,200 and
$6,200 to complete all mandatory sections of the EPA82 form. Assuming 900
PMNs per year, the total annual cost of the mandatory portion is $1,080,000-
5,380,000.
The differences between the EPA82 form and the EPA79 form are mostly
deletions. The EPA79 form requests information on chemical identity,
production and marketing plans, transport, risk, detection methods, exposure
and release at sites controlled by the submitter, exposure and release at
sites controlled by others, consumer and commercial exposures, a Federal
g ter Notice and attachments. The EPA82 form deleted the transport, risk,
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EXHIBIT IV-8
ESTIMATED LABOR REQUIREMENTS FOR EPA82
CLERICAL TECHNICAL MANAGERLI
I. General Information 2-6
A. Submitter Identification
B. Chemical Identity
1. Class 1 or 2
2. Polymers
3. Impurities 1-6
4. Trade Identification 0-1
C. Generic Names 0-4 0-1
D. Production and Marketing
Data 1-2
1. Production Volume 1-4
2. Category of Use 1-8
3. Hazard Information 1-1
II. Human Exposure and
Environmental Release 2-5
A. Industrial Sites Controlled
by the Submitter - 2-6
1. Operations description
- type and duration 1-2
- block diagram 1-12
2. Occupational exposure 1-8
3. Environmental release 1-6
IV. List of Attachments 2-6
V. Test Data
A. Notice Form Sections 1
B. Environmental Fate data 8-40 2-8
C. Health axid Environmental
Effects Data
TOTAL 6-17 6-25
Lj lncluded in above estimates.
2 Inc1uded legal review time.
On1y one of these two sections would be completed.
“ Counts polymer chemical identity section, not Class 1 or 2.
a a
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detection methods, exposure and release at sites controlled by others,
consumer and commercial exposure, and Federal Register Notice requirements.
In addition it simplified the production and marketing, exposure and release,
and attachments section. The only additional request was for molecular weight
distribution data for polymers. Exhibit IV-8 summarizes the hour estimates
for the mandatory portion of the EPA82 form.
3. Confidentiality Cost for the Proposed EPA82 Requirements
EPA82 requires generic chemical identity and generic chemical use
although substantiation is not required for these items. The costs to provide
these items were previously estimated as $56 and $13 per PNN respectively.
Substantiation of confidentiality claims only occurs when an FOIA request is
made.
In other words, an expected cost of $69 is always being incurred. Since
F0I.A requests occur 17.7 percent of the time, other confidentiality costs of
$1686 ($1755 less $69), occur that often for a total of $298 per submission
($1686 x .177) on average. Therefore, confidentiality costs per submission
equal $367 ($69 + $298). For 900 PMNs, total annual confidentiality costs for
the final form are $330,300.
4. Delay Cost for the EPA82 Form
Delay costs are the same for this option as for other options. As
before they range from $1,054,500 to $1,843,400.
5. Costs of Restrictive Actions for the EPA82 Form
EPA analysts have determined that the number of restrictive actions
will differ with alternative forms. Therefore, costs of restrictive actions
are $2,373,000 to $3,679,000 based on the probability of health or
environmental problems being caught by the EPA82 form compared to the EPA79
form.
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EXHIBIT IV-9
TOTAL ANNUAL COSTS OF THE EPA82 FORM
(Thousand of1981 Dollars)
$l,080 -
$330-
$1,055 -
$2,373 -
$4,838 -
E. COMPARISON OF COSTS OF THE ALTERNATIVES
In the previous three subsections, the quantifiable costs of each
alternative were developed. In this subsection the totals are compared.
EPA79 is more expensive primarily because its mandatory form completion costs
and confidentiality costs are higher than the others. The delay costs arid
restrictive action costs do not change among the alternatives. Exhibit IV-lO
compares the options.
EXHIBIT IV-1O
COMPARISION OF INDUSTRY COSTS OF ALTERNATIVES
(Millions of 1981 Dollars)
Total Annual Cost Savings Over EPA79 Form
EPA79 Form $6.9 - 20.6 — —
CMA Proposal $4.8 - 11.5 30% - 44%
EPA82 Form $4.8 - 11.4 30% - 45%
form.
6. Summary of Costs for the EPA82 Form
Exhibit IV -9 provides the costs estimates for the proposed EPA82
Cost of Forms
Confidentiality
Delay
Restrictive Actions
Total Costs
$5 ,580
$330
$1,843
$3,679
$11,432
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F. EFYECT OF PROPOSED EXEMPTIONS PROGRAM ON SECTION 5 PROGRAM COSTS
This subsection discusses the effect of exemptions on the costs estimated
in the previous subsections. Under current or proposed exemption rules, the
fol]owing four categories of chemicals would be eligible for some sort of
exemption from the regular PMN process: low volume chemicals (proposed rule),
site-limited intermediates (proposed), instant photographic chemicals (final
rule), and polymers (proposed). Some new chemicals are likely to be eligible
for more than one exemption. For example, a new polymer might be produced at
low levels, thus making it potentially eligible for both the polymer and low
volume exemptions. Or, companies intending to manufacture new site-limited
intermediates would have the option of producing that chemical under one of
the low volume exemptions as long as they were to be produced in quantities of
10,000 kg or less, and met the specific exemption terms applying to that
category. The choice of which exemption to use for those chemicals eligible
for multiple exemptions will be left to the manufacturer.
The chemicals to which each exemption applies, as well as the nature of
the exemption, are enumerated below:
Low Volume Exemptions . Prior to commencement of manufacture, the
submitter must submit a short exemption notice (containing the
manufacturer’s name, manufacturing site, the chemical identity of the
compound, its use.) Except for chemicals manufactured at volumes less
than or equal to 1,000 kg a year, the chemical must be reviewed by a
qualified expert employed by the submitter. Carcinogens, teratogens and
acutely toxic chemicals would be automatically excluded. For chemicals
with a production volume less than 1,000 kg/year, this review need
not be performed. EPA must review exemption requests within 14 days.
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For the 1,000 kg or less exemption, there are no automatic exclusions
from the exemption. If the chemical substance has serious acute or
chronic effects or significant environmental effects under conditions of
use it is excluded from the exemption.
EPA would have the authority to declare a specific chemical
ineligible for the exemption if it failed to meet the terms of the
exemption. The rule would also establish procedures by which EPA could
revoke exemptions for chemicals found to be ineligible for exemption
after manufacture had commenced.
Site-Limited Intermediates . This exemption is similar to the low
volume exemption. Site-limited intermediate chemicals would be
automatically excluded from the site-limited intermediate exemption if
they had carcinogenic or teratogenic effects. Site-limited intermediate
chemicals would also be excluded from the exemption (based on conditions
of use) if they had serious acute-or chronic effects, or significant
environmental effects. Manufacturers must submit a short exemption
notice. Again, EPA has 14 days to act on exemption requests.
EPA would have the authority to declare a specific chemical
ineligible for the exemption if it failed to meet the terms of the
exemption. The rule would also establish procedures by which EPA could
revoke exemptions for chemicals found to be ineligible for exemption
after manufacture had commenced.
• Polymers . Under this exemption, polymers would be potentially
eligible for an exemption from PMN requirements if they were not
specifically excluded from the exemption, and met certain eligibility
criteria. In addition, certain procedural and other safeguards would be
imposed. The basic elements of this alternative are as follows:
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a) Certain polymers would be automatically excluded from the
exemption. These would include water soluble polymers, biopolymers,
polymers that exceeded specified content levels for certain elements,
polymers with covalently bonded halogen or cyano groups, polymers with
certain reactive functional groups, and polymers designed to degrade,
decompose, or depolymerize.
b) Polyesters which are made from a specified list of monomers
would be eligible for the exemption if manufacturers notified EPA when
they begin manufacture of the new polymer. Residual content of certain
listed monomers would be limited to one percent.
c) Polymers that met certain number-average molecular weight and
polydispersity criteria would be exempt if the manufacturer notified EPA
when manufacture of the new polymer commenced. The notice would include
chemical identity and reasonable estimates of polydispersity and average
weight as defined in the proposed rule:
d) Polymers above 1,000 number-average molecular weight would be
eligible for an exemption if manufacturers notified EPA at least 14 days
before they produced the chemicals. The notice would include chemical
identity information, residual content, production volume, and a
description of use.
e) EPA would have the authority to declare a specific chemical
ineligible for the exemption if it failed to meet the terms of the
exemption. The rule would also establish procedures by which EPA could
take regulatory action, or require that a PMN be filed for a specific
chemical, if it determined that serious unresolved issues concerning
toxicity or exposure remain at the end of the 14-day period, or if the
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Agency at any time, determined that the manufacture, processing, use, or
disposal of the polymer may present an unreasonable risk.
Instant Photographic and Peel-Apart Film Articles . This exemption
applies to chemicals used as ingredients in t?i tat ” photographic and
peel-apart film. Under this exemption, already in force, manufacturers
(primarily, Polaroid and Kodak) are allowed merely to submit notification
of intent to begin manufacture on or before the first day of production.
They must certify that they are aware of the exposure and environmental
release provisions of the exemption (an exposure limit of 10 ppm or 50
.tg/m 3 , engineering controls and personal protective devices, water
and air effluent treatment guidelines) and are willing to abide by them.
1. Cost of Exemption Notices
The exemptions being proposed by EPA require that manufacturers of
exempted chemicals provide notices of intent to manufacture. EPA estimated
the cost of all the exemption notices e .xcept for the photographic chemicals
notice. We assume that the photographic exemption notices will cost the same
as the least expensive exemption notice.
Notices for low volume chemicals and site limited intermediates would be
required to include certain information on chemical identity, site of
manufacture, production volume, and use. If a chemical is to be produced in
quantities between 1,000 and 10,000 kilograms per year or is a site-limited
intermediate then a qualified expert must evaluate the chemical. Both of the
low volume exemptions and the site-limited intermediate exemption are 14-day
premanufacture notices. This means the manufacturer must wait 14 days before
commencing production. The polymer exemption calls for zero-day notice for
some polymers and a 14-day premanufacture notice for others. The inst nt
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photographic exemption is a zero-day premanufacture notice with certification
that proper exposure and release provisions will be followed.
ICF and EPA estimated the cost of a risk assessment by a qualified expert
to be $695-$l,575 if exposure was limited (Warhit 1982 Appendix B). In cases
where exposure was expected to be more widespread, the cost would be
$l,195-$3,075 (Warhit 1982 Appendix B). Both of these estimates were based on
October 1980 labor rates. Using December 1981 labor rates would result in the
costs rising to $790-$l,780 for the limited exposure analysis and
$l,340-$3,440 for the full risk and exposure assessment. —
The cost of an exemption notice for the low volume, 14-day review
polymers, and site-limited chemicals was estimated using October 1980 labor
rates to cost from $150-$420 assuming no risk assessment was required (Ng
1982, p. 76). For polymers, the zero-day notice should cost $l90-350 (Luttner
1982, p. 106). Using December 1981 labor rates, these costs would rise to
$l70-$480 for the low volume, polymer 14-day, and site-limited notices; and
$210-$370 for the polymer zero-day notice. Exhibit IV-ll summarizes the cost
of each notice.
EXHIBIT IV-ll
COST OF EXEMPTION NOTICE 2
(1981 Dollars)
Exemption Notices
Less than 1,000 Low Volume $170- 480
Other Low Volume $960_2,260*
Site-Limited $960-2,260
Photographic $170- 480
Polymer Zero-Day $210- 370
Polymer 14-Day $170- 480
* Could be as high as $1,510-$3,920
if exposure was not limited.
21 Values derived from EPA exemption analyses adjusted for inflation in
labor costs to move forward to December 1981.
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2. Total Annual Cost of Exemption Alternatives
In order to estimate the total annual cost of the alternatives, the
number of notices required must be computed. In a previous analysis (Luttner
and Shapiro 1982), EPA estimated that, without exemptions, 900 PHNs would be
submitted annually. This estimate (900 PMNs per year) has been used to
compute costs of the reporting alternatives without exemptions.
To determine the number of PMNs that would be exempted we analyzed a dat. i
base of about 500 PMNs considered representative of all 1,700 submitted to
date. Based on this analysis we determined the percentage of chemicals
annually falling into different exemption categories. We multiplied the
percentages by 900 to obtain numbers of exemptions. Our derivation of the
number of and kinds of exemptions expected annually is explained below.
When the individual exemption alternatives are considered separately the
following results are obtained:
39 percent of PMNs qualify for the low volume
exemption with 52 percent of these qualifying
for the less than 1,000 kg notice and 48 percent
qualifying for the greater than 1,000 kg notice;
• 10 percent of PMNs are site-limited
intermediates of which 75 percent would qualify
for exemption;
• 3 percent of PMNs qualify for the instant
photographic exemption;
• 26 percent of PMNs qualify for exemption as
polymers.
Together these percentages sum to 75.5 percent. However, considerable
overlap among exemptions exists. About one-half of the eligible site-limited
intermediate are also low volume, and 20 percent of the polymers are low
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volume. Thus, when all exemptions are considered as a package, only 64
percent of the P 1Ns in this sample would be exempted.
The precision of the exemption percentage estimates is not exact. They
should be viewed as ranges of plus or minus five to ten percent. The lack of
precision stems from the changing nature of the P 1N chemical submissions.
Over time the types of chemicals being submitted under the PMN process will
change as will the number o PHNs. The PMN sample used to determine the
exemption percentage estimates is thought to be indicative of the steady state
of PMN submissions during the 1980-1982 period, but a different sample would
provide slightly different estimates. Therefore these estimates should not be
taken as exact percentages but rather as approximate percentages.
In this analysis, we assume that a submitter whose chemical qualifies for
any of several exemptions will choose to file an exemption under the
alternative with the lowest filing cost. Thus, many of the site-limited
intermediates with production volumes less than 1,000 kg per year were assumed
to be produced under a low volume exemption. If they expect production
volumes greater than 1,000 kilograms, they would choose to avoid the later
year reporting requirements that occur when production exceeds certain limits
by filing under the site-limited intermediate exemption. Likewise, submitters
for polymers are assumed to file the polymer exemption no matter what their
production volume. Out of those that would be exempt, data analysis revealed
that 24 percent would submit less than 1,000 kg low volume exemption notices,
25 percent 14-day low volume exemptions notices; 6 percent site-limited
intermediate exemption notices; 5 percent instant photographic exemption
notices; and 40 percent polymer exemption notices. According to analysis of
our data base, the polymer notices would be split 51 percent zero-day polymer
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notices and 49 percent 14-day polymer notices. Overall, the Agency would
receive about 576 exemption notices annually. Exhibit IV-12 shows the number
of each kind of notice the Agency would receive under each alternative.
Using the counts from Exhibit IV-12 and the cost per notice from Exhibit
IV-11, we can compute the total annual cost of exemption notices as shown in
Exhibit IV-l3.
EXHIBI1 IV-12
NUMBER OF NOTICES RECEIVED ANNUALLY*
Proposed
No or Current
Exempt ion Exemption
Policy Policy
900 324
Less than 1,000 kg Low Volume 138
Over 1,000 kg Low Volume 144
Site-Limited Intermediate 35
Instant Photographic 29
Polymer Zero-day 117
Polymer 14-day 113
Total 900 - 900
*This analysis assumes that PMN costs have had no effect on numbers of
new chemicals introduced.
EXHIBIT IV-13
ANNUAL FORM-FILING COST OF EPA82 FORM
WITH AND WITHOUT EXEMPTIONS
(Thousand of 1981 Dollars)
With No Exemption $1,080 - $5,580
With Proposed and Final $633 - $2,590
Exempt ions
Difference $447 - $2,990
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3. Exemption Options and Delay Costs
The exemptions will affect delay costs because chemicals which are
exempt will be subject to less pre-submission and post-submission delay.
Pre-submission delay will be reduced under the proposed exemptions be’ause the
time required to complete an exemption notice will be reduced. Although no
hard data exist with which to estimate pre-submission delay under the proposed
exemptions, it would seem that in most cases the pre-submission delay period
should not exceed one week. 22 Therefore, for purposes of this analysis, it
will be assumed that the pre-submission delay period for chemicals covered by
the exemption will be equal to one week.
Post-submission delay will be reduced under the p roposed exemption policy
because some chemicals now subject to ninety-day review periods would be only
subject to zero-day or fourteen-day reviews. Host chemicals eligible for
exemptions will be subject to fourteen-day review. However, some polymers and
all instant photographic chemicals will be subject to zero-day review.
In order to estimate the proportion of PMN submissions eligible for
exemption, the sample of approximately 500 chemicals was analyzed. It was
found that 64 percent would only be eligible for exemptions, as discussed
previously. Based on an annual PMN submission rate of 900 chemicals, this
would result in 576 chemicals eligible for exemptions.
For the 576 chemicals expected to benefit from delay reductions under the
proposed exemptions, analysis revealed that 24 percent (144) would be eligible
2 The only situation in which delay might exceed one week would be one
in which a risk assessment required extensive data gathering from sources not
quickly accessible to the submitter. This would only occur for site-limited
intermediate and 1,000-10,000 kilogram low volume exemption candidates.
Together these represent only 26.5% of all chemicals eligible for exemption.
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for the zero-day review period while 75 percent (432) would be eligible for
the fourteen-day review period. Thus total delay for 144 would be 7 days; and
for 432, 21 days. Chemicals eligible for zero-day review include instant
photographic chemicals and certain polymers (about 50 percent of eligible
polymers). Chemicals eligible for fourteen-day review include other polymers,
site-limited intermediates, and low volume chemicals. For the 324 still
submitting PNNs, 321 would experience 120-day delays and 3 would experience
210-day delays. Total delay costs then would be 0.1% x 144 x .46
$438,500; plus .3% x 432 x .46 x $438,500; plus 1.6% x 321 x 46 x
$438,500, plus 2.8% x 3 x .46 x 438,500 (assuming a 5 percent real rate
of return). This totals $1,343,400. At a 10 percent real rate of return the
total delay costs would be $2,364,400 if all PMNs were subject to delay.
However, only 39.5 percent (those with COMs within 30 days) may be subject to
delay. Thus estimated delay cost are $530,600 to $933,900 (See Section C,
Chapter III for details.)
Exhibit IV-14 provides a comparison of delay costs with and without the
exemption rules.
EXHIBIT IV-14
ANNUAL DELAY COSTS WITH AND WITHOUT
SECTION 5 EXEMPTIONS
(Thousands of 1981 Dollars)
No Exemptions $1,055 - $1,843
Proposed Exemptions $ 531 - $ 934
Difference $524 - $909
— 11 —
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4. Effect of Exemptions on Confidentiality and Restrictive Actions
Exemptions will not affect confidentiality costs because
confidentiality provisions for exemptions notices will be identical to those
for the EPA82 form. The marginal cost of asserting confidentiality is close
to zero. In cases where substantiation is later required there is no data to
suggest that providing substantiation for several items (on the EPA82 form) is
more costly than providing it for a few (on exemption notices). (Although it
might intuitively seem more costly; most substantiations in PMN files appear
to be boiler plate language).
5. Cost Savings From Exemptions
Overall the exemption program would save industry from $1.0 to $3.7
million annually.
G. COST TO GOVERNHENT
The cost to EPA to review the alternative forms does not change
significantly among them for several reasons. First of all, the experience to
date indicates that even for the standard EPA79 form, tremendous variation in
the quality and amount of information provided exists. Thus, the Agency in
its initial review process often relies on telephone conversations with
companies to fill in data gaps. In addition, some of the information with
which the Agency has been provided is not essential to the initial review.
The Agency has learned through its review of over 1,700 PMNs which items are
critical for initial review. All three forms usually have this information.
Whenever a company does not submit these items, the Agency typically calls the
company for the information. The phone calls do not in our judgement add
substantially to the cost estimates developed in Chapter III. Therefore, ICP
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does not believe the Agency costs will change with the choice of forms.
Assuming 900 PMNs per year, total costs will be 900 x $7,728 (from Chapter
III) or about $6,955,200 annually.
Implementation of exemptions, however, will significantly change EPA
costs. The savings can be calculated using a three-step process. First, it
is necessary to determine how many PtlNs would no longer be submitted because
the chemicals in question qualified for exemptions. This number must be
multiplied by the cost to review these kinds of PMNs. Next, it is necessary
to determine what kinds of exempt-ion notices would be submitted. These must
be multiplied by the cost to review exemption notices developed in Chapter
III. These exemption notice review costs must then be subtracted from the
savings from not performing PMN reviews.
The exemption program will reduce the number of PMNs EPA must review
annually by 576 (assuming 900 are received). Instead it will process:
• 138 less than 1,000 kg low volume exemption notices
at a cost of $640 per notice
• 144 14-day low volume exemption notices at a cost
of $1,483 per notice
• 35 site-limited intermediate exemption notices at a
cost of $1,483 per notice
• 29 instant photographic exemption notices at a cost
of $640 per notice
• 117 zero-day polymer exemptions at a cost of $640
per notice
• 114 14-day polymer exemptions at a cost of $1,483
per notice
Because the exemptions are designed to exempt only those chemicals that
do not represent an unreasonable risk to health or the environment, we can
assume that the submitters of the types of chemicals presently undergoing
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detailed review and section 5 control actions will continue to submit PliNs.
We can also assume that the chemicals for which manufacturers submit exemption
notices will be among the 95 percent of all PMNs that only went through
initial review and were dropped. The savings from not reviewing 576 “typical”
PMNs is then 576 times $4,593 (see Exhibit 111-5) or S2,645,568. The cost to
review 576 exemption notices with the mix of characteristics shown is
$61b,279. Therefore, the savings to government from the exemption program is
$2,645,568 less $616,279 or $2,029,289.
H. OTHER COSTS
This chapter has provided estimates of the direct costs of compliance for
regulated parties and government. These direct costs represent the
expenditure of resources by regulated parties and governments that is required
for compliance with the section 5 regulations. These direct costs, however,
are only part of the total costs to society. . This section briefly discusses
the other components of total cost to society.
1. Indirect Costs
In addition to direct costs, indirect costs may also be incurred by
regulated parties and governments. These indirect costs represent the
expenditure of resources by regulated parties and governments that is induced,
though not required, by the section 5 regulations. One type of indirect cost
is toxicological testing. Although no toxicological testing is specifically
required under section 5, regulated parties may choose to test in order to
increase the probability that production of their new chemicals will not be
regulated by EPA. Another example of induced costs are the costs of reduced
innovation. The innovation effects of section 5 regulation are discussed in
more detail in Chapter V.
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The expenditures of resources by regulated parties and governments caused
both indirectly and directly by section 5 may have further effects throughout
the economy. The expenditure of resources by regulated parties may affect
their output, the prices at which they sell their output, their profits, and
the number of workers they employ. Changes in the price and output decisions
of individual firms may produce industry-wide changes in prices, output, and
profits, and may spread to other industries and the U.S. economy as a whole.
The costs incurred by government may result in some combination of higher
taxes, higher government borrowing, and reductions in spending on other EPA
programs.
The ultimate measure of the cost to society of all these effects is the
value of goods and services lost by society as a result of the use of
resources to comply with a regulation, and the use of resources to implement a
regulation. The cost to society can be represented by changes in the
difference between the price of a good and the amount that consumers are
willing to pay for it. In a competitive market, all consumers pay the same
price, i.e., the price established by the interplay of supply and demand.
However, there generally are some consumers who would purchase the product if
it were offered at a higher price. These consumers receive a bonus or
consumer surplus. 23 If section 5 regulation raises the price of new
23 Another element of the cost of regulation is producer surplus, where
this is defined as the profits above a fair return on capital earned from the
development, commercialization and sale of goods and services. (It is also
known as the return to entrepreneurship.) In a competitive environment, all
producers receive the same price, and their combined supply curve includes a
return on capital invested. However, there usually are producers who would be
willing to offer their product at a lower price. These producers receive an
extra profit or producer surplus. If regulations prevent introduction of a
product, producers lose this producer surplus. However, the loss in producer
surplus from a reduction in new product introduction is offset by a reduction
in producers’ research and development expenditures. Therefore, the total
cost to society of section 5 regulation is measured by consumer surplus.
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chemicals, society will consume smaller quantities of them, thereby reducing
consumer surplus. If section 5 regulation reduces the number of new chemicals
introduced, consumers will not receive this bonus from the foregone new
chemicals.
2. Distributional Costs
The distribution of cost among members of society must also be
examined in evaluating the quality of the regulation. Regulations may affect
different firms and industry segments in different ways. For example, a
particular reporting requirement might place more of a burden on one
particular industry segment that commonly introduces large numbers of
chemicals, than on another segment of the industry which does not introduce
new chemical products so frequently. It has been suggested, for example, that
some small businesses may have stopped innovation activities because the costs
of section 5 notices, as perceived by them were too onerous. These effects
will be discussed further in Chapter VI. -
I. CHAPTER SUMMARY
The form-filing, confidentiality, delay, and restrictive action costs of
the regulatory options under consideration have been developed in this
chapter. The EPA79 notice would cost industry between $6.9 and $19.0
million. The CMA79 notice would cost industry $4.8 to $11.5 million; and the
least expensive EPA82 notice would cost between $4.8 and $11.4 million. EPA
cdsts would be about $7.0 million annually.
With exemptions, the three alternative forms would cost industry and EPA
the amounts shown in Exhibit IV-16. As the Exhibit shows industry costs drop
from 20-34 percent when the EPA82 form is used, and EPA costs 29 percent.
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EXHIBIT IV-15
DIRECT COSTS OF REGULATORY OPTIONS
(Thousands of 1981 Dollars)
Total Industry Costs
Form Filing Costs
Confidentiality Costs
Delay Costs
Restrictive Actions
Total
Total EPA Costs
Review
Total Costs
$1,620 - 13,140
1,580
1,055 - 1,843
2,605 - 4,038
$6,860 -20,601
$6,955
$13,815 -27,756
$1,170 — 5,760
321
1,055 - 1,843
2,308 - 3,578
$4,854 -11,502
$6,955
$11,809 -18,457
$1,080 - 5,580
330
1,055 - 1,843
2,373 - 3,679
$4,838 -11,432
$6,955
$11,793 -18,387
EXHIBIT IV-16
ANNUAL COSTS OF ALTERNATIVE FORMS
WITH EXEMPTIONS IN PLACE
(Thousands of 1981 Dollars)
Average
Submitter
Cost per New
Chemical
6.2 - 13.2
4.2 - 8.3
4.3 - 8.4
% Change ’
19 - 38
21 - 35
20 - 34
EPA79 CMA79
EPA82
Form
EPA79
CMA79
EPA82
Total
Industry Costs
5,542 - 11,863
3,825 - 7,488
3,867 - 7,533
EPA Costs
$4,935
$4,935
$4,935
(29.0)
(29.0)
(29.0)
*Change relative to costs without exemptions.
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CHAPTER V
INNOVATION EFFECTS
Many parties argue that the major economic effect of section 5 of TSCA
will be changes in the innovation activities of chemical companies (CWPS 1981
CMA 1979, pp. 112-160, CNA 1981, Heiden and Pittaway 1982). For this reason
it is appropriate to discuss the ways in which the PMN process affects
innovation and to present some analyses of the possible magnitude of the
effect.
Innovation activities encompass a large number of different efforts
including process research and development, existing product research and
development, new product research and development, and new chemical research
and development. For purposes of this discussion, process research and
development are those activities directed tQward increasing efficiency by
changing the technology used to produce an existing product. Existing product
research and development are those activities directed toward making an
already existing product better. Usually this means improving the quality of
the product. New product research and development is directed toward the
advancement of scientific knowledge and development of new products, as well
as toward new technologies necessary to bring the product to market. New
product R&D may include new formulations, significant new applications of
existing chemicals, and, of course, the subject of this analysis, new
chemicals. New chemical R&D, a subset of new product R&D, is those activities
directed toward bringing to the market a totally new compound.
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In this chapter we explore how the costs of filing a P IN (developed in
Chapter IV) might affect new chemical research and development. Then previous
analyses estimating the effect of PMN requirements on new chemical innovation
are discussed and conclusions about the innovation impact drawn.
A. BACKGROUND
Previously ICF estimated that the effects of the section 5 program would
be potentially noticeable at each step of the innovation process (ICF 1980,
Part I, p. 83-110). These steps were defined as:
• Resource allocation to research and development;
• Allocation of research and development budget among
process, existing product, new product, and new
chemical activities;
• The creative research process;
• Commercial development; and
• Market introduction and response.
In the resource allocation decision, the existence of section 5 costs
would potentially reduce the return available from research &nd development
and therefore chemical companies might invest in other kinds of activities
(e.g., capital or labor). At the allocation of the R&D budget stage, the
company might choose to deemphasize new chemicals and new products in favor of
new processes or it might cut basic research and focus on developmental
activities. In the creative research process , management could stop all
projects geared toward developing chemicals whose properties were similar to
those EPA has questioned in previous section 5 or other government actions.
Commercial development would be affected if, as CMA suggests (CMA 1981, p.
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111-45 to 111-62), potential customers began requiring that a new chemical be
cleared through the PMN process before they will test it; and, of course, if
the costs of filing the form reduced the expected return below the acceptable
level. Also, anecdotal evidence of the effect of the 90-day delay indicates
that some chemicals are too time-sensitive to be introduced if subject to a
PMN process. The market introduction and response stage could be thwarted if
the PMN review resulted in reformulation, if costly workplace controls were
required, or if the PMN reviei resulted in the chemical not being marketed at
all.
These potential effects become significant if the costs of the program
are large relative to the sums chemical firms spend on innovative activities.
In Chapter IV, the total annual costs to industry of the program were
estimated to be at most twelve million dollars. ICY recently tried to
estimate the total amount spent by chemical companies of new chemical research
and development. We found, that existing published data only allows for
estimating new product spending. Using a necessarily cumbersome set of
separately developed data we inferred total new product spending to be
approximately 2.2 billion dollars in 1980. The portion of the new product
spending associated with new chemicals could not be determined.
The methodology employed started with NSF data on chemical industry
research and development. Then we broke it into three categories (process,
new product, existing product) using McGraw-Hill data. Next we used
Pharmaceutical Manufacturers Association survey data to remove that portion
which could be considered drugs-related. The result was the $2.2 billion
estimate (Chem Week 1981, Chem Week 1982, Chem Eng News 1982). Appendix E
provides a full documentation of how the estimate was derived.
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Because the program costs seem so small relative to the total amount
spent by the chemical industry on research and development, it seems
intuitively possible that the program has no potential significant innovation
efcect. However, since the costs of the program per new chemical introduction
are between $3,000 and $18,000 dollars, some parties, notably the CSMA, have
argued that a significant distributional effect in the form of many fewer new
introductions of small volume chemicals is occurring as a direct result of the
PuN process (Heiden and Pittaway 1982).
This phenomenon could manifest itself in a reduction in the number of
small volume introductions after section 5 took effect. However, the economic
value of the lost introductions would not be as great as the percentage
decline in introductions because the profits lost from not introducing small
volume chemicals are not as great as the profits from an average new chemica]
introduction. That is, the private return in dollars from small volume
chemicals is less than the private retu.rn for high volume chemicals so long as
the price and profit margin are assumed the same (CMA 1982). Even if prices
are higher for small volume products, the prices are generally not high enough
to generate profits (in dollars) as great as those earned on high volume
products. (For example a $25/kg product with a 50 percent profit rate and.
1,000 kg annual production generates a profit of $12,500. A $.50/kg product
with a 5 percent profit rate and 1,000,000 kg annual production would generate
$25,000 in profits.) Thus, even if there was a substantial reduction in the
number of new products, there might be only a small overall economic effect.
The rest of this chapter explores some estimates of the change in new product
introductions and in overall research and development spending on new product
since 1978.
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B. THE CSMA STUDY
The Regulatory Research Service (RRS) performed a study for CSMA in 1981
on the impact of TSCA on innovation in the chemical specialties
industry. 2 ’ (Heiden and Pittaway 1982.) The purpose of the study was to
define the nature of the TSCA impacts and to obtain baseline data that could
trace the effects of TSCA on innovation over time. To collect data, a survey
was made of the membership of CSMA. The survey data for new introductions for
1976, and 1978 through 1981 are used here. Data for 1977 were not included
because no data for that year were obtained by the survey. Data for 1979 were
not used because no meaningful allocation could be made between pre- and
post-PMN periods (PMN filings began in Mid-1979).
The RRS study was based on a sample drawn from members of CSMA. Attempts
were made to obtain data from non-member firms in the chemical specialties
industries, but none of the responses proved to be usable. RRS developed two
surveys, one for the product manufacturers of the CSMA and one for the
ingredient suppliers. The samples for the two surveys overlapped, because
five of the ingredient suppliers are also product manufacturers. In our
analysis, only survey responses from the ingredient suppliers survey were
used, because the product manufacturers are formulators that by definition do
not develop new chemical substances. 2 SJ The ingredient suppliers sample was
very small (18 firms).
21 ’ The chemical specialties industry cannot be precisely defined.
Generally, it includes firms that produce chemicals that end up in household
use, such as adhesives, detergents, fragrances, gasoline additives. Firms
that produce chemical specialties range from the formulators to such giants of
the industry as Dow and. Dupont (both of whom are members of CSMA).
25 In the Heiden and Pittaway study, some new chemical substance
development is shown for product manufacturers. According to a CSMA
spokesman, this is a result of the product manufacturers doubling as
in redient suppliers to themselves.
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Although no statistical data were given, the authors of the study
concluded that the sample was roughly representative of the entire population
of ingredient suppliers, both within CSMA and of the entire chemical
specialties industry. (Telephone conversation with Heiden and Pittaway on
April 26, 1982 and April 27, 1982.) The authors based this conclusion on
their knowledge of the respondents and of the chemical specialties industry.
No assertion--statistical or otherwise--was made to the representativeness
of the sample to the chemical industry as a whole. Because of the lack of
statistical data, no attempts could be made by RRS to weight the sample to
make it representative of either the chemical specialties industry or the
entire chemical industry.
RRS defined a new introduction as a new chemical substance developed and
made available for customer evaluation, similar to but more inclusive than the
section 5 definition of a new substance requiring a PMN. The RRS definition
is more inclusive because it includes test market chemicals and, more
importantly, because it includes certain chemicals manufactured for R&D
purposes, which are totally exempt from the PMN requirements.
The RRS survey, by tracking the same sample of firms in 1976, and then
from 1978 through 1981, yields the only set of pre- and post-PMN data based on
a single sample of firms both before and after the start of the PMN program.
Second, it provides the data on new chemical substance introductions segmented
by size of firm for the years prior to 1979.
The RRS study showed average introductions for the sample in 1976 and
1978 to be 168 chemicals per year. In 1980-1981, the average was 123.5. On
the basis of this information, ICT concluded that a 23.5 percent
(168-123.5/168) reduction in new product introductions occurred between the
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periods 1976-1978 and 1980-1981. According to RRS, the firms with less than
$100 million dollars in annual sales accounted for all of the decline (Heiden
and Pittaway 1982, p. 2 of Executive Summary). To the extent that small sales
volume companies are correlated with small production volume chemicals, this
information would tend to confirm the hypothesis that most of the impact of
section 5 falls on small volume chemicals.
Additionally it is possible to combine this information with information
from the NERA study (see below) of the effect of TSCA to crudely estimate how
much of a reduction in profits the 23.5 percent might represent. In Table
5.11 of the NERA study the average third-year sales volume of a new chemical
substance for firms under $100 million in annual sales was $124,800. For the
average firm, the sales were $741,000. By weighting the averages by numbers
of firms in the samples, the average third-year sales of $918,000 was computed
for firms with greater than $100 million in sales. If we assume that average
expected profit-margins are the same across firm size, then the economic value
of new chemical introductions by firms with less than $100 million in sales is
1/6 that of the average company. Thus a 23.5 percent decline in small company
introductions would represent a 4 percent decline in the profits from new
chemical substance innovation.
The RRS analysis goes on to make two additional points that tend to
suggest that the hypothesized effects on the research and development process
are in fact occurring. First, it states that the innovation decline appears
to have taken the form of a reduction in the more speculative types of
innovation; i.e., those developed for a firm’s general cuarket, rather than
those presumably less speculative activities initiated in response to customer
requests. This could be a manifestation of a turning away from basic
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research. Second, they note that product manufacturers (as distinct from
ingredient manufacturers) have not experienced significant declines in
innovation. Thus a shift to new product innovation and away from new chemical
innovation could be taking place in the allocation of R&D budgets. (In the
chemical specialties markets, new products are often reformulations of
existing chemicals. These new products would not be subject to PMN.)
C. THE NERA STUDY
The National Economic Research Associates (NERA) performed a pilot study
of TSCA-related impacts for the Chemical Manufacturers Association (CMA) (NERA
1981). The objective of the study was to develop and test a methodology for
assessing the impacts of compliance with TSCA. In the course of the study,
NERA surveyed the CMA membership to develop information that would allow a
preliminary evaluation of the impacts of regulation. As best as can be
determined, the CNA membership does not include firms with manufacturing
activities outside of SIC codes 28 (chemical manufacturing) or 291 (petroleum
refining). Thus, the survey data do not cover chemical innovation outside the
chemical or petroleum industries.
NERA obtained usable data from 36 of the 170-odd members of the Chemical
Manufacturers Association. The 36-firm sample is small, self-selected, and
skewed heavily towards large firms. NERA made attempts to weight the sample
to make it representative of the industry as a whole, but the weighting
process may have made the sample less, rather than more, representative.
New introductions were defined by NERA as substances introduced into
commerce that would not have been on the TSCA inventory, if such an inventory
had existed for the pre-inventory period. This definition is essentially
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equivalent to the TSCA section 5 definition, with one possible exception. The
language of the ‘ERA survey might cause companies to report new chemicals
undergoing test marketing evaluation by the customers of the firm. The
section 5 regulations specifically allow an exemption or test-marketed
chemicals from full notification requirements. Because we could not
definitely conclude that test-marketed chemicals were in the NERA sample, we
did not adjust for it.
The survey respondents were instructed to consider a chemical
introduction as new unless there was evidence to the contrary. The first
edition of the TSCA inventory was not published until the middle of 1979, so
there was no positive way of checking if a substance introduced before 1979
was truly new or just new to the firm. Therefore, given the instructions that
a product be considered new unless there is evidence to the contrary, and that
no positive way of checking exists, substances that were not new could have
been counted as new in the survey results. The NERA data are reduced to
eliminate as best as possible chemicals that were not genuinely new using the
percentage of PMNs submitted that were subsequently determined to be on the
EPA inventory.
Overall, four major problems with the NERA study are:
1) It is based on a small, self-selected sample skewed
heavily towards large firms;
2) It does not include introductions from outside SIC
codes 28 and 2911, and does not extrapolate to cover
these chemical activities;
3) It probably counts test-marketed chemicals as new
introductions; and
4) It probably includes some chemicals as new
innovations when they were only new to the firm, not
society.
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NERA attempted to correct the first problem. ICF made adjustments based on
PMN data to compensate partially for the other three problems.
A major advantage of the NERA study is that survey respondents are
identified by company name. This enabled ICF to track new chemical substance
introductions for the identical sample from 1973 through 1981, using NERA data
for the period 1973 through 1979, and EPA ’s PMN file data for 1980 and 1981.
NERA concluded that there were about 1700 new chemicals introduced
annually prior to section 5’s implementation. Furthermore, they estimated
that almost 1000 of these were introduced by firms with less than $100 million
in sales. Using confidential data in the EPA files, adjusted to be consistent
with the NERA survey data, 26 - 1 ICF estimated the change in new product
introductions by the 36 surveyed firms. For these 36 companies, innovation as
measured by number of PMNs submitted was up on average 20 percent. However,
the rise was due entirely to an increase by large companies with small
companies showing declines. (See Chapter VI for a more detailed discussion of
the findings of the NERA study with respect to small business effects).
In order to better understand these results, ICF broke the 36 companies
into strata based on firm size to see what this result would indicate for the
industry overall, using the NERA weighting methodology. ICF found that the
NERA weighting methodology gave great weight to small sales volume chemical
companies so that changes in new introductions by the surveyed small companies
created large swings in the estimates of total industry new chemical
products. Using the NERA weighting methodology, a 26 percent overall decline
in new introductions was projected. Furthermore, ICF found that the estimate
26 Correctjons were made to eliminate intermediates, test marketing
chemicals, and chemicals already in existence.
— —
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for companies with more than $500 million in sales was higher than expected,
but that the estimate for companies with less than $500 million was below
expected values. This leads to the conclusion that a 26 percent reduction in
new chemical introductions occurred, with companies with less than $500
million in sales incurring all of the decline. This result would be generally
consistent with the CSMA findings.
NERA noted that the 90 percent confidence interval for their 1700
chemicals per year estimate was 450-3000. ICF determined that 85 percent of
this variation was due to variability with number of small company
introductions -- the group which the NERA survey covered least well. Because
the confidence interval is so great, it is more valid to conclude that there
has been no statistically significant change in the number of new chemicals
introduced. ICF believes that no conclusions can be drawn about small company
innovation until much better data about small chemical company innovative
activities is presented. -
D. THE ADL STUDY
In December 1978, ADL provided EPA with an economic analysis of the PMN
regulations which concluded that if the PMN submission cost was $5,000 - about
30 percent fewer new chemicals would be introduced. Several weaknesses in the
ADL study cast doubt on this conclusion. First, almost no documentation for
this conclusion exists. Second, ADL provides no analysis for its conclusion
that between 700 and 1300 new chemicals were introduced annually in the
1970’s. Third, the 30 percent reduction is based on analysis of only 10
chemicals introduced in the past (and ADL does not provide an explanation for
how the analysis was performed). Fourth, after ICF determined what ADL had
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done, it was obvious that ADL had assumed perfectly elastic demand, i.e., no
ability to pass through form-filing costs to consumers of the new chemical.
Notwithstanding these weaknesses, it is illuminating to see what the ADL
approach would predict given the data now available.
As mentioned above, ADL believed that 700-1300 new chemicals (other than
drugs and pesticides) were introduced into commerce annually before section 5
took effect. According to Table 111-1 of the ADL report, 30 percent of these
were produced in quantities of over 1000 lbs., while 70 percent were produced
in quantities under 1000 lbs. This is in stark contrast to analysis of the
PMN data base that reveals that between 79 percent and 88 percent of all PMNs
are expected to be produced in quantities of 2,200 lbs. or more. One
explanation for the difference between PMN submissions and ADLts analysis is
that the PMNs are projections while the ADL estimate reflected reality (i.e.,
often new products do not do as well as expected). Another explanation is
that section 5 has affected small chemical innovation -- but these numbers
suggest drops of magnitudes greater than even the trade associations estimate.
ADL Estimate 27 PNN Data in 198127.1
(from Table 1)
Small volume 700 82 - 144
Large Volume 300 540 - 602
In contrast to the ADL figures shown above, ADL’s estimate of the decline
due to the PMN program was based on a sample of chemicals of which only 30
27 For ADL 1,000 lbs. cut-off, for PMNs 1,000 kilogram (2,200 lbs.)
cut - off.
- 130 -
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percent were produced in quantities of less than 1,000 lbs. annually.
However, for the following reasons the sample was used:
• this sample more closely matches the expected
production volumes reported in the PMNs;
o patent data indicate much greater numbers of
innovations by large companies; and
• the Snell conclusion(Snell 1975) (developed in only
two months without using proper survey research
techniques) that small companies produce many more
innovatior s than large has not been corraborated by
any other research.
As shown in Exhibit IV-16, the cost of the EPA8Z form per new chemical
entities, for the PNN programs range from $5,600 to $13,100 dollars in 1981
dollars. This cost must be compared to the estimated net present value of the
profit stream in 1981 dollars to determine whether, after imposition of the
PMN costs, the product still would generate a positive return. In previous
work ICF found the estimated net present value of sales (assuming a 15%
nominal discount rate) of the 10 ADL chemicals in 1977 to be as shown below.
Using the chemical products producer price index to inflate the sales to 1981,
we then multiplied by the average profit rate in the chemical industry (6%),
to obtain the net present value of the profit stream associated with each of
these chemica1s. 25 As Exhibit V-i shows, only one of these ten could not
result in a positive return even after imposition of the $5,600 PHN costs. If
21 The costs should be adjusted for tax effects since they represent
pre-tax costs. However, given the imprecise nature of this analysis, we have
used the pre-ta.x value to be conservative. That is, this is an estimate of
the greatest impact possible.
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the true cost per P 1N were $13,100, then atmost two of the chemicals would not
be introduced. The one chemical represents approximately 0.4% of the total
profits associated with the set of chemicals, the two, 2.0%. Assuming that
consumer surplus is proportional to producers surplus (and its proxy--reported
profits), then the net loss to society was at most 2.0 percent of the pre-TSCA
innovation value.
EXHIBIT V-i
NET PRESENT VALUE OF PROFITS FOR TEN CHEMICALS
(Dollars)
1977 NPV 1981 NPV 1981 NPV
Chemical of Sales of Sales of Profits
1 $36,650 $55,640 $3,338
2 $145,950 $221,574 $13,294
3 $189,830 $258,191 $17,291
4 $316,990 $481,239 $28,874
5 $325,500 $494,159 $29,650
6 $348,450 $529,000 $31,740
7 $394,540 - $598,972 $35,938
8 $745,510 $1,131,799 $67,908
9 $818,430 $1,242,502 $74,550
10 $5,191,370 $7,881,297 $472,578
E. CONCLUSIONS
On the basis of limited evidence, it appears that the effects on research
and development hypothesized originally in ICF’s 1980 report on the economic
impact of the PMN rule, as summarized above, were valid. That is, the major
effect of the the rule is selective; some of the smaller volume, lower value
chemicals probably can not absorb even the relatively low reporting burden
represented by the most recent EPA proposals. (Exemptions should
significantly reduce this burden). The overall economic effect is
— —
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considerably less because the value of the profits foregone and the benefit to
consumers not obtained from small volume chemicals is much less per chemical
than a large volume or high value product. No data indicate that high value
or large volume products have been affected by the program. Thus, if an
effect on new chemical innovation has occurred, it is likely that this effect
has been so small as to be statistically insignificant in a net social welfare
sense. That is, both the CSMA and the ADL approaches yield estimated losses
of less than 5 percent of the value of innovation prior to TSCA, and the
uncertainty around all of these estimates is much, much greater than 5
percent.
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CHAPTER VI
SMALL BUSINESS EFFECTS
A. INTRODUCTION
Generically, the effects of federal regulation on small business are of
serious enough concern that a statutory remedy designed to mitigate adverse
effects has been put in place. In September of 1980, Congress enacted the
Regulatory Flexibility Act (P.L. 96-354), which requires that regulatory
agencies consider and be sensitive to the potential burdens that regulations
may place on small business. Such burdens may be disproportionate because it
may be difficult for small business to meet regulatory requirements which fall
uniformly on firms of all sizes. Therefore, burdens which larger firms might
easily absorb could pose substantial problems for small firms. In theory,
such disproportionate burdens could ultimately affect the ability of some
small firms to compete with larger firms.
Throughout the evolution of the section 5 program, much concern has been
expressed about the potential effects of the PMN reporting requirements on
small firms. Such concern has appeared in both comments to proposed rules as
well as in various formal analyses (Ansul Company 1979, CMA 1979, SOCMA 1979,
ICF 1980, CMA 1981, and Heiden and Pittaway 1982). Among the concerns
mentioned have been the following:
• innovation is of the utmost importance to small
firms;
• small firms rely on many low-volume chemicals and
therefore are likely to have to submit many section 5
notices;
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• low-volume new chemicals are the ones most likely
to be adversely affected by section 5 requirements;
and
• costs associated with the section 5 program will be
difficult for small firms to absorb.
In this chapter, these concerns are explained in detail and four previous
analyses relating to such effects are reviewed (Section B). It is important
to understand that many of the analytical efforts reviewed in Section B were
developed from assumptions about primary economic effects which may no longer
be representative of the range of primary economic effects associated with the
regulatory options now under consideration. Estimates of primary economic
effects imposed on small business by the regulatory options currently under
consideration are addressed in Section C. In addition, potential effects of
the proposed exemption options on small business are addressed in Section D.
A chapter summary is provided in Section E.
B. REVIEW OF PREVIOUS ANALYSES
Over the past four years, four economic studies have discussed TSCA’s
impact on small business in the chemical industry. One of these was prepared
for the Chemical Specialties Manufacturers Association (CSMA) (Heiden and
Pittaway 1982) and another for the Chemical Manufacturers Association (CHA)
(NERA 1981). The other two studies, prepared for EPA, were performed by
Arthur D. Little, Inc. (ADL 1978) and ICF Incorporated (ICF 1980). This
sectIon reviews each of these studies.
1. The CSM.A Study
In 1981 the Regulatory Research Service (RRS) performed a study for
CSMA on the impact of TSCA on innovation in the chemical specialties industry
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(Heiden and Pittaway 1982 ).29.i The RRS study is based on a survey sample
drawn from members of CSMA. As stated in Section V.B, the average number of
new chemical introductions in 1976 and 1976 were 168 per year. In 1980-81,
howe”er, the average was 123.5. According to RRS, firms with less than $100
million in annual sales accounted for 98 percent of the decline. Thus, the
analysis found a striking difference between section 5 innovation effects on
small companies and section 5 innovation effects on large companies. RRS made
no claim as to the cause of the decline but implied that it was due to TSCA
section 5.
The CSMA study focused on ingredient suppliers and specialty product
manufacturers, two large subgroups of the chemical specialties industry.
Exhibit VI-l presents the number of new substances produced by ingredient
suppliers in the RRS survey, as a function of time interval and company size.
The data suggest that innovation by ingredient suppliers has decreased for
firms below $200 million but has increased for firms above $200 million. RRS,
however, classifies “small” firms as having sales less than $100 million.
Thus, “small” firms and larger ones under $200 million appear to be similarly
affected by section 5, based on the data developed by RRS.
29 See Section V.B, p. 126 for a definition of the chemical specialties
industry.
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EXHIBIT VI-1
NEW SUBSTANCES PRODUCED BY INGREDIENT SUPPLIERS IN THE
RRS SURVEY AS A FUNCTION OF FIRM SIZE
(Estimate)
Size by Total Chemical Sales 1976 1978 1979 1980 1981
$100 million (12 firms)
Firm speculation 69 72 36 40 39
Customer request _
Total 133 143 87 99 101
$100 - 200 million (2 firms)
Firm speculation 15 15 10 8 8
Customer request 0 0 0 0 0
Total 15 15 10 8 8
$200 million (4 firms)
Firm speculation 10 10 15 10 16
Customer request 5 5 7 7 8
Total 15 15 22 17 24
Source: Heiden and Pittaway 1982, p. 11-8.
The study remarks that section 5 costs faced by small firms are less than
those faced by large ones. For example, RRS estimates PMN filing costs of
$5,000 for small firms (under $100 million in sales), $8,000 for medium firms
($100 - 500 million), and $7,800 for large firms (over $500 million). But the
study also supports the view that TSCA is relatively more burdensome to small
firms. RRS suggests that the reason small firms face lower per-chemical costs
is that they are not willing to incur any higher costs, since they cannot
absorb higher costs through the marketing of a large number of new chemicals
or large volumes of existing or new chemicals. That is, the opinion held by
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RRS and CSMA is that small firms generally market small volume chemicals, and
their expected profits from these chemicals cannot compensate for additional,
up-front, section 5 costs.
RRS further suggests that an additic nal burden could exist because small
companies lack expertise in PMN filing. For example, these firms may not
employ specialists who know precisely what information should be submitted to
fulfill PMN data requirements. Therefore, according to the RRS report, small
firms face additional problems due to their lack of expertise in regulatory
matters.
The CSMA study states that the following observations of ingredient
suppliers support their opinion regarding the willingness of small firms to
incur PMN filing costs:
• The average present value of profit targets for new
chemicals appears to be directly related to the size
class of the firm (Exhibit VI-2).
• rianagers of small busine5ses seem more likely to
reject marketing a new substance than managers of
large businesses, when both face the same regulatory
cost (Exhibit VI-3).
The study includes data collected from interviews with the managers of
certain ingredient suppliers. These managers were asked if their decision to
market a new chemical would be influenced by “an up-front regulatory cost of
$7,000 as a pre-condition for commercialization.” Of firms with less than $50
million in annual sales, eight of ten “indicated they would seldom, if ever,
engage in such development.” In contrast, of firms with annual sales over
$500 million, only one of seven replied that the up-front cost would
significantly affect the decision to market a new chemical. RRS remarks that
interview results for firms in the middle range are unconclusive.
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EXHIBIT VI-2
AVERAGE PRESENT VALUE OF PROFIT TARGETS PER INNOVATION
FOR INGREDIENT SUPPLIERS IN FOUR SIZE CLASSES
( 15% DISCOUNT RATE )
(Millions of 1981 Dollars)
Overall Firm Annual Sales Size Average Present Value
< 10 $O.153
11-100 $O.334
101-200 $O.438
> 200 $O.909
Source: Heiden and Pittaway 1982, p. 111-27.
EXHIBIT VI-3
AVERAGE REJECTION RATE PER INGREDIENT INNOVATION ASSOCIATED
WITH PMN REQUIREMENT, BY DISCOUNT RATE (12, 15, & 20)
AND SIZE CLASS OF REPORTING FIRM
Overall
Size Class No. of Average Rejection Rate
(Millions of Inno-
1981 Dollars vations Lower Limit Upper Limit
in Sales in Regulatory Cost ($4K) Regulatory Cost ($18.4K)
Per Year) Sample 12% 15% 20% 12% 15% 20%
< 10 10 .17 .19 .23 .51 .58 .70
11-50 11 .12 .12 .14 .35 .38 .42
51-100 4 .16 .17 .19 .47 .51 .58
101-200 2 .1]. .12 .15 .32 .36 .43
201-500 3 .00 .00 .00 .01 .01 .01
> 500 8 .00 .00 .01 .01 .02 .02
Source: Heiden and Pittaway 1982, p. 111-26.
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The study also investigates the extent to which small ingredient
suppliers depend on innovation. RRS concludes that ingredient suppliers rely
heavily on their ability to market new substances in order to remain viable.
Moreover, RRS suggests that this is especially true for small and medium size
companies, which generally derive a large portion of their earnings from the
sale of substances not in existence five years ago (Exhibit VI-4). Because of
this and the greater problems of small businesses to incur regulatory costs,
RRS predicts a gradual shift in the market share of chemical ingredients to
large companies. Hence, RRS believes there will be less competition in the
ingredient industry by small firms as a result of section 5 costs.
EXHIBIT VI-4
ESTIMATED AVERAGE PERCENTAGE OF INGREDIENT SALES ACCOUNTED FOR
BY PRODUCTS NOT IN EXISTENCE FIVE YEARS AGO, BY OVERALL FIRM SALES SIZE
Firm Size Class % Sales from Substances Not
( Millions of 1981 Dollars) in Existence Five Years Ago
< 50 16.5%
51 - 200 18.0%
> $200 6.0%
Source: Heiden and Pittaway 1982, p. 111-38.
The survey conducted by RRS included 100 firms. Yet data on new
substances produced in 1976 and 1978-81 were obtained from only 18 ingredient
suppliers. However, 12 of the 18 companies had annual sales of less than $100
million.
The authors of the study conclude that the sample is roughly
representative of the entire chemical specialties industry. Although they do
not provide statistical data to support this, they base their conclusion on
- 1h fl -
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their knowledge of the respondents and of the chemical specialties industry.
(From telephone conversations with Heiden and Pittaway on April 26, 1982 and
April 27, 1982.) As mentioned in Section V.B, no assertion -- statistical or
otherwise - - is made as to the representativeness of the sample to the
chemical industry as a whole.
The study generally describes a “small” firm as one having sales less
than $100 million. This seems generally consistent with other analyses,
although there may be a need to focus on even smaller firms as well. For
example, it may be desirable to consider as “small” those firms with annual
sales below $30 million. 30
2. The NERA Study
In January 1981, the National Economic Research Associates (NERA)
prepared for CMA a pilot study of the impact of TSCA on the chemical industry
(NERA 1981). This study has already been discussed from the standpoint of
innovation in Section V.C. For this study,.. NERA conducted a survey of the
industry, and used it to examine the direct and indirect costs to chemical
firms of complying with TSCA regulations. The study addresses, as a major
issue, the relative impact of TSCA on small chemical companies. In September
of the same year, CMA wrote a report that contains the NERA (1981) study and
supplements it with CMA’s own comments and observations.
CMA believes that TSCA costs are more burdensome to small than to large
firms because they decrease the profitability of small firms’ new chemical
products more than those of large firms. Referring to the survey data, CMA
30 This was one parameter selected by EPA to define small businesses
for the purposes of the TSCA Section 8(a) Preliminary Assessment Information
Rule (47 FR 26992).
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argues that the profitability of small firms is impaired more by TSCA because
small firms incur the highest ratio of TSCA-related Costs to revenue. That is,
compliance costs behave like fixed costs which burden small firms proportiona-
tely more than large firms. Exhibit VI-5 presents the TSCA costs per million
dollars of domestic sales, by company size, as reported in the CMA study.
EXHIBIT VI-5
TSCA COSTS PER MILLION DOLLARS OF DOMESTIC SALES,
BY COMPANY SIZE, AS INDICATED BY CMA
(Millions of 1979 Dollars)
TSCA Cost Per Million
Company Size Dollars of Sales
Undez 25 $1,311.04
25 - 100 $1,175.87
100 - 200 $346.38
200 - 500 $321.39
500 - 1,500 $429.92
Over 1,500 $542.41
Source: NERA 1981.
The survey data indicate that large firms have higher TSCA regulatory
costs, in proportion to their sales, than medium-size firms. Of course, the
bulk of this difference may be reflected in non-PMN factors (like Inventory
reporting). Another explanation for this is that medium-size firms may
introduce the least number of new chemicals in proportion to their revenue.
Additionally, there could be two other explanations, assuming NERA’s survey
data are reflective of the industry: (1) Medium-size firms may produce more
new chemicals for which health and safety are generally less subject to
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question than the new chemicals produced at large firms, and so they incur
lower filing costs; (2) Large firms may be willing to spend proportionally
more on regulatory measures in order to further ensure against any risks of
delay or cancellation, especially when these risks concern high volume
substances. Thus, they may be willing to provide very complete data packages
to eliminate any “snags” in the PMN review process.
The NERA (1981) study classifies “small businesses’ t as businesses with
less than $100 million in annual sales revenue. It states that small chemical
companies “produce a relatively large share of all new chemical substances.”
In addition, the study remarks that several small businesses are
“single-product 1 entities.” CMA further believes that many small firms are
under continuous pressure to innovate in order to maintain the size of their
markets. The report implies that small firms face the most risk, in terms of
firm failure, if their innovative capabilities are hindered. Thus, CMA
suggests that the impact is two-fold: TSCA imposes on small businesses not
only a disproportionate cost burden, but a disproportionate risk and
uncertainty burden as well.
CHA maintains that the extra burden which section 5 of TSCA imposes on
small companies will lead to an increase in the number of small business
failures. The report suggests two main reasons why this would be bad for the
country as a whole:
(1) Small business introduce a relatively large proportion of
all new chemical substances. Therefore, fewer small
companies could result in less innovation;
(2) A reduction in the number of small companies implies
higher concentrations in chemical industries, hence, less
competition.
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The NERA (1981) survey was based on responses of 36 C 1A member companies
which represented about 20 percent of C 1A membership or 23 percent of CMA
membership sales. Of the total “chemical industry” as defined by CMA (see
below), these firms comprised 14.7 percent in sale5.
However, the sample of chemical firms used in the survey is not
representative of the entire chemical industry for several reasons. The
36-firm sample is small, self-selected, and skewed heavily tc wards large
firms. For example, only five firms are in the “under $25 million” stratum,
though they are used in the study to represent 2,480 of the 3,018 total
companies with more than 20 employees in SIC codes 28XX and 2911 (the chemical
industry).
To account for an underrepresentation of small firms in the survey
sample, NERA (1981) used a “separate ratio method.” The survey sample was
first divided into six strata based on company size. The two lowest
categories were “under $25 million” and”$25-lOO million.” For any variable
under consideration, this method would weight the mean of each stratum by the
fraction of sales which that stratum represented in the entire chemical
industry. However, firms adversely affected by TSCA regulations may have had
more incentive to participate in the study than firms not adversely affected
(in order that their burden be reported and analyzed). Therefore, if the
survey responses are in fact biased (in any direction), this weighting process
potentially exacerbates the distortion in the data.
3. ICP Study
ICP (1980) performed an analysis of the economic impacts of section
S notice requirements under TSCA (ICF 1980). Part I analyzes the impact on
the chemical industry, and one of the issues considered is the variable impact
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of section 5 on chemical firms of different sizes. To examine the issue, ICF
(1980) conducted a meeting of experts on the chemical industry and
innovation. Two of the experts were scholars from the academic community who
had studied chemical innovation. Three others were independer t consultants to
the chemical industry who collectively held a total of 100 years of industry
experience. The ICF (1980) study presents the opinions of these experts with
regard to the impact of TSCA on small chemical companies.
The ICF (1980) study breaks up the chemical industry into four size
categories: $0 to $3 million in annual sales, $3 to $10 million, $10 to $200
million, and greater than $200 million. It analyzes the characteristics of
different size firms and relates their behavior to possible impacts of section
5 regulation. According to the study, the important distinctions between
different size firms are their expected sales volumes for new chemical
products and the access they have to expertise on TSCA regulation. ICF states
that the expert panel characterized mid-sizç firms ($10 to $200 million) as
having limited information on about regulatory and legal matters. In
addition, ICF (1980) said:
Without expertise in regulatory matters, they would likely
choose to take actions that minimized their exposure to
the threats posed by regulation. Thus, they should be
expected to (1) steer their new product development away
from suspect chemicals, and (2) minimize their regulatory
and legal costs by simply not marketing any chemical on
which EPA makes a request for additional data.
That (ICF 1980) study pointed out that small companies, below $10
million, also have low expected profits on new chemical introductions and a
lack of regulatory expertise -- even less than medium size firms. The study
remarks that their small managerial staff and legal capability act to increase
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direct out-of-pocket costs and uncertainty costs. Delays in new chemical
introduction are also mentioned as a factor that could burden small businesses
more than large ones; the study indicates that small firms have less expertise
in trying to avoid delays than large firms.
The report (ICF 1980) adds that small companies and some mid-size
companies may not have the legal expertise to protect confidential information
submitted to EPA. Therefore, ICF (1980) believes that information
requirements under section 5 could provide large companies with an inexpensive
way to track their small rivals’ new product development.
ICF (1980) predicts that, over the long term, the chemical industry may
become more concentrated, and innovative companies may be necessarily larger
in order to absorb higher regulatory costs. Furthermore, firms may shift
their market strategy toward the consolidation of product lines into high
volume products.
The ICF (1980) study does not define “small business” in a manner
consistent with that of other studies. For example, what may be true for
firms below $10 million, or small companies as discussed in the ICF study, may
not be true for firms below $100 million as discussed in the CSMA study. By
examining a sample of approximately 500 PMNs submitted in 1980-81, ICF found
that the number of companies submitting PMNs with annual sales less than $30
million is about twice that of companies with sales less than $10 million.
Hence, the $10 million definition of small is limited in its applicability.
4. ADL Study
ADL released its study in December 1978 (ADL 1978), so much of its
content does not reflect the current reality of the section 5 program.
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Nevertheless, the study’s general comments on the impact of TSCA on small
companies are still relevant. These comments are:
• The per chemical filing costs incurred by small
firms tend to be lower then those of large firms.
ADL believes this is because small firms do not have
as much access to information as large firms, and
therefore, they would supply less, incurring lower
per-chemical costs.
• Regardless of their lower per-chemical filing costs,
small firms are potentially burdened more by section
5 because filing costs represent a higher proportion
of the profit stream from small-volume chemicals.
• Small companies are less willing to cope with the
potential uncertainties and risks associated with the
section 5 program and therefore would likely redirect
themselves away from new chemical innovation.
The data to support these conclusions were developed under tight time
deadlines and therefore may not be as complete as they otherwise might have
been. Also, it is important to note that the nature of the section 5 Program,
as analyzed by ADL (1978), differs significantly from the regulatory options
now under consideration.
5. Summary of Previous Studies
Clearly, the consensus from previous analyses is that the section 5
program potentially results in disproportionate economic effects on small
businesses. These findings have contributed towards the evolution of the
section 5 program to the current set of regulatory alternatives. The effects
of these alternatives on small businesses are discussed in Section C.
Furthermore, the proposed exemptions policy further mitigates the potential
economic effects on small businesses. These are discussed in Section D.
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C. ESTIMATED COST TO SMALL BUSINESS AND IMPACT ANALYSIS
Most of the studies discussed previously draw the conclusion that the
potential exists for small business to be adversely affected by the section 5
premanufacture notification requirements. In this section, the magnitude of
the potential impact is determined after developing a definition of ‘a small
business for TSCA section 5 analysis purposes. Using the PMN data base and
the costs developed in Chapter IV, the amount of cost imposed on small
business is computed. Because these costs are based only on actual PMN
submissions by small companies, they potentially understate total costs on
small business. This is true because previous studies discussed in Section
VI.B suggest that there may also be costs associated with not commercializing
chemicals which become unprofitable as a result of section 5 requirements.
However, the magnitude of these costs are not known with sufficient certainty
to include them in the analysis. Also in this section, the program cost to
small business (as estimated from PMN submissions) is compared to two measures
of the financial health of small business -- sales and profitability; and the
section 5 cost per new chemical is compared to expected new chemical sales and
profits.
1.. Definition of Small Business
Several sources exist for the definition of small business,
including the Small Business Administration, industry, and EPA. The Small
Business Administration (SBA) defines small businesses by SIC codes. For each
4-digit code, the SBA develops employment cut-offs that firms cannot exceed if
they are to qualify as a small businesses for purposes of government
procurements and often for special treatment under certain government
programs. For the chemical industry and certain other industrial sectors most
— 11.0 —
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affected by the PMN requirements, the cut-off has generally been either 1,000
or 500 employees per firm. Based on data from the latest Census of
Manufactures , sales per employee in the chemical industry (Major Group 28)
are $134,000 in 1977 dollars (USDOC, 1981). When inflated to December 1981
dollars using the Producer Price Index for Chemicals and Allied Products, this
estimate becomes $203,000 per employee. Thus, the SBA definitions of 500 or
1000 employees translate to cutoff points of approximately $100 million or
$200 million in annual sales.
The chemical industry has defined small entities for certain surveys it
has conducted. In 1975, Foster D. Snell chose a definition of $30 million of
sales in 1972. This amount would be $84 million today, based on the change in
the Producer Price Index for Chemicals and Allied Products from 1972 to
December 1981. NERA’s study used a $100 million sales level in 1979. RRS’s
study for the Chemical Specialties Manufacturers’ Association used $30 million
in 1981 sales. -
The final alternative to consider concerns the TSCA definitions used in
section 8. EPA has tailored the definition to the particular purpose that the
regulation serves. For Inventory reporting in 1978, a situation in which a
comprehensive list of all chemicals manufactured was sought, the small
business definition chosen was $5 million in sales in the most recently
completed fiscal year. For the 8(a) Level A rule, a $30 million cut-off was
chosen. 31 ICF noted (in ICP 1980) that it panel of in4ustry experts
considered $20-$30 million in annual sales to be the point at which the
31 Both these definitions included other considerations such as
production volume of specific chemicals.
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research and development processes of a company changed from being primarily
entrepreneurial to being slightly formalized. 32
In conclusion, either the $30 million or $100 million sales levels may be
appropriate cutoffs for defining small chemi al firms for innovation analysis
purposes. Therefore, for completeness, this analysis is performed for both
definitions.
2.
Estimate of Impact on Small Business
ICF analyzed a sample of approximately 500 PMNs submitted in 1980 anc
1981 to assess the extent to which small business incurred the cost of the
program. Approximately 6.7 percent of the PMNs were submitted by 14 companies
with sales of less than $30 million during the year in which the PMN was
submitted. Furthermore, approximately 12.6 percent of the PNNs were submittec
by 29 companies with sales of less than $100 million. Thus, small companies
on average can be expected to absorb these percentages of the total industry
costs of the program. From Exhibit IV-15, the total industry program costs
are $4,838,000 to $11,432,000 annually, given use of the EPA82 form. Assuming
per-PMN costs are constant across all firm sizes, firms with less than $30
million in annual sales then must absorb costs in the range of $324,000 to
$766,000 (6.7% of the total cost). Firms with less than $100 million in
annual sales must absorb $610,000 to $1,440,000 (12.6% of the total industry
costs).
The effect of these costs on these firms is measured by comparing the
section 5 costs to the total sales volume and estimated annual profits of the
smaller companies. The 14 companies in the sample with less than $30 million
32 The experts also noted that around $200 million in sales the process
almost certainly becomes totally formalized.
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in sales averaged $12 million in sales. This estimate of average annual sales
was derived from EPA data developed from several sources. It is interesting
to note that this estimate of $12 million in average annual sales for 14
compani s with less than $30 million in annual sales is somewhat higher than
the estimate developed in economic analysis conducted to support TSCA section
8(a) rulemaking. According to the Office of Pesticides and Toxic Substances,
EPA (OPTS 1981), 312 companies with less than $30 million in sales averaged
$6.5 million in annual sales.
Assuming EPA receives a total of 900 PMN submissions per year, the total
sales of small companies submitting PMNs each year would be $317 million.
This estiinatewas derived by multiplying the total sales for these 14
companies by the ratio of 900 PMNs to the number of PMNs in the sample. Thus
the cost ($324,000 to $766,000) is only .1 percent to .24 percent of total
sales. Assuming industry pre-tax profit margins of 12 percent, 33 the cost
would represent 0.9 percent to 2.0 percent of profits. These ratios were
calculated assuming pre-tax costs and pre-tax profits. The same ratios would
hold if costs and profits were both specified on an after-tax basis.
When considered in the context of the larger definition for small firms
(annual sales less than $100 million), the impacts are even less. The
adjusted total annual sales of these companies is approximately $2 billion.
The $610,000 to $l,44 0,O00 total cost is between .03 percent and .07 percent
of sales, and is 0.3 percent to 0.6 percent of profits of these firms,
assuming a -pre-tax profit margin- on sales of 12 percent.
33 For industrial chemicals and synthetics, after-tax return on sales
averaged 5.9% for the first three quarters of 1981 (CEA 1982, p. 332).
Assuming a corporate income tax rate of 50%, pre-tax profit margins are assumed
to be double after-tax margins.
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Exhibit VI- 6 summarizes these findings.
EXHIBIT VI-6
IMPACT OF TOTAL PMN COST TO SMALL BUSINESS MEASURED
AS A PERCENTAGE OF SALES AND PROFITS
Small Business Definition Sales Profits
Annual Sales < $30 million* .10 - .25% 0.9 - 2.0%
Annual Sales < $100 million** .03 - .07% 0.3 - 0.6%
*Average sales of firms in this category are about $12 million annually.
**Average sales of firms in this category are about $36.6 million annually.
3. Estimate of Impact on Typical New Chemical Introduced by Small
Business
Using data on PMN submissions, ICF examined the ability of small
firms to absorb PMN filing costs. A sample of approximately 500 PMNs, all of
which were submitted in 1980-81, were analyzed. For this sample, there were
14 companies with annual sales less than $30 million which submitted PMNs.
ICF calculated the average expected production volume per new chemical for
each of these companies. The average expected production volume per new
chemical per “small company” was then derived by averaging expected production
volume across all firms with sales less than $30 million. This average was
103,848 kilograms expected volume, per new chemical, per small company
annually.
ICF used this expected annual volume figure in the following sensitivity
analysis of the profits of small companies. The range of prices for the new
chemical was assumed to be between .50 and 2.00 dollars per kilogram. When
applied to the annual production volume of 103,848 Kg., this price range
translates into a range of annual sales for the new chemical of $52,000 -
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$208,000. Assuming alternative pre-tax profit margins on sales of 12 percent,
30 percent, and 60 percent (which correspond to after-tax margins of 6
percent, 15 percent, and 30 percent 31 ’ ), ICF derived ranges of possible
annual profits associated with these profit margins. Then, assuming a
constant profit yield for ten years and a real discount rate of ten percent as
specified by the Office of Management and Budget (0MB, 1981), the present
value of profits that would result from the sale of a new chemical by a small
firm was estimated. This present value was estimated for each of the three
possible profit margins, as shown in Exhibit VI-7. ICF then performed exactly
the same analysis for firms with annual sales less than $100 million. Exhibit
VI-8 summarizes this second analysis.
EXHIBIT VI-7
DERIVATION OF PRESENT VALUE OF PROFITS FOR EACH OF THE ALTERNATIVE
PROFIT MARGINS, FOR A NEW CHEMICAL BY A FIRM WITH
ANNUAL SALES LESS THAN $30 MILLION
Price Range: $.50 - 2.00/Kg
Annual Production Volume: 103,848 Kg.
Revenue Range: $52,000 - 208,000
Profit 10-Year PV of Profit
Margin Annual Profit Range Range (10% Discount )
12% $6,200 - $25,000 $38,000 - $154,000
30% $15,600 - $62,400 $96 ,000 - $383,000
60% $31,200 - $124,800 $192,000 - $767,000
3 Six percent derived from industry average ROS (CEA, 1982). Thirty
percent roughly derived from NERA (1981) average third year profits from less
than $500,000 new chemical sales markets divided by average third year sales
from those markets (actual value 35.4%). Fifteen percent derived from NERA
(1981) average third year profits from al]. new chemical markets divided by
average market size (actual value 16.7%).
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EXHIBIT VI-8
DERIVATION OF PRESENT VALUE OF PROFITS FOR EACH OF THE ALTERNATIVE
PROFITS MARGINS, FOR A NEW CHEMICAL BY A FIRM WITH
ANNUAL SALES LESS THAN $100 MILLION
Price Range: $.50 - 2.00/Kg
Annual Production Volume: 389,036 Kg.
Revenue Range: $195,000 - 778,000
Profit 10-Year PV of Profit
Margin Annual Profit Range Range (10% Discount )
12% $23,400 - $93,400 $144,000 - $574,000
30% $58,500 - $233,400 $359,000 - $1,434,000
60% $117,000 - $466,800 $719,000 - $2,868,000
Taking the total EPA82 Form cost estimate from Exhibit IV-15 and dividing
by 900 PMNs per year yields the estimated cost of submitting a PMN as $5,400 -
$12,700. ICF compared this cost estimate with the present value of
per-chemical profits for three cases. The “best” case for both types of small
firms is the lowest possible PMN cost ($5,400) along with the highest possible
present value of profits ($767,000 for ±irms below $30 million). Similarly,
the worst case is the highest possible PMN cost and the lowest possible
present value for per-chemical profits. Finally, the average case combines
the mid-range of both the PMN cost per-chemical ($9,050) and the present value
of profits per chemical for a 30 percent pre-tax profit margin.
Exhibit VI-9 illustrates the best, average, and worst cases that might
occur from the possibilities considered in this analysis.
EXHIBIT VI-9
PMN COST AS A PERCENT OF PRESENT VALUE OF EXPECTED PROFITS
Type of Firm Best Case Average Case Worst Case
Sales Below $30 Million 0.7% 4% 33%
Sales Below $100 Million 0.2% 1% 9%
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In conclusion, in a worst-case situation, firms below $30 million in
sales could sometimes incur a section 5 cost which could approach 33 percent
of the present value of their expected profits. For firms with sales less
than $100 million, this worst-case estimate is about 9 percent. Therefore,
ICF concludes that in a worst-case situation, small firms (especially those
below $30 million in annual sales), could potentially be significantly affected
by section 5. The respective percentages for the average-case situation are
approximately 4 percent for firms below $30 million and 1 percent for those
below $100 million. In the best situation, all small firms incur costs which
are less than 1 percent of the present value of the profit stream. It is also
important to understand that all of the above estimates do not incorporate any
savings due to the proposed exemption rules. These exemptions will reduce the
burden on small firms, as discussed below in Section D.
D. EFFECTS OF PROPOSED EXEMPTION RULES ON SMALL BUSINESS
This subsection discusses the effects of the proposed exemption rules on
small business. It uses a methodology consistent with that presented in
Section F of Chapter IV. That is, it utilizes a sample of approximately 500
PMNs considered representative of all PMNs submitted to date to estimate the
number of PMNs submitted annually by small business, the proportion of those
PMNs which would be subject to exemptions under the proposed rules, and the
approximate savings to small business which are attributable to the proposed
exemptions. These estimates are based on the assumption that the exemption
rules will not affect the rate of section 5 submissions from small business.
Because the exemptions could conceivably reduce the perceived barriers to new
chemical development, it may well be true that the rate of new chemical
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development would be higher under the exemption rules than in their absence.
Therefore, the estimates presented here are probably more representative of
lower bounds on the savings to small business due to the proposed exemptions
rules.
In order to put the small business savings into perspective, it will be
useful to briefly summarize the findings presented in Section F of Chapter 4.
The major findings were as follows:
• Based on a sample of approximately 500 PMNs, 64
percent of all PMNs would be eligible for some type
of exemption.
• Total savings to submitters would be between $1.0
and $3.7 million, based on an assumed submission rate
of 900 PMNs per year. This represents between 20 and
33 percent of total industry costs associated with
the EPA82 form.
With respect to small firms 1 analysis of the sample of approximately 500
PMNs yielded the following information:
• Firms with annual sales less than $30 million
submitted 6.7 percent ofall PMNs. However, 62.5
percent of the submissions from these firms would be
eligible for some type of exemption.
• Firms with annual sales less than $100 million
(including the above firms) submitted 12.6 percent of
all PMNs. However, 50 percent of the submissions from
these firms would be eligible for some type of
exemption.
Statistically, one would accept the hypothesis that PMN submissions from firms
under $30 million in annual sales qualify for exemption at the same rate as
PMNs in general (62.5 percent for firms with sales under $30 million versus 64
percent overall). However, for firms with sales under $100 million, such a
hypothesis cannot be accepted. A chi square test applied to samples of
exempted PMNs from firms with sales less than $100 million and a sample from
firms with sales greater than $100 million showed them to be statistically
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different. This phenomenon is best explained by the fact that for the data
analyzed, firms with sales between $30 million and $100 million do not seem to
benefit from the low-volume exemption for very small chemicals (less than 1000
kg.) whereas very small firms and large firms both seem to benefit. At the
present time, it is not known whether this is an artifact of the sample, or an
accurate reflection of innovation behavior by firms of these sizes. Exhibit
VI-lO provides estimates of the important exemption parameters for three
non-mutually exclusive size classes, including the distribution of potential
exemptions by exemption type.
EXHIBIT VI-lO
ESTIMATES OF EXEMPTION PARAMETERS BY SIZE CLASS
Firms < Firms <
$30 million $100 Million
in Sales in Sales All Firms
Proportion of PMNs 7% 13% 100%
Proportion of PMNs submitted 63% - 50% 64%
which are eligible for
exemption
Exemption Type
Photographic 0% 0% 5%
Zero-Day Polymer 20% 16% 20%
14-Day Polymer 5% 10% 24%
Low Volume (< 1,000 Kg.) 35% 24% 24%
Low Volume (< 10,000 Kg.) 40% 50% 25%
Site Limited 0% 0% 6%
Total 100% 100% 100%
Source: Sample of approximately 500 PMNs.
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Based on these data, it is possible to construct the following estimates
for each size class, assuming a total annual submission rate of 900 chemicals:
• number of PMNs submitted,
• number of PMNs eligible for exemptions, and
• number of PMNs eligible for exemptions in each
exemption category.
Ehibit VI-li contains these data.
EXHIBIT VI-il
ESTIMATES OF PNN SUBMISSIONS AND POTENTIAL
EXE 1PTI0NS BY SIZE CLASS
Firms < Firms <
$30 million $100 Million
in Sales in Sales All Firms
Number of PMNs Submitted 60 113 900
Number Eligible for Exemption 38 57 576
Exemption Type
Photographic • 0 0 29
Zero-Day Polymer 8 9 115
14-Day Polymer 2 6 113
Low Volume (< 1,000 Kg.) 13 14 138
Low Volume (< 10,000 Kg.) 15 28 144
Site Limited 0 0 35
Total 38 57 576
As can be seen in Exhibit VI-il, 38 of 60 submissions (63%) from firms
under $30 million in annual sales are eligible for some type of exemption,
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while 57 of 113 submissions (50%) from firms under $100 million in annual
sales are so eligible.
Exhibit VI-12 displays the savings due to the proposed exemption policy
for firms with less than $30 million in annual sales. Form filing savings
were based on the difference between form filing costs for the EPA82 form and
the form filing costs for the various exemption notices as estimated in
Exhibit IV-ll (pg. 110). Costs of delay were based on the estimated present
value of the per-chemical profit stream for firms under $30 million in sales,
as estimated in Exhibit VI-7. The total estimated savings to these firms due
to the proposed exemptions rules are $33,000 - $317,000. When delay costs are
calculated based on the range of profit streams used in Exhibit VI-12, total
costs for the 60 PMNs expected to be submitted by these firms are estimated as
$310,800 - $900,000 (assuming all costs associated with the EPA82 form). The
proposed exemptions would therefore result in a savings of 11 percent to 35
percent of total FMN costs for this class of companies. This is consistent
with the savings generally attributable to the exemptions policy for all firms.
Exhibit VI-13 displays the savings due to the proposed exemption policy
for firms with less than the $100 million in annual sales. Form filing
savings were estimated as described above. Delay savings were based on the
best available data regarding the present value of the per chemical profit
streams for companies of this size. This data suggested a range of $144,000
to $2,868,000 as shown in Exhibit VI-8. Total estimated savings to these
firms due to the proposed exemptions policy are $71,000 to $973,000. When
delay costs are calculated based on the range of profit streams used in
Exhibit VI-13, total costs for the 3.13 PuNs expected to be submitted by these
firms are estimated as $646,360 - $2,913,140. Thus, the savings due to the
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EXHIBIT VI-12
EXEMPTION SAVINGS FOR FIRMS WITH LESS THAN $30 MILLION ANNUAL SALES
(1981 Dollars)
# of Form Filing Cost Form Filing Cost
PMNs Category Without Exemption With Exemption Savings
Form-Filing Savings
8 Zero-Day Polymer 9,600 - 49,600 1,680 - 2,960 7,920 - 46,6
2 14-Day Polymer 2,400 - 12,600 340 - 960 2,060 - 11,6L
13 Low Volume 15,600 - 80,600 2,210 - 6,240 13,390 - 74,3
(< 1,000 Kg.)
15 Low Volume 18,000 - 93,000 14,400 - 33,900 3,600 - 59,1(
(< 10,000 Kg.)
$26,970 - $l91,.
Delay Savings 2
8 Zero-Day Polymer 1,600 - 31,520 110 - 2,160 1,490 - 29,J (
2 14-Day Polymer 400 - 7,880 70 - 1,490 330 - 6,39
13 Low Volume 2,600 - 51,220 480 - 9,680 2,120 - 41,54
(< 1,000 Kg.)
15 Low Volume 3,000 - 59,100 560 - 11,170 2,670 - 54,07 ’
(< 10,000 Kg.) S $6,380 - $125,2’
Total Savings $33,350 - $316,76
Total Savings (Rounded) $33,000 - $317,00
1 Per-chemical form-filing costs without exemption are assumed to be
$l,200-$6,200, as determined by dividing total form-filing costs in Exhibit
IV-16 by 900 chemicals. Per-chemical form-filing costs with exemptions are
provided in Exhibit IV-ll.
2 Delay costs use the methodology developed in Chapter IV.B.3 (p. 83).
However, direct costs of delay are based on a.d estimated pre-tax profit stream
of $38,000-767,000 per chemical for firms with under $30 million in annual sales
and a 10 percent real rate of return as mandated by 0MB. Therefore per-chemical
delays without exemptions are estimated to be: Profits x 3.2% (value of delayin
4 months at 10% real rate of return) x .8625 (% of PMNs not withdrawn nor inter-
mediates associated with other PHNs) x .46 (% of remaining PMNs for which EPA
receives a commencement of manufacture notice) x .395 (% of remaining PMNs for
which EPA receives a commencement notice within 30 days of expiration of review
period) = $200 - 3,940. Per chemical delays with exemptions are calculated
similarly, only with different delay periods, as explained in Section IV.B.3.
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EXHIBIT VI-13
EXEMPTION SAVINGS FOR FIRMS WITH LESS THAN S100 MILLION ANNUAL SALES
(1981 Dollars)
jft of Form Filing Cost Form Filing Cost
PMNs Category Without Exemption With Exemption Savings
Form-Filing Savings
9 Zero-Day Polymer 10,800 - 55,800 1,890 - 3,330 8,910 - 52,470
6 14-Day Polymer 7,200 - 37,200 1,020 - 2,880 6,180 - 34,320
14 Low Volume 16,800 - 86,800 2,380 - 6,720 14,420 - 80,080
(< 1,000 Kg.)
28 Low Volume 33,600 - 173,600 26,880 - 63,280 6,720 - 110,320
(< 10,000 Kg.)
$36,230 - 277,190
Delay Savings 2
9 Zero-Day Polymer 6,660 - 132,480 460 - 8,110 6,200 - 123,370
6 14-Day Polymer 4,440 - 88,320 840 - 16,710 3,600 - 71,61(’
14 Low Volume 10,360 - 206,080 1,960 - 38,980 8,400 - 167,100
(< 1,000 Kg.)
28 Low Volume 20,720 - 412,160 - 3,920 - 77,960 16,800 334,200
(< 10,000 Kg.) $35,000 696,280
Total Savings $71,230 - $973,470
Total Savings (Rounded) $71,000 - $973,470
Per-chemical form-filing costs without exemption are assumed to be
$1,200-$6,200, as determined by dividing total form-filing costs in Exhibit
IV-16 by 900 chemicals. Per-chemical form-filing costs with exemptions are
provided in Exhibit IV-ll.
2 De1ay costs use the methodology developed in Chapter IV.B.3 (p. 83).
However, direct costs of delay are based on an estimated pre-tax profit stream
of $38,000-767,000 per chemical for firms with under $30 million in annual sales
and a 10 perc-ent real rate of return as mandated by 0MB. Therefore per-chemical
delays without exemptions are estimated to be: Profits x 3.2% (value of delaying
4 months at 10% real rate of return) x .8825 (% of PMNs not withdrawn nor inter-
mediates associated with other PMNs) x .46 (% of remaining PMNs for which EPA
receives a commencement of manufacture notice) x . 395 (% of remaining PMNs for
which EPA receives a commencement notice within 30 days of expiration of review
period) = $200 - 3,940. Per chemical delays with exemptions are calculated
similarly, only with different delay periods, as explained in Section IV.B.3.
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proposed exemptions rules are 11% - 33% of total PMN costs expected to be
incurred by firms with annual sales under $100 million. This is consistent
with the finding for firms under $30 million in sales, as well as all firms in
total.
In conclusion, the proposed exemption rules will significantly reduce the
burden on small firms. For firms under $100 million in annual sales, saving
would appear to be between 11% - 33%. Similar saving are projected for firms
under $30 million in annual sales. Because projected savings for all firms
are between 20% and 30%, it would seem that the smallest firms (those under
$30 million) benefit from the proposed exemption rule at roughly the same rate
as large firms. However, firms between $30 and $100 million in sales do not
appear to gain as much. There is no evidence that large firms will overly
benefit from the proposed exemption rules, at the expense of small firms.
E. SUMMARY OF SMALL BUSINESS EFFECTS
In this chapter, four previous analyses were discussed which noted the
potential for disproportionate effects on small business resulting from the
section 5 program. These findings have contributed towards the evolution of
the section 5 program to the current set of regulatory alternatives.
Direct costs to small manufacturers were estimated using the sample of
approximately 500 PMNs discussed in Chapter II. Firms with less than $30
million in annual sales were found to submit 6.7 percent of the PMNs while
firms with less than $100 million in annual sales were found to submit 12.6
percent of the PMNs. Exhibit VI-14 provides estimates of total costs, and the
percentage of sales and profits represented by these costs:
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EXHIBIT VI-14
COSTS OF SECTION 5 PROGRAM TO SMALL BUSINESS
(1981 Dollars)
Small Business Definition Total Cost Cost/Sales Cost/Profits
Annual Sales
< $30 rnillion* $324,000- $766,000 0.10-0.24% 0.9-2.0%
Annual Sales
< $100 rnillion** $610,000$l,440,000 0.03-0.07% 0.3-0.6%
*Average sales of firms in this category are about $12 million annually.
*Average sales of firms in this category are about $36.6 million annually.
However, because this analysis is based on chemicals which, by
definition, were those submitted by small firms which could absorb the PMIS
costs and remain profitable, the cost estimates could be biased downward. The
PNN data base provides no infornimation on chemicals which might have been
commercialized in the absence of the section 5 program.
Yet to the extent this phenomenon exists, it will be mitigated somewhat
by the proposed exemption rules. Because the exemptions could conceivably
reduce the perceived barriers to new chemical development, it may well be true
that the rate of new chemical development would be higher under the exemption
rules than in their absence. For firms under $30 million in annual sales, the
proposed exemptions would result in a savings of 11 to 35 percent of total PMN
costs. For firms under $100 million in annual sales, the expected savings are
11 to 33 percent of total PMN costs. These estimates could be more
representative of lower bounds on the exemption-related savings to small
business because it reduees the perceived barriers to new chemical
development. In general, there is no evidence that large firms will overly
benefits from the proposed exemption rules at the expense of firms with under
$30 r illion in annual sales.
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CHAPTER VII
HEALTH IMPLICATIONS OF REGULATORY ACTIONS RESULTING FROM
ALTERNATIVE P!’IN RE ORTING FORMS
A. INTRODUCTION
The following chapter discusses and projects human health impacts that
might have been associated with regulatory decisions taken by EPA due to
differences in the types and amounts of information supplied by the three
alternative PMN forms. This analysis of human health impacts is based on a
study of PMN cases performed by the Industrial Chemistry Branch (ICB),
Economics and Technology Division, of OTS (Farris, 1982). The objective of
the ICB study was to review PMNs for which the Agency had taken regulatory
actions and to determine whether use of any one of the three alternative forms
would not have resulted in identification of the respective PMN chemicals for
Agency action. The health impacts which are discussed in this chapter
constitute only the differential effects associated with the use of the
alternative PMN reporting forms for the particular cases examined. They do
not in any way constitute a summary of the health benefits of the entire PMN
program.
B. OVERVIEW OF THE ICB PMN STUDY
The intent of the Industrial Chemistry Branch study was four-fold. It
was intended to:
identify the PMN form data elements critical for
comprehensive, accurate, and informed PMN reviews;
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• identify the source(s) of data for critical elements;
• determine whether use of any of the three
alternative PNN forms would have resulted in the
Agency’s failure to identify risk factors due to lack
of data; and
• evaluate the extent to which use of the three PNN
reporting forms would have resulted in regulatory
outcomes different from those which actually occurred
for a group of PMNs acted on by the Agency.
These objectives were met through a careful review of PMN cases by a
senior OTS scientist with substantial experience in the P 1N review process.
In effect, this process required reconstructing the history of the separate
P 1N reviews; this entailed a careful reading of the complete file and
discussions with numerous OTS personnel to verify the important features,
problems and regulatory outcomes of PMNs investigated. The results of this
study, though necessarily judgmental, are based on a high level of knowledge
and expertise. The results were also corroborated through consultation with
other OTS staff.
Reviews were conducted for 14 of the 64 PMNs for which the Agency has
informally or formally expressed concerns about possible risks to health or
the environment. The actions taken in these cases include TSCA (5)(e)
actions, withdrawal or suspension of PMNs due to imminent 5(c) or 5(e)
actions, and voluntary actions taken by the submitter following negotiation
between the submitter and EPA. An implicit assumption of the study was that
the same level of OTS resources.would be available for reviews regardless of
the PMN form used by submitters.
This study produced a large number of interesting and important results.
For the purposes of this analysis the most important is identification of
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differences in regulatory outcomes given the alternative PMN form . However,
we believe it is useful to briefly describe other areas of important
information resulting from the study germane to the entire issue of
premanufacture notification.
1. Factors Critical to Identification of Risk
Critical identification factors were defined as specific categories
of information that contribute to the Agency’s identification of risk leading
to regulatory action. In the ICB study, factors were rated as being of low,
medium, or high importance in identifying risk with those receiving medium or
high ratings considered critical. The following factors were rated critical
(the numbers in parentheses indicate in how many of the 14 cases the item was
of medium or high ixnportance):*
-- chemical identity (14).
-- impurities identity (<3).
-- description of use (14).-
-- hazard warnings (5).
-- number of customers (4).
-- block diagram (<3).
-- occupational exposure - sites controlled by submitter (9).
-- occupational exposure - sites controlled by others (10).
-- release to the environment - sites controlled by others (4).
-- consumer or commercial exposure (5).
*It is important to note that these ratings are indicators of the
relative importance of the various pieces. All of the factors are considered
important in that they permit OTS staff to evaluate potential human health
and/or environmental effects associated with PMN chemicals.
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The Agency’s structure/activity relationship and internal health analyses
were critical for 11 cases, while in the other three, analyses of impurities
of substances generated d nring use of the PMN substances were critical.
Health data submitted with the PMN substances were not the primary grounds for
concern in any of the 14 cases in the study, nor was information on release to
the environment at sites controlled by the submitter ever the sole factor in
Agency decisions concerning possible actions. For eight cases, data from
previous PMN reviews were critical factors.
2. Sources of Data on Critical Factors
The three major sources of information used in PMN reviews are: (1)
the PMN itself, (2) supplementary information provided by the PMN submitter,
and (3) other sources used by OTS personnel during the course of the review.
The amount and type of information supplied with a PMN varies in part
according to the form used by the submitter. -
Of the 14 PMN cases in this sample, the PMN alone provided sufficient
data for chemical identification of most class 1 substances; class 2
substances and polymers required additional information, usually from the
submitter. (A class 1 substance is one which can be defined by a specific
structural formula; class 2 substances cannot.) Adequate use information was
received with the PMN in only two cases with all of the other 12 requiring
significant additional information from the submitter.
Generally speaking, the PMN forms provided complete information of the
following types: class 1 chemical identification, production volume, and
hazard warnings. Adequate information was less often provided concerning use
category, polymer identification, and occupational exposure at sites
controlled by the submitter. PMN data were of little use for providing
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exposure information on sites controlled by others and consumer/commercial
exposures. The PMN forms in this sample were insufficient in and of
themselves to evaluate health hazards because the test data and/or risk
assessments received with the P 1Ns were not relevant to the Agency’s concerns.
3. Potential for Different Regulatory Outcomes Given Use of Alternative
PMN Forms
The likelihood that the Agency will identify and act upon PMN che-
mica’ls relies equally on two factors. The first is the information provided
in the PMN submissions. The second is the expertise of OTS personnel, i.e.,
their collective ability to evaluate the degree of potential hazard associated
with new chemicals. Because the Agency is confident that the level of
in-house expertise is high and that the degree of expertise available is
comparable across all individual PMN reviews, the major variable is the
quality and quantity of information available to assess the PMN chemicals.
Although information provided in P!hlN submissions is and will continue to
be supplemented by information from sub nitters during the review period, OTS’s
ability to identify suspect chemicals is likely to be increasingly dependent
upon the information provided in PMN submissions themselves. This situation
results from the simple fact that the Agency expects to experience further
increases in the number of PMNs submitted, 35 while resources available for
reviews will be relatively stable. Thus, the level of effort expended per
review will necessarily be reduced, arid the amount and quality of information
provided in the initial PMN submissions will further increase in importance in
enabling OTS to perform its assessments. However, increased OTS expertise and
35 The current PMN submission rate of about 900 per year has been
projected to increase to a range of 1100 to 1300 in FY 84 (Luttner and
Shapiro, 1982).
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efficiency in evaluating data regarding the potential health effects of PMN
chemicals will help to maintain the quality of the analyses.
The different information requirements of the three PMN forms addressed
in this analysis (the EPA79, EPA82, and the CMA79 forms) are summarized in
Appendix D. Of the three, the EPA79 form requires the most data, while the
other two require considerably less information.
The ICB PMN review study found that, of the 14 regulatory actions taken,
nine cases were not affected by the particular PMN reporting form used.
However, in five cases there was some probability that a different regulatory
outcome would have occurred had a different PMN requirement been in place.
The probability estimates (i.e., changes in regulatory outcomes) are
subjective estimates based on a combination of factors, including the
identification of factors of particular importance to risk concerns and the
extent to which such factors are likely to be provided given use of
alternative PMN forms. The cause(s) of concern, the critical data which led
to the action taken, and the probabilities of the same action being taken with
other forms for these five cases are presented in Exhibit 7-1.
This analysis of human health impacts therefore focuses on the five PMN
substances previously identified by ETD personnel (Farris 1982) for which the
use of different PNN reporting forms could have resulted in different
regulatory decisions than those that were actually taken.
This chapter addresses the health implications of regulatory actions
resulting from the use of different proposed PMN forms. Little d-iscussion of
the environmental effects due to alternative forms is provided. Quantitative
analysis of toxic effects were not conducted for a number of reasons: (1) for
PMN A significant EPA concern about environmental release and subsequent
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EXHIBIT Vu —i
SuMMARY OF PROBABILITIES FOR DIFFERENT REGULATORY
ACTION FOR SELECTED PMNs
cI L.L Regulatory Action
Original
Form Submitted
Probability Of Action
Beina Taken With Other Forms And Reason For Difference
PMN A
Withdrawn - 5(e)
action was likely
due to processor
exposure
Submitter’s own data
package.
EPA79 - Properly filled out would have resulted In same action
with 95 percent probability.
EPA82 - 75 percent chance of same outcome; reduced exposure
data relative to EPA 79.
CMA19 - 85 percent chance of same outcome (better processor
exposure section than EPA 82).
EPA79 EPA82 - 80 percent chance of same outcome; insufficient
processor/consumer and other chemical informaL ion.
CMA79 - 85 percent chance of same outcome; lack of some
chemical identity information.
PMN C
Label change.
Submitter’s Own Data
package (very detailed)
EPA79 - 80 percent chance of same oulcome; form requires less
detailed exposure information than was submitted.
EPA82 - 50 percent chance of same outcome; reduced
consume r/comme rc i a I exposure requ i reuierits.
CMA79 - 110 percent chance; lower consumer/commercial exposure
data requi cements.
EPA82 - Same action would have occurred.
CMA79 - 50 percent since decomposition product identity or
original MSDS is optional; greater than or equal to 95
percent if these data were submitted (somewhat
unlikely).
EPA79 EPA82 - Same action would have occurred.
CMA79 - 80 percent chance of same outcome; lack of block
diagram and reduced likelihood of MSDS.
PMN B
Withdrawn -
5(c) extension
likely.
PMN D
PMN E
EPA79
MSDS Change.
MSDS Change.
Source: Farris 1982.
- 170 -
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toxicity and persistence existed. However, the lack of test data precluded
quantitative assessment of the problem. Analysis of analogues showed that PHN
A may have presented a moderate to severe hazard to aquatic life and that
bio-concentration may be an important factor. EPA requested ecological
testing be performed and the submitter withdrew the PMN. (2) PMN B was
expected to be persistent in the aquatic environment, and to possess aquatic
toxicity. In this case as well, analogues were used to predict problems with
the PMN and only speculative conclusions could be reached. The P 1N was
withdrawn by the submitter; (3) for PMNs C, D, and E, there were no problems
identified concerning environmental release, toxicity, persistence, or
bio-concentration. All three PMNs were dropped from review after voluntary
actions were taken by the submitters.
In the discussion that follows we briefly outline the regulatory history
of the substances in question, analyze the conditions under which human
exposure or environmental damage might occur, review the toxic properties of
the substance and, where possible, develop rough estimates of the health
impacts that could have resulted from alternative regulatory or voluntary
actions.
C. CASE STUDIES
1. PMNA
a. Regulatory History
This PMN substance was intended for use as a plasticizer in the
prod iction of consumer products made from polyvinyl chloride plastic (PVC).
The manufacturer stated that although initial production runs of tens of
thousands of kilograms were anticipated, commercial success of the product
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might increase demand to as much as several million kilograms per year. The
PMN was submitted on none of the three forms under consideration but was
accompanied by an information package designed by the submitter. The major
concerns expressed by EPA were primarily due to the large production volume
arid resulting potential for occupational and consumer exposures. The Agency
conducted several extensive reviews of the possible health effects of the PMN
substance and estimated the likely extent of exposure. Eventually a decision
was made to draft a 5(e) order, requesting more information on potential
chronic toxic effects. The manufacturer withdrew the PMN the day the order
was issued.
b. Human Exposure and Environmental Release
The PMN substance was to have been produced in a modern,
highly-automated, dedicated facility in an enclosed process. The two steps in
the production processes were to be performed in very large sealed vessels.
The EPA exposure assessment study estimated that no more than 12 workers would
be exposed to the PMN substance during its synthesis or packaging. They would
be exposed to the pure liquid material primarily through the dermal route.
The compounding of PVC using the PMN substance was to be carried out at
facilities not controlled by the manufacturer. The compounding would involve
the mechanical mixing of the PMN substance with raw PVC resin and other
additives and would occur at 20-30 facilities owned by the major customers of
the PMN manufacturer. EPA estimated that 500-1000 workers would be exposed
dermally to resin formulations containing the PNN substance, and that air
exposure levels (inhalation) would be on the order of 0.1-5.0 mg/rn 3 .
The fabrication of PVC products containing the PMN substance would take
place at numerous small facilities specializing in the manufacture of one or
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more specific types of products. EPA estimated that 15 to 30 thousand workers
would be exposed to the PMN substance during fabrication. Exposure levels
were expected to be about the same as for formulation.
The PMN substance was not expected to decompose completely during
fabrication or to react with the PVC to become immobilized in the final
products. Some, if not the bulk, of the PMN substance would be available to
cause exposure to the consumers of PVC products. EPA estimated that as many
as 100 million persons were potentially at risk of exposure. EPA calculated,
using typical values for the proportion of the PMN substance found in products
and the expected extent of dermal exposure, that the average consumer could be
-6
expected to absorb as much as 2.6 x 10 mg/day of the PMN substance.
It was also estimated that up to 2-4% of the PMN substance could be
released into the environment per year. Some release to publicly owned treat-
ment works or the Mississippi River was also expected. A lack of environmental
test data prevented any further analysis of environmental release or exposure.
c. Toxic Properties
Because the PMN substance was closely related to a number of
other widely used plasticizers, some data were available which were useful in
assessing the possible toxic effects of the PMN substance. The acute toxicity
of this family of substances was generally quite low. Previous industrial
experience with similiar substances indicated that dermal exposure could cause
skin irritation, although test data submitted for the PMN substance itself
failed to find evidence of skin irritation in animals.
The PMN substance was expected to be metabolized very rapidly in the body
to mainly innocuous compounds although one scientist expressed mild concern
that one of the metabolites was similar to a prostaglandin precursor and that
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ingestion of the PMN substance could disrupt prostaglandin metabolism and
cause unspecified metabolic and physiological disturbances.
Several members of the family of compounds to which the PMN substance
belongs have been shown to possess carcinogenic activity. Thus, one of the
major concerns expressed early in EPA’s evaluation of the toxicology of this
compound was the potential for carcinogenicity. However, a review of the
literature indicated that the nearest analogue to the P!’1N substance which has
been tested for carcinogenic activity has not been demonstrated to cause
cancer in animals. Five out of six long-term studies of a relatively close
analogue to the PMN substance showed no detectable carcinogenic activity.
Only one study indicated an increase in tumor incidence in mice exposed to the
substance, and in that study, the elevation in tumor incidence was not
statistically significant. No other close analogues of the PMN substance have
been tested for carcinogenicity. At the end of the Agency’s review, possible
carcinogenicity was still of concern, but the level of this concern was
somewhat lower than it had been originally.
Little data are available on the inutagenic properties of the PMN
substance, but the close analogue was found not to be a mutagen in standard
bacterial assays.
d. Health Implications of Alternative Regulatory Actions
The ETD analysis of alternative reporting forms suggested that
two of the reporting forms under consideration, the CMA79 form and the EPA82
form, might not have supplied adequate data on the duration and intensity of
processor exposure to alert EPA to the potential health hazards of the PMN
substance. ETD staff estimated that there would be approximately a 15 percent
and 25 percent chance, respectively, that EPA would have allowed the PMN
substance to be produced had these forms been used.
-------
We would suspect that the major immediate effects of allowing this
substance to be made would have been the occurrence of increased exposures,
possibly producing some number of cases of dermatitis among the workers
exposed during the production of the PtIN substance and during the formulation
and the fabrication of PVC resin. The number and severity of these effects
cannot be estimated from the available data.
While it is possible that chronic effects other than cancer might occur,
(considering the number of workers exposed, such effects might constitute a
substantial portion of the total health impact), the number of likely cases of
such effects also cannot be estimated.
The majority of the available data suggest that the PMN substance is not
a carcinogen. It is not unlikely, therefore, that the PMN substance would in
fact not cause any measurable increase in cancer incidence among exposed
workers or consumers. However, if one extrapolated from the 95 percent upper
confidence limit for the highest dose “negative” animal test (assuming that
the test gave a false negative result), rough calculations 35 indicate that
each year of use of the PMN substance would be expected to produce about 9
cases of cancer among all of the exposed workers over their lifetimes. About
8.7 would be expected to occur among fabricators, 0.3 among formulators, and
less than 0.02 among the producers of the PMN substance. No cases (less than
0.001 cases/year) would be expected to occur among consumers. More than
anything else these estimates spell out the potential health implications of
the high occupational exposures, and illustrate the reason for EPA’s concern.
36 JTh1s assessment assumes a linear dose-response extrapolation from
the highest dose “negative” animal test result.
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The question of what proportion of these possible health effects were
prevented by EPA’s action (and might not have been prevented by the CMA and
EPA82 forms) is very difficult to answer. The major substitutes for this
materia] are very close structural analogues, which would be expected to have
very similar toxicological properties to the PMN substance. Since the
feedstock materials for these analogues are becoming more expensive (this
being the major reason for the introduction of the PMN substance), it is
possible that EPA’s action resulted in a slight decrease in the total amount
of plasticizers of this type consumed and a corresponding slight decrease in
the health effects associated with this class of materials (primarily skin
irritation).
2. PMNB
a. Regulatory History
This substance is also a plasticizer used in the production of
PVC coatings and floor tiles. It is a low molecular weight polymer. The
manufacturer estimated that as much as a few hundred thousand pounds of the
PMN substance would be manufactured in the third year of production.
The PMN was submitted on the EPA79 form although not all of the
information requested in that form was supplied. Again, one of the major
concerns expressed by EPA had to do with the potentially large production
volume and resulting exposures. In addition, ambiguities about the actual
chemical composition of the PMN substance prompted EPA to actively solicit
more data from the manufacturer and to become concerned about the potential
for possible adverse health effects and possible effects of exposure to two
major chemical constituents of the PMN substance. When it became clear that
EPA intended to extend the review period, the manufacturer withdrew the PHN.
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b. Human Exposure and Environmental Release
The PMN substance was to be produced by a standard reaction
procedure in a closed reaction vessel and shipped in drums to processing
facilities. Little other information was supplied by the manufacturer about
the production process, the use of protective equipment, or expected levels of
exposure. EPA estimated that fewer than 10 workers would be exposed during
production and that as many as 100 to 1000 could be exposed during processing
and application of the substance. An undetermined number of others (floor
installers and consumers) would be expected to experience some exposure as
well. The Agency noted that measured occupational exposure levels to similar
substances in similar applications had been on the order of l0 mg/rn 3 in
air during production and processing. In rooms tiled with products containing
the PMN substances, consumer exposures were expected to be much lower.
Environmental releases were expected to be on the order of a few
kilograms/year to air, hundreds of kilograms/year to landfills and as much as
several thousand kilograms per year to publicly owned water treatment works.
These releases were thought to pose a mild toxic hazard to aquatic organisms.
It was also known, however, that certain constituents of the PNN substance had
potential to be bioconcentrated and could also pose a threat to human health.
Since environmental test data were not available for the PMN substance,
analysis of environmental effects was not possible.
c. Toxic Properties
The original PIIN filing gave very little information as to the
actual chemical composition of the PMN substance, describing it merely as a
low molecular weight polymer. Subsequent discussion with the manufacturer
disclosed the fact that the material, while it did contain some relatively
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high molecular weight material, was composed, on a molar basis, primarily of
low molecular weight oligomers.
In particular, analysis suggested that the PMN substance could contain
significant amounts of low molecular weight components and unreacted
feedstocks. Structural analogues to several of these substances have been
observed to display a wide range of toxic effects, most notably on the
reproductive system. Closely related substances of oiie component, for
example, have been demonstrated to cause impaired fertility, decreased fetal
weight, dominant lethal mutations and teratogenic effects in experimental
animals. A similar situation is seen for the second component, with analogue
compounds closely related to the PMN substance having been found to be
teratogenic in laboratory animals and to cause decreased fetal weight,
dominant lethal mutations and sister chromatid exchange in animals. Evidence
for effects in humans is slight, however, and the recent laboratory studies
suggest that the majority of the effects seen in animals occur only at dose
levels far higher than those likely to be experienced by humans.
d. Health Implications of Alternative Regulatory Actions
The ICB analysis estimates that, owing to differences in the
amount of data requested concerning the chemical identity and consumer and
producer exposure to the PMN product, there is about a 20 percent chance that
the Agency would not have taken action on this substance if the EPA8Z form had
been in use and about a 15 percent chance that they would not have taken
action if the CMA form were in use. If EPA had not taken any action, the PMN
substance could have been produced, human exposure would have taken place, and
adverse health effects similar to those described above might have occurred.
It is not possible, because of the lack of data concerning exposure levels and
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uncertainty about human toxicity, for the reproductive effects to be estimated
quantitatively. Based on analyses of the toxicological literature, however,
we would not have expected the number or severity of effects to have been very
great and it is possible thit no detectable adverse health effect would have
occurred as a result of the P 1N substance being produced.
As in the previous case, the potential magnitude of the net health
impacts jssociated with the decision not to produce this substance is reduced
by the fact that some of the substitutes for this chemical are closely-related
chemically (and toxicologically). In this case, however, there appear to be
some substitutes commonly in use which are less likely to be harmful. Thus,
it is likely that the prevention of the production of the PMN substance has
resulted in positive health impacts is somewhat greater than in the previous
case.
3. PMNC
a. Regulatory History -
PMN C is a catalyst used to process photographic prints. The
notice of intent to import did not make use of any of the alternative PMN
forms under consideration. Information on consumer exposures contained in the
notice, which would not have been required by either the EPA82 form or the CNA
form, alerted EPA to the possibility of adverse health effects among
consumers. The Agency suggested an alteration in the product label which
would tell consumers that gloves should be worn during use. The importer
agreed and commenced to import the chemical.
b. Human Exposure and Environmental Release
Since the chemical is imported, occupational exposures during
manufacture are not of concern in this case. The substance is imported in
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essentially pure form in bags. The substance is a fine powder and it must be
assumed that there is considerable potential for airborne dust formation.
When received by the importers, the substance is dissolved in warm water in
open vats. Gloves, aprons and masks a’-e worn by the workers performing this
task. The importer then sells the concentrated solution to consumers who
dilute it further for use. In the initial dilution step, workers are exposed
for 50 person-hours per year to both airborne dust and water solution of the
substance. During packaging, six workers are exposed for a total of 900
person-hours per year.
A relatively large number of consumers (professional and some amateur
photographers) are expected to be exposed to the PMN substance. The Agency
analysis of consumer and environmental exposures estimates that between 3,200
and 9,600 persons will use the material each year. Each user is expected to
use the material between 50 and 150 times per year for an average of 15
minutes per use, although the actual length of exposure (arising primarily
from spills and splashes) will be much shorter. All consumer exposures are
expected to be dermal, and Agency scientists believe that, at most, 10 percent
of the PMN substance would be absorbed through the skin during a 5-minute
exposure to either the of the PMN solutions.
Some concern was expressed over the aquatic toxicity of the substance,
but it is clear that, owing to the small volume of material imported and the
small concentrations of material in the final product, even a very small
dilution volume would be sufficient to lower the concentration below levels
toxic to aquatic plants, fish, and sewage treatment organisms. No significant
environmental exposure or release was expected for this chemical and concern
was low.
lRfl -
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c. Toxic Properties
The only toxicology data available concerning the PMN substance
itself were results of tests conducted by the manufacturer and submitted with
the PMN. These results indicated that the P 1N substance was a relatively weak
acute toxin in rats and produced “slight” skin irritation and “mild” eye
irritation in standard tests in rabbits. These results are not particularly
relevant to the assessment of potential chronic effects, but they do suggest
that, under the stated conditions of occupational and consumer exposure, few
acute toxic effects can be expected. The acute studies showed the liver and
pancreas to be the major target organs.
No data were available in the file about the chronic toxic effects of the
PMN substance other than a statement that similar substances, by mimicking the
structure of DNA bases, may cause mutations and elevated cancer risks. There
was also evidence that chronic exposure could cause liver injury, making the
liver a potential site for tumor formation. A close analogue was shown to be
an antithyroid agent.
Since the data are so inconclusive (when not contradictory), it does not
appear to us to be appropriate to attempt any quantitative assessments of the
cancer risks associated with exposure due to the PMN substance, or even to
maintain that exposure to the substance would produce any increase (or
decrease) in cancer risk among exposed individuals. Instead, the following
discussion will be limited to the other chronic effects (described above) of
exposure to the PMN chemical. -
d. Health Implications of Alternative Regulatory Actions
The ICB analysis suggests that the information supplied by the
manufacturers which caused EPA to be concerned with the potential health
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effects from consumer exposures would probably not have been included in
either the CIIA or EPA82 forms. Without specific exposure information, EPA
might not have identified consumer exposure as an important potential health
problem and probably would not have suggested the labeling changes which were
voluntarily accepted by the manufacturer. Users would not have been warned to
wear gloves while handling or using the product and increased dermal exposure
would have resulted. ETD estimates that with the EPA79 form in use, there
would have been about an 80 percent chance that some form of warning would
have been supplied, while with the EPA82 and CMA79 forms, the chance that any
regulatory concern would have been expressed would be about 50 percent and 40
percent respectively.
In order to assess the potential hazards from consumer exposures, it was
necessary to estimate the amount of PMN substance that would be absorbed
during a typical exposure. 37 We assumed that typical exposure would
involve contact (due to a splash or spill) with either the concentrated. or
diluted solution; and that, in either case, the total amount of PMN substance
involved was <5.0 mg. We assumed that the length of contact with the skin is
15 minutes, and that during this time as much as 30 percent of PMN substance
would be absorbed.
The doses involved are below what is commonly believed to be the
threshold for chronic toxic effects. However, from a physiological
standpoint, the upper end of the dose range is very close to toxic levels. It
37 Thj 5 analysis is based on the known toxicological properties of any
of the PMN substances. The analysis may appear somewhat cryptic because of
the need to preserve the confidentiality of more specific data relating to the
chemical identity and toxic properties of the PMN substance.
- 1g , -
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is likely that some small proportion of the exposed population would be
sufficiently susceptible to experience some adverse effects, if only changes
in physiological state (abnormal levels of enzymes in the blood, for
example). As a rough estimate (more refined estimates are not possible, given
our state of knowledge), we would expect that possibly 1-10 percent of those
individuals receiving high exposure could experience some symptoms of toxicity.
The effects of exposure could range from asymptomatic slight changes in
indices of liver function, to severe liver toxicity characterized by
gastrointestinal upsets, malaise and possibly fever and headaches. Changes in
skin pigmentation might occur, along with the development of brittle
fingernails and increased dental caries. Fatal outcomes are unlikely since
the association between exposure and symptoms is likely to be discovered
before very severe effects occur.
It is difficult to estimate the effect of the warning 1-abel on user
behavior or the extent to which exposures wQuld be reduced. Without the
warning, it is likely that some users would wear gloves anyway. With the
warning, many users might still not take precaution to reduce dermal contact.
As an upper limit on the number of cases of toxic effects that could be
avoided, we will assume that the warning would prevent all high exposures. If
it were assumed that, without the label, 10 percent of the 3200 to 9600 users
would experience high exposures (and 1-10% of these would experience adverse
effects), this implies that failure to label would result in between 3.2 and
96 cases of adverse health effects as described above among regular users of
the PMN substance at any point in time. The upper limit is probably on
overestimate, because a large number of users implies a lower average
exposure. Assumptions about a greater degree of care among users without the
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warning label, or less than 100 percent efficiency of the warning in reducing
high exposures would correspondingly reduce the estimate of the reduction in
adverse health effects. We think it would not be unreasonable to assume that
without the warning label 25 percent of users would wear gloves, while with
the warning label 75 percent would wear gloves. This would imply that the
failure of label that might have resulted from insufficient PMN data, could
have resulted in between 0 and 48 cases of toxic effects, some of which,
perhaps the majority, would be asymptomatic changes in the physiologic state
of the exposed individuals. Greater or less efficacy of the warning label in
reducing high exposures would result in corresponding increases or decreases
to the number of individuals, with an upper limit of 96 cases.
4. PMND
a. Regulatory History
This PMN substance is a photographic chemical which was to be
imported in sinai]. amounts to be used as an ingredient in an “instant” film
cartridge. The PMN was submitted on the EPA79 form, and the principal concern
centered on the presence of an unavoidable trace contaminant, a decomposition
product of the PMN chemical. This substance is a known animal carcinogen. In
addition, the PMN substance itself was known to be a severe eye irritant and
capable of causing burns if dermal contact occurred.
Because of the extremely small volume of substance that was to be
imported, EPA did not feel that major regulatory action was required. The
Agency did, however, recommend that the Material Safety Data Sheet (MSDS) be
revised and the importer agreed to do so. The revised MSDS included mention
of the carcinogenic properties of the trace impurity, emphasized the danger of
allowing dermal or eye contact and recommended local ventilation practices to
- 184 -
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be used when handling the substance. EPA agreed to allow commencement of
importation.
b. Human Exposure and Environmental Release
EPA estimated that a total of approximately 80 workers would be
exposed to the PMN substance. Exposure levels in air were estimated to be
between zero and 1 mg/rn 3 . The manufacturer stated that it was standard
procedure for workers involved in the production of similar products to wear
gloves, goggles, breathing .masks and impervious clothing, so that effective
exposure levels, not counting spills or other accidents, would be much lower
than the estimated ambient air levels. Because of the low volume to be
imported, environmental release of the substance (into publicly owned
treatment works), was not thought to present any danger to humans or other
organisms.
c. Toxic Properties
The PMN substance itself is a strong acid, and as previously
stated, could be expected to cause eye irritation at high vapor concentrations
and skin burns if derrnal contact with a concentrated solution were to occur.
The use of the personal protective devices mentioned above and proper work
practices should minimize the incidence of such occurrences, however.
The trace impurity (no mention was made of its concentration in the PMN
substance) has been unambiguously demonstrated to be a potent animal
carcinogen, although no human epidemiological evidence is available.
d. Health Implications of Alternative Regulatory Actions
The ICB analysis suggests that if the EPA82 form had been used
for this substance, there w uld have been approximately a 30 percent chance
that no concerns would have been raised and the substance would have been
-------
cleared for import without any revision of the MSDS. If the CMA79 form were
used, it was estimated that there would have been. approximately a 50 percent
chance that no action would have been taken. This is because neither of these
forms would have required submitters to supply information regarding the
identity of the impurity which was the major cause of concern.
It is probable that the revision in the KSDS provoked only marginal
changes in practices and procedures used when handling this material. Even
without the changes, the material would have been labeled as corrosive and
irritating and it appears that the firm in question already had in place a
reasonably aggressive policy on the use of personal protective devices.
Nonetheless, the more explicit warnings on the revised MSDS, and the warnings
about the possible carcinogenicity of the impurity might have influenced
workers and supervisors to be more careful and could have prevented a few
cases of skin or eye injury per year. It is not clear, however, that any
significant number of cancers would have been prevented. Rough calculations
indicate that even at the estimated maximum exposure levels, (assuming no
protective effects from personal protective equipment), exposure to the
impurity in the PMN substance would have resulted in less than l0 cases of
cancer among all of the workers per year of exposure. 38
In this case, (like all cases other than withdrawal and suspensions) the
issue of the health effects of potential substitutes does not arise because
EPA action did not directly result in chemical substitution.
3 This calculation is based on a linear dose-response extrapolation,
on the basis of lifetime average daily dose, from the lowest-dose positive
animal bioassay, assuming worker exposure levels of 2. mg/rn 3 for the entire
8-hour working day for one year of exposure.
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5. PMNE
a. Regulatory History
The PMN substance in this case is a salt of the acid that
constituted PMN D. Unlike the previous case, however, this substance was to
be manufactured in the United States rather than imported. The PMN substance
appeared to be intended for use in the same product as PMN D and may in fact
have been intended to be substituted for it.
The PMN was submitted on the EPA79 form. The health concerns were
similar to those concerning PMN D. Although the PMN substance would have been
a less severe skin and eye irritant and would not decompose to form the
carcinogenic by-product, it would have been manufactured from that substance
and would contain small amounts as an impurity. EPA again did not take direct
regulatory action, but allowed manufacture to commence after the submitter
made voluntary revisions to the tISDS. The revisions were almost identical to
those made for PMN D. -
b. Human Exposure and Environmental Release
Again, approximately 80 workers would have been exposed to the
PMN substance. Precise exposure levels to the PMN substance were not known,
but probably would have been similar to those for PMN D. Exposure to the
carcinogenic starting material (the impurity in PMN D) would be higher during
manufacture, however. Personal protective devices were to be employed during
the production and use of the material. Environmental release was not expected
to present a problem and consumer exposures were not expected to be
significant.
c. Toxic Properties
The acute toxic properties of the PMN substance (eye irritation
and the ability to cause skin burns) would be expected to be less for this
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substance than for PMN D due to the neutralization of the acid. The magnitude
of the carcinogenic hazard posed by the PMN substance would be proportional to
the levels of exposure to the starting material during manufacture. The
hazard could easily be greater than that posed by the use of P 1N D.
d. Health Implications of Alternative Regulatory Action
The ETD analysis estimates that there would have been a 20
percent chance that EPA would not have recommended changes in the MSDS had the
CMA79 form been used. Had this occurred, the result probably would have been
similar to that for PMN D, namely, the occurrence of at most a few more cases
of skin or eye irritation and a negligible increase in the cancer risk to
exposed workers. Both the EPA forms would have “caught.” this chemical.
The implications of the fact that PMN E may be a partial or complete
substitute for PMN D are not clear. If either chemical is used to the
exclusion of the other, then it would not be proper to attribute the risk
reduction for both chemicals to the PHN program or to the use of one or
another of the PMN forms. Also, to the extent that P 1N E is used in
preference to PMN D, net health risks would be increased because the synthesis
of PMN E involves the use of the highly carcinogenic starting material, while
the importation of PMN D does not involve such risks, at least at facilities
under the jurisdiction of TSCA. It is likely that the PMN program was
influential in the producer’s decision to consider the use of the less
hazardous substance. Thus any decrease in exposure to PMN E can probably be
attributed to the P!IN program.
D. SUMNARY OF ANALYSIS OF ALTERNATIVE PMN FORMS
Exhibit 7-2 summarizes the results of this analysis. In two of the cases
that were analyzed .(PMNs A and B), information submitted on non-standard PMN
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EXHIBIT VlI-2
SUMMARY OF RESULTS
Result of Agency I
PMN Number I Concern
Probability Not Caught I
With Other Form I Net health Efiect
I
I
I
Withdrawn
25%
EPA82 I Few short-term benefits -— SUbstitUteS present
15%
CMA19 I roughly comparable hazards -- possible long-term
benefits (see text)
I
Withdrawn
I
15%
20%
CMA19
(PA82
Few short-term benefits -— substitutes present
rougly comparable hazards -- possible long-term
benefits (see text)
I
I
I
I
C I Labe l/MSDS Change
50%
60%
EPA82
CMA79
Up to 50 cases of chronic toxicity among
regular users of Lhe PMN substance
I
I
D
Label/MSDS Change
30%
50%
EPA82 I Up to 10 skin or eye irritations per year could
CMA79 I
occurl
I
E
Label/MSOS Change
20%
0%
CMA79 I Up to 10 skin or eye irritations per year could
EPA82 I
I
occur
I
I
A
B
- 189 -
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forms eventually led to such grave risk concerns on the part of EPA that the
manufacturer withdrew the PMNs. In each case, ICB believes that there is some
chance (15-25 percent) that the use of either the EPA82 or CMA form would have
allowed these substances to be introduced without regulatory concerns, .‘hile
the EPA79 form would have almost certainly “caught” the two substances.
For PMNs C and D, ICB judged that there was a substantial likelihood
(30-60 percent) that the CMA79 and EPA82 forms would not have provoked
sufficient Agency concern to have resulted in the labeling or MSDS changes
which actually occurred, while the EPA79 form was almost certain to have pro-
vided sufficient information. For PMN E, only the CMA form was considered to
have the potential (20 percent probability) for riot supplying sufficient data.
In three of the five cases (PriNs A, B, and C), differences in the amounr
of data concerning exposures to processors or consumers requested by the
various forms could have resulted in different levels of Agency concern and
correspondingly different Agency actions. Ambiguities concerning the exact
chemical identity of PMN B also contributed to potential differences in
regulatory outcomes between the three PMN forms. In the case of PMN D, two of
the forms (EPA82 and CNA79) might not have alerted EPA to the identity of a
potentially hazardous impurity in the PMN substance; while in the case of P1*1
E, the CMA form, by virtue of not requiring a block diagram, might have mislec
the agency into assuming that this substance was manufactured from P1*1 D, wher
in fact it was not.
Based on ICB’s assessment, it would appear that the EPA79 form was more
likely to provide sufficient information for regulatory decisions then either
the EPA82 or CMA forms.
—
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The magnitudes of the benefits of having sufficient information to make
the correct choices seem to be rather modest for the five cases studied. For
the two cases which were voluntarily withdrawn, short-term benefits are
expected to be slight (if any existed) because other chemicals with similar
hazardous properties are likely to be substituted for the PMN chemicals.
However, there may be long-term benefits of discouraging the introduction of
hazardous new chemicals, even where they may not pose a substantially greater
risk than the chemicals they would replace. The pursuit of this policy will
ultimately result in significant decreases in the aggregate risks associated
with new chemical products by categorically encouraging the introduction of
less hazardous chemicals.
For the three cases where labeling and MSDS changes were made, benefits
take the form of reduced exposure resulting from safer handling practices.
For PMN C, the photographic chemical with considerable potential for consumer
exposure, as many as 50 cases of chronic toxicity, many of them perhaps
substantial in severity, were avoided. In the case of the two substances used
to produce instant film cartridges, changes in the MSDS may have resulted in
the avoidance of some small number (probably less than 10) cases per year of
skin or eye irritation due to improper handling practices.
It should be noted that the number of cases analyzed here is too small to
provide a statistically valid sample of results upon which to give definitive
quantitative estimates of the benefits of one or another PMN form. Potential
benefits could be much greater where a PMN is filed for a substance with dif-
ferent properties (more severe toxic effect) than close substitutes, or where
a hazardous chemical was introduced for a “new” use (no close substitutes were
available). The potential benefits in these situations may be very great.
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It should also be reiterated that these cases do not provide an estimate
of the total benefits of the PMN program. The cases analyzed here are marginal
cases or close calls; in the case of obviously hazardous chemicals we would
expect that any of the three forms under consideration would supply adequate
data to enable EPA to recognize the hazards associated with their introduction.
Also not analyzed here is the deterrent effect of the P 1N program - i.e., that
aspect which has probably discouraged manufacturers from submitting some new
products, which they know to be hazardous, to the Agency for review in the PMN
process. It is probable that this deterrent effect constitutes the major
portion of the health benefits of the PNN program.
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CHAPTER VIII
IMPACT OF THE FINAL FORM
In the previous seven chapters the costs and benefits of three
alternative PMN information requirements were determined and compared. The
results of this analysis show that the substantially reduced reporting burden
represented by the CMA79 and EPA82 forms would in some cases result in
unacceptable PMN review decisions due to the lack of important data and
information. That is, reductions in risk that have occurred under the interim
policy would not occur 10-35% of the time if either of these two forms were
adopted as final forms. For this reason the Agency decided to amend the EPA82
form in such a manner that it could be reasonably certain that the FINAL form
would result in the same PMN-specific outcomes, retrospectively, as have
occurred since the program began. -
A. DEVELOPMENT OF A FINAL FORM
This refinement of the form is simply the last adjustment in a long -
series of adjustments that began in late 1978. At that time the Office of
Toxic Substances had been focusing on developing the Chemical Substance
Inventory as required by section 8(b) of TSCA. Because the statute mandated
that the PMN program begin shortly after the inventory closed, OTS developed a
form designed to meet the statutory requirements and that would allow a
thorough risk analysis of the new chemical within the ninety day PMN review
period. The economic analysis of this form (ADL 1978) suggested that serious
economic consequences might result from its promulgation. However, the Agency
proposed the use of this particular form in a rule published in January 1979.
- 1 .1
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The industry response was sharp. The major criticisms were that the form
was overly burdensome and asked for information that was both inaccessible to
the submitter and beyond the requirements of the statute. In response the
Agency published amended interim guidance in May 1979. This amended interim
guidance formed the core of the PMN policy for the next three and a half years.
In October 1979 the Agency proposed another PMN form that was
significantly less burdensome than the January 1979 form. (This form was the
baseline of this analysis.) Even this considerably less burdensome form was
considered overly costly by the industry, which provided economic arguments in
au attempt to prove that the form cost would destroy chemical innovation (CMA
1981). Some anecdotal evidence also suggested that certain R&D programs were
temporarily ceasing new chemical innovation activities as the industry waiteci
to see how the P 1N program evolved (ICF 1980).
As previously stated, the Agency chose to rely on the interim policy for
operating purposes for over three years. Under the interim guidance more thar’
1500 PMNs have been submitted over the past three years. As discussed in the
previous chapters of this report, the Agency has learned much about both what
is required to determine the risks posed by a new chemical and what kinds of
questions typically trigger concerns during the Agency’s review.
This experience with the interim policy allowed the Agency to make
substantial revisions to the proposed form with the confidence that the
revisions would not result in increased risks from new chemicals. Indeed,
over the past three years many amendments to the EPA79 form were considered
internally and after careful analysis and long debate accepted or rejected.
The EPA82 form, a draft document prepared solely for internal for OTS
analysis, represented the culmination of this activity as of the spring of
1982.
— In,. —
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There are many reasons why the Agency chose to amend the EPA82 form,
i.e., to develop the FINAL form. As described in Chapter IV, the strategy
behind the EPA82 form was to require completion of a short form which would
request only that information needed for initial review, and to rely on
voluntary data submissions and, if necessary 1 . section 5(e) authority to
collect additional information when the information provided for initial
review was insufficient. Analysis performed in support of this RIA suggested
that some items had been left out that were needed for initial review and,
most importantly, some items that had been critical to identifying some
problem chemicals were not included. Thus, with the EPA82 form it was more
likely that a problem chemical could go through initial review without being
recognized as hazardous. The FINAL form, by adding certain items, insured
that potential problem chemicals would be identified during initial review.
The FINAL form was also analyzed from the standpoint of its economic impact
with the goal of reducing the reporting burden as much as possible, again
without jeopardizing the Agency’s ability to identify problem chemicals.
In this chapter the contents of the FINAL form are described and its
costs and benefits are discussed. The FINAL form analysis has been prepared
to parallel the previously presented analyses of the EPA79, Ct1A79, and EPA82
forms. The analysis concludes that the FINAL form will cost industry between
$100,000 and $1,600,000 annually more than the EPA82 form. In return for this
relatively small increase in costs, the Agency can be confident that it will
be able to identify problem chemicals and obtain reductions in risk in the
future consistent with those obtained in the first three years of the
program’s existence.
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B. ANALYSIS OF COSTS OF THE FINAL FORM
The information sought under the FINAL form includes: submitter’s
identity; chemical name, identity, and molecular structure; simplified
production and marketing data; simplified process diagram; and simplified
worker exposure, release, and disposal estimates, and less specific
information about sites not controlled by the submitter (data comparisons are
relative to the EPA79 form). A copy of the FINAL form is presented in
Appendix G.
1. Differences Between the FINAL Form and EPA79 Form
Differences between the FINAL form and the EPA79 form are
highlighted below. These differences are illustrated in detail in Appendix D.
a. Submitter’s Information
The FINAL form requires the name of the person filing the
notice, the technical contact, the identifying number of any prenotice
communication and any test market exemption or bonafide request information.
It does not request the name of the parent company or the expected
commencement of manufacture date.
b. Chemical Identity
The FINAL form requires basically the same information as the
EPA79 form with the addition of 1) molecular weight distribution and
distribution of low-weight species for polymers, and 2) specific byproduct
information.
c. Productionand Marketing Data
EPA does not request maximum and minimum production volumes for
each of the first three years of production. Rather, the first twelve month
production volume and maximum production for any 12 month period during the
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first three years are requested. Information is required on the intended
categories of use of the chemical by function and application. Estimates of
the number of customers for each category of use and descriptions of
categories not contributing to production estimates, but actively explored,
are not required. Formulation percent is specifically requested. Also sought
is whether the chemical will be used in industrial, commercial, consumer, or
site-limited situations.
d. Other General Information
Sections on transport methods and detection methods are
eliminated. Space for providing a risk assessment is eliminated since EPA
interprets this as a health and safety study which would be received as part
of other data.
e. Industrial Sites Controlled by Submitter
EPA requires identity of sites, number of sites, amount
manufactured or processed, points of release of the new chemical substance,
and identity and weight of feedstock materials. Items not required include:
reactions and side reactions for each chemical conversion, identification and
weight of all materials leaving each operation and conversion, methods of
transfer, whether the system is open or closed to the workplace, and points of
release of byproducts.
EPA would not require submitters to identify operations in which workers
may be exposed and routes of exposure but instead to describe activities in
which workers may be exposed to the new substance.
Also, a list of substances, other than the new substance, that are likely
to occur in the workplace would not be required. This information would be
obtained during detailed review if needed.
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For environmental releases, EPA would require estimates of the amount of
new substance released, the media of release, and the control technology on a
release-point specific basis.
- f. Industrial Sites Controlled by Others
The FINAL form requests a general discussion of occupational
exposure and environmental release at sites controlled by others, including
submission of information on the number of workers exposed, exposure duration
periods, and an estimate of the number of sites at which such operations will
occur.
g. Consumer and Commercial Use Exposure
No consumer and commercial use exposure information would be
required, but the submitter would have the option of providing demographic
data. In the use section, the submitter would check a box if either
commercial or consumer use was expected.
h. List of Attachments and Federal Register Notice
All tests and other data in the submitters possession would be
required, and other requirements for notice attachments remain the same. A
Federal Register notice would not be required.
2. Form-Filing Costs for the FINAL Form
The FINAL Form represents a decrease in hours and costs compared to
the EPA79 form and a slight increase relative to the CMA79 and EPA82
proposals. Using the labor rates discussed in Chapter III and hours estimates
necessary to complete the FINAL form as shown in Exhibit VIII-l, the cost to
complete all mandatory sections of the FINAL form is between $1,300 and
$7,500. Assuming 900 PuNs per year, the total annual cost of the mandatory
portion of the FINAL form is $l,l70,000-6,750,000.
- lgR -
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The differences between the FINAL form and the EPA82 form are mostly
minor additions and clarifications. The EPA82 form requests information on
chemical identity, production and marketing plans, and exposure and release at
sites controlled by the submitter, and attachments. The FINAL form simplified
the production and marketing, exposure and release, and attachments section.
The additional information requirements are: characterize occupational
exposure in terms of worker activities; match the release points in the
process diagram with the environmental release information; and provide
general information about exposure and release at sites not controlled by the
submitter. Exhibit VIII-l summarizes the completion hour estimates for the
FINAL form.
3. Confidentiality Cost for the Proposed FINAL Form Requirements
The FINAL form requires the same generic information as the EPA82
form -- generic chemical identity and generic chemical use. Substantiation
is not required for these items. The costs -to provide these items were
previously estimated as $56 and $13 per PMN respectively. Substantiation of
confidentiality claims only occurs when a Freedom of Information Act request
is made.
In other words, an expected cost of $69 is always being incurred
regardless of the PMN form used. Because FOIA requests occur 17.7 percent of
the time, other confidentiality costs of $1686 ($1755 less $69) occur that
often so that the expected value per PNN of other confidentiality costs is
$298 ($1686 x .177). Therefore, confidentiality costs per submission equal
$367 ($69 + $298). For 900 PMNs, total annual confidentiality costs for the
FINAL form are about $330,300.
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4. Delay Cost for the FINAL Form
Delay costs are the same for this option as for other options. As
before they range from $1,054,500 to $1,843,460.
5. Costs of Restrictive Actions for the FINAL Form
Changes to the EPA82 proposed form were made solely to insure that
the FINAL required form would result in the risk reductions consistent with
those achieved using the EPA79 form. Obviously, achieving these risk
reductions requires that restrictive action costs be incurred. The number of
restrictive actions should not differ from those made with the EPA79 form.
Therefore, costs of restrictive actions are the same as they were for the
EPA79 form -- $2,605,300-$4,038,200.
6. Summary of Costs for the FINAL Form
Exhibit VIII-2 provides the cost estimates for the proposed FINAL
Form.
EXHIBIT VIII-2
TOTAL -ANNUAL INDUSTRY COSTS OF THE FINAL FORM
(Thousands of 1981 Dollars)
$1,170 —
$330 -
$1,055 -
$2,605 -
$5,160 -
Cost of Forms
Confidentiality
Delay
Restrictive Act ions
Total Costs
C. SMALL BUSINESS IMPACT
In Chapter VI the effects of the PMN program generally and the EPA82 form
specifically on small busines were addressed. In this section the impact of
$6,750
$330
$1,843
$4,038
$12,961
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EXHIBIT VIII-l
ESTIMATED LABOR REQUIREMENTS FOR FINAL FORM
CLERICAL TECHNICAL MANAGERI
I. General Information 5 2-6
A. Submitter Identification
B. Chemical Identity
1. Class 1 or 2
2. Polymers 1 _ 6 3J
3. Impurities 1-6
4. Trade Identification 0-1
5. Byproducts 0-1
C. Generic Names 0-4 0-1
D. Production and Marketing
Data 1-2
1. Production Volume 1-4
2. Category of Use 1-8
3. Hazard Information 1-1
II. Human Exposure and
Environmental Re1ease 5 2-9 2-8
A. Industrial Sites Controlled
by the Submitter
1. Operations description
- type and duration 1-2
- process diagram 1-10
2. Occupational exposure - 2-15
3. Environmental release 1-8
B. Sites Controlled by Others 0-17
IV. List of Attachments 5 , 6 2-6
A. Notice Form Sections 1
B. Environmental Fate data 5
C. Health and Environmenta1 6 8-40 2-8
Effects Data
TOTAL 6-21 18 123” 6-27
1 Inc1uded in above estimates.
2 Inc1uded legal review time.
On1y one of these two sections would be completed.
4 Counts polymer chemical identity section, not Class 1 or 2.
5 These titles match EPA79 headings for ease of comparison. Actual
headings in non-EPA79 Forms differ. See Appendix G for copies of all forms.
6 Estimate of 8-40 hours and 2-8 hours is for both kinds of tests.
Clerical hours at list of attachments includes test data clerical hours. See
prior text for a full discussion.
- 200 -
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the FINAL form on small business is measured using the same parameters used
there. In Chapter VI we estimated the costs that small business would bear,
and the effect of those costs on profits and sales of small business. Then we
compared the per-P 1N costs with the expected present value of profits from new
chemicals introduced by small business. For comprehensiveness small business
was defined two ways: less than $30 million in annual sales and less than
$100 million in annual sales.
1. Estimate of FINAL Form Impact on Small Business
From Chapter VI approximately 6.7 percent of the PMNs are submitted
by companies with sales of less than $30 million; approximately 12.6 percent
of PtlNs are submitted by companies with sales of less than’ $100 million.
Thus, small companies on average can be expected to absorb these percentages
of the total industry costs of the program. From Exhibit VIII-2, the total
industry program costs using the FINAL form are $5.2 to $13.0 million
annually. Assuming per-PMN costs are constant across all firm sizes, firms
with less than $30 million in annual sales then must absorb costs in the range
of $348,000 to $871,000 (6.7% of the total cost). Firms with less than $100
million in annual sales must absorb $655,000 to $1,638,000 (12.6% of the total
industry costs).
The effect of these costs on these firms is measured by comparing the
section 5 costs to the total sales volume and estimated annual profits of the
smaller companies. From Chapter VI, we know that the total sales of companies
submitting PMNs with annual sales less than $30 million each year is $317
million. Thus the cost ($348,000 to $871,000) is only .1 percent to .27
percent of total sales. Assuming industry pre-tax profit margins of 12
percent, the cost would represent 0.9 percent to 2.3 percent of profits.
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When considered in the context of the larger definition for small firms
(annual sales less than $100 million), the impacts are even less. The
adjusted total annual sales of these companies is approximately $2 billion.
The $655,000 to $1,440,638 total cost is between .03 percent and .08 percent
of sales, and is 0.3 percent to 0.7 percent of profits of these firms,
assuming a pre-tax profit margin on sales f 12 percent.
Exhibit VIiI-3 summarizes these findings.
EXHIBIT VIII-3
IMPACT OF TOTAL FINAL FORM COST TO SMALL BUSINESS MEASURED
AS A PERCENTAGE OF SALES AND PROFITS
Small Business Definition Sales Profits
Annual Sales § $30 million* .10 - .27% 0.9 - 2.3%
Annual Sales § $100 mi11ion .03 - .08% 0.3 - 0.7%
*Average sales of firms in this category are about $12 million annually.
**Average sales of firms in this category are about $36.6 million annually.
2. Estimate of Impact Per New Chemical
In Chapter VI we estimated the present value of the profit stream
from a “typical” small manufacturer’s new chemical to be between $38,000 and
$767,000 (see Exhibit VI-7) for less than $30 million companies and $144,000
to $2,868,000 for less than $100 million companies. We compared the cost
estimate per PMN with the present value of per-chemical profits for three
cases. The “best” case for both types of small firms is the lowest possible
PMN cost ($5,800) along with the highest possible present value of profits
($767,000 for firms below $30 million). Similarly, the worst case is the
highest possible PMN cost and the lowest possible present value for
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per-chemical profits. Finally, the average case combines the mid-range of
both the PMN cost per-chemical ($10,100) and the present value of profits per
chemical for a 30 percent pre-tax profit margin.
Exhibit VIII-4 illustrates the best, average, and worst cases that might
occur from these possibilities.
EXHIBIT VIII-4
PMN COST AS A PERCENT OF PRESENT VALUE OF EXPECTED PROFITS
Type of Firm Best Case Average Case Worst Case
Sales Below $30 Million 0.8% 4% 38%
Sales Below $100 Million 0.2% 1% 10%
Based on this analysis, it appears that in a worst-case situation, small
firms (especially those below $30 million in annual sales) could potentially
be significantly affected by section 5. The respective percentages for the
average-case situation are approximately 4 percent for firms below $30 million
and 1 percent for those below $100 million. In the best situation, all small
firms incur costs which are less than 1 percent of the present value of the
profit stream.
D. BENEFITS FROM THE FINAL FORM
Based on a retrospective analysis of problem chemicals, the Agency
determined that the FINAL form would result in increased health benefits
compared to the EPA82 form. -Exhibit VIII-5 compares the -probabilities of
regulatory activities being taken with the FINAL and EPA82 forms. The FINAL
form is intended to give the same regulatory actions as the EPA79 form and for
the problem chemicals examined the same outcome was generated for all but one
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EXHIBIT VIII-5
PROBABILITIES OF REGULATORY ACTIONS USING
EPA82 AND FINAL FORMS AS COMPARED TO EPA79 FORM
Reason for Less
Probability of Regulatory
Case Action Being Taken with EPA82 FINAL
Number Com ared to EPA79 Form Form As Compared to EPA79 Form
PMN A Insufficient occupational Sufficient information for EPA
exposure information, to ask the necessary questions to
regulate the substance.
PMN B Lack of processor/consumer Improved exposure and chemical
exposure information; lack identity information.
of chemical identity
information.
PMN C Identification of the existence Form contains check box for
of consumer exposure. consumer use.
PMN D Same action would have occurred Same action would have occurred
(identity of impurities and (identity of impurities and
MSDS submission required). MSDS submission required).
PMN E Same action would have occurred. Same action would have occurred.
—
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chemical. One chemical (PMN J) resulted in a slightly different outcome using
the FINAL form and is discussed below.
The problem PMNJ whose outcome changes with the FINAL form, was PMN .1
(see Appendix F). This PMN, submitted on the EPA79 form, contained a very
detailed assessment of commercial use, the ultimate use. Since commercial use
was the major concern of the Agency, and the PMN had a low SAT rating, unless
detailed information was available on commercial use it is unlikely that
regulatory action would be taken. The FINAL form does not require detailed
information on use and therefore it is unlikely that this form would result in
the same regulatory action as EPA79. As a result the FINAL form would resu’r
in approximately a 15% chance of not getting voluntary action (change in TSDZ)
to regulate the substance.
E. CONCLUSIONS
Exhibit VIII-6 compares the FINAL form costs to the cost of the other
forms. As the exhibit shows, the FINAL form represents a 25%-37% reduction in
cost relative to the EPA79 form.
EXHIBIT VIII-6
COMPARISON OF ANNUAL INDUSTRY COSTS
(Millions of 1981 Dollars)
Total Annual Cost Savings Over EPA79 Form
EPA79 Form $6.9 - $20.6
CHA Proposal $4.8 - $11.5 30% - 44%
EPA82 Form $4.8 - $11.4 30% - 45%
FINAL Form $5.2 - $13.0 25% - 37%
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As mentioned at the outset of this chapter, the FINAL form represents the
culmination of years of analysis, debate, and rulemaking. Activities during
the past few months have resulted in the development of much useful
information that allowed the Agency to make refinements in the form that both
reduced its cost and ensured adequate protection against unreasonable risks.
Because of the intensity and duration of the analysis, it seems reasonable to
believe that the FINAL form represents the option that provides the best ratio
of benefits to costs. That is, the Agency believes that by promulgating this
FINAL form it will achieve all of the benefits that it has achieved over the
past three and half years while reducing the industry burden. When the
proposed exemption rules are implemented, this burden will decrease even
further. But, of course, the best measure of the success of this program in
terms of reducing burden on industry will be the number of PMNs and exemption
notices received by the Agency in the future. If the number of PHNs and
exemption notices increase after these rules are promulgated, then the net
benefit of this regulatory option will be demonstrated.
- 207 -
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section 5 Regulation Proposed on October 16, 1979. Washington, DC: OTS
USEPA.
43. USDOC. 1981. U.S. Department of Commerce. Bureau of the Census. 1977
Census of Manufacturers, Vol. I. Washington, DC: USDOC.
44. USDOC. 1982a. U.S. Department of Commerce. Bureau of Economic
Analysis. Economic Indicators. Washington, DC: USDOC.
45. USDOC. l982b. U.S. Department of Commerce. Bureau of Economic
Analysis. Survey of Current Business, July 1981 Supplement. Washington,
DC: USDOC.
46. USDOL. 1977-81. U.S. Department of Lakor. Bureau of Labor Statistics.
National Survey of Professional Administrative, Technical, and Clerical
Pay. Bulletins 1977-81. Washington, DC: USDOC.
47. USEPA. 1982a. U.S. Environmental Protection Agency. Office of
Pesticides and Toxic Substances. Premanufacturing Notification:
Exemption of Chemicals Used in or for the Manufacturing or Processing of
Chemicals Used in or for the Manufacturing or Processing of Instant
Photographic and Peel-Apart Film Articles. (47 FR 24308).
48. USEPA. l982b. U.S. Environmental Protection Agency. Office of
Pesticides and Toxic Substances. Premanufacturing Notification:
Proposed Exemption for Site-limited Intermediate Chemical Substances and
Chemical Substances Manufactured in Quantities of 10,000 Kg or less. (47
FR 33896).
49. USEPA. 1982 c. U.S. Environmental Protection Agency: Office of
Pesticides and Toxic Substances. Premanufacturing Notification:
Proposed Exemption for Polymers. (47 (FR 33924)
-------
50. Value Line Investment Survey. 1980. Chemical (Basic) Industry. January
25, 1980. 551.
51. Warhit EB, 1982. Economics and Technology Division. Economic Impact
Analysis of TSCA section 5(h)(4) Exemptions: Site-Limited Intermediate
Chemicals. Washington, D.C.: OTS USEPA. EPA 560.
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APPENDIX A
UNIT COSTS OF LABOR
A. COST OF REQUIRED LABOR
Labor rates are important to the form cost analysis because they can be
multiplied by hour estimates to derive the cost of submission. As developed
below, these labor rates (in December 1981) were $17/hour for clerical
personnel, $43/hour for technical personnel, and $67/hour for managerial
personnel. These rates are substantially higher than the rates used by ADL in
1975 ($10/hour for clerical, $25/hour for technical, and $50/hour for
managerial).
The subsequent paragraphs explain how these 1981 labor rates were derived
and the methodology used for projecting 1978 rates. First data sources are
reviewed, then estimates of clerical, technical, and managerial hourly costs
in 1978 and 1981 are presented. These estimates are compared to Arthur D.
Little, Incorporated (ADL) 1978 estimates and 1978 ADL estimates inflated to
December 1981 using the GNP deflator.
ADL’s 1978 labor rates for managerial and clerical personnel are very
close to the corresponding labor rates that could have been developed using
our methodology. However, ADL’s technical rate was 10 percent to 34 percent
too low.
B. SOURCES OF DATA
ICP updated the labor rates ADL used in its cost work because: 1) it has
been over three years since publication of the first ADL report (December
1978); 2) inflation has been relatively high during this period; 39 and 3)
ADL’s technir.al rate was underestimated.
-------
To update the labor costs, ICF intended to duplicate ADL’s estimates using
their methodology with more recent data. ADL’s original cost estimates could
not be replicated, however, because ADL’s work provided no explanation of the
analytical techniques used. Their report states:
The staff time and costs required to complete each major
section of the Notice Form were estimated by professionals
familiar with the relevant areas. (ADL 1979 pig)
At the time the ADL report was being prepared, (September-October 1978),
two sources of chemical industry data were available that- could have been
utilized to derive labor costs for each category. The first is the Labor
Department’s annual pay survey. (USDOL 1978) The second is the National Scionce
Foundation’s studies of the cost to support a Ph.D. -level researcher. (NSF
1981a, NSF l978a, NSF l978b).
In March of each year, the Department of Labor, Bureau of Labor
Statistics (BLS) takes a national surv y of selected professional,
administrative, technical, and clerical occupdtions in private industry. This
large scale survey examines annual salaries in several industrial
classifications (chemist, engineer, etc.) and by job seniority category to
determine what the comparable pay for U.S. government civilian employees
should be. In 1977, the nationwide sample for the manufacturing sector was
comprised of 1,799 establishments with 1,436,667 professional, administrative,
supervisory, and clerical workers. Technical personnel were excluded. The
minimum size of the chemical est-ablishment surveyed employed 100 or more
persons.
3 ’ Between the second quarter of 1978 and the fourth quarter of 1981,
the GNP price inflator increased by 34.6 percent. (USDOC 1982A, USDOC l982B)
-------
The National Science Foundation maintains statistical series about
research and development that can be used to calculate the cost to maintain a
Ph.D. -level researcher. These series are entitled: U.S. Scientists and
Engineers and Research and Development in Industry . By dividing the annual
research and development expenditure for the chemical industry by the number
of scientists and engineers employed for R&D in the industry, a total cost per
R&D professional can be estimated. Because research and development funds
include wages and salaries, materials and supplies consumed, property and
other taxes, maintenance and repairs, depreciation, and an appropriate share
of overhead, we concluded that values computed from this data represent a
maximum cost per technical person hour.
C. CALCULATION OF ICF ESTIMATES OF MANAGERIAL AND CLERICAL RATES
To calculate a labor cost for managerial and clerical personnel, the BLS
mean annual salaries for the appropriate occupational category were adjusted
to account for the additional costs of corporate overhead expenses, general
and administrative expenses, and fringe benefits. Discussions with chemical
companies whose sizes range from medium ($50 million in sales) to large ($500
million in sales) indicated that corporate overhead usually is 15 to 25
percent of direct labor costs; fringe benefits are 35 to 45 percent of direct
labor costs; and general and administrative expenses are 50 to 60 percent of
direct labor costs. In total, the additional corporate costs were estimated
to range from 95 to 130 percent (approximately 110 percent on average) of
direct labor costs.
As a cross-check on these overhead rates, CMA’s 1981 survey results (CMA
1981c) were studied. Eleven firms provided salary rates and provided overhead
-------
rates that varied from 16% to 100%. Eighteen firms provided labor rates that
included both salaries and overhead. The two samples, though not purely
comparable, can be compared to arrive at estimates of the “typical” overhead
in the surveyed chemical companies. Exhibit A-i shows the comparison.
As the exhibit shows, RRS’s survey results are very close to those
determined here.
Full Rate!
____________ ____________ Salary Rate Overhead
2.5 150%
2.3 130%
2.3 130%
1.2 20%
1.8 80%
2.1 110%
Source: CMA 1981, p A-B
a! RRS did not report expected labor hours. Weights used here reflect
mid-point hours estimated for the EPA79 form by ADL.
To arrive at a total annual cost, 110 percent of annual salary was added
to the salary to reflect overhead costs. These costs were further adjusted
for inflation using the GNP deflator to move annual March data forward to
October 1978 and December 1981. In 1978 the appropriate factor was 1.046 and
in 1981 the factor was 1.064.
To arrive at cost/hour, the annual salary was divided by the 2080 hours
in a year. The aggregate calculation is illustrated in the equation below:
EXHIBIT A-i
RRS SURVEY RESULTS: CHEMICAL FIRM OVERHEAD a/
(1980 Dollars)
Salary Rates Full Rates
( dollars/hr ( dollars/hr ) _____________
Secretarial 6.80 17.26
Technical 16.08 36.96
Managerial 20.77 48.19
Legal 50.49 62.47
Unweighted Average 23.54 41.22
Weighted by expected
hours per category a! 17.15 36.60
-------
Hourly ( annual salary + 1.10 x annual salaryl x GNP inflator factor
Labor Rate = 2,080
To estimate managerial cost, the chemist managerial level that would
ordinarily review reports and documents being released by the firm was
selected. This level, Chemist VIiI,’° which corresponds to a GS-15 level
federal position, includes responsibilities for several subordinate
supervisors or team leaders some of whose positions are comparable (USDOL
1977, p.51).
Clerical rates were also developed from the BLS reports. A mid-level
clerical secretary category was selected, corresponding to a senior steno-
grapher or upper GS-4 level secretary. This individual would take varied
technical or specialized vocabulary dictation, or would be a secretary to an
executive or managerial person (USDOL 1977, P.59).
To check for data bias that might have occurred because the reporting
firms were generally large, a comparison was made between the median
managerial salary data for the entire United States and the salary of persons
in firms of more than 2,500 employees. The respective difference was negative
0.3 percent in 1978. Even though the BLS does not sample establishments with
less than 100 people, the small wage difference between all firms and large
firms indicates that including smaller firms would probably not appreciably
change the national average direct labor costs.
Chemist Level VIII data was not reported in 1981 because the sample
size is too small. Therefore, ICT assumed that these managers received on
average the same increase over reported 1979 salaries as all other
chemists--27.14 percent.(USDOL 1981)
—
-------
1. 1978 Rates
Exhibit A-2 illustrates the hourly labor cost, additional corporate
cost factor, inflation factor for the period from the first quarter 1978 to
the second quarter 1978, and the resultant ICF estimates of total 1 abor cost
for managerial and clerical personnel. The ADL estimates are included for
comparison purposes.
EXHIBIT A-2
SUMMARY OF ICF LABOR COST ESTIMATES
FOR MANAGERIAL AND CLERICAL CATEGORIES
(1978 Dollars)
Average Total Adjusted
Direct Additional GNP Full
Category Hourly Cost x Cost Factor x Inflator = Hourly Cost ADL Cost
Managerial $22.67 2.1 1.045 a/ $49.75 $50.00
Clerical $ 5.29 2.1 1.045 $11.61 $10.00
a/ First quarter to second quarter 1978.
To insure a proper perspective, ICF examined the full range of costs
possible for the managerial category. Using the endpoint estimates for the
additional overhead costs (95 to 130 percent), a range of total managerial
cost of $46.20/hour to $55.67/hour was calculated. This outcome was very
close to the ADL estimate.
2. 1981 Rates
Exhibit A-3 illustrates the calculation of the December 1981
managerial and clerical labor cost per hour, using March 1981 BLS survey
data. The full range of ICF’s managerial cost estimate, using the same
q
-------
endpoint estimates for the additional overhead costs as in the previous
paragraph, was $62.10/hour to $74.84/hour.
EXHIBIT A-3
SUMMARY OF ICF LABOR COST ESTIMATES
FOR MANAGERIAL AND ADMINISTRATIVE CATEGORIES
(1981 Dollars)
Average Total Adjusted ADL 1978 cost
Direct Overhead GNP Full Adjusted
Category Hourly Cost x Cost Factor x Inflator = Hourly Cost for Inflation
Managerial $29.93 2.1 1.064 a/ $66.88 $66.07
Clerical $ 7.56 2.1 1.064 $16.89 $13.21
a/ First quarter 1981 to fourth quarter, 1981
D. CALCULATION OF ICY ESTIMATES FOR TECHNICAL RATES
1. 1981 Rates -
Technical labor costs are not directly available from the BLS
series. However, as mentioned above, the National Science Foundation annually
collects and publishes data which can be used to derive the costs to support a
Ph.D. -level researcher. The most recent data, originating from the National
Science Foundation, appear annually in Chemical and Engineering
News . These data include national averages for the total company cost (in
constant 1972 dollars) to support a Ph.D. -level researcher in the chemical and
allied products industry for one year in the years 1969 through 1979. To
project a 1981 cost, a trend-line analysis using least-squares regression was
performed. As shown in Exhibit A-4, this analysis yielded a cost of $50,400
per year measured in 1972 dollars.
- 219 -
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EXHIBIT A-4
COSTS OF AN INDUSTRY R&D SCIENTIST OR ENGINEER IN THE CHEIICAL INDUSTRY
(Thousands of 1972 Dollars)
Percent
Reported Cost Trend Cost D viation
1969 47.7 46.7 -2.1
1970 46.8 47.0 0.4
1971 45.5 47.3 4.0
1972 47.1 47.6 1.1
1973 48.3 47.9 -0.8
1974 49.0 48.2 -1.6
1975 48.5 48.5 0.0
1976 50.3 48.8 -3.0
1977 49.4 49.1 -0.6
1978 49.2 49.5 0.6
1979 48.8 49.8 2.0
1980(p) -- 50.]. . --
1981(p) -- 50.4 --
(p)--projected
Source:ICF estimates and Chem Eng News 1981, 59(30):28
After adjusting for inflation using the GNP inflator, a mid-1981 annual
cost of $97,564 was calculated in current dollars. The hourly labor rate was
calculated by dividing $97,564 by the standard 2,080-hour work year. This
calculation yielded a total hourly cost of $46.91 in mid-1981. Inflating this
figure by 3.4 percent to account for changes in the price level between the
second quarter and the fourth quarter resulted in a technical cost of $48.49
per hour.
2. 1978 Rates
Using only data available in late 1978 (1969 through 1975) and the
same methodology, the 1978 technical labor cost would have been $49,614 in
1972 dollars. Using the GNP deflator, the mid-1978 cost was estimated to be
$74,445, or $35.79/hour. This cost is significantly higher than the original
-------
ADL estimate of $25.00. The ICF estimate is supported by at least one major
chemical company, Nalco. Nalco presented a cost analysis and quoted a
technical labor cost of $35.00/hour in its public comments on the ADL cost
analysis in 1979 (Nalco Chem Co 1979).
As a check on ADL’s technical estimate, ICF also considered the cost of
the average Ph.D. chemist in private industry, as reported by the American
Chemical Society based on a March 1981 survey. According to a Chemical and
Engineering News report based on this data, the median annual salary in March
1981 of Ph.D. chemists was $39,000. (Chem Eng News, 1981 59(42)57). This
figure translates into a cost per hour of $41.90, which is considerably more
than an inflation-adjusted ADL estimate of $33.03.
As another check, we examined the median annual salary reported to the
American Institute of Chemical Engineers by its members. This amount was
$34,000 in March 1981 and, after adding overhead costs, yielded a cost per
hour of slightly more than $36.52 in December 1981 (AICHE 1981, p.6). Even
this “average technical person” would cost 10.6 percent more than the
inflation-adjusted ADL estimate.
Therefore, it is clear that the ADL technical estimate was too low, and
the cost per R&D scientist was the best cost per hour estimate to use for
technical personnel.
E. CONCLUSION
Exhibit A-5 contrasts estimated December 1981 labor costs for each labor
category with ADL estimates after inflating the ADL October 1978 values by the
GNP deflator. The table shows that, on the basis of publicly available wage
and price data, the ADL labor rates were reasonable for managerial and
clerical personnel but were underestimated for the cost of technical personnel.
v.a .
-------
EXHIBIT A-5
COMPARISON OF HOURLY LABOR COSTS
USING DIFFERENT METHODOLOGIES AND DATA SOURCES
Fall 1978 Labor December 1981
Source Labor Costs Category Labor Costs
ADL: $50 Managerial $66
$25 Technical $34
$10 Clerical 413
ICF: $50 Managerial $67
$27-$38 Technical $37-$48
$11 Clerical $17
The cost of reporting form options will be evaluated using December 1981
labor rates derived from publicly available data. These rates are shown in
Exhibit A-6.
EXHIBIT A-6
CHEMICAL INDUSTRY LABOR RATES
(December 1981 Dollars)
Labor Category Hourly Rate
Managerial $67.00
Technical $43.00
Clerical $17.00
The estimates and costs per labor hour developed in this appendix are used in
Chapter IV, Section B to estimate the form filing costs under each of the
reporting and exemption options. In chapter IV, Section B the hour input
estimates are developed.
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APPENDIX B
DERIVATION OF FORMULA FOR DETERMINING PRESENT
VALUE OF PROFITS DELAYED
Assume that P. (i=l,n) represents the real profits associated with the average
new chemical
1 . 2 3 1+t 2+t 3+t n+t
Expected profit stream p 1 p 2 p 3 p
Expected profit stream p 1 p 2 p 3 p
(lagged t months)
Delay cost = (PV of profit flows with no delay) - (PV of profit flows
with delay).
Let r = real (monthly) discount rate.
r 1 r r
I I p I I p I
xii ii xii ii ni i ii
Delay cost Z I I — Z I I -= K I — I
i=l I ii i=l I i+tI i=l I i i+tI
I (l+r) I (1+r) I I (l+r) (l+r) I
L .i L J L .1
r 1
I t I I I
Ip ((l+r] - lii t I p I
x i I i I (l+r) — 1 xi I i I
=zI 1= • ZI I
i=l I i+t I t i=1 I ii
I (l+r) I (l+r) 1 (l+r) I
I I I J
1
= 1 - S PV of expected profit stream with no delay
t
(l+r)
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APPENDIX C
DESCRIPTION OF REVIEW PROCEDURE
Upon receipt of a premanufacture notice, EPA staff stamp the time of
receipt and log it in to signal commencement of the 90 day review period.
Then EPA staff conduct an administrative review. This review includes:
• a check to determine that the substance is not
already on the TSCA chemical Inventory and that a
notice is in fact required;
• composition of a letter to send the submitter
acknowledging receipt of the notice;
• labeling and blacking-out for public file purposes
any information which is claimed confidential and for
which substantiation has been submitted with the
notice;
• checking the notice for compliance with the
requirements of TSCA; and
• preparation of a summary of the notice to be
published in the Federal Register as required by
section 5(d)(2) of TSCA.
A public file is then established which includes public inquiries and all
non-confidential information regarding the notice. The staff that conducts
the administrative review also tracks the notice through the subsequent review
processes.
Following the administrative review, EPA chemists conduct a preliminary
review of the notice. During this preliminary review, all chemicals listed in
the notice are identified by name, function, and structure; any technical
information is validated. The chemists outline the synthetic route that will
be used to manufacture the substance and list the physical and chemical
-------
properties of the substance. These properties include the state of matter,
molecular weight assessments of polymers, and any instabilities of the PMN
substance.
A team of scientists then reviews the potential health and environmental
effects of the chemical substance. This Structure Activity Team (SAT)
identifies the toxicologically significant portions of the molecule to assist
in the identification of structural analogs. This team assigns a number
representing a level of concern for the potential health and ecological
hazards posed by the chemical substance. These indicators of concern drive
much of the later review. Those substances that receive low SAT scores for
both health and ecological concern generally require little further analysis.
Following the SAT review, an interdisciplinary team reviews the chemical
substance and other relevant material assessing the exposure and hazard
information in the notice and pertinent literature. The purpose of this
review is to identify substances for detailed review, for follow-up or
referral actions, or whether substances should be dropped from further active
consideration. As necessary, EPA staff conduct literature searches for
information on structurally related analogs and consider whether the substance
has potential for other uses in addition to the ones indicated in the notice.
After the interdisciplinary team has completed its assessments, a summary
of the case and findings are put together along with staff recommendations for
the ultimate disposition of the case. The case is reviewed by OTS management
and is disposed of in one of the following ways:
1) Drop--EPA has reviewed the PMN, and intends not to
take any further action at this time;
-------
2) Drop/FO11OWUP”EPA will not take action during the
notification period, but the Agency may subsequently
consider whether to require follow-up reporting;
e.g., a Significant New Use Rule or section 8(a) rule
for another use (or higher production volume);
3) Detailed Review-- implies some concern by the Agency
for the health or ecological effects resulting from
use of the PMN substance, and that further analysis
by the Agency is needed before a decision is made.
If further analysis is necessary, an interdisciplinary team does an
indepth study of the case. After completing these analyses, EPA staff
recommends either to end active consideration of the notice or to continue the
review and contemplate Agency action. Occasionally, EPA takes a section 5
control action.
When a chemical is not subject to section 5 control action, EPA expends
no further resources on it, except to send a letter to submitters indicating
that the Agency has stopped its review of the chemical. Submitters, of
course, must wait until the review period expires before manufacturing or
importing the chemical substance.
This set of activities constitute the normal PMN review process. As
described above it can be broken down to four separate activities:
• administrative review (document control) and
in-house tracking
• initial review
• detailed review
• section 5 control action.
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APPENDIX D
COMPARISON OF FOUR REPORTING OPTIONS
EPA79
FORM CMA79 FORM FINAL FORM EPA82 FORM
I. General Information
A. Submitter’s Identity adds type
of notice
(import or
manufacture)
1. person filing notice no change no change no change
2. technical contact no change no change no change
3. parent company deleted deleted deleted
4. manufacture commencement date deleted deleted deleted
5. prenotice communication deleted adds TIlE and deleted;
information bonafide adds THE
request and bona-
questions fide
request
quest ions
B. Chemical Identity
1. Class 1 chemical
substance
a. CAS Registry No. no change no change no change
b. specific chemical name no change no change no change
c. molecular formula no change no change no change
d. synonyms no change no change no change
e. trademarks no change no change no change
f. structural design no change no change no change
2. Class 2 chemical substance
a. CAS Registery No. no change no change no change
b. specific chemical name no change no change no change
c. synonyms no change no change no change
d. trademarks no change no change no change
e. immediate precursors & no change no change no change
reactants, nature of
reaction, structural
diagr am
- 227 -
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COMPARISON OF FOUR REPORTING OPTIONS
(cont ‘d)
EPA79
FORM
CMA79 FORM
FINAL FORM
EPA82 FOR
I. General Information (cont’d)
3. Polymers
a. monomers and CAS
Register No.
b. minimum average
molecular weight
no change
deleted
no change
no change
*
no change
no change
4. Impurities
a CAS Registry No.
b. maximum percent present
c. concentration controlled
no change
no change
deleted
no change
no change
no change
no change
no change
deleted
C. Generic Names
(completed if specific
chemical identity is
claimed confidential)
no change
no change
no ch r ge
D. Production and Marketing Data
1. Annual Production (Minimum
& Maximum)
a. 1st year
b. 2nd year
c. 3rd year
no change
no change
no change
1st 12 months
plus max. of
any 12 months
product ion
of 1st 3
yrs., max
of any 12
mos. pro-
duction
*Requires the following additional information beyond EPA79
requirements: (1) method used to derive molecular weight; (2) structural
diagram; and (3) additional information on low molecular weight species
(weight percent less than 1,000 and less than 2,000 “typical composition”).
**Same as EPA82 except that additional information on low molecular
weight species is for those with weight percent less than 500.
***Add Byproducts questions here. Questions about byproducts were
included under site information on other forms.
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COMPARISON OF FOUR REPORTING OPTIONS
(cont ‘ d)
EPA79
FORM CMA79 FORM FINAL FORM EPA82 FOR I
2. Category of Use
a. use categories no change rio change no change
i. production pct. no change no change no change
ii. site limited,
industrial, commercial, deleted no change deleted
consumer
b. other categories explored deleted deleted deleted
c. used to treat drinking deleted deleted deleted
water or used in products
that come in contact
with same
3. Has substance been optional deleted deleted
manufactured before?
4. Hazard warning (copy optional no change no change
provided)
5. No. of customers committed deleted deleted no change
to purchase and pct. of
production involved
E. Transport
1. DOT shipping name and optional deleted deleted
hazard class
2. mode(s) of transport optional deleted deleted
F. Risk Assessment optional deleted optional
(evaluation of health/
environmental mental risk
due to manufacture,
processing, use, etc.)
G. Detection Methods optional deleted deleted
(are analytical methods
available to identify the
substance in various media)
*Add formulation percent.
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COMPARISON OF FOUR REPORTING OPTIONS
(cont’d)
EPA79
FORM CMA79 FORM FINAL FORM EPAS2 FORM
II. Human Exposure and Environmental
Release
A. Industrial sites controlled
by submitter
1. Process info.
a. identity of site no change adds number deleted
of sites
b. site type deleted no change no change
c. hours operated optional adds batch! no change
day
d. amt. manufactured, optional no change deleted
processed, used
2. Block diagram deleted further simplified
(identifies major opera- simplified to no ch mica
tions and chemical identify only reactions
conversions; indicates opened where NCS
and closed points of material leave process
transfer andpoints of release
to environment)
3. Occupational exposure
a. site identity no change deleted deleted
b. exposure of site (routes, no change no change
no. exposed, duration, (duration, duration,
concentration) no. & route) no. & row
i. manufacture
ii. processing
iii. use
iv. disposal
c. description of operations deleted deleted deleted
where workers are
directly exposed
*Major revision. Submitter identifies worker activities. For each
worker activity the physical form, maximum number exposed, and maximum
duration are provided.
- 230 -
-------
COMPARISON OF FOUR REPORTING OPTIONS
(cont ‘d)
EPA79
FORM CMA79 FORM FINAL FORM EPA82 FORM
II. Human Exposure and Environmental
Release (cont’d)
d. physical states of sub- deleted determined no change
sta.nceto which workers above
may be exposed
e. list and give CAS No. no change provided above optional
of other substances
(byproducts, etc.) to
which workers may be
exposed
4. Environmental Release/
Disposal
a. site identity no change deleted deleted
b. duration and amount of
substance released
i. air optional * duration
ii. land optional no change
iii. water optional amount
deleted
iv. effluent stream optional deleted
flow rate
c. composition of release deleted * optional
materials at each point
of block diagram
d. pollution control optional * no change
equipment and disposal
operations used for
releases
e. water discharge optional no change no change
dest mat ion
B. Industrial Sites Controlled by (same as own deleted
Others
*Match of release points with II.A.2. Provide amount, media, and control
technology for each release point.
General description of exposure and release to be provided in narrative
form.
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COMPARISON OF FOUR REPORTING OPTIONS
(cont’d)
EPA79
FORM CMA79 FORM FINAL FORM EPAS2 FORtI
II. Human Exposure and Environmental
Release (cont’d)
C. Consumer and Commercial User deleted option of
Exposure providing
demographi
data
1. Exposure information:
a. whether consumer or optional
commercial
b. manufactured by submitter optional
or others
c. exposure routes optional
d. maximum number exposed optional
e. frequency of exposure optional
2. Estimates of potential optional
exposureby category (if any)
3. For these products, explain optional
aspects that will cause
exposure to the new substance;
for mixtures, give maximum
percentage of weight by new
substance
4. By-products formed from deleted provided above
each category of use
III. List of Attachments *
A. Physical/Chemical Properties deleted deleted deleted
Data
B. Health & Environmental no change no change no change
Effects Data
*Submitter provided a table of contents for additional information such
as test data, optional information, and confidentiality attachments.
-
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COMPARISON OF FOUR REPORTING OPTIONS
(cont ‘d)
EPA79
FORM CNA79 FORM FINAL FORM EPA82 FORM
III. List of Attachments (cont’d)
C. Notice Amendments no change no change no change
D. Confidentiality Attachments no change no change
E. Voluntary Agreements optional no change
IV. Federal Register Notice deleted deleted
A. Chemical Identity no change
B. Manufacturer Identity deleted
C. Use Data no change
D. Test Data no change
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APPENDIX E
R&D SPENDING ON NEW CHEMICAL PRODUCTS
The purpose of this appendix is to estimate R&D spending on new products
by the chemical industry before and after section 5 of TSCA went into effect.
TSCA section 5 may have affected the pace of new product development in the
chemical industry because section 5 regulates the introduction of new chemical
substances and significant new uses of existing chemicals (although it is not
yet clear how this latter authority will be used).
As discussed in Chapter V, by examining trends in R&D spending, this
appendix lays the groundwork for estimating the producer surplus on new
products developed by the chemical industry. To isolate potential regulatory
effects on innovation, we distinguish expenditures for new product development
from spending on productivity improvement and brand proliferation.
This appendix is organized as follows:
• Section A : discusses the data and methods used to
develop the estimates of new product R&D spending.
• Section B : presents and discusses actual trends
in total and new product R&D spending.
• Section C : breaks the series into two time
frames: pre- and post-19 79 , compares the two periods
to evaluate potential TSCA section 5 effects, and
discusses possible transition phase distortion.
A DEFINITIONS, DATA, AND APPROACH
Information on R&D expenditures by industry is available from several
sources. However, independent sources usually do not agree. In part,
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alternative estimates reflect the use of different definitions of key terms.
We have specified a set of working definitions to avert confusion and
facilitate comparison of data from different sources. After discussing these
definitions, we outline the data sc urces and estimation methods.
1. Definitions
The most widely used information on total R&D expenditures is
developed by the National Science Foundation (NSF). Because the NSF data are
the basis of this analysis, we have adopted definitions generally consistent
with those used by NSF [ NSF 1981, pp. 79-88]. The relevant definitions are:
The chemical industry includes all chemical and
allied products firms classified as SIC 28 in the
Standard Industrial Classification Manual. The three
principal groupings within SIC 28 are: industrial
chemicals (SIC 281-82, 286), drugs and medicines (SIC
283), and other chemicals (SIC 284-85, 287-89). Some
firms not affected by TSCA are in this category. For
example, SIC 28 includes pharmaceuticals, cosmetics
and agricultural chemicals, all of which are
potentially regulated by other legislation.’’ On
the other hand, SIC 28 does riot include certain types
of firms (e.g., photographic chemicals and equipment)
that may be affected by TSCA. Unfortunately, the SIC
data do not permit disaggregating to correct fully
these imprecis ions.
• Research and development include basic and applied
research in the sciences and engineering as well as
the design and development of prototypes and
processes. This definition excludes quality control,
routine product testing, market research, sales
promotion, sales service, and research in the social
sciences or psychology.
• Expenditures for research and development are
funds for operating expenses incurred in the conduct
of research and development in a company’s own
LJ The principal governing legislation for pharmaceuticals and cosmetics
is the Federal Food, Drug, and Cosmetics Act (1962) and for pesticides, the
Federal Insecticide, Fungicide and Rodenticide Act (as amended, 1978).
-------
laboratory or other company -owned or -operated
facilities. These expenses include wages and
salaries, materials and supplies, property and lother
taxes, maintenance and repairs, depreciation, and an
appropriate share of overhead. Capital expenditures
are excluded. Although total R&D expenditures
include federal funds, for our purposes we will be
looking only at com any-finan 4 expenditures.
Expenditures for new roduct R&D cover the cost of
basic and applied R&D expenditures for the
advancement of scientific knowledge and development
of new products, as well as new technologies
necessary to bring new products to market. Included
are significant improvements and modifications of
existing products. For example, in the chemical
industry, new product R&D spending may include
outlays on:
-- new chemical entities,
-- new formulations, containing new chemical
entities, and
-- significant new applications of existing
chemicals.
• Ex enditures for orocess R&D include the cost of
research oriented mainly toward improving the
efficiency of manufacture for existing products.
• R&D ex eriditures for new brands include expenses
for researching and developing a new brand of a
product already in the market. New brands are not
new products unless they comprise a new formulation
or chemical ingredient.
2. Data Sources
The data used to estimate new product R&D expenditures are mainly
from five sources. Four of the sources used here estimate R&D expenditures:
the National Science Foundation, McGraw-Hill, a survey conducted by Wational
Economic Research Associates for the Chemical Manufacturers Association, and
the Pharmaceutical Manufacturers Association series. Each set of estimates is
independent in that it uses a different survey instrument, sample, and time
frame. Where surveys overlap, multiple sourcing enables crosschecking; and
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gaps and deficiencies in one source often can be offset by information
collected by another source.
The fifth source of R&D information (a study by the Regulatory Research
Service for the Chemical Specialties 1anufacturers Association) focuses on the
characteristics of actual R&D projects in a segment of the chemical industry.
Although not directly translatable into dollars, nor representative of the
entire industry, this detailed product information highlights some complex
problems associated with distinguishing new product from other R&D
expenditures. The data are used qualitatively to form our interpretation of
R&D spending data.
The following sections discuss the data sources and problems in using
each individually.
a. National Science Foundation Series (NSF 1981 )
The National Science Foundation (NSF) compiles R&D expenditure
data that is the most reliable available in the sense of being based on a
representative sample.
The NSF data are derived from an annual survey of all manufacturing and
some (research performing) service industries. On the basis of a
representative sample (NSF 1981, pp. 3-7) composed of approximately 11,500
companies, NSF estimates R&D expenditures by funding source (company or
government) and broad use (applied versus basic research). Because NSF also
compiles industry sales data, trends in R&D expenditures can be assessed in
the context of overall sales growth.
A particularly useful feature of the NSF data is that a consistent series
is available from 1956. Unfortunately, the most recent data available are for
1979. Although NSF data do not illuminate post-TSCA effects, the NSF series
-------
does provide a good picture of the trend in total company-financed R&D
expenditures.
Unfortunately, NSF historically has not distinguished process from
product-oriented R&D. Some information is vai1abLe, but only for 1979. That
year is the first in which companies were asked to differentiate product from
process R&D. Even so, companies were not asked to break product R&D spending
into new product expenditures and spending on new brands of existing
products. Fortunately, this weakness of the NSF data is addressed by other
sources.
b. 1cGraw-Hi11 Series ( IcGraw-Hil1 1981 )
McGraw-Hill Publications also conducts an annual survey of R&D
expenditures by industry. Like NSF, McGraw-Hill bases its estimates on a
sizable sample (450) of firms in both manufacturing and service industries.
Unlike NSF, the McGraw Hill sample is not truly representative; it is skewed
toward larger companies. However, the firms in the McGraw-Hill survey acco c,
for a disproportionately large amount of investment - - approximately one-third
of all industrial capital expenditures. Thus, the 1cGraw-Hill survey
emphasizes the expenditure patterns of major spenders. Data on total capital
spending and sales provide a frame of reference for assessing R&D trends.
McGraw-Hill’s data cover largely the same time period as the NSF series.
Consistent data are available from 1956. However, the McGraw-Hill data extend
through 1981, with projections to 1984. Thus, McGraw-Hill provides a useful
crosscheck to NSF over the 195-6-1979 period and can be used -to evaluate the
period immediately following the date section 5 of TSCA became effective.
A particularly valuable aspect of the McGraw-Hill survey is the inclusion
of a question on the breakdown of spending between product and process R&D.
-------
As a result, we have information for selected years beginning in 1966 on the
product-process delineation. This is important for evaluating the hypothesis
that regulation of the substances may have encouraged a shift from product to
process innovation. Additionally, the McGraw-Hill data distinguish spending
on new product development from expenditures to modify existing products.
This is a necessary step toward assessing potential effects of regulation on
chemical innovation.
As a cross check, the product-process proportions shown for 1979 by
McGraw-Hill are virtually the same as the percentages in the NSF breakdown.
However, data collected by the National Economic Research Associates (NERA) do
not agree as well.
C. National Economic Research Associates (NERA) Data (NERA 1981 )
The National Economic Research Associates (NERA) performed a
pilot study (released in 1981) of TSCA-related impacts for the Chemical
Manufacturers Association (CMA). The objective of the study was to develop
and test a methodology for assessing the costs of compliance with TSCA. In
this connection, NERA surveyed 36 members of the Chemical Manufacturers Associ-
ation on a range of questions including R&D expenditures in 1977 through 1979.
A primary weakness of the NERA data is that the sample was both small and
unrepresentative, only CMA members were surveyed and only a portion of that
membership chose to respond. The result is a rather small (36), self-selected
sample, skewed toward large firms. For these reasons, the NERA data are
suspect and are used only as cross references, not as primary sources.
An advantage of the NER.A survey is that it gathered information on the
spending breakdown between process and product and between new and existing
products. While the NERA data appear to differ somewhat from the NSF and
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McGraw-Hill findings, they may be useful for establishing a reasonable range
for the proportion of R&D going to new products.
d. The Pharmaceutical Manufacturers Association Series (PMA )
The Pharmaceutical Manufacturers Association (PMA) has surveyed
its membership annually since 1959. PMA represents 149 member firms that
account for between 90 and 95 percent of U.S. ethical pharmaceuticals
production. Because ethical pharmaceuticals account for most of R&D spending
by the drugs and medicines category of SIC 28, the PMN survey are very similar
to 4SF’s results for the drugs and medicines category.
The PMA collects data on sales and R&D expenditures by U.S. pharmaceutical
manufacturers both in the U.S. and abroad. Domestic spending is identified
separately. In addition, PMA requests a breakdown between new and existing
products.
Unfortunately, the PMA data do not distinguish well how much of the R&D
spent on new or existing products was for process improvement. However, PMA
gives some information on the proportion of all R&D spent on “Process
Development for Manufacturing and Quality Control” which can be used to
estimate process R&D spending.
The PHA data will be used to separate drugs and medicines from the rest
of SIC 28. This is important because drugs and medicines are not affected by
section 5 of TSCA. Moreover, drugs and medicines, as a group, is one of the
largest segments of SIC 28 in terms of R&D expenditures.
e. Chemical Specialties Manufacturers Association Data (Heiden and
Pittaway 1982 ) -
The Chemical Specialties Manufacturers Association (CSM)
recently sponsored a study of TSCA’s impact on chemical innovation. The
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study, performed by Heiden and Pittaway of the Regulatory Research Service,
highlights some special problems with using R&D expenditure data.
The study was based on a survey of CS 1A members who were potentially
affected by TSCA.” 2 Among other things, this survey collected information
on the characteristics of recent product innovations during the period
1976-1981. The CSMA survey describes whether product innovations by the
sample firms were for existing or new products. For each category, the data
show whether the innovation involved a new formulation, a new use of an
existing chemical, or a new chemical substance. These data show that:
• spending on new product may be oriented toward
development of new brands rather than discovery of
new chemical entities and formulations;
• modification of existing products may produce new
chemical entities and formulations; and
• from the standpoint of section 5 TSCA effects,
expenditures on existing products may be as relevant
as spending on totally new products.
In contrast to the other four data sources, CSMA does not give R&D
expenditures for these new product innovations. Consequently, there is no way
to relate directly the CSMA product information and other available R&D
spending data. Even if the CSMA data could be translated into dollars, its
usefulness would be limited because it is not representative of the whole
chemical industry. The CSMA survey is based on 100 self-selected respondents
h i3 CSMA sampled by mail. 198 ingredient suppliers and product manufac-
turers. Sixty-nine of the firms (35%) responded. An additional 31 firms were
surveyed by personal interview. The resulting sample of 100 firms is
distributed like CSMA’s membership in terms of type of manufacturing operation
and sales volume. It is not necessarily representative of non members (15
percent of the chemical specialties industry are not CSM members) or of the
chemical industry as a whole.
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from only the specialties segment of the chemical industry. As a result, the
CSMA information may be used qualitatively only to develop R&D spending data
for the purpose of this analysis.
3. Estimation Approach
This appendix has two purposes: to construct a data series for R&D
spending by the chemical industry for new product development and to identify
whether major shifts in this series coincide with the effective date of
section 5 of the Toxic Substances Control Act.
A major feature of this approach to estimating R&D expenditures is that
it combines information from four independent sources. Consequently we had to
establish working definitions that would ensure consistency. Despite our
efforts, inconsistencies and gaps among the sources remain. Bridging these
gaps required making key assumptions on the basis of incomplete information.
To preclude any inference of unjustified precision, we present our findings in
terms of relevant ranges rather than point estimates.
The approach for estimating new product R&D expenditures involves three
major steps:
• estimating total company-financed R&D expenditures
made by the chemical industry for several years prior
to and following the effective date of section 5 of
to TSCA;
• estimating a reasonable range for the proportion of
total R&D denoted to new product innovation before
and after TSCA;
• applying this proportion to the estimate of total
R&D expenditures to derive the likely range of
expenditure for new product R&D in selected years
between 1966 and 1981.
- 242 -
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Having constructed the new product R&D expenditures series, the next step
is to assess whether TSCA section 5 coincided with any observable shifts in
such spending.’ 3 To do this, we will:
• determine whether actual new product R&D
expenditures after TSCA section 5 were in the range
expected on the basis of pre-TSCA trends;
• discuss possible transition phase distortions.
B. ESTIMATES OF NEW PRODUCT R&D EXPENDITURES BY THE CHEMICAL INDUSTRY
As discussed in the previous section, information on R&D spending is
available from several sources. However, no single source provides enough
data to construct a series on chemical industry spending for new product R&D.
The NSF series on total company R&D expenditures formed the basis of our
estimates. R&D spending by the chemical industry includes expenditures by all
of SIC 28. To arrive at new product R&D spending potentially subject to
section 5 of TSCA, these data were adjusted using information from other
sources as follows:
• The NSF data go only as far as 1979. To extend the
series to 1981 (and project it to 1984), we applied
the annual rates of increase in the McGraw-Hill
series. Historically, the two series had shown
almost identical annual rates of change.
• The extended series of expenditures was converted
to constant (1981) dollars using the GNP deflator
(the index used by NSF). NSF found no appreciable
‘ 3 We note that several factors other than TSCA could have contributed
to shifts in the R&D series (e.g., the Occupational Safety and Health Act,
actions of the Consumer Product Safety Commission, private court actions
general economic conditions). Given the focus of this report, we use TSCA as
short hand for all of these effects. As indicated in Chapter 2, later
analyses may attempt to estimate the effects of TSCA’s section 5 with greater
precision.
a I a
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difference between the GNP deflator and a special
price index for academic R&D expenditures that NSF
had constructed. (NSF 1972)
• Total R&D spending was then broken into three
categories: process, new product, and existing
product. The McGraw-Hill data were used for the
disaggregat ion.
• Because drugs and medicines are not regulated by
TSCA and because they represent a large portion of
SIC 28 R&D spending, we tried to separate drugs and
medicines from SIC 28. Information collected by PMA
on R&D spending by the ethical pharmaceuticals
industry was the basis for the breakdown.
Unfortunately, the PMA data do not break out process
spending very well. We had to make some assumptions
about how process R&D was distributed between the new
and existing product categories. Despite its
deficiencies, the PHA data are the best available.
• Based on the characteristj s of actual product
innovations reported by CSMA, we established a range
for new product R&D.
• Using 1979 as the breakpoint for the implementation
of section 5 of TSCA, we estimated a Baseline
Research and Development Expenditures (pre-1979 R&D
expenditures) and a Post section 5 Research and
Development Expenditures (R&D expenditures made from
1979 to 1981).
The following sections provide detail on these steps.
1. Trends in Total R&D Expenditures
As noted in the definition section, this analysis considers only the
company-f inanced portion of R&D expenditures. Most data on R&D expenditures
by industry combine company with government funds as long as the research is
performed in a private company ’s faci1ity.” Such data are useful for
indicating the total level of R&D activity conducted by the private sector
“ 4 The NSF data exclude R&D subcontracted out, because of duplication
problems.
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However, for this analysis, company-financed spending is more relevant because
R&D estimates will ultimately be used as a lower bound for producer surplus.
Fortunately, the NSF data distinguish company and government R&D
expenditures. For years after 1979, when other sources must be used, the
estimation of the company portion in the chemical industry is relatively
simple. Unlike industries, such as aerospace, which rely heavily on
government research funding, the chemical industry has historically financed
its own R&D. In contrast to other industries, there has been no significant
shifting over time of funding burden between government and companies.
Approximately 90 percent of all R&D has consistently been company financed in
the chemical industry. (NSF 1981)
2. R&D Expenditures in Current Dollars
Exhibit E-1 shows total company-financed R&D expenditures for the
period 1957 to l984. The trend in the chemical industry is compared with
all industries combined to provide a point of reference.
Spending in industrial chemicals through 1979 is also shown in Exhibit
E-l.’ 6 Under the assumption that most industrial chemicals are subject to
TSCA, industrial chemicals may be viewed as a sort of minimum bound for R&D
spending potentially susceptible to section 5 of TSCA. Unfortunately,
post-section 5 trends for industrial chemicals are not available. The only
source of information on industrial chemicals R&D spending is NSF, which does
ISJ ual data were interpolated 1959 through 1962 and 1982 through
1983. See Appendix Exhibit C-]. for the data on which Exhibit E-l is based.
“ Industrial chemicals (SIC 281-82, 286) include establishments
primarily engaged in manufacturing basic organic and inorganic chemical for
industrial use as well as plastics, synthetic resins, synthetic rubbers,
synthetic and other man-made fibers except glass.
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/
25
20.
15’
10.
5- -
2
1
(I )
0
1L4
0
U)
z
0
I -I
Soiirce Appendix Exhibit C-1
_ -7
- -_-
I I I I • I I I I
I
I
I I • . I I
I I P I U I
57 60 62 64 66 68 70 72 74 76 78 80 82 84
YEARS
ALL INDUSTRIES
ALL CHEMICALS — -
INDUSTRIAL CHEMiCALS
PROJECTED - - - -
a
-------
not go further than 1979. 1cGraw-Hi1l does not collect data from which
post-1979 (post section 5) R&D spending on industrial chemicals can be
inferred.
Several points emerge from the available data:
Industry spends a large and consistently increasing
amount of money on R&D. Between 1957 and 1981, R&D
spending in current dollars increased from $3.4
billion to $34.4 billion. According to the
McGraw-Hil]. survey of R&D plans, recent growth rates
are expected to continue through 1984.
• The chemical industry is a major R&D spender.
However, the chemical industry’s rate of growth in
R&D spending has been less than that of total
industry for much of the time frame. Between 1957
and 1982, chemical R&D spending in current dollars
increased from $0.6 billion to $5.0 billion.
• The chemical industry experienced a steady rate of
growth in R&D spending except for the mid-70’s. The
steady trend is expected to continue through 1984
(according to McGraw-Hill).
• Industrial chemicals have strong growth in R&D
spending through 1979. Indu trial chemical R&D
spending in current dollars grew from $0.4 billion to
$1.7 billion between 1957 and 1979.
3. R&D Expenditures in Constant Dollars
Exhibit E-2 presents the same data translated to read 1981 dollars.
Eliminating the distorting influence of inflation permits assessment of
whether any significant change in R&D activity actually occurred.
• In the chemical industry, the high growth in R&D
real dollar spending of the late 1950’s and early
1960’s tapered off significantly after 1965. From
1965 to 1974 R&D real spending by the chemical
industry increased from $3.0 billion to $3.5 billion
-- an average annual rate of 1.9 percent. R&D real
spending actually declined in 1971. This pattern was
generally reflected by all industry, implying the
sensitivity of R&D spending to general economic
conditions.
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EXHIBITE-2
REAL R&D EXPENDITURES, ACTUAL 1981 AND PROJECTED TO 1984
ALL INDUSTRIES
ALL CHEMICALS — - —
INDUSTRIAL CHEMICALS — - - —
PROJECTED - - - -
- . .— .
7
—
“-. —.
60 62 64 66 68 70 72
74 76 78 80 82
35
25
15
5
z
C)
c J
/_
4
3
/
//
/
2
1
57
YEARS
-------
• R&D real spending, in chemicals as in all industry,
surged after the mid 1970’s (excepting the recession
year 1975). R&D real spending on chemicals increased
from $3.7 billion to $4.4 billion from 1973 to 1979.
This amounts to an average annual real increase of 2.9
percent.
• Industrial chemical’s real R&D spending declined
from the mid 1960’s to the mid 1970’s. Between 1965
and 1973 R&D real spending declined from $2.0 billion
to $1.7 billion or (2.0) percent annually. Although
from 1973 to 1979 R&D real spending increased by 2.7
percent annually this only served to lessen previous
losses. Only in 1979, did real R&D expenditures
return to the 1965 level. Recent Chemical Week and
CEN news article highlight the tremendous rebirth in
R&D spending in the 1980’s.
• These trends likely reflect a combination of
factors. Possible contributors include economic
conditions, renewed emphasis in the competitive need
for R&D, tax law changes, or (particularly in
chemicals) increased need to achieve efficiency in the
use of oil after 1973. To the extent that efficiency
improvement is a factor, one might expect to see a
greater emphasis on process oriented R&D.
Fluctuations in R&D spending may reflect either changes in the amount of
discretionary funds available to corporations or shifts in the allocation of
available funds among competing uses. To get at this question we have
examined various industrial indicators. Exhibit E-3 relates current R&D
expenditures to current sales as a proxy for industry performance. Exhibit
E-4 shows how current R&D expenditures compare to other current capital
investments (mainly plant and equipment.)’ 7
‘ These categories are mutually exclusive, R&D expenditures exclude
capital investments.
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EXHIBIT E -3
CURRENT R&D EXPENDITURES AS A PERCENT OF. CURRENT SALES
-.-\
I___.-_ —
at / ‘
\_--. ‘
N
3
_ N
2 ALL MANUFACTURING INDUSTRIES
ALL CHEMICALS — - —
INDUSTRIALS CHEMICALS — - - —
PROJECTED — — - —
1
,_________ I
/
-------
—.-
CURRENT R&D EXPENDITURES AS A PERCENT OF OTHER CURRENT CAPITAL INVESTMENT
ALL MANUFACTURING INDUSTRIES
ALL CHEMICALS
PROJECTED
60 62 64 66 68 70 72 74 76 78 80 82 84
YEARS
80
60
40
\
/
a
1
57
Sour : Annend
Exhibit C 3
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Based on these data it appears that R&D in the
chemical industry has declined progressively both as
a share of sales and as compared with other capital
investment. From a peak of 4.1 percent in 1962,
chemical R&D spending as a proportion of sales
dropped to 2.9 percent in 1981. For the same period,
chemical R&D as a proportion of other capital
investment fell from 74.4 percent to 39.9 percent.
The surge in R&D spending coupled with a drop in real
capital investment projected for 1981 through 1985 is
expected to increase the R&D/Capital Investment
ratio. However, the increase to 49.4 percent will
not fully restore past declines.
• The relative decline of R&D spending in the
chemical industry is similar to the pattern for
industry as a whole. From these data, chemicals do
not appear to be specially affected by regulatory or
non-regulatory influences.
Generally, total real R&D expenditures by the chemical industry were flat
or declining from the mid 1960’s to the mid 1970’s. After 1973, real R&D
spending grew more rapidly and this trend is expected to continue. Notwith-
standing this surge, R&D has continued to decline both as a proportion of
sales and in relation to other capital-investment.
The trends in the chemical industry are broadly similar to those of all
industries combined. On the surface this would indicate no special adverse
effects on innovation in the chemical industry. However actual effects on
innovation can only be assessed after considering possible shifts in the
distribution of R&D funds to new product research.
4. New Product Spending by SIC 28
Not all R&D is innovative in the sense of generating new products.
An important research effort is -improving -the efficiency of production.
Additionally, some R&D is denoted to bringing out new brands of products
already on the market.
-------
The purpose of isolating new product spending by the chemical industry is
to identify the portion of R&D oriented toward producing new chemical
substances to new chemical formulations using new chemical entities. In other
words, the purpose i to identify the innovative component of chemical R&D
that might be affected directly by section 5 of TSCA.’’
5. Industry Data on New Product R&D
Data on the allocation of R&D expenditures to process (efficiency),
existing products (new brands) and new products (innovation) is scarce. The
only consistent series is provided by Because the question
on allocation of R&D was not regularly included in the annual survey until
1973, before that year, data are available only for 1966 and 1971. Planned
spending for 1981 is also included.
Exhibit E-5 shows the proportion of all industry 50 R&D spending that
went to process (efficiency), existing products (brand), and new products
(innovation). -
Generally the trend has been toward greater
emphasis on process as compared with product R&D
spending. Between 1971 and 1981, process R&D grew
from 12 to 17 percent of total R&D.
Ie$JTSCA section 5 covers new chemical substances and significant new
uses of existing chemicals, although it is not clear yet how the latter
authority will be used. Various aspects of existing chemicals are covered by
TSCA section 5.
9 Unlike NSF, McGraw-Hill does not distinguish spending by source.
Consequently, the breakdown is for R&D expenditures by both government and
industry for research conducted in company facilities.
S OJ Non-manufacturing is excluded. However non-manufacturing accounted
for less than five percent of the 1980 R&D spending in the McGraw-Hill survey.
-------
14
‘n C i
14
• 11.
70
60
50
40
30
20
10
66 1
68
70
p
EXHIBIT E—5
ALLOCATION OF ALL INDUSTRY R&D SPENDING, BY TYPE
NEW PRODUCT
EXISTING PRODUCT — —
PROCESS — - - ____
PROJECTED- - - -
S
/
\
/
-
S
S
-
p.
/
S
72 74 76 78 80
V P7 I?
-------
• Within the product category there was an apparent
shift toward existing products during the early
1970’s. However this trend has reversed somewhat
since 1978.
• None of these changes has been very large.
The reasons underlying these trends are not clear. It is possible that
the marginal costs of the three different types of investment differ. For
example, if product R&D generally requires a greater concomitant expenditure
on capital equipment, product R&D may appear more expensive on the margin.
Cost differentials together with capital availability and general economic
conditions may be at least partially responsible for any shift from product to
process R&D spending. However, such an examination is beyond the limited
scope of this study.
In contrast to all industry, the chemical industry has included some
pronounced shifting among categories. (See Exhibit E-6).
• The proportion of R&D spent on process
approximately doubled during the 1970’s (from seven
percent in 1971 to 18 percent in 1981).
• At the same time expenditures shifted from new to
existing products; new and existing products
practically switched in relative importance. This
shift, which does not appear to be reversing, began
in 1974.
NSF data for 1979 are available for crosschecking the McGraw-Hill
distribution. In 1979, NSF asked companies to break down total R&D (company
and government) into the proportion spent for product and for process. 5
51 - The NSF data exclude basic research which was approximately nine
percent of R&D and unclassifiable research (12 percent for the chemical
industry in 1979).
-------
EXHIBIT E-6
ALLOCATION OF ChEMICAL INDUSTRY R&D SPENDING, BY TYPE
NEW PRODUCT
EXISI’lNG PRODUCT — - —
70
PROCESS — - - ____
PROJECTED
60
50 r - - -
/-
\/.
40.
141
Is,
UI
“3
jI 141
o I /
I
30 - - - -
20 /\
IN,
/\ . • 5
I
10 . 5 /
-
a _________________________ — — J
I I I I I I I I I I I—.
66 68 70 72 74 76 78 80
-------
Their findings (75 percent product and 25 percent process R&D in the chemical
industry) are very similar to the McGraw-Hill results (76 percent and 23
‘
percent respectively).
The NERA data show a somewhat different allocation. NERA fouM 1979
spending on process to be 41 percent, and product to be 59 percent (new
product 42 percent and existing 17 percent). 52 It should be noted,
however, that the NERA sample consisted mainly ot larger companies and, unlike
the NSF samples, is not considered representative of the industry.
On the surface, the McGraw-Hill information points to a pronounced shift
away from new product spending by the chemical industry in 1974. New product
spending dropped from 54 to 31 percent of total R&D expenditures in 1974.
This in part results from a greater emphasis on process R&D after 1973 (from
seven percent percent to 18 percent in 1974). The balance is due to a shift
in spending from new to existing product R&D.
6. Interpreting Industry Data . -
The ambiguity arises from common variations in the usage of the term
“new product.” Unfortunately the meaning relevant here (new chemical entity
or formulation using a new chemical substance) is not universally employed.
The first time a company sells a product, the company may consider it a
new product. However, from the market’s standpoint, this company’s first
introduction may be a new brand rather than a new product. The definition
depends on whether the item comprises a new chemical ingredient and/or a new
formulation. For example, a company’s introduction of generic laundry
52 Percentages after subtracting basic research (6.4 percent of total)
and unclassified (7.3 percent of total).
-------
detergent may constitute a new product line for the firm but may only be a new
brand in the market place.
In contrast, modifications or improvements to existing brands may involve
the use of a new chemical substance. Although a firm would probably classify
this as R&D for existing products, for our purposes it constitutes new product
R&D. Firms’ breakdowns of R&D spending between new and old products may not
be appropriate for the purposes of this analysis.
This point is highlighted by information collected for the CSMA study on
chemical specialty manufacturers’ products innovations. The CSMA survey
distinguished new product from existing product innovations. Additionally,
the survey described whether the innovation involved a new chemical
formulation and/or a new chemical substance. The findings are presented in
Exhibit E-7.
Chemical specialty manufacturers may not be representative of the entire
chemical industry in the quantity or breakdown of product R&D spending. Never-
theless, the data illustrate some important features of product oriented R&D.
• There are important differences among chemical
firms in what is meant by a new product. Ingredient
suppliers consider only new chemical substances to be
new products. Product manufacturers who supply final
products (e.g., hairspray) use a broader definition.
(Beiden and Pittaway 1982, p. 1-5)
• Among product manufacturers, new product
“innovations” may be merely new’ brands to the
company. Although new product innovations do not
necessarily involve any new chemical formulation,
existing products must involve at least a new
formulation to be considered an in.novation. (Heiden
and Pittaway 1982, p. 11-il)
• For product manufacturers, it is possible for at
least as many new formulations and new chemical
substances to result from existing as new product
-------
PRODUCT INNOVATIONS
IXIIIBIT E—7
BY ChEMICAL SPECIALTY MANUFACTURIHC FIRMS
Total Number of Products
Number that are New Brands
(Percent of Total Products
Number that are New
Formulation
(Percent of Total Products)
o Number with First Use
Ingredients
(Percent of New Formula-
tion)
o Number with
Substances
(Percent of
tion)
Source: Holden and Pittaway 1982, Exhibits 11-2 and 11-3.
A. Product Manufacturers
New Chemical
New Formula-
1916
1918
19(9
1980
.1
1981
New
Existing
New
Existing
New
Existing
New
Existing
New
Existing
129
72
160
115
120
115
131$
101
1113
113
47
(36.4%)
60
(46.5%)
0
(0%)
72
(100%)
51
(35.6%)
85
(53.1%)
0
(0%)
115
(100%)
19
(15.8%)
80
(66.7%)
0
(0%)
73
(100%)
23
(17.2%)
83
(61.9%)
0 28
(19.6%)
101 81
(100%) (56.6%)
0
(0%)
113
(100%)
19
(31.1%)
22
(30.6%)
18
(21.2%)
‘s5
(39.1%)
18
(22.5%O
211
(32.8%)
29
(311.9%)
36
(35.6%)
26
(32.1%)
25
(22.1%)
3
(5.0%)
3
(4.2%)
0
(0%)
1
(0.9%)
3
(3.8%)
3
(Ii.1%)
0
(0%)
0
(0%)
8
(9.9%)
2
(1.8%)
I
163
0
173
0
119
0
1211
0
133
0
163
(100%)
0
(0%)
173
(100%)
0
(0%)
119
(100%)
0
(0%)
124
(100%)
0
(0%)
133
(100%)
0
(0%)
B. Ingredient Manufacturers
Total Number of Products
Number with New Chemical
Substances
(Percent)
- 259 -
-------
R&D. In neither case does the proportion of
innovations containing new chemical entities exceed
six percent.(Heiden and Pittaway 1982, p. 11-10)
The available data on R&D spending combine expenditures by product
manufacturers and ingredient suppliers in the chemical specialties as well as
other segments of the chemical industry. We would like to focus primarily on
ingredient suppliers in each segment of the chemical industry because these
firms are the primary developers of new chemical substances. New chemical
substances, in turn are the major target of TSCA section 5 at this time. 53
Unfortunately, we do not know how much of aggregate R&D expenditures were
made by ingredient suppliers. Although the CS 1A data may be representative of
the distribution of firms by type for the chemical specialties segment, there
is no reason to believe that the proportion of ingredient suppliers is similar
in other segments of the chemical industry. Thus the CSMA data is of little
use for breaking out the relative proportion of ingredient suppliers in the
whole chemical industry. -
Even if we knew the relative number of ingredient suppliers, we still
could not identify the proportion of R&D expenditures for which this group of
firms accounted. Neither CSMA nor any other data source indicates what
proportion of R&D spending is made by ingredient suppliers. Except in the
unlikely case that all firms (regardless of size or type of business) spend
the same amount on R&D, it is not possible to break down aggregate R&D
spending on the basis of the distribution of the number of firms.
53 TSCA section 5 also covers significant new uses of existing
chemicals. However, it is not yet clear how this authority will be used.
-------
Despite these limitations, the CSMA data do help us interpret R&D
spending trends. For example, CSMA data show that in both the new and
existing product categories, the aggregate R&D expenditure data includes
spending on new formulations that may or may not i’-lcorporate new chemical
substances. Ideally, only R&D spending for those formulations containing new
chemical substances (or significant new uses ‘of existing chemicals) and
covered by section 5 of TSCA should be included in our series. However,
because the CSMA data, as noted above, cannot be used directly to adjust R&D
data, we do not feel that formulations subject to section 5 can be accurately
separated. Consequently, our series overstates new product R&D spending by
the amount, devoted to new formulations that do not include a new chemical
substances (or significant new uses of existing chemicals).
In addition, the CSMA data show that aggregate industry data on R&D
spending to develop new products may include spending for new brands as well
as expenditures for new chemical entities and new forxnulati ns (regardless of
whether they incorporate new chemical substances). Moreover, reported R&D
spending on existing products may include expenditures for new chemical
substances and new formulations (with or without new chemical entities) but it
appears to exclude spending on new brands.
In other words, R&D spent on either new products or existing products may
include spending for products subject to TSCA section 5: new chemical
substances and new formulations with new chemical substances (or significant
new uses of existing chemicals.) Likewise, both existing and new product R&D
spending include expenditures on new formulations that do not include new
substances and are not subject to TSC.A section 5. However, only R&D spending
for new products includes expenditures for new brands which definitely are not
covered by section 5.
-------
New product R&D spending includes two types of expenditures that are not
subject to section 5 (new brands and new formulations that do not have new
chemical substances). On the other hand existing product R&D contains only
one type of spending not subject to TSCA section 5 (new formulations riot
containing new chemical entities). It is not clear which category actually
incorporates more spending on new chemical substances.
7. Determining the Proportion of New Product R&D/SIC 28
Because of the inherent imprecision of the data, we established a
range for the proportion of new product R&D rather than estimating a precise
percentage. To get the maximum estimate (upper bound) of the proportion of
R&D expenditures spent on new chemical substances (i.e., new products) we usee
total product R&D expenditures (i.e., total R&D less process R&D). As noted
above, this estimate includes an undetermined amount of spending on products
not subject to TSCA section 5.
As mentioned above, it is not clear which of the following categories
contains more spending in new chemical substances: data reported as R&D
spending on new products; or data reported as R&D spending on existing
products. Of the two, the estimate of existing product R&D spending is
larger. To lessen the chance we have left out relevant R&D spending, we
selected existing product R&D spending as the minimum estimate (lower bound)
of R&D expenditures on new chemical substances (i.e., new products).
Exhibit E-8 shows how the range of new product R&D spending has changed
over time in the chemical industry. From this perspective, it is not clear
that a dramatic shift away from new product spending has occurred. The range
for new product spending narrowed substantially during the 1970’s. The
reduction in the range resulted partially from a decline in the maximum
-------
E iIBIT E-8
PROPORTION OF R&D SPENT ON NEW PRODUCTS BY
THE CHEMICAL INDUSTRY
Range of
Year Per”entage
1966 20% - 90%
1971 30% - 93%
1973 39% — 93%
1974 51% - 82%
1975 51% - 88%
1976 55% - 92%
1977 50% — 80%
1978 58% - 84%
1979 45% - 76%
1980 50% - 82%
1981 (planned) 51% - 82%
Source: : 1cGraw Hill Publications
possible percentage going to new product R&D. Since the maximum is based on
total product spending, this means R&D proc-ess spending increased. However,
at the same time, the minimum percentage going to new product spending
increased. (This, of course, is an artifact of the choice of existing product
R&D as the lower bound.)
In other words, spending on developing new chemical formulations and
substances has not necessarily declined because a larger portion of R&D goes
to process spending. The evidence suggests an intensifying interest in
reformulating and improving existing products. The reduction in what
McGraw-Hill termed new product spending may reflect a reduction in development
of ntire1y new items. Alternatively, the shift may equally imply a reduction
in brand proliferation as firms retrench in existing product lines.
-------
Year
1966
1971
1973
1974
1975
1976
1977
1978
1979
1980
1981 (planned)
Source:
Millions of
$615.2
$992.1
$1,356.2
$1,905.9
$1,958.9
$2,218.7
$2,047.5
$2,409.3
$2,958.0
$2,329.0
$2,563.2
ICF estimates.
1981 Dollars
- $2,768.4
- $3,075.5
- $3,233.6
- $3,064.3
- $3,380.1
- $3,711.3
- $3,276.0
- $3,489.4
- $3,306.8
- $3,819.0
- $4,077.9
To further refine our estimates of new product spending, we have tried to
separate R&D spending on new drug and medicine products from the rest of the
Exhibit E9 presents the estimates of new product spending (in real 1981
dollars) implied by the distribution of R&D shown in Exhibit E-8. The
estimates are simply the product of the new product spending percentages and
real company R&D expenditures by the chemical industry. Strictly speaking,
the allocation percentages should be applied to R&D spending from all
sources. However, the government contribution has consistently been small (10
percent of the total). The potential distortion is negligible when compared
to the size of the range.
Based on the data in Exhibit E-9, it appears that in five of the seven
years after after 1974 real spending on new products increased. However,
declines occurred in 1977 and 1980.
EXHIBIT E-9
REAL NEW PRODUCT SPENDING BY THE CHEMICAL INDUSTRY
(1981 Dollars)
-------
chemical industry’s expenditures. The disaggregation was based on R&D
information collected by PMA.
As discussed earlier, PMA conducts an annual survey of its membership
which accounts for approximately 90 to 95 percent of all pharmaceutical
production. Pharmaceuticals, in turn, comprise the majority of R&D spending
in drugs and medicines. Although real pharmaceutical R&D spending reported by
PMA as a proportion of R&D spending by drugs and medicines in the NSF series
has declined over time, the current ratio is 0.80.
PMA does not break R&D spending for new product, existing product, and
process into naturally exclusive categories. From 1972 to 1979, PMA provides
data showing the proportion of all R&D that was devoted to new products as
compared with existing products. Elsewhere, PMA shows the proportion of all
R&D that was for process development for manufacturing and quality control.
PMA does not indicate how much of process expenditures were spent on existing
as compared with new products. To combine the two independent pieces of
information we assumed that, after subtraction of process R&D, the remaining
expenditures were divided among new and existing products in the same
proportions as reported for total R&D.
This percentage allocation was applied to the NSF data series (as updated
here) to determine the amount of real R&D spending (1981 dollars) in each
category.
In other words, total R&D spending by the drugs and medicines group was
distributed as follows:
R+DT = (R+DT)] + [ B (1 ) (R+DT)] + [ (1-8) (1-u) (R+DT)]
Where
-------
R+DT
= total R&D spending by drugs and medicines.
= proportion of total R&D spent on process.
(1-u) = proportion of total R&D spent on products.
= proportion of total R&D spent on new products.
(1-a) = proportion of total R&D spent on existing products.
The results for drugs and medicines (Exhibit E-lO) show that:
• In contrast to the rest of the chemical industry,
the drugs and medicines group has increased the
proportion of R&D spent on new products.
• Spending on both process and existing product R&D
declined.
EXHIBIT E-lO
DISTRIBUTION OF R&D SPENDING IN THE DRUGS
AND MEDICINES SEGMENT
(Millions of 1981 Dollars)
Process New Product Existing Product
Year Amount Amount Amount
1972 $143.5 12.2 $787.9 69.0 $244.6 20.8
1973 $127.9 10.0 $912.1 71.3 $239.2 18.7
1974 $127.8 9.4 $978.2 71.7 $257.1 18.9
1975 $148.3 9.8 $1074.5 71.0 $290.6 19.2
1976 $152.0 9.5 $1182.2 73.9 $265.6 16.6
1977 $148.7 9.3 b/ $1178.2 73.7 b/ $271.8 17.0 b/
1978 $150.8 9.2 $1206.7 73.6 $282.0 17.2
1979 $150.9 8.8 $1287.8 75.1 $276.1 16.1
1980 c/ $152.6 8.4 $1382.7 76.1 $281.6
1981 c/ $155.1 8.0 $1495.1 77.1 $288.9 14.9
a/ Assumed to the same proportion of Product Category as proportion
reported for all R&D.
b/ Estimated on basis of average annual change between 1976 and 1978.
C, Estimated by extrapolating average annual rate of change 1972-1979.
Source: NSF 81 and PMA.
-------
Exhibit E-1l shows the range of spending on new products after drugs and
/
medicines has been subtracted. From the lower bound (based on total existing
product R&D) we subtracted drugs and medicine existing product R&D. From the
upper bound (based on all product R&D) we subtracted drug and medicine new
product and existing product R&SD. The impact of separating out drugs and
medicines has been:
• to reduce the range of new product spending,
principally by lowering the upper bound,
• to lower significantly the estimate of new product
spending.
EXHIBIT E-ll
REAL NEW PRODUCT SPENDING BY
THE CHEMICAL INDUSTRY EXCLUDING DRUGS AND MEDICINES
(1981 Dollars)
Year Millions of 1981 Dollars
1973 $1,116.8 - $2,082.3
1974 $1,648.8 - $1,832.0
1975 $1,668.3 - $2,015.0
1976 $1,953.1 - $2,263.5
1977 $1,775.7 - $1,826.0
1978 $2,127.3 - $2,000.7 a/
1979 $1,681.9 - $1,742.8
1980 $2,047.4 - $2,155.3
1981 (planned) $2,247.3 - $2,293.9
Source: ICF estimates.
C. COMPARISON OF PRE- AND POST-TSCA PERIODS
One reason for examining new product spending is to identify if a major
shift in new product R&D expenditures may have coincided with the effective data..
of section 5 of TSCA. Because section 5 imposes additional costs on new product
development, the regulation may discourage innovation. If so, a reduction in
R&D expenditures might be observed when section 5 went into effect (1979).
-------
The first step toward comparing new product spending before and after
TSCA was dividing the series into two time frames. Pre-section 5 was repre-
sented by the period prior to 1979. Post-section 5 included 1979 and after.
Having split the series, the problem was to determine whether post-section
5 new product spending differed from what it would have been in the absence of
section 5. We used two approaches to assess whether a significant shift in
new product R&D coincided with implementation of TSCA’s section 5. The two
methods were fitting of a trend line, and extrapolating pre-1979 R&D spending,
and comparing representative average R&D spending before and after 1979.
1. Fitting A Trend Line
Fitting a trend line is a method of extrapolating year to year data
against which to compare actual R&D spending after section 5. The growth rate
for the trend line considers each data point in the period. In a linear
analysis, essentially, a straight line is fitted between the series of data
points that results when spending is plotted as a function of time. The
growth rate is the slope of that trend line.
In fitting the trend line we used the mid-point of the R&D spending range
for the chemical industry excluding drugs and medicines. Actual new product
spending for 1974 through 1978 was used to determine the growth rate for the
projected series. 5 ” The actual spending data were then compared with what
5 We did not use data for 1973, which is the only year of fully
adjusted data we have prior to 1974. The reason for excluding 1973 is that
between 1973 and 1974 a dramatic shift occurred in the distribution of R&D
spending by type. This shift toward greater process R&D has not reversed .....for...
the entire 1974-1981 period. Consequently, we believe that the 1973-1974
shift represents more of a structural change than a normal year to year
observation. Moreover, as the shift coincides with a sharp rise in oil
prices, it is likely related to economic factors rather than TSCA section 5.
-------
would have been expected if there were no year to year variation from the
implicit trend.
The results of this exercise are shown in Exhibit E-12. The findings
show a drop in R&D spending after section 5. However, this decline in R&D
spending is not statistically significant for two reasons. The amount of the
deviation from trend in 1979 and 1980 is not large, when compared to the
amount of deviation from trend experienced between 1974 and 1978. To test the
statistical significance of the result we constructed the model
R&D = b + b 1 (Year-1973) + b 2 D (Year-1973)
where D = 1, if the year is 1979 or 1980, and D0 in other years. The results
showed b = 1699.1, b = 68.8, and b = -34.8. Then we calculated the
o 1 2
t-statistic based on the hypothesis that there had been no change from the
previous trend and found that we could not reject this hypothesis (t = .88).
EXHIBIT E-12
TREND ANALYSIS OF REAL NEW PRODUCT
R&D SPENDING BY THE CHEMICAL INDUSTRY
(Millions of 1981 Dollars)
Trend Line
Year Actual Estimates a!
1974 $1740.4 $1789.8
1975 $1841.7 $1850.4
1976 $2108.3 $1911.1
1977 $1800.9 $1971.7
1978 $2064.0 $2032.3
1979 $1712.4 $2093.0
1980 $2101.3 $2153.6
1981 (planned) $2270.6 $2214.3
a/Trend line estimated from actual data, 1974-1980.
R&D (millions of $) = 1699.1 + 68.8 X (Year-1979) - 34.8 X D X
(Year-1973), where D equal 0 in 1974 to 1978 and D = 1
in 1979 and 1980.
Source: ICF estimates.
-------
In addition to our finding of no statistically significant deviation from
trend, it must be noted that extrapolation by a trend line does not really
reflect what would have happened in the absence of TSCA section 5. The normal
year to year variation results from a convergence of factors whose interaction
is not captured by simply fitting a trend line. (META 1981)
2. Estimating Representative Average R&D Spending
Another approach to assessing section 5’s potential effects involves
comparing average R&D spending before and after section 5 took effect.
Provided the data are adjusted for inflation and real growth in the chemical
industry, the pre-section 5 spending figure would comprise a baseline for
assessing post-section 5 spending. To estimate a figure of baseline R&D
spending, we averaged R&D expenditures in 1981 dollars for 1974 through 1978.
This approach was taken because:
• 1978 may not be representative of a good baseline
because of potential transition phase distortions.
• No clear trend was evident between 1974 and 1978;
the spending vacillated year to year.
• A big shift in 1974 occurred; years prior to 1974
were excluded to eliminate the distorting influence
of factors precipitating the 1974 change in spending.
(ICP n.d.)
A similar approach was taken to estimating R&D expenditures after section
5 went into effect. New product R&D expenditures for 1979 through 1981 were
averaged to achieve the estimate. In this case, the average approach was
adopted mainly to minimize potential transition phase problems.
In doing the averages, we used the midpoint of the R&D spending range for
each year. As in the trend analysis, we used real R&D spending in 1981
dollars. Consequently, the distorting effects of inflation were removed.
- 27fl -
-------
We also adjusted the data for real growth in the chemical industry. We
wanted to eliminate the effect of correlation between R&D expenditures and
industry size so that we could observe better the potential regulation effects.
To make the adjustment we used an index of real growth in chemical sales.
The Adjusted series is shown in Exhibit E-13.
EXHIBIT E-13
ADJUSTED REAL NEW PRODUCT SPENDING BY THE CHEMICAL INDUSTRY
(EXCLUDING DRUGS AND MEDICINES) a/
Year Millions of 1981 Dollars
1974 $2,333.0
1975 $2,498.9
1976 $2,599.6
1977 $2,156.8
1978 $2,419.7
1979 $1,754.5
1980 $2,242.6
1981 (planned) $2,270.6
a/ Adjusted for inflation using the GNP deflator (1981
100) and for real growth in chemical sales (1981 = 100).
Source: ICF estimates.
Exhibit E-14 gives our estimates of real adjusted R&D spending both
before and after section 5 took effect. The baseline R&D expenditures
estimate is $2401.6 million as compared with $2089.2 million after section 5.
Although these results seem to indicate a decline in R&D spending after TSCA
section 5 took effect, the drop is probably not significant. The difference
of means test that we applied resulted in a t-statistic of 1.4084 which for
the number of degrees of freedom was not significant at the 90 percent level.
-------
EXHIBIT E-14
ADJUSTED REAL NEW PRODUCT SPENDING BY THE CHEMICAL INDUSTRY
BEFORE AND AFTER SECTION 5
(Millions of 1981 Dollars)
Midpoint
Baseline (before section 5; average 1974-1978) $2401.6
After section 5 (average 1979-1981) $2089.2
Source: ICF estimates.
3. Conclusions
Despite the numerous assumptions required, the differences in the
data, and the complexity of the problem, the two approaches used here give
similar results. On the basis of both the trend fitted extrapolation and the
comparison of representative averages were found:
• Actual R&D spending by the chemical industry
(excluding drugs and medicines) declined relative to
the baseline in 1979 (the year TSCA became effective).
• The magnitude of the drop was not significant when
compared with normal year to year variation in the
data.
In addition, the trend fitted extrapolation indicates that by 1981
planned R&D spending will exceed projected R&D expenditures. This reinforces
the notion that the decline relative to baseline in 1979 was not out of the
ordinary.’ At any rate it appears that the decline in spending relative to
baseline is a temporary not a permanent phenomenon.
Even the small and temporary shift noted here cannot be attributed
exclusively to TSCA section 5. In addition, in any evaluation of R&D spending
data, it is important to bear in mind that:
-------
• Coincidence is not causality. Changes in spending
that occurred when section 5 went into effect may
have been induced by unrelated factors, e.g.,
profitability, oil-price shocks of 1979, or tax code
changes.
• R&D spending is not the same as innovation.
Although we have tried to isolate new product
spending (which is not precisely new chemical
spending), we are still a step removed from
predicting or evaluating innovation. The
relationship between the quality and quantity of
innovation and the level of new product R&D spending
is still unknown.
• The timing of spending changes may not coincide
with section 5’s effectividate. To the extent the
chemical industry anticipated section 5, the effects
on innovation may be felt in one or more years prior
to 1979. Alternatively, if innovation (and R&D
spending) are multi-year processes TSCA section 5’s
impacts may not be seen until several years after
1979.
4. Transition Phase
The likelihood of a transition phase complicates efforts to relate
new product spending changes and section 5 of TSCA. The transition phase may
precede section 5’s effective date, follow the effective date, or both.
Major legislation such as section 5 of TSCA is widely debated prior to
enactment. Industry knows generally the provisions and effective date of the
law. Adjustments to comply with or minimize the effect of section 5 may have
begun years in advance.
For example, high new product spending during 1978 may have been induced
by section 5. Chemical companies may have pushed their research schedules
forward to complete projects in advance of the regulations effective date.
The incentive for such behavior is that pre-TSCA introductions of new chemical
substances would be exempt from the pre-manufacture notification process. The
1979 drop in spending may merely be a return to trend.
-------
To the extent 1978 spending was section 5 induced, the extrapolation
based on 1978 is distorted. The expected spending range would be overstated
and the potential effect of section 5 overstated. The result would be an
erroneous impression that TSCA depressed spending rather than simply shifted
the timing.
Although industry can anticipate the general form of legislation, it may
not be completely familiar with all details. Unfamiliarity with reporting
procedures and requirements may make compliance more expensive initially.
This may be especially true of smaller firms that may be less accustomed to
government regulations and do not have legal and technical expertise to adjust
quickly to a new regulatory regime. In this case, adverse impacts experienced
immediately after a change in legislation may overstate the long term effects.
For example, an alternative view of the 1979 drop in new product spending
is that 1979 was an adjustment year. As firms become more accustomed to
section 5, they resumed spending on new product R&D.
Actually section 5 may have engendered both anticipation and
unfamiliarity effects. Consequently it is very difficult to assess the
duration of the transition period or whether it has a large enough impact to
matter.
4
-------
APPENDIX F
HEALTH EFFECTS OF EPA REGULATORY ACTIONS CONCERNING
NINE PMN CHEMICALS
The following section briefly discusses the likely health implications of
regulatory actions that EPA has taken on nine PMN chemicals where agency
health concerns resulted in voluntary actions on the part of manufacturers to
reduce exposures. These actions ranged from simple revisions of Materials
Safety Data Sheets (MSDS) to requests for lengthy, in some cases apparently
permanent, suspensions of Agency review for substances where it had become
clear that EPA had serious reservation about health risks.
The discussions which follow each. contain a brief description of the PMN
substances, the nature of the health concerns raised by EPA, the regulatory
history of the PMN and an assessment of the likely net health impacts of EPA’s
decision. In several of the cases, quantitative estimates of risk reduction
are not possible because of uncertainties about exposure levels, dose-response
relationships, or lack of knowledge about the toxic effect of substitutes for
the PMN chemicals.
A. PMN’S F. G, AND H
These three chemicals are closely related crosslinking agents for use in
coatings. The manufacturer (they were all made by the same firm) intended to
S.
produce over 1,000 kilograms per year of each substance. EPA estimated that
about 6 workers would be exposed to the PMN substance during production and
formulation of the product and another 100 workers would be exposed during
-------
application of the coatings. Exposure levels were estimated to be between 8.0
and 0.01mg/N 3 in air during application with average levels being about 0.1
mg/N 3 . The major concern regarding these substances was that they were
intended to decompose during use and would be expected to decompose upon
exposure to moisture to yield one of the starting materials, a known animal
carcinogen. EPA repeatedly asked the manufacturer to supply information on
worker exposures and the toxic properties of likely substitutes. Upon
realizing the depth of EPA’s concern, the manufacturer requested that the
review period be suspended and no Agency action has since been taken in this
case.
Despite the fact that animal tests indicate that the starting material in
question is a relatively potent animal carcinogen, simple calculations
suggest 55 that because of the relatively low exposure levels, the number of
cancers prevented by EPA’s action is quite small, on the order of lxlO_B -
lxlO- 6 per exposed worker per year of exposure. It should be noted,
however, that the PNN substance was judged to be more toxic then 10 of 16 of
its possible substitutes, and significantly less toxic than only one of its
possible substitutes, so that in this case, EPA action probably resulted in a
net substitution of less toxic substances for a more toxic one.
B. PMNI
This substance is a low molecular weight polymer. The manufacturer
intended to produce up to several thousand kilograms/year for use as an
55 These calculations assume air exposures between 0.01 and
0.8 ig/m 3 for 24 hours per worker per year (EPA estimate), 100 percent
conversion of the PuN substance to the carcinogenic starting material and 100
percent absorption of inhaled vapors.
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automobile lubricant additive. The agency estimated that about 12-30 workers
would be exposed to the pure substance during production and as many as 65,000
consumers (auto mechanics) would experience dermal exposure to the substance
diluted in crankcase lubricant for up to 250 hours per year. The manufacturer
had tested the substance for toxicity prior to filing the P 1N and found that,
while the pure substance was a skin and eye irritant in rabbits, it was a
relatively weak acute toxin. EPA was concerned that expected breakdown
products of the material could be skin sensitization agents. The
manufacturers voluntarily suspended the review period while sensitization
tests were performed. The tests on the pure substance proved to be negative.
Examination of the chemical structure of the PMN substance indicated that
little of the toxic breakdown product would actually be formed during use.
The substance was therefore “dropped” and production was allowed to begin.
It is difficult to estimate the health impacts associated with EPA action
in this case. The slight delay in introduction of the chemical may have
prevented some small number of cases of skin and eye irritation. Since the
health effect associated with the use of substitute additives was not known,
the net effect on health cannot be determined. Of course, had the substance
been found to be a skin sensitizer, and there were reasonable grounds to
suspect that it was, considerable direct health benefits might have been
realized by EPA’s action.
C. PMNJ
The PMN substance in this case is an organic salt mixture. It was
intended to be imported as an ingredient in a neutral metal cleaning
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formulation in quantities of over 5,000 kilograms per year. Approximately 5
workers would have received intermittent dermal exposure to the pure substance
during formulation, and as many as 500 workers would have been exposed to
dilute water solutions of the PMN substance during use. The pure P 1N
substance was tested and found to be a moderately potent eye irritant. The
overall level of concern, however, was relatively low because of the low
production volume and low concentration of the substance in cleaning baths
during use. EPA suggested, however, that the substance be labeled to prohibit
use with certain cleaning fluids, because of the possible formation of a
carcinogenic derivative. The company agreed and amended the TSDS (techni a1
services data sheet) to state that the product should not be used in
conjunction with certain cleaning fluids.
Little evidence exists to indicate how often the PMN substance would have
been used with the problematic cleaning solutions had the TSDS not been
altered. To what extent the TSDS resulted in changes in user behavior, or the
extent to which worker exposure was changed by EPA actions is not clear. A
simple worst-case exposure calculation suggests that the reduction in
health risks brought about by the labeling was quite small, between 10 and
102 total cases of cancer prevented per year of use of the PMN substance
among all exposed workers, assuming that the use of the substance in
conjunction with problematic cleaning solutions was completely abolished by
the TSDS revision. This may not have been the case because of the large
number of cleaning formulations in use.
56 We assumed workers were exposed to 10-100 ml per day of bath fluid
containing 0.1-1.0 percent PMN substance for 240 days per year, that 10-100%
of the PNN substance was converted to nitrosamine and that 10-100% was
absorbed through the skin.
-------
D. PMN’S K, L, AND M
These three substances are closely related fabric dyes, intended for
import in quantities of < 10,000 kilograms per year by a major dye
manufacturer. Approximately 35 workers per yeat were expected to be exposed
to these substances, 6 to the solid powder during dyebath preparation and 29
to freshly-dyed fabric and dyebath liquid. The substances were to have been
released to privately and publicly owned water treatment works in significant
amounts and could have been released into drinking water. All three of the
substances have in common a chemical structure which could be expected to
break down under ambi nt conditions to yield at least two families of
metabolites which were structurally similar to known human and animal
carcinogens. During the review period, EPA made repeated requests to the
importer for data concerning the metabolism of the PMN substance and related
chemicals. When it became clear that little was known about these substances,
EPA suggested that mutagenesis studies be performed on the three chemicals. A
formal 5(e) order was not drafted, but the Agency still has the substances on
a 5(e) course should the submitter decide to resume the review period without
submitting additional data. The importer requested that the review period be
suspended and no further action has been taken as of this time.
By its action, EPA has delayed, pending the development of further
information, the introduction into commerce of three substances which there is
good reason to believe could pose substantial carcinogenic risk to exposed
individuals. Unfortunately, because of our lack of knowledge about the nature
and amounts of the metabolites that would be formed and the carcinogenic
properties of these metabolites, it is not possible to develop quantitative
estimates of the number of cancers prevented. Again the lack of knowledge
-------
about the toxic propert . of likely substitutes also affects our ability to
perform quantitative benefit estimates.
E. PMNN
This chemical is an intermediate in the production of dyes for textiles
and plastic resins. The manufacturer intended to produce this substance, in
quantities of < 5,000 kilograms per year. Only four workers were expected to
be exposed to the PMN substance during its synthesis and use. EPA’s concern
over the substance arose from the fact that several structural analogues to
the PMN chemical had been found to be animal carcinogens and information
supplied in the PMN which suggested that exposure levels might be high duri p
one particular step in the production process. Subsequent discussion with the
manufacturer indicated that substantial exposures were not likely to occur
because standard company practice required the’ use of local exhaust
ventilation and personal protective devices during handling of all dangerous
substances. The company agreed, however, to revise the MSDS to include
mention of the carcinogenic properties of the analogues of the PMN substance
and the PMN was “dropped” from further review.
Since so few workers were exposed to the PMN chemical and since exposure
levels were so low even without EPA’s intervention, it is not likely that the
revision of the MSDS produced anything but a very small decrease in the
expected cancer risk for the exposed individuals. In fact, several recent
epidemiologic studies of populations exposed to high levels of a close
structural analogue to the PNN chemical, have found no increase in cancer
incidence among exposed individuals. Thus the PMN substance may in fact pose
even less of a carcinogenic risk to humans than the animal tests of analogue
substances suggest.
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F. SUMMARY AND DISCUSSION
Our analysis of these nine PtIN submissions did not find any individual
case in which EPA action prevented adverse health effect on the order of
magnitude similar to those associated with the better-known occupational
toxins or environmental pollutants. In the two instances (PMN’s F, G and H
and PMN J) where quantitative assessments of risk reduction were developed,
the estimated number ot cancer cases prevented is m ich less than one. In
other cases (PMN’s K, L, and M) where the Agency raised concerns about the
carcinogenic properties of three textile dyes, it is likely that cancer risks
to the exposed workers were also reduced. Although uncertainties concerning
dose response relationships made quantitative assessments of risk reduction
infeasible, it is possible that the magnitude of risk reduction in these cases
could be larger than that for actions taken in the two previous cases. For
the other case in which a suspect carcinogen was involved (PMN N) the exposure
levels and the number of workers exposed were so low and the evidence for
carcinogenicity in humans was so ambiguous that a confidence interval for our
estimates of cancer risk reduction must include zero.
For PMN I, EPA ’s action delayed the introduction of the substance into
commerce until results of animal testing indicated that the chemical was not a
skin sensitizer. In this case it is difficult to estimate the benefits of the
EPA’s action, which would take the form of possible reduced incidence of skin
and eye irritation during the delay before introduction, although the expected
number of cases avoided is probably much greater than the number of cancers
prevented in the previous examples.
-------
F. SUMMARY AND DISCUSSION
Our analysis of these nine P 1N submissions did not find any individual
case in which EPA action prevented adverse health effect on the order of
magnitude similar to those associated with the better-known occupational
toxins or environmental pollutants. In the two instances (PMN’s F, G and H
and PMN J) where quantitative assessments of risk reduction were developed,
the estimated number ot cancer cases prevented is much less than one. In
other cases (PMN’s K, L, and M) where the Agency raised concerns about the
carcinogenic properties of three textile dyes, it is likely that cancer risks
to the exposed workers were also reduced. Although uncertainties concerning
dose response relationships made quantitative assessments of risk reduction
infeasible, it is possible that the magnitude of risk reduction in these cases
could be larger than that for actions taken in the two previous cases. For
the other case in which a suspect carcinogen was involved (PMN N) the exposure
levels and the number of workers exposed were so low and the evidence for
carcinogenicity in humans was so ambiguous that a confidence interval for our
estimates of cancer risk reduction must include zero.
For PMN I, EPA’s action delayed the introduction of the substance into
commerce until results of animal testing indicated that the chemical was not a
skin sensitizer. In this case it is difficult to estimate the benefits of the
EPA’s action, which would take the form of possible reduced incidence of skin
and eye irritation during the delay before introduction, although the expected
number of cases avoided is probably much greater than the number of cancers
prevented in the previous examples.
-------
The results of this analysis do not in and of themselves constitute an
estimate of the benefits of the PtIN program. The number of chemicals analyzed
is not sufficiently large to give a statistically representative picture of
new chemical introduction. It is not at all surprising that we did not
encounter a vinyl chloride or a benzidine among our sample of nine chemicals
since such high-volume and highly toxic chemicals will be introduced into
commerce quite rarely. When they are introduced, the benefits of having the
PMN process in place to “catch” them would be substantial. Also, the fact
that the PMN program is in place decreases the likelihood that such very
hazardous substance would be considered for introduction at all by
manufacturers.
It is difficult to predict how hazardous the newly-introduced chemicals
would have been over the period covered by this analysis in the absence of the
PMN program, but we suspect that the deterrent effect of the program in
preventing the introduction of such substances into commerce has been great.
It is highly probable that the existence of the PtIN program has resulted not
only in the introduction of less hazardous chemicals than would otherwise have
been introduced, but also in improvement in the measures taken to limit
exposure when new chemicals are introduced. The benefits, in terms of reduced
risks to human health that have resulted from the deterrent effects, are
certainly much greater than the modest benefits which have arisen through the
control of the nine chemicals analyzed here.
Finally, the benefits that we have estimated to have accrued from EPA’s
actions have taken the form in most cases, of cancers avoided. This is
primarily because cancer dose-response extrapolation is relatively
straightforward compared to assessing the likelihood of other adverse
-------
effects. In our professional judgment, it is probable that risk of other
types of effects averted by these nine EPA actions to reduce exposure to toxic
substances (such as idiosyncratic or hypersensitivity reactions to chemicals
among the exposed populations or other effects not predicted by toxicity
testing) would be much greater than the number of cancers prevented.
Unfortunately, there is at present no way to estimate the magnitude of these
effects.
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APPENDIX G
SAMPLE OF EPA79, CMA79, EPA82, AND FINAL FORM
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Federal Rel!ister I Vol. 44. No.201/ Tuesday. October 18. 1979 I PTo osed Ru.les
59738
F CFCS F u- M
United States
-
Etwirorirnentai Protection
Agency
PRE?J1A UFA TURE NOTICE
DOME T C MANUFACTURERS
Wimo comsisted send tills toni 1S
Document Control Off Ic r
Office of Tosic SuSs*anc’s. TS . 3
U . S. E.P A.
401 U Street. LW.
wasiunglon. o.c.
£ PA u Q L1
Date at receiot
GENERAL INFORMATION
The Premanufacture Notice form ton domestic manufacturers is must be maoe in accordance with section IV of these instructions. -
divideS into me following parts: II you claim any tell, in jnv attacniment to this form cont,defltiai.
see SPECIAL INSTRUC 1ONS ‘or attacnirnents. AooenGix A.
Part 1 — General Information Section ii. Actiendix S ‘ .xamo,es. provtees aeditional guidance
Part II — Human Lxoosure and Environmental qelease for asserting and sucstantlatinl claims of confidentialitY.
Part III — List of Attachments Iii accordance with sections I ant Ii of the confidentiality instiujC-
tiens. claims of confidentiality must be maoe oy using tne follow-
Part IV — Federal Register Notice ung $11 categories.
Part V — Optional Data
The optional oart part VI is not included in this package. Alt . MANUI’ACTURERI IOEN11TY ...
data reduested in the mancatory tarts tarts I. II. Iii. and IV ) - A claim I cønl.dentualuty for Category A. Manutactwer a
must be redorted to the extent tney are known tO or reasonaoiy identity, automatically includes items 4. 2. ant 3 in tan
ascertainaole oy the submitter. This means triat the sucimiter section A. —
is ez .oecteS to answer all cuesuons to the oesI of his.’her aailiry,
including naming reasonaole estimates in cases wnere coiimiete 3. SPECIFiC CIIEMICAL IDENTiTY
factual information is not availagie. If the suomitter is unaale
to maMa a reasenaoie estimate ti.e.. the data is not known ano A claim at confidentiality for category B. Saecific C emic3i
not reuonaoiy asce,tainaole), he/she snould enter ‘?fA met Identity, automatically incluees items L. 2. and I in :ant i,
ava ,la Olei. section 8.
In east I. the submitter is recuired to reoort the soecific chemical C. PRODUCTION VOLUME
identity of the new suostaflee. tegardleu of wnelflet the informa. A claim of confidentiality I or category C. Pocuction VOlumc
tion is claimed as confidential, in accordance with Dr000aed automatically .nci es item in oart I. section 0. These
720.ZDifl. the suemattef may authorize anolnet person to reeort items Go not nees to oe individually claimed.
the specific chemical identity li his,ier behalf, The notice will
not e valid ipitil tile specific chemical identity is received by 0. USE DATA
EPA.
A claim of confidentiality for cotetory 0. Use Date. auconati-
If the space on the form is not sufficient tO adeduately answer a caliy inciumas ,tem 2 in tart I. section 0. These .tems ao not
duesliolt. me sUOIii,tten may attach additional sneets. identify any feed to or individually claimed.
continuation ay part, section, suosecuon. and item.
E. PROCESS INFORMATION
ASSERTING AND SUBSTANTIATING
C2.MM$ OF CONFIDENTIAUTY A claim of confidentiality for category E. Process Information,
automatically includes items in part it, section A supaec:lon
Reao Aooend.z A. tr’ tnjctions for Asserting and Substasitialing - 2. These items co not need to be individuaiiy claimem.
Claims of Confidentiality, for infolitiation au hOw 10 Claim tid
suoaianuata ’ confidential business information included in this F. OTHER INFORMATION
form on in attacrmtento to the form. Claims of confidentialitY NO items on tne form are automatically included in this
must be made ui accordance with sections I and hot these insVuc category. Titus all claims lot this category oust specify
tions. In additIon. suostanhiatioft of all claims of confldeetlatily category F. -
GENERAL CER11FICA flON
I hereay certify to the t of my kaeeisdge aes befief. that: I also’ agree to permit access to. and the cocying of recores by a
duly authorized representative of the EPA Administrator in
a. The company named in section A. item 1. intends to irianuuac’ ance with the Toxic Suosunces Canirol Act and any regulations
tune for a commercial asmoose the chemical suostance for W II IC II issued thereuncer, tO document any information reported in
this notice is suamitted, other titan in small miantities for tfli form.
research and devetooiiwnt, and that the suastance is not
excluded from piemoulacture notification (40 CFR 720.131;
. All information entered on this Prewianutacture Notice form is -
complete and truthful as of etc date of suomittal: ant Signature of authorized orticial -
e. I am suomitting with liii form all tESt data in my possession
or control concerning effects of the suostance on heaitfi or
the environment and a descniotlon of any other aata kilewn 1
to or ‘easonaoly ascertainaoll op me, in accordance with Date
40 CFR 720.23.
I
—
CONFIDEI4TIAUTf CER11F1CATION -—
I hereby certify to the truth and accuracy of the following c. The information is not Oublicly availaole elsewnere; ags
four statements concerning all information ,mnich is clauses d. Disclosure of tne information claimed confidential would cause
confidential. suostantlal harm to my conmeny 5 cbmoetitive oosition.
a. My company has taiuen measures to protect the confidentiality
Of the information, and it will continue to tate mesa measures: Signature of authorized official
. The information is not. and has not been. reasonaoly obtain-
able Dy other ecsons lotrief than governmental boalesi by using
legitimate iteans (other than discovery based Ofi a showing Date
Of special need in a judicial or ouasi. uaicial groceesingi wilfl
out tite c omoany a consent:
EPA Penn, 7710.23 (9.79)
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Federal Ra ater I Vol. 44. No. Zoi / Tuesday. October16 . 1979 / Pro ozed Rules
I Part I — G!NERAL INFORMATION
5.cti.. A - MAPIUFAC11JRER IOENT1FiC T1oN
If you claim Manutacturer’ridenmty confucennal. mark (X the bos.aL!ha right. 0
The answers to items 1. 2. anc 3 will be included in thus claim.
If you claim the answers to items 4 or S conSidemtah tace ’tP letten A—if ut the boz.wrncfl indicates
the oasis of your claim and answer the linkage ouestions in aopenwx A, section IL for c3tegor les A—i.
1. Person Namretautron -ony ar Title-
F Iing
NOtiCI- Or gant zati on
Mailing address (Nl,,,aor arid street s
City. State, ZIP code
I -,
Name Title
2..T.cnn,ca . . -
Contact
Mailing address (Nunm. m d sl7 t)
City. State. ZIP coo. Mm cooe Nu icer
Teleonone u
I. Parent Name
Camiiany
Mailing aooress (N&me r arid sueeri — -
C ti. State. ZIP ccae .
.
.
4. Enter the untenceo oate of Convnencentent of manu4ac ire for comoiercial purposes.
If me intended date of commencement of manufacture is more than
3 years after me aate . f this notice. suomit evidence of intent to
manufacture in accordance wim 40 CFR 720.ZQ(h).
Mark this box ii you attacn evidence. -
Month
Year
‘
I
I. If you have had a Prenotfc. Cammunucation (PC) Concerning this notice I Mar.i (x — —
and EPA assigned a PC numoer tO this notice, enter PC Numoer - Ii 1IOVPS
—
CONTINUE WITh SECTION B ON PAGE 3
(-
— ‘r
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59790 Feâeral Re ster / Vol. 44. No. 01 / Tuesday. October 16. 1979 I Prooosed Rules
) Section B — CHEMICAL IDENTITY
If you claim Chemical Identity confidential, mark iXl trie ioz at inc rignt.
The answers to items 1. 2. and 3 will be induced in this laim.
If you claim Chemical Identity confidential, is —. —
this claim limited tO the pertea prior to manufacture’ Yes 2 I No
If you claim the answer to item 4 confidential. place the letters A—F in the Des wntch indicates
the oasis of your ciaam and answer the linkage Questions in appenoix A. section II. loT
categories A—E..
[ Cam
Camolete either 1. 2. or 3 as approonate. Comolete 1. I tiag
1. Ciass 1 • 1• CAS Registry No. lit knowin
Chemica’ —
Substance b. Specific cnemical name
(other than
polymers)
—
C. Molecular formula
- 4• 3pey . - -
S. Traceinariu -
- 1. Structural diagram
%
a
:
a
S - -
• DUai’* this boa 1 you attacn a continuation -sneer.
2. Class 2 a. CAS Registry No. if knowni
Chemical
Substance b. Specific cnomicai nate. •
—
C. Synonyms
—
Traoemariu
S. List the imniooiate precursor suostaitcetsi arid reactants with their resoecuve CAS Registry Numoensi I
sos cescrice inc nature of trio reaction. Also provide a oaniat or incomplete chemical structure diagram
(where a rowatai. inoicata the range of composition.
Morn mis box ii you attacn a continuation sheet. -
-------
3. e iY.i
federal I Vol. 44. No. 201 / Tuesday. October 16 . 1979 / Proposed Rules
a. (1) Provide the specific chemical names arid the CAS Registry Numoer of those monomers and other reactants useø i tt
the manutac ure of the polymer, (2) Marl IX) the identity column if you wisii monomers useo at two percent coy weignu
or less to oe listed as oart of the polymer description on tne inventory. (3) Provide (tie intenoec range of comoosltcon
of the polymer in terms of monomer percent (by weignt), It your notice is for any eboolymer of the listed monomers.
enter “any” under Range of Composition, ia For cacti monomer, indicate the maximum amount c weignt percenfl ttiat
may oe ,,oresent as a residual in In. polymer as distriouced ri commerce.
Monomers and CAS Registry No.
Ii )
Mare (X)
Identity
12)
composition
Range of
(3)
(weigit percent)
Maximum amount
ca
C. c
i
.
is
.
Ii
‘I
b. Indicate the minimum average molecular weight or the minimum degree of polymerization of the Polymeric compositions
to wnicn this notice applies.
.
0 am this box ii you attach a continuation sheet.
4. Impurities
(ai List each impurity, including CAS Registry Number, wflich may reasenaoly be anticipated to be present in me chemical
suestance as it will be manufactured for commercial purposes. ( Dl Estimate tn. maximum percent (by weignht of cacti impurity,
Base your answer on information developed during R & 0 actIvities, your knowsec ,ge of manufacturing process cnemistry and
anticipated ouality Control ooerations, (C) Math IX) if the concentration of an impurity will be scecafically Controlled because
of your concern aoout potential adverse health or environmentaj effects. a ) Estimate the maximum totai percent (by weujlt)
of the impurities mat may be-present.
Impurity and CAS Registry numoar
tar -
Maximum
percent
present
Md,It it to be
soecrf’casiy
COntrOlled
Coni
ial
On
tc h
—
.
I
isi
is
c
I_
lb
lb
,
I
i I
I
S
/ d Total percent
—
.
.
—
[ Marx this box if you
arzacn a continua tI . snmet,
Section C — GENERIC NAMES ‘
Complete this section only if Specific C2nemical Identity is claimed confidential.
For Instructions on how to develop generic names, see aPpendix ii, 40 CFR 720 (44 PR 73) , Pr 000sed
Prenianufactu,e Notification Reoucrements and Review P’ocedures.
I. Enter the
generic name
agreed on oy
EPA in
P’enotjce
Communication
or Provide 3
generic names,
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Federal Re ’ st r / VoL 44. No. / Tuesday. October lB. 197 / Prønosed Rules
S.ction 0 - PRODUCTION AND MARKETiNG DATA
If you cLaire Pr O tioaVOi coi identi* mark (X) the e at me rignt
The answers te ite. uIl be ir Ju0ed in tins claim.
t. Estimate tPl&mtnimuin and aresa oct voi rie for the first tfTee years of proCuctiore. lnct in yc t,etales
ro0uctron oy others widi wnom y a nave U eO to ni 1WacXara the tie’. c. *ca 5nro0t e.
rru4L cure, ) ‘esT
(1) —
Pr aucticn $ gJyrr
C nñc
hal C.
Minimum - Maximum
(2) (3) I
1. First year S •
—
b.Secoadyear
.
C. Thud year
LCatefe’ o*eae
If you claim Use Oats confidential, mark IX ) the bax at the rigt*.
The answers to item 2 will be included in the CI3IIL
a. List the categoryf 1 uV us. cu umicl, Iiv ovc uc1ia. es1i i. (E uole solwe,t eoed 3m 3otO iYe amt.) List
partial information if comolete infOririatIOl i IS nOt known. çE. amaie: solvent.) Mani )X) the categories of u,e as Site limited. indusb al.
çguinercial, or consumer. Estimate tne percent ol total production for the I ir 5t 3 years devoted to eacn category of use.
Mwi (xI
nate cosulrr,vs l
e ory t e
— (1) ‘
Pioduction
percent
S ( )
I
r r
J
Site limited
(3)
Indus t rial
(4)
Corisnercial
(5)
ConsumerS
(6)
.
— .H.
1
1.1
0 4ark thIS box I you atte P a’ contlnuatIGfl sneet.
b. List sri’ order catetoryties) ot use that you ha ’ re actively ezolored
j
0 Maa ’ thts box II you attach a C dItIuBtlCfl sneef.
c. Do ye, intend or exoect the new chemical substance to be toed to
treat 3inking water s Øies or to be used in groGuCts e.g., paints
or ccaitngst that will coma in canta with.dritiking water? i EYes ZONO s( Don’t i no
MOTE — It you claim u*answers to items 3 or 5 eønfldentlal, place the letteñsl A—F)n the box wnicfl indicates
the basis of y r claim and answer tire linkage qi.resricns in appenoix A, Section II c categories A—E.
If you claim any item soocutted in an artacrrnrent confidential. see SP C)AL INSTRUCTiONS. appenoix A,
section II, part 6.
3. l isa the emica1 3.uA 5ta e ‘ “ 0 . 14s Dom’t høe.
4. hazard warnings Attach 10 thIs notice a copy or reasonacle acsimiIe of any hazard warning statement. Iabo4. ae ing,
matting or inStrUctionS. technical data sheet, material safety data sheet. ano any other Information
which will be crovuoed to a ny perace re Ctng me It bai ing. a oem. use. assonasi, eaImemt
upon accidental ezao .Mrre. the tormwatior , Construction, Ot Iaoeliri& of pIoCucts COZaaLn4n& me new
CJW ,w,C 5u1t . .
0 ‘Jark this box if you atta t a heZar warning.
S. E. a Number of custome s 1 Percenta eoroouction co
Commitment to curenase the new chemical suostance Item you
for a c Legory at ’ use ur s we to you., ti’- ’ tire oe.ceo ag
of your OrOduct,ion volume trial will be ourcnaseo by soon
customers during the first 3 years of production.
—289—
-------
i v, . . u. gui. , iu v. iciooer ID. i 1 / rOvosea Ruleg
Section E — TRANSPORT
Como ete this section if you intend to ship the new chemical suostance from ‘is site of manufacture.
If you claim the answers to items I or 2 confidential, place the Iettercsl (A—F’ in me box which irtoicates the
basis of your claim aria answer the linkage Questions in aoperiaiz A, Section II for categories A—€.
1. Enter the prone, DOT snipping name and hazard class of the new chemical suostance (ii applicaplel,
a.
5hio ung
name
.
l’tazare class
2. Marti Xl he moaetsi at transport which, you believe will be used for trio new chemical suostanca. —
J Truck - s Plans -
2 (, , Railcar sfl Other —
— x’5arge,vessel -
s( P iDeline - -
Section F — RISK ASSE5 MENT -
If you claim any item-sajbmitted in an attachment confidential, see SPECIAL INSTRUCTIONS, appendix A,
section tlpart B.
If you have evaluated the health or environmental risks which may Pe presented by the manofacture. ocessing
distribution-in commerce, use, or disoosal of the new chemical suostance anacri your evaluation.
0 MarSi this box ii you attach a risk assessment.
S.cté.n G — DETECTION METHODS
If you claim the answers t item I confidential, place the letter(s) A—F in the box winch indicates the basis at
your claim and answer ciie linkage questions in appendis A, section II, for categories A—c..
.
, Is an anatytical meth ava.lab4e to identity and quantify the presence of the new chemical substance
C
t
Identity
Quantity
a. In t0lacs airs
i Yes 2 ,] No 3 Don’t know
.
S. In woriwlace air?
t Q Yes 2 (‘ No 3 Oon’t know
..
b. In effluent streamsP £ .
1 Yes 2 Ne Don’t know
I. In effluent streams?
Yes 2 No 3 Don’t k w
C. In materials reQuiring disoosal?
Yes 2 (“1 No 3,00.11 know
g. In materials requiring disposal?
-, Yes z No 3 Don’t know
d. In one Products for wnicn trio new
— - SuOstance is an ntermeaIa
z No 3000fltknow
I I. In entt products tot which the new
substance is an interme ia
i EYes zONe 3 Oon’tknow
—290—
-------
59794 FederaL Register / vol. 44. No. 201 / Tuesday._October_18. 1979 / Prvt,osed Rules
Port II — HUMAN EXPCSURE AND ENVIRONMENTAL REL!ASE
Section A — INDUSTRiAL SITES CCNTROLL.ED By THE SUBMITTER
If you cta.m Process Information confidential. mark (X l the epa at tile r gm.
The answer to suosectiOn 2 wiil oe included in this claim. - —
If you claim the answers to items in SuOsections 1. 3. or 4 confidential, enter the letterts) A—F in (Pie box wnicn indicates
the oasis of Your claim dfld answer the luni age cuestions in aooenOia A. section I I for cace orres A—i. It you claim inc
answers to items 3.3. 3. or 4.4 in suesections 3 or , or any items suomirted ii an att3C1vr. r1 cor idential. see SPECIAL
lNSTRUCT10NS appenaz A, section II, part .
Campiete a separate suosectlon 1 aria suosect lon 2 srieel for eacit site wnere yc will manufacture. rocess or use tne
new cnemucal suostance. - —
SubsectIon I. — PROCES5 INFORMATiON
1.3 Identity Mama
of site
Physical location aacress lNumoe, and st,eer,
—
- City, County, State. ZIP cooe .
-
•
1’
1— -
—
1.2 Type of site t Manufac utng a Processing 3 Use a fl Continuous $ Batos
1.3 I-tows of operation Days per year IOur per day
1.4 Amount mamatactis ,. - - ‘ -
processed, or useo — . SL iim K2jyr U .
J SubsectIon 2 — 8LQ X DIAGRAM -
LI Provide a block dm imssdyu the iia er ant and onl cee rsions . . Also .nc*s e
1. For each Chemical convess&ca ii i the block diaW’ot identity the maio, chemical reactions ana the malor side reactions.
b. Provide me aeproxtmatc a teed ma nals. . .sl 5. at oiea cts weicli ace emefm and leaving
mon masot unit operation arG chemical con unr. Indicate me r Pioa of Wansler of tiles. memnais a wnethev
tile operation is open or CIOUP to ate workplace environment.
e. Identify those DauntS in tile bloeX diagram Irene wnicil there will be releases of the new cnemical substance or
byproauct ma*eriais into the air. iana , or waler environment. -
0 am rh s box It ya enactt a cceeint, on Sheet.
-------
- Federal Re ster / VoL. 44. No. 201 / Tuesday, October 16. 1979 / Prc osed Rules
uOsictlos .1 — OCCIJPA ’TlONAL EXPOSURE
Comotete a seParate subsection 3 for cacti site at wnicti you will manufacture, process, use, or Jisopse of
the flew-chemical SUbStanCe. Indicate me antic Dated mets) of exposure to the new Crfemicaj Substance
ie g., nnagatiois, ingestion, Cermafl, he numoer of emclnyees antictoated to be exoosec y eacn route, and
the flaxansjm Cufatton of sucfl exPosure in cays oer year and hours oer Cay). In the tacie helow, rnar* iX)
A—Average or P—?,ak (or the conceritJat)on ieve,s that are exPected to e present in tie immeomato vicinity
of (tie process eouloment, Base your answer on maximum annual Production, processing. or use outing the
fist 3 years of manutactiara under normal. ooerating condItions with all engineering saleguaras in )ace.
tia
3..1 Idemity 4ame.
of site
Physical location address fNun er ._ sti .t
City. County, State, ZIP code
1,2 Occu at onai E e at InCs thaf lile
Concentration .
Uazimua , 5 ) U
Exposure duration I X) acc, ,j j l , .rv,
exposed Unit A — Avefape P — Peas
(4) iTleasije 3—l I 1 -43 10—ICO I >
C L ) (2) (3) Hr.,oay Caysiyr.
A
.
a. Manu(acoue
I
I
•
- porn
zfl mg/&
A
P
P
-
A
-
b. Prscess ng
i ppm
z mg,’in 3
.
e.Use
I. ]‘
•
•
‘
i .ppm
.
d.Oispc sai
•
i
i ppm
afmng.’&
•
3.3 Descnbe those operations in wflicft workers will be directly exposed to the new criemical subst ance.
0 Marir this ex ii yoc srtacfr a tin ark sflhi4.
3.4 Math IX) as maey of the pnysic.al states of the i cr iemtca l sunstarice to which workers may he exposed in the workpla Gun:
i Solid 3 Aerosdl $ Mist Oust a Other — .Soedlly.
a Gas Powo r 6 Fume s - Liquid
3.3 For each site of m,mrutactu,s, list any other substances e.g.. byproducts, co-products, (eed$ cks and Intermediate,)
associated with eie manufacture of the new chemical substance mat may reasonaoiy be anticipated to be present in the
woikolaca and to wnicn workers may be exposed. Proviac the CAS Re ,stry Nwnoe,, —
Substance
(1)
CAS Registry Number
(2)
0 Mam rriIs box ii yvu aftecn cQ’itinueripn sneer.
Corn
tiat
f
-------
59796
Federal Re ter I VoL 44. No. 201 I Tuesday. October 16. 1979 / Pro oaed Rules
a
SUOSSCtIOO 4 — £ IVIRONMENTAL REL A3E AND DISPOSAL
Comojete a seoarate suosection 4 for eacn site wnere YOU intend to ‘nanulac:ure, process, use or ausoose g C, i
the new chemical suOstence. tia l
4.1 Identity ( ‘lame —
of site —
Ptiysscag location acoress (NuI7?oe ane sr,eerj -
City, County, State, ZIP cooe
—
4.2 Inalcate the duration of release unto the air and water env’ronsnent and the annual amount 01 new chemical suostance
reIeasea tO the air, water, and lane. Mark (X) the ausoosition of trio water ouscriar e ano estimate me effluent flow rate
from the site. Enter the name of the PO N or receiving waler Dody. 3ase your answer on maaimum annual orocuction -
diilng trie first 3 years of manufacture under normal ocerating conditions.
p —
L!uratuon of release Amount of new cnemtcai suostance reieaseo uKt’yr.t L..
Meaia Less ioo— 1000— More than -
l i v e , 1 day .,ays/yr. than 10 10—100 1000 10.000 10.000
(1) 2 3 6 ( ç
LA IS
1
1 I__
.- - - - -1. -S . .J
I____
c.Water J
I J
1
1
1
- ‘ I POTW (Publicly Owned Treatment WQtICSI ‘ I
L Enter nne
a j Navigable waterway (
3COther )
4. Effluent seeam flow rate Gallons I
4.3 Faa eacn release point indicated In the blocit diagram, characterize the camoosit,on of the release materials,
Q uarn r,,is x ii you at teen a nInuaUon sheet.
4.4 Qescrihe Ooilut,e control eauuoment and disoosal ooerations e.g.. scrueber, baghouse. Iaridtitt, incinerator,
activated sluoge, careen aosorotien, etc.) useo to treat individual or cenloined releases uncicateø in dIe
bloc* olagiano s of processing. aria us. ooerations.
0 tark tflrs box It ettacn a continuation sneer,
-------
Federal Re iatzr / Vol. 44. No. ZDl I Tuesday. October 16. 1979 / Prooosed Rule!
) Section B — IP4DUSTRtAL SITES CONTROL.L!D BY OTHERS
Comofete this SeCtiOh us,n your Owe, forecasts, any information already cotaifled from other nersOns w O may oroCess.
use. isoese of. or nemneutacture (under contract) tree cTeem,cai suostanc. or any other reformation treat us reason—
adly ascertainaule. Can ’oiete a seoarate suosection rio osectiore 2 for esen site wnere you ezoect ctreer persars
to ni gitjfacture iun der contract), oc5ss, u t. or aisooze of me new cnem,cal suOStarice.
If you ciasm the swers tO the it os in subsections 1, 3, as 4 confidential, enter the lettefis) A—F in the 001 WMCZI
uno cates the oasis of your claim anu answer me in ate questions in aooenais A. section ii. as catagones A—€..
If y e ciaum tIee answers to ttone5 ire zuooec:e e 2. or rtem 3.3 ire st , sect,on 3 confidential, see SP C2AL1HSTRUC11ONS
in a penoiz A. aection II. part B.
Su .ct1o. — PROCESS I) FORMAT1ON I ’a
1.1 Identity “
of site
(Oøtionall
Physica* location address (Numoer and street)
City, , State, ZIP onse
Canny - ..
—
- .
,
S. —
p”
u . Se sintIG. 2 — PROCESS DE3CRIPTIC
Brie y descriOs use, or 11e ,ufactwin* o eraIions conductfd by others.
£hnt z II 1M .a fJnueIT_ ent.
-------
597 8 Federal Rewter I VoL 44. No. 201 / Tuesaav. October 18. 1979 I ProDosed Rules
Su s.ettoa 3 — OCCUPAT1ONAt. £IPOSURE
Comotete a seearate suosec!ian 3 for eacri irI usu,al site w,iere you exoect o er oersons to orocess. ise. isoase of. or
manuiacture the new cnem,cal suostance. Indicate the antic ,oateo routes of ezcosure to the suost nce e.g.. innauauon.
ingestion. :ermall. the numo of emolovees anticloateG to oe ex i ose0 by eacn route. ar the maximum auracion or SIJGn
exoosufe tin Gays oer year ana flouts oer Gay). In th tao(e oelow. arli iX) A—Avera e or P— eai for the concenwatien
levels that are exoected to be aresem in the immeciate vicinity of the orocess ecu’omern. Base your answer on t.e -
maximum amount ant)cioatee to oe manufacturea. rocesseØ. used, or disposed euring the first 3 years of operation C:nf
unoer normal conditions wirn all engineering sateguarcs in place. tial
3.1 identity lame —
of site
Oational) —
Physacai ocalion aaoress gNunvev ailo streeri r
City. State. ZIP caae .‘
1--
County -
I—
3.2 Occuoational £xoosure at industrial Site k
- Concentration ‘: “.
Maximum Maximum (5)
Activity E.wosure nunrner duration • M8rt fX aooroovsare column
routetsi expose d Unit of A — Averace —
(4) measure o-.. 1—;o I to— ool too S -
(2) (3) Hrs..aayOavs.yr. AlP A)PJA P A P1.,
ppm
a. Manufacture 2 mg m3
b. Processing
.
;
I
i pm
2 1’ mg/mi
—
.
c-Use
C ppm
2lmg/rn3
-
d. Oisoosa -
I
:; pom
a mg m3
— — — a — —
3.2 Oescribe those activities in whi w ttefs will be directly exposed to Gte t chemical substance.
0 *Jark this box II yøu artacti a c an tlnuarlrjp sheet.
3.4 Marit X) as many of the onysical states of the new Chemical suostance to wnicn workers may be exposed in the workplace. C nfie
Sol’d 31 ’AefosoI sr ’Mist 7( Du5t sCO o ter —SceciIy 4 C3
a Gas a Pewøer 1 Fume a Liawe . I
-------
Federal Re ster I Vol. 44. No. 201 1 Tuesday. October 16. 1979 I Proposed Rules
-
Suessctlon 4 — ENVIRONMENTAL RELEASE ANO DISPOSAL
Coirolete a seoarate subsection 4 for each site vnere ocher cersons intend to manufacture. (under COntTact)
process. use, or cispose of. the new chemical suostance.
n
Name —
4.1 Identity
of site
fOotionail Physicai location acoress (NuIrCer ano streer)
City, State. ZIP coca
County
4.2 Indicate the duration of releas, into the air and water environment and the annual amount of new chemical substance
released to the air. water, and land. Mark IX) tpie ci position of the water aiscnarge at estimate the elf tuerit flow rate
from tne site. Enter t e name of the POTW or receiving water body, Bas. your answer on maximum annual production
during the fIrst 3 yee of manufacture under normal operating ccnditions.
—
‘
(1)
Duration of release
Amount of new chemical suostance released (Kg/yr.) ft
H d
rs., ay
(27
.ays/yr.
- (3)
Lass trtan
(4)
10—
100
(5)
00—
1000
(6)
1300—
10.000
(7)
More than $..,
10.OCO
(8)
a.Air
I
—
b. Land
C. Water
,
I -
I
I POrN (Publicly Owned Trea nent Works)
2 Navigable waterway Ern.r name.
3 3OtMr J
4. Effluent stream flow rate I Gallons per day
4.3 (1) List any byproduct materials contesning the new chemical substanc. that are generated during manufacturing. use, and
processing ocerations ane winch are d lspeseO of leg., landfill, Incineration, or other pnysical,tramicai eatxnenti. Water
effluent ane air emission streane snould not be listed here. Estimates ct- ’eiease of the riew.clwmical suostance contained
In such streatTte are reawred to øe regortee in item 4.2. (2) Inotcate cite netfiod of disposal. (3) Estimate the amount of
each material generated (Kg/) g of the new chemical suostancet, and (4) estimet the percent (by weight) of the new
Chemical 5UndiSfl C*.
Material • Anticipated method Amount Percent of
reauiririg disoosal - of cisposal (Kg/Kg) aeworiemical
- C
(1) . (27 (3) (4)
uam this z ii you artacit a onntMuallon sh.ei.
-. ..‘ —
-------
aoo Federal R Wter I VoL 44. No. i / Tuesday. October 16. 1979 / Proposed
Section C — CONSUMER AND CDMMERC AL USER EXPOSURE
Camoiete its section for all consumer and commercial categones of use wn,Ch Involve use of a crocuc: i ac
unternlonauy contains me new crion cai Praveøe Qie information aseo on yaw o tarec.as
information alreaoy ootained from other gersons. or any otoer iorarmaL on meL is reason iy scorr.ain a.
if you claim me answers to item I confidential, enter letterisi A—F in tilC box wnuch indicates t e oasis of
your claim ano answer trie lin*age cuestions in aooenoix A, section II. for categories A—i.
If you claim tile answers to .tame 3. or 4 confudentiat, . SPEC:AL NSTRUcT;oNs. acoenaux A,
section I I, oart 8. -
1.. Con ete me table below. For eacn consumer and commercial use category reooct d in section 0. i m 2. nark (X l if ie
. ‘il be manutacturee by the suom.tter or oy amer aersons. Incicate tue maxinsim numoer of consumers or commercial
ims — ‘—I too. - -i. zis o.-o--— : gag .4 — . ‘ ton izeciamicy of • “a.
US. category Manutactureo
C ,a y of use front
by —
•t II, sectiOn 0 f
(I cnsumeriCommerctai Suomirterl Outer
.
(41
Maximum 1 Freauency of exoosure
,
exoosed
(5) j Oaiiy I ‘ieek,y Mon0tiv
.
I
lii
I___
1
—
r____I
a a -— .
V — -—-‘s av. beon d elcoen si ootOnsal -e—--re Joveis (or saca gory oi use.
V this box It you attacs any eetlimetea. -
3. For eons orOdIIC oentarning t ie new chemical sucstanc., exolain any ascecs itS cntisiroction or formulation nscu
you Oesseve will limit me ooteatlai foe exo.sw. to me new c.-ienso.i SuOstanca. Fat mixtures, indicate tie maximum
perce.a by wei t of the Coomical suostance in the oreeuct.
Q Mark this box If you attach a continua t Ion sneer.
1. Jdentaiy any by roo g whidi ate torn as a result of eaon cata ry of van-describen in thIs section. -
0 ‘Jam rh,s box ii you attach, a Continuation sneer.
-------
Federal Resister / Vol. .4. No. 201 / Tuesday. October 16. 1979 / oposed Rales
Part III — LiST OF ATTAC 1MENTS
Under section id )f 1)18) and (C) of T CA and 40 CFR 720.23. a manufactuer must submit all test aCa in his
possession and control, and a Cescriotron of any outer cata that are nown to or reascnaoly 3scertainaole y
himiner concerning the effect of manufacture. ;rocessing, distribution in c:mmerce. use, or cisoosal of the new
chemical suostance on health or the environment. The reguiations soecify wnicn ta must be Suomitlec
with the notice and which cata may be referencei by literature citations. Using t! e cate ories orovided.
idernify it attachments containing test oats. oescriotions of bats, or literature Citations in accoroance with
720.23: t2) other attacriments recurred to be sucmittao with this notIce; (3) confidentiality suostantiattons
ana 41 attachments which contain information voluntarily submitted. All attachments srtouid be clearly
identified and numbered.
To assert and substant ate a claim of confidentiality tar any information inc1i. ed in the tollowing
attachments, follow me Instructions in Aooenoiz A, section I I, part 5. lote — Soecial directions for
test oata or other 11ealtlf arc Safety’ Studies inCluded in sechon I I, .as1 C.
The instructions brovide that you must also surmita “sarnttzed cony of the attachment with all information
that you are claiming c nfiCentiai beletea. EPA .,ll place this caoy in the public boc et.
Attacnment name
Attachment rsjm
-
.a.PP iy ical - I
and
chemical , ‘
pro oerties
data
b. health anO
environmental
effects data -
e• r ments t t;on, , i. 3ect ion 1 Ite m -
:
I I .
I
I Si
d. Confider, .. I I -
tiality I
attachments I
— I I
I
..
I. Voluntary .
at.acmnents
I I
0 Marn this ox ii /Guaftacfl a cc.flinuatlon sfl er.
-------
59802
Fe erni Re’ .ster / Vol. 44. No . 201 /Tu day. October 18. 1979 / Prooosed Riles
- Part IV — FEDERAL REGISTER NOTIC!
lnlo,rnat,o,, rov.d.d 1,, this part wilt be published ii, the Fedevoi Req,srev in araoraa,,ee w,th secno’, 5(d) (2)
ei TSCA. Do not enter an ’ anfoiinat,en in this part (or wn.ch you have asserted a claim oF conisderniaisty.
Section A — CHEMiCAL lDEwrIT ’r -
Erner the soecific cneniic.a name of the sa stance ii it is net aame c Wid itt . if a e c2I i ntit7 is GLaueed
ccntident,ai • enter e name agr to ay EPA ma Pe ne or EPA wili ori rm of e three
Loneric names in part I, on C.
Section 3 — MAHUFAC11JRER jDEMT1Fjc r o m4
Enter e legal title of the organization tiiin this notice it It is not claimed confidential. it * legal title of the organization is
ctai med cant identia I • ree a oeetmooem of e wgame ao. m ea e w,m oem .i I I. AOXnoiz A. lnsvucuons for
ana Suostantiawig C amms of CooaiGentiality.
Section C — USE DATA
1. ii ase data were n claimed confidential in section 0, list the catagory(iesl of use that you recortea in section 0. item 2a.
Msi (X) it t? use catageryt .es us site timied nevs iat. c c iaI. or consumer.
-
- (1)
Miv X) acooer’a,. Oar
Site limited
(2)
Ind ustrial
(3)
Convec i .a
(41
C n.sua ies
(5 )
I__
I__
.
-:
•l
2. 1? use data wore Claimed confidential. provide a deseriotionof the category of use(s) of the cnenucal substance in acz oanca wsOi
Section iI A. InsOu tsons tot Ass.tti, a, Su s n ung C.ontmoentaaiity. ThiS de3a’iptlOn Wouid be 33 soncific as
wi4 I fe aI n( onidew(ae4 sofarmeejee.
—
S.c,i.e 0— TEST DATA
List all st data concerning Itaith aed environmental etfec of the manufactwe, Processing, distnbuuan. in commute, use, or disposel of
the new chemical suestance tnat are being submitted. deserihed. or cited as part of this notice. PTQyid. a out aosvact of au test aata on
the new chemical sl. sIance that e submitted iii iceordomuce with 7 20.23 (a ) ano 720.20(j). If pnysicai .cnenmcai prooeri,es are clammed con-
fidential, ov,oe a generic desaiguon of thessprogerlses in accordance wito section III , A4 In4iZ A, lnsUucUons for A.ssargjgtg an
Sum stanuasing C)aums of Confidentiality. - — -
Marx this box ii you- artao’, a continuation sneer.
-------
APPENDIX
PRE .LA.N1JFACTURE NOTI CE
cERTIFICATION STATENENT : it is hereby certified
that, to the best of its knowledge and belief: (1) the sub-
mitter of this form intends to manufacture for a commercial
pur cse the chemical substance for which this notice is sub-
mitted, other than in small antities for research and
development, and that the substance is not excluded from
premanufacture notificatjon.under Section 5 of the Toxic
Substance Control Act (TSCA); (2) all information entered on
this form is complete and truthful as of the date of submit-
tal; (3) the form contains all information described in Sec.-
tions 8(a)(2)(A)—(D) and (F)-( ) of TSCA insofar as it is
known to or reasonably ascertainable by the submitter, as
re ired by Section 5(d)(l)(A) of TSCA; and (4) submitted
with this form are all test data in the Possession or contrc_
of the submitter which are related to the effect of any manu-
facture, processing, distribution in ccmme:ce, use r dispcsa,
of the new chemical substance or any article containing such
substance on health or the enviro ent, and a descri:tion f
any other data concerning the effects of the substance on
health or the environment that are known to or reasonably
ascertainable by the submitter, as req-uired by Sections
5(d)(l)(B) and (C) of TSCA.
(Name of Submitter)
(Signature of Authorized Offic:
(Date)
When completed, send this notice to:
Document Control Officer
Office of Toxic Substances
TS —793
U.S .E.P.A.
40]. M Street, S.W.
Washington, D.C. 20460
CONFIDENTIALITY INSTRUCTIONS : If a claim of co —- --
f±dentialitv is asserted for any data or information contajnec
in this notice, a check must be placed in the box in the left
hand margin immediately adjacent to the data or information
entry. If a claim of confidentiality is not asserted on thIs’
form at the time of submission of the information, EPA may maL
the information public without further notice. Claims of con-
fidentiality must be made and substantiated in accordance wit
Section 14 of TSCA and EPA ’s rules (40 C.F.R. § ___ ).
FOR EPA SE CN Y
Date of receipt
-------
CENE? ;L INSTRUCTIONS
These instructions are intended to assist the sub—
mizter of a premanufacture not ce in the use of the Prernanu—
facture Notice Form.
The Premanufacture Notice Form consists of the four
parts listed below. Each part consists of two or more sec-
tions.
J.
Part I — General Information
Part II — Risk Assessment Data
Part III - Optional Risk Analysis Information
Part IV - Optional Additional Information
On Workplace Exposure and
Environmental Release
All sections of Parts I and II must be completed by
the submitter. Section 5 of TSCA does not reci.iire the su.brnjs-
sion of Parts III or IV. These parts, or selected sections,
may be completed at the discretion of the submitter.
In completing Parts I and II, the submitter must
provide EPA with all test data in its possess on or control
which are related to the effect of any manufacture, processing,
distribution in commerce, use or disposal of the chemical
substance or any ar icle containing it on health or the en—
vironrnent and a description of any other data cbncerning the
effects of the substance on health or the enviror_’nent that are
known to or reasonably ascertainable by the submitter.. In
addition, it must provide all of the other information and,
data rec-uested that are known to or reasonably ascertainable
by it. Thus, it must answer all questions to the best of its
ability, including reasonable estimates where it does not know
with factual certainty the answers to particular questions.
In cases where the submitter cannot provide a reasonable
estimate ( i.e. , the information is unknown and is not reasona..
bly ascertainable), it should enter NA (not available).
Information is “reasonablyascertajnab le” if it is information
which a business in the submitter’s position would usually
possess in the normal course of preparing to manufacture a new
chemical substance for commercial purposes, taking into account
customary business practice in light of all relevant economic
and safety considerations relating to the new chemical substance.
-------
PART I
GE E L INFORNAT ON -
All data re ested in this Part must be provided
insofar as they are own to or reasonably ascerta na.b1e by
the submitter. In cases where the rec- ested data are unknc’ n
and not reasonably ascer a2.na 1e, enter NA (not availa.oie).
Section A . Submitter Identification
1. Person Filing Notice -
Legal Title of Organization_____________________
Name of Authorized Official_____________________
[ 1
[ ]
( ]
[ ] Mailing Address
( ]
( ]
I)
(3
Section B .
C]
C]
C]
C)
I I
2.
Tecb.n.ical
Name
Contact
.
•
Title
.
Mailing
Address_______________________________
Telephone Number________________________________
Chemical Identity
Complete either 1, 2, or 3 as appropriate.
Complete 4. If chemical identity is claimed
confidential also complete 5.
1. Class I chemical substance (40 C.F.R. § ___)
(other thanpolymers)
a. CAS Registry No. (if known)______________
b. Specific Chemical Name____________________
c. Molecular Formula_________________________
d. Synonyms_______________________________
e. Trademarks_________________________________
Title
-------
C I
C]
St ct a1 D cr i
2. Class II chemical substar.ce (40 C.F.R. §
•a. CAS Registry No. (if J own)
_____ )
b.
Specific Chemical N e -
e. List the immediate precursor substance(s)
and/or reactants with their respective CAS
Registry Number(s) and the nature of the
reaction. Also provide a partial or
incomplete chemical structure diagram
(where appropriate). Indicate the range
of composition.
C)
( ] C. Synonyris
d. Trademarks
C]
-------
3. Po1 rmers
(1) Provide the specific chemical name and t
CAS Registry Nu er of those monomers and
reactants used at greater than two percent (‘
weight) in the manufacture of the pol rmer.
Monomers used at two percent (by weight) or
less need not be listed as part of the polvrne
descripti . (2) Provide the intended range
composition of the po1 er in te s of monome
percent (by weight). Calculate the p ;cent
based on the composition of the pol er forme
If the notice is for any copol er of the
listed monomers, enter ‘any” under P ance of
Composition. (3) For each monomer, indicate
the ma; imu amount (in percent weight) that
may be present as a residual in the pol ’ner
as distributed in commerce.
(1) Monomers and (2) Range of (3) Ma:d.mu .m R
CAS Recistry No. Coracosjtjon ( Weicht P
I] ________________ ___________
[ 1 ______________ __________
I I ________________ ___________
4. Impurities
Estimate the purity (by weight) of the chemjc
substance as it will be manufa ured for com-
mercial purposes.
Total Percent
List the identities and estimate the maximum
percent (by weight’) of those identified im-
purities which may reasonably be anticipated
to be present in the chemical substance as it
will be manufactured for commercial purposes,
Base the answer on information devej.oped4urj 1
R&D activities, knowledge of manufacturing
process chemistry, and anticipated quality
control operations.
Max izn
Identity Percent
I I
II
Li
-------
5. Chemical Identity Claimed Confidential
If claimed for a period prior to or following
Commencement of manufacture:
Proposed Generic Name:
Is this claim limited to the period prior to
manufacture?
/ /Yes / /No
Su.bstantjatjon and other materials re ired to
be submitted with a claim of confidentiality must
be attached.
Section C . Production and Categories of Use Information
1. Estimate total production volume for the first
three years of manufacture. (Use the ranges
iet forth at 40 C.F.R. § ___ .) Include in your
estimates production by others with whom you
have contracted to manufacture the chemical
substance.
Production
[ ] a. Fi st Calendar Year __________
f J b. Second Calendar Year
[ ] C. Third Calendar Year __________
2. Production Estimates for Categories and. Pro-
posed Categories of Use.
List the categories and proposed categories of
use (e.g., captive intermediate) for the sub-
stance and estimate the percent of the maximum
anticipated annual production volume which will
be devoted to each category and proposed cate-
gory of use during the first three calendar
years of production.
Category of Use Percent of Production
jJ _______________
C) ___________________ ______________________
C] __________________ ____________________
I I ___
-------
Section D . Federal Register Notice
Information provided in this section will b
published in the Federal Register in accorda:
with Section 5(d)(2) of TSC . . Separate sec-
tions are provided for presentation of data
related to confidential information where
apDroorjate. Do not enter any infor aticn
in this section which you consider con::den-
t1a .
1. Generic class of substance or, if you
consent to its dis losure in the Tederal
Register, its chemical identity.
2. Use information.
List each non-confidential categor ’an
proposed category of use for the chemica
su.bstance.
3. If any data relating to the chemical
substance are being submitted pursuant t
Section 5(b) or Section 4 óf TSCA, de-
scribe the nature of the tests performed
and any data. developed.
Section E .
Provide a list of all attachments which are su.bmit
ted with this form.
—306—
-------
PART II
RIS Z ASSESSZ•!ENT DATA
Section A . Chemical Prooerties, Enviror nental Fate Charac-
teristlcs, and Human and Ecological Effects
Data.
Under Sections 5(d)(l)(3) and (C) of TSCA, a sub-
mitter must submit all test data in its possession and control
relating to the effects of any manufacture, processing, distr bu-
tion in commerce, use or disposal of the chemical su.b tance or
any article containing it on health or the enviror ent. It must
also describe any other data concerning the effects of the sub
stance on health or the env ronznent that are knc o or reason—
ably ascertainable by the submitter. . Using T le 1, identify
the test data relating to physical and chemical properties and
health and enviro nental effects for which you have submitted
(1) data, (2) a description of data, and/or (3) a literature
citation. You may wish to provide addit onal information or
explanation to EPA. Section A of Part III is an optional
section which provides a fo iat for the presentation of such
information.
T le 1
CONFIDENTIALITY : The information that is re ired to be
entered in this table is limited to an identification of the
physical/chemical properties and health and environmental
effects for which test data or a description of data have been
submitted with this notice. If a claim of confidentiality is
asserted for any of these data, the attached document(s) which
contain(s) the data must be marked “confidential.”
1. Test Data on Physical/Chemical Properties.
(1) data submitted
(2) description submitted
(3) literature citation
Tvoe of Test Data (1) (2) (3)
[ 3 1. __________ C] C] 1]
C] 2. __________ (] [ 1 (3
3. __________ C] [ 3 1]
[ ) 4. __________ C] (3 ()
-------
2. Te t Data on Health and Envircr tental Effects.
(1) data su m1tteQ
(2) description submitted
(3) literature citation
Nature of Test Data (1) (2) (3)
] 1. ________________________ C I I I r
(] 2. _________ [ ] [ ] [ ]
1 ____________ 1 .
C ] 4. ________________________ C I • C I
Section B . Occupational Exposure, Disposal, By-Products
All the data re iested in this Section must be
provided insofar •as they are known to or reasonably ascertain
able by the submitter. In cases where the recuested data are
unknown and not reasonably ascertainable enter NA (not ava lab
1. Industrial Sites Controlled by the Submitter.
a. Occu ational Ex osure . For ea ch site at which you
will manufacture, proce s, use or dispose of the
chemical substa ce, indicate the ar ticipated route c
exposure to the substance (e.c., inhalation, ingest
dermal), the number of employees anticipated to be
exposed by each route, and the maximum duration of
such exposure (in days per year and hours per day).
Base your answer on maximum annual ptoduction, pro-
cessing, or use during the first three years of
manufacture under no al. operating conditions with
all safeg iards in place. (Use the ranges set forth
at 40 C.F.R. § ____.) If more than one site is
involved, attach supplemental forms.
Maximum
Identity of No. of Exposed Duration
Site Route(s) Employees Exoosur
a. ___________
b. _________
C. ___
—308-
-------
b. D s osal of Chemical Su.bstance . For each SitS at
w c you will m r.ufact re, rocess, use, or d s cse
of the chemical substance, cent zy its ant c1;azed
methods of d s csal, if any, including release into
the environment. Ind cata whether these methods of
disposal will occur inc denta1 to the manufacture,
processing or use of the su.bs-tance or will follow
its end use. Include only forms of disposal which
are deliberate or planned. Fugiz ve or inadvertant
release of the substance into the enviror_tent should
not be listed. Where there will be no disposal of
the chemical substance at the site, check “none.” For
each form of disposal which y-ou identify, th icaze
whether it will result in “minimal” release of the
substance intc the envircnmnent. “ ‘!inimal” release
is release which, taking into account all relevant
factors, is too small to have a mazer al effect on
the envircnm ent. You may ex lain the basis for
this conclusion in Part III of this form if you
wish. If more than one site is involved, attach
supplemental forms.
End
Method of Minimal Use
Identity of Site Disposal (Check) ( Check) ( Check )
[ ] _______ Air
[ ] Water
[ ] Land
( ] Destruction
[ ] Other
[ ] None
c. By-Products . For each site at which you will manu-
facture the chemical substance, list the CAS Registry
Numbers of the identified by-products that reasonably
may be. anticipated to result from the manufacture of
the chemical substance. If more than one site is
involved, attach supplement forms.
Identity of
Site By-Product (CAS No. )
• [ ) _________________ a. ___
[ ) b.
Cl C.
r i A
-------
2. Industrial S1t s Not Controlled by Submitter.
a. Workolace E; osure .
Using any infcrmaticn already obtained from
other persons who may process or use the sub-
stance or from your o forecasts and any othe:
information that is reasonably ascertainable,
indicate the anticipated employee exposure
to the chemical substance at industrial sites
• that you do not control but where you expect i
will be processed, used br disposed of: For
each site, indicate the anticipated route of
exposure to the substance (e.c., inhalation,
ingestion, dermal), the number of emblovees
anticipated to be ex osed by each route, and
the maxim duration of such ewosure (in days
per year and hours per day). Base your answer
on maximum annual production, processing,0r
use during the first three years of manufactur
u der normal operating conditions with all safe
guards in place. (Use the ranges set forth at
40 C.F R. § ___.) If more than one site is
involved, you may provide one answer for all
sites ccrn.bined or use separate forms for each
site.
No. of Exposed
Emolovees
b. DisDosal of Chemical Substance .
Using any information already obtained from
other persons who may process or use the
chemical substance or from your own forecasts
and any other information that is reasonab y--
ascertainabre, identify the anticipated methodE
of the chemical substance’s disposal, if any,
including release into the environment, at
industrial sites which you do not control but -
where you expect the substance will be processe
used or disposed of. Indicate whether these
methods of disposal will occur incidental to it
manufacture, processing or use or will follow
its end use. Include only forms of disposal
which are deliberate or pla ed. Fugitive or
Identity of Route(s)
Si. te _________
________________ a.
I) ___________
I]
b.
C I
C.
Maximum
Duration
Ex osu :
_. , n_.
-------
• inadvertant release of the substance into th
environment snould not be listea. Where there
will be no disposal of the chemical substance
at the site, check “none.” For each form of
disposal which iou identify, indicate whether
it will result in “minimal” release of the sub-
stance into the environment. “Minimal” release
is release which, taking into account all relevant
factors, is tco small to have a material eff ct
on the enviror rnent. You may explain the basis
for this conclusion in Part III of this form
if you wish. If more than one site is involved,
you may provide one answer for all sites cor ined
or use separate forms- for each site.
End
Method of Minimal Use •
Identity f Site Distosal (Check) ( Check) ( Check ) (
( ) _______________ Air
( ) Water
] Land
[ ••J Destruction
Cther
( J None
-311—
-------
Date of receipt
When
comoistud
senO this
form to:
Etitur thu total number of pages
In the Premanufacture Notice
I3ENERAL INS?RUC11ONS
This Premanufacture Notice form is divided into four parts. Parts I,
Ii, an lit are mandatory. You must provide all information requested
to the extent that it is known tO Of reasonaOle ascertainable by you.
Make reasonaole estimateS if you do not have actual data. II you do
not know or cannot ascertain the information, enter “Ni ” (not known
orreasoflaOlY ascertainable). The parts are:
I. GENERAL INFORMATION
You must orovidethe chemical identity of the ubstanCC. even if you
claim tne identity as confidential. You may authorize another person
to report the identity for you, but your submission will riot be com
plete and review will not begin until EPA receives this information.
II. hUMAN EXPOSURE AND ENVIRONMENTAL RELEASE
You may need additional copies of part II, sections A and B if
there are several manufacturing, processing, or industral use sites.
or if there are several operations at an individual site. You may
obtain additional sections of these from the Office of Toxic
Substances Industry Assistance Office.
II. LiST OF ATTACHMENTS
You should attach additional sheets if you do not have enough space
on the form to answer a question fully. In part Ill, list these aftacn-
mentS and any test data. optional data, anc confidentiality materials
you include in the Notice.
IV. OPTIONAL INFORMATION
You may include any information you think EPA should consider in
evaluating the new substance. This section suggests categories of
optional information.
Before you eomplete this form you sflouid read the “In tructtofls
Manual for PremanulactUre Notification.”
ASSERIING AND SUBSTANTIATING CONFIDEN11AL1 CLAIMS
‘ lou may claim any information in this notice as confidential. For
nstructionS on claiming information as confidential and substantiating
those claims, read part II of the Instructions Manual.
You must assign each of your confidentiality claims tO one of the
seven categories listed below. Mark (X) the box next to the categories
you have claimed in the form as confidential.
A. SUBMITTER IDENTITY
B. CHEMICAL IDENTITY
O C. PRODUCTION VOLUME
0. USE INFORMATiON
E. PROCESS INFORMAT iON
F. PORTiONS OF A MIXTURE
i. OTHER INFORMATION
TEST DATA AND OTHER DATA
You are re uiredtO submit all test data in your possessic
and to provide a description of all other Uata known om
ascertainable if these data are related tO the health and
tal effects of the manufacture, processing. distnbutic
use, and disposal of the new chemical supatance. Teas
data concerning the new chemical substance, and a
byproouct, coprQduCt, degradation product. unintenc
product, or other substance or mixture related to the
processing, distribution in commerce, use, or discosal
substance. Test data also include data analyses and risk
Following are examples of test data. Time Instruct
provides additional examples.
• Environmental fate data
Spectra IJV and visible)
Density of liquids and solids
Water solubilit’y
Melting point/melting range
Boiling point/boiling range
Vapor pressure
Partition coefficient. ri—octanol /water
Volatilization from v’ater ar.d soil
Biodegradation
hydrolysis (as a function of ph)
Chemical oxidation
PPmotochemiCal degradation
Adsorption/des orptiofl to soil types
Dissociation constant
• Health effects data
Mutageni citY
Carcir i oge nic it ’Y
Teratogenicity
Acute toxicity
Repeated dose toxicity
Metabolism studies
Sensitization
Irritation
• Environmental eflects data
Microbial and algal toxicity
Terrestrial vascular plant toxicity (e.g., eeo
studies. growth irifllbitiOfll
Acute and chronic tpxicity to animals (e.g.,
mammals, invertebrates)
• Risk assessmentS
• 5tructure/activity relationships
öblA
Environmental Protection
Agency...... 29
PREMANUFACTURE NOTICE
DOCUMENT CONTROL OFFICER
OFFICE OF TOXIC SUBSTANCES, TS .793
U.S. E.P.A.
4O H STREET. SW
WASHINGTON. D.C. 20460
DRP !I
cumenL ccntroi nwrioe(
case numnoe:
I
EPA Form 7710.25 (4J.32)
— 11? —
-------
c 4_• I
CERTIFICATIONS 2.9
ENERAL CEWTWICATION
I certify that to the beat of my knowledge and belief
1.The conmany named in part l,section A,subsection 1. of this notice form intends to tnanuta Zui .qr i çor
for a commercial puroose, other man in small quantities for researcn and developmen tflePWC a C
identified in part I, section S. ‘t
2. The substance identified is not exemot from ernanufacture notification.
3.All information provided in this notice is comolate and trutiuful as at the date of subsussion.
4. I am submitting with this notice all test oats in my oossession or control and a des wtian of any other
d3t3 known tO or reasanacly ascertainaale by me if these cats are related to the effects at the substance _____
on i alth arid in. environment. - —
I will allow an authorized recresentatlve of the PA AdminisUator to esamine and copy records in accordance
witil me Toxic Suontances Conwai Ac: to document any information in this notice.
e
ignature at authorized official Date
-
ONFIOEJ4TIAUT’f CER1IF1CAT1ON - . #.
Far all information claimed as confidential, I certify that to the best of my knowledge and belief:
1. Tb. comoany namea in oart I, section A, suosection 1, protects the confidentiality at the information and
will continue to protect it.
2. The information has not been reasonaoly ascertainaOle Dy amer erzans (excluding governmental bodies)
using legitimate means (excluding discovery Dasea on a snowing at soecial need in a judicial or quasi
judicial preceeoingj without the comoany’s consent.
3. The information is not publicly available.
4. Disclosure of inc information wculd substantially harm my comDany’3 competitive position.
‘ •
J
.,
Signature of authorized oft ictal Date
—
Pan I — GENERAL INFORMATION
) Section A — SUBMITTER IDENTIFICATION
If you claim the category “ utmitter Identity” as confidential, mark (X) the box at the rignt.
You do not have to answer linkage questions for the certification signatures and for subsections 1, 2, and 3
if you make this claim. I I you want to claim these subsections individually, do riot mark the box.
Place the letter sl A—G in me confidential code box next to any subsection you claim as confidential I
to indicate the basis of your claim. Answer the linkage questions in the Instruotlens Manual for
categories A —F. I
. Person Name of auttionzed official Title
submitting
notice
Organization
Mailing address (nwncer ,d streeQ
-.
.%
City, State, ZIP cone
- -
2. Teennical Name - Title -
contact
Mailing address (mimear and srree
City, State. ZIP coo. Teleonone Area code Nunwer
—_
3. Have you submitted a test marketing exemotion (TME) application Yes No
for the cMm 1c31 suostance covered oy this notice
4. nave you submitted a oona tide request far the chemical suostance - Yes
-------
rary I — r r a I Il I — wIIIIiiU 1J
Section 3 — C 1EMICAL IDENT1T’f — C4nflnu.
3. im wities uII#/ E.
(a) — List eacfl imOurity, incIu ing C. .S Registry Nurrioer, that may reasonably be anticiqated t be present in the chemical substar e
as it will be manufactured for commercial purpose.
(b) — Estimate the maximum percent (by wetgnt of eacn impurity. Base your answer on information oe’velooed during R&D activities,
your knowledge of manufacturing P?OC!55 cflemisty, and anticipated quality control operations.
Impurity and C. 3 Registry Nurm er
(a)
0
MarIe IX)
mis box
if you arrach a c nrlnustiQn sneer.
4.Trac
e i entif I
cation —
List pioemarxs and traoe names for the new cnemical s stance n
amed in SubsectionS 1 or 2
.
5. Genetic cnemical name
If you claim chemical identity as confidential, enter the generic chemical name you develoced with E A in prenotice communication
provide trvee jeneric names. If you provide three names, identify the name you prefer. PA will release only one name fcr pudlic
identilication. Read vie Instiuctioni Manual for guidance on developing generic names.
I
0 MarJr IXJ trill oox If you atT fl a flf1fludt1 sheet.
O u CPa rrIo .a5 4. .6Z)
-------
2. Polymers
a. Indicate the average molecular weight of the polymer. Indicate the method used to determine molecular weight Provide
a range of values if more tnan one value is amic:aated. Characterize the amount of low molecular weigffl species antici
pateo. Estimate the weignt percen t below 1.000 and below 2.000. Describe how you rnaae the estimate. If you intend to
manutactite more than one composition of the polymer. ,rovide this information for each cpmoo sitiOti.
DRP
0 Mark (X) this box if you attacn a ccntiniiaUon ShSr.
. (1) — Provide chemical names and CAS Registry Numners of monomers arid other reactants uud in the manufacbzre
of the polymer.
(2) — Mark (X) the identity cplunrn if you want a monomer used at twO percent (by w.igflt) or less to be listed as part ..
of tne polymer descriatlOli on the chemical substznce tnventory. -..
(3) — Provide the range at esmoosition of he polymer in monomer percent Iby weight).
(4) — Indicate the typical or desired camposition of the polymer in monomer percent I by weight).
(5) — Indicate the maximum amount of eacn monomer in percent (by weight) that may be present as a residual in the
polymer as distributed Ifl commerce.
If you intend to manufacture more than one comoositian of the polymer. provide this information for eacn composition.
Monomer and CAS Re is Numoer Identity Range of Typical Maximum ( ,
g trY . Ma,a (X) composition composition residual
(1) (2) (3) (4) (5) —
ô
ii
%
I_________
%
‘b
%
%I ‘ f ri
0 (X) this box if you attach a conunuarion Sh09t.
. Provide a representative structural diagram of the polymer if possible.
:
•
Ptrrt
I —
GENERAL INFCR)itATION — Continued -
Swion
B CHEMICAL. IDENTiTY - Csntinued
-
U
— U
c_i .
S
0 MIlk (X) this box if you at? a poiirifluatlOfl 31*9?.
-------
ran I — ia r’ r\fl ’I I’. I — WlI4IIIUVU
S.ctien B — C IEMICAL IDENTiTY — C4ntinu
3. irnpisities
(a) — L zt eacfl imOurity, including CAS Registry MumOer. that may reasonably be anticipated to be present in the chemical substar e
as it will be manufactured for :ommerciat purpose.
(b) — E stimate the maximum percent (by weignt) of cacti impurity. Base your answer on information Oeveloped during R&D activitIes,
your ncwEecge of manufacturing process cnemistry, and anticipated quality Control operations.
Impurity and CAS Registry Nurndet
pa
(a)
MaiN (X)
(his box
if you attach a continuation sneer.
4. Trac
e iaentsf I
cation —
L sI aoemarxs and trace names for the new cnemical si. stanCe named n a
ubsections 1 or
5. Generic chemical name
If you claim chemical identity as confidential, enter the generic chemical name you develoced with EPA in prenotlce communication
provide trree generic names. It you provide tnree names, identity the name you prefer. EPA will release only one name toe public
identification. Read e lnsuuctloits Manual for guidance on developing generic names.
/
0 MaiN (X) this 00 5 if you attach a continuation Sheet.
WORu £P .7 l -ZS i .a.aai
-------
Part I — GENERAL INFORMATiON C ntinuetI
Section C — PRODUCTtON, IMPORT, EXPORT, AND USE DATA
if you ciaim vie category ‘Pro u on Votume ’ as confiuenual, marii (X) vie oox at me rignt. ) r D
You do not have to answer linkage questions for items in subsection 1 if you make this claim. If you want
to claim items in this subsection individually, do not mark the boa.
Place the letter(s) A .—G in the confidential code box next to any item you claim as confidential to indicate
the asis of your ctaim. Answer me linkage questions in the InstructIons Manual for categories A—F.
1 .!stimate tiie maximum annual oduction volume during the first three years of rc uctien or import. Include in 2¼
your estimates oGuction oy others Mith whom you iave contracted to manutac we the new chemical suostance.
Period Covered (Mo.’ y)
Maximum volume (kg/yr)
From To (2)
I
-3. Category of use———
If you claim the category ‘Use Information” as confidential, mark (X) the box at the right.
Y u do not have to answer linkage ouuttons for items in subsection 3 ii you make this claim.
If you want to ciaim items in this suosection individually, do not mark this box.
—a J.
You must claim lie des iotion of The category of use and The use information related to that category
separately. Place me letters A—G in the confidential code Xx next to any item that you claim as
conltdentia l to indicate the basis of your claim. Answer tne linkage questions in the Instructions
Manual for categories A—F.
a. !.. st the categories of use on wnicn you oasea your proauc:ion estimates. Gtve as complete a cescriotion as possible. Read
the Insmic:Ians Manual for examples. Estimate me percent of totai production tar the first three years devoted to eacn category
of use. Mark (X) the use if site limited.
Ca of Prnduction ‘.iarn (X) it :
gory. percent sire limited
- • — - -- • (1) (2) (3)
%
1
j___
Q Mire (X) this box if you attach a cci’itffiuarlcr, sneer.
. Generic If you claim any category of use description in subsection 3, item (a as cpnfidential, enter a generic description
use of mat category. Read me Instructions Maneal 1 r guidance in developing the generic description.
description
Mefir (X) this box If you attaCh I c itinuafIcn sneer.
4. ilazard information — Attacn a cocy or reasonacie facsimile of any hazard warning statement, label, labeling, rnartungar ir%sUuction , technical
data sneet, material safety data sheet, and any omer information which will be Provided to any berson regarding the safe
handling, ansoort, use, disOosal, beatznent mon accidental exposure, or the formulation, construction, or labeling of
producta containing the new chemical substance. Read the Ins uctlons Manual for instructions on claiming arid
substantiating confidential information in attachments. List in part III any nazara information you auacn.
12 . . . . I V I _. .4 ...
-------
Sectie,. A — SITES CONTROLLED BY THE SUBMITTER
Ccmpl.t. a s. arat, sactiss A f or each opsratl at an lndus tal sIte wflsiv you will ounutaCteN, process, mass the
new chemical suhstanca.
If you claim the category “Process Information” as confidential, mark CX) the box at the right. -
‘lo u do riot have to answer linkage auestions for items in subsection 1 if you make this claim.
If you want to claim items in this category individually, o not mark the box.
Place the letterts) A—G in the confidential code box next to any items you claim as confidential
to inoicate the basis of your claim. Answer the linkage questions ri the InstructIons Manual
for categories A—F.
1. Ooeration descriotion — i’
a. Type
‘ , rIc (X)
Manufacturin( 20 Processing 0 Use
b. Duration I1oi s/day ‘Days/year
—
C.Oiagram
Provide a diagram identifying the followving:
(1) Major unit ocerations and chemical conversions. - •
(2) T ie aooroxinmte weignt of all materials (including feedstocks, reactants, byproductS, coproducts, solventS. catalysts and
surfactanisl entering the process.
(3) Materials (including reedstocks. reactants, byproducts, coproducts, solvents, catalysts and surlactants) leaving the process.
(4) Identify those materials that will be incinerated.
Q MSM (X) this box It you attach a ecritinuation sneer.
VØ p4 CP i,’o-as I4 -4 S2I
-------
DRAFT
Part II — HUMAN EXPOSURE AND ENVIRONMENTAL RELEASE — Can
Section A— S1TE CONTROLLED BY THE SUBMITTER — Continu.d
2. Occ i;atiorial E.xooswe at lndu.suia$ 5ite
a. Occu attonaI exosure
(1) — Indicate the pnysical form(s) of the new chemical substance at the time of exposure for any ndiv,dual worker.
(2) — £iter the numoer of workers anticipated to be excosed Curing each activity.
(2) and (4) — giter the maximum exposure for any individual worker in hours ;er day and oays per year.
U
.5
= “5
00
U I. ’
PI ysicaI form(s)
(I) ‘
Maximum numoer ex osed
(2)
Maximum duration
.
Mrs/day Days/yr -
(3) (4)
—
“
,JJ••
0 Mark (XJ m is x ii’ you arracn a caerinuar’on sneer.
3. Eavsronznernai Release and Dispssal
a. Release and Disposal Data - -
For releases of the new chemical substance to air and water, identify the source of release and the type of release
con roi tecnnology. For ;eeases disPosed on land, indicate the source of the re 1 ease and charac:erize the disPosal -
method. Marii IX) the destination of the water discharge.
Duration of release
Control technology -
Mrs/day Days/yr
(a) (b) (C) (d)
—
(1)Aar
—
—
.
—
(2) Water
(3) Land
—
—
Marx (X)
one
a — —.
- — a --
-------
Part III — LIST OF ATTACHMENTS
If you ,jse acditrnnal conies of oart II. sections A or 0. insert these sections alter the corresponding section
of the flOtiCC form. If you suoms! attacnments to any suosectiOn or item. insert tne attacnmeflt alter the page
containing the suosection or item. Attacn test data. optional information. ano confidentiality attacnments
after e last page of the form.
—
Numoer tne pages of the completed Premanufacture Notice consecutively from the first oage of the notice form
to the last page of your last attachment. Write th name of the attacriment in the appropriate soaces OeIOw.
In the cotumn to the rignt. ‘ive tne inciusive oage numoers for aaditional sections of the form ano attacnments
to suosectIOfl or items and give the numoer or the first page of test data and optional information attachments.
Wt n listing confidentiaiity linkage ano suostantiatlOn attacnments. identify the part. section. supsect200. or
item of the form to wntcn they acoly.
Place the letterisl A.—G in the confidential coae box next to any attachment name that you claim as confidential
to n icate tne oasis of your ciaim. Answer the linkage cuestions in the Instructions Manual f or categories A—F.
This claim constitutes a claim only for tne attachment name riot for any information in the attachment.
Read the InstructIons Manual for information on how tO claim any information in an attachment as confidential.
You must submit a cooy of the attachment with all the information that you claim as confidential deleted. EPA
wiII place this sanitized copy in the puolic file. L43t sanitized copies in the “Confidentiality AttacnmefltS’
— space.
Attachment name f_____
a. Notice
form
sections
and
attacnment s _______
b. Environmental
fate data ______
C. Health
arid ______
environmental
effects data
4. Optional
— information _____
•. Confidentiality I i
attacnments Part i Section i Subsection I Item
(Lnikage ano —
suostantiation)
- 4.fa,I ‘X) rn,s Ocx f you arrach a continuation sneer. Enter t nwribef .
-------
. PART IV—OPTIO AL INFORMATION
A reasoned evaluation of the health and environmental effects of a new chemical sub
requires data on the chemical’s properties, production volume, worker exposure, and environ-
mental release. Parts I and II of the form request this information. Other factors, however, can
affect EPA’s analysis of risk. This optional part gives you the opportunity to provide additional
information that you believe EPA should consider in evaluating potential risks associated with
the chemical substance and to present your analysis of information given in the mandatory sec-
tions of the form. Listed below are categories of information which may be included in this
part. You may induce information on subjects not mentioned here. Read the “instructions
Manual for Prernanufacture Notification” for guidance on how to claim information in attach-
ments confidential.
RELATiVE RISK ANALYSIS
Comoare the health and environmental risk of the manu-
facture, processing, use, or disposal of the new chemical
substance -to-the sc ubstaTrca currently in use. State
whether or not the new substance will be less toxic than
substances which it may or wilL pIace. Indicate whether
or not workers exposed to the new substance in produc.
tion or pro ssing will face a lower risk than they would
if the substance were withheld from production. State
whether or riot a net decrease in the amount of toxic sub-
stances released into the environment will result from the
new chemical’s production. Specify me methodology used
in determining any reduction of risk.
PROCESS CHEMISTRY
Provide information on process chemistry controls that
limit impurity or byproduct concentrations. Such infor-
mation rnigflt explain that a particular reaction was chosen
and that temperature control, pressure control, or con-
tinuous monitoring is used to limit these concentrations.
EFFICACY INFORMATION
Attach any efficacy data or product bulletins you may
have on the new chemical substance.
ADDITiONAL EXPOSURE AND ENVIRONMENTAL
RELEASE INFORMATION
Attach any additional exposure and environmental release
information you may have. Such information may include
specific time-weighted averages for durations, concentra-
tions, and amounts, the minimum monitorable levels of
the new chemical substance, its impurities and byproducts
in the workplace or in effluent, and anticipated transpor-
tation exposure. If there are differences among sites,
describe these differences. Provide data on releases from
equipment used to produce the new chemical substance
when you also use this equipment to produce other sub-
stances. Describe any market studies that identify consumers
by age, geographic location, or other factors. Identify
any environmental impact statements or similar documents
about manufacturing or processing facilities and landfill
sites previously submitted to government agencies. Provide
any such documents you have not submitted to any agency.
ADDITIONAL PRODUCTiON INFORMATiON
Indicate whether the estimates of anticipated pr ducti
volume in the form are based on firm orders or forecas
Provide any explanation which may assist EPA in det
mining whether your estimates of production volume m
be higher or lower than your actual production.
INDUSTRIAL HYGiENE
a.
Describe the major aspects of any industrial hygiene p.
grams you will establish to recuce the risk to worxers pos
by exposure to the new chemical substance. Such progra
may include chemical hazard education, exposure mc
itoring, physical protection measures, chemical emer r.
evacuation procedures, and health examinations. Expl;
how these programs reduce risk. If programs differ c
sites, explain these differences..
ENGINEERED SAFEGUARDS
Attach a description of design features in the mariufar ’tu
processing, use. or disposal of the new chemical substar
which limit the risk to health and the environment ‘.
a descriotion may examine botri workplace safeguards
environmental release safeguards. Indicate the f nctiori
efficiency of eacn safeguard. Note its relation to ex os
information included in parts I and II. If the safegua
used vary among sites, explain why.
USE RESTRICTION INFORMATION
Explain any restrictions on use or other control of the ii
chemical substance not addressed in other sections of
form which should be considered by EPA in its assessrn1
of the risk associated with the substance.
ECONOMIC AND NON-ECONOMIC BENEFITS
Explain why the economic or non-economic benefits
the new chemical substance make the risks associated ‘
its manufacture, processing, use, or disposal reasonat
State, for example, whether or not the production
substance directly or indirectly affects human....b .ealth
safety, improves environmental quality, conserves ener
or substantially affects employment or balance of tra
LIST ALL ATTACHMENTS TO TillS OPTIONAL PART IN PART Ill, LIST OF ATTACHMENTS
-------
•;ate ot 1 C8IPZ
Put I. GENERAL INFORMATION
You must provide the chemical identity of the substance, even if
you claim the identity as confidential. You may authorize another
person to report the ideritity.for.you. but your submission wiil not
be complete and review will not begin until EPA receives this
intormaton.
Pen I I. HUMAN EXPOSURE AND ENVIRONMENTAL
RELEASE
You may need additional copies f part I I. sections A and B if there
are several manufacture. processing, or use operations that you
will descnbe in the notice. You may obtain these additional
sections from the Office of Toxic Substances Industry Assistance
Offica.
Part III. UST OF ATrACHMENTS
You should attach additional sheets if you do not have enough
space on tile form to answer a question fully. In part Ill, list these
attachments. any test data or other data, and optional information
that you include in the notice.
OPTIONAL INFORMATION
You may include in the Notice any information that you want EPA
to consider in evaluating the new substance. The Instructions
Manual identifies categories of optional information that you may
went EPA to review.
CONF1DENTIAUTf CLAIMS
You may claim any information in this notice as confidential. To
assert a claim, mark IX) the confidential box on the forn
associated with the information that you claim as confidential. If
you claim information in the Notice as confidential, you must
provide a sanitized version of the Notice, including attachments.
to EPA with your submission. For additional instructions on
claiming information as confidential and subtantlaung
confidentiality claims, read tne Instruct ion. Manual.
Indicate below the categories of Information you have claimed as
confidential.
o SUBMfl1 IDENTITY
CHEMICAL IDENTITY
PRODUCTION VOLUME
o USE INFORMATION
PROCESS INFORMATiON
PORTiONS CF A MIXTURE
0 OThER INFORMATiON
You are required to submit all test data in your posession or ct
trol and to provide a description of all other data known or
reasonably ascertainable ii these data are related to the healti
and environmental effects of the manufacture, processing,
distribution in commerce, use, and disposal of the new cherni
substance. Complete teat data, not summaries of data, mu
submitted. Following are examples of test data and other cat.
You should submit thesS data according to the requirements
§720. 50 of the Premanufacture Notification Rule.
• Environmental fat. data
Spectra (UV and visible)
Density of liquids and solids
Water selubilitv
Melting poirrt/meltinq range
Boiling pointiooilinq range
Vapor pressure
Partition coefficient, n-octanollwater
Biodegradation
‘lydrolysis las a function of pHI
Photochemical degradation
Adsorotion/deserotion to soil types
Mutagenicity
Carcinogenicity
Teratogenicity
Acute toxicity
Repeated dose toxicity
Metabolism studies
Sensitization
Inftavon
ffects data
Microbial and algal toxicity
Terrestrial vascular plant toxicity (e.g.. saedgemlina’
studies, growth inhibition)
Acute and chronic toxicrty to animals (e.g., fish. bird
mammals, invertebrates)
EPA Form 7710-25 (12.20-12)
• PREMANUFACTURE NOTICE
FOR NEW CHEMICAL SUBSTANCES
When
completed
sand this
form to:
DOCUMENT CONTROL OFFICER
OFFiCE OF TOXIC SUBSTANCES, TS-793
U.S. E.P.A.
401 MSTREET,SW
WASHINGTON, D.C. 20460
Enter the total number o pages ocument control number EPA case nurnoer
in the Piemanufacture Notice _____________________________
GENERAL INSTRUC1IONS
You must provide all information recuested in this form to the extent that it is known to or reasonably ucer•
tamable by you, Make reasonable estimates if you do not have actual data. If you do not know or cannot
reasonably ascertain this information, enter “NK ” (not known or reasonably ascertainable).
Before you complete this form you should read the “Instructions Manual for Premanufacture Notificatfanof
- - -New Chemical - Substances.” -.
TEST DATA AND OTHER DATA
Teat data
Dissociation constant
Other physicallthemic
• Health .ft.cts data
0th., data
• Risk aaeas.munta
• Stnicturalacdvlty raladonahlp*
• Teat data not In the possessIon or contr d of the subi
— 122 —
-------
CERT1F!CAT1ON
I wufy that to the best of my knowledge and ballet
1. The company named in part I. section A. subsecoon I • of this notes form intends to manufacture or import for a
commercial purpose. otner than in small quantities for research and development, the suostance identified in part
I. section 8.
2 • All information provided in this notice is complete and truthful as of the date of submission.
3 • I am submrtthtg with this notice ad test data in my pq ssesaion or control and a description of all other data known
to or reasonably ascertainable by me as required by S 720.50 of the Prernanufacture Notification Rules.
I will allow an authorized representative of the EPA Ad ni 1 t tor to examine and copy records in accordance with
the Toxic Substances Control Act to document any information in this notice. —
d
;igi ature of authonzed official - Date
Part I — GENERAL INFORMATiON
Saction A — SUBMITTER IDENTIFICATiON
Mark (X I the ConuidentIai” box next to any subsection you claim as conuldemial.
—
. Person Name of authorized official Title
submitting
notice
Company
Mailing address (number and street)
City. State. ZIP cods
Mark (XI ap ropnaT. boxiesl 0 Manufacturel 0 Agent 0 Joint submission
t. Tecnnical Name Title -
contact -
Maiisng aaaress tnumoer aria stre.u —
City. State. ZIP cods I Area code I Number
- - Telephone I
I I
—
. If you have had a prenotice communication (PCi concerning this notice and EPA i Mark IX )
assigned a PC Number to the notice, enter the number I if none 0
-
If you have submitted a test marketing exemption ITME) application f or the chemical
substance covered by this notice, enter the TME number assigned by EPA
Mark IX)
if none 0
—
5 • If you have suomrrted a boris tide request for the chemical substance coveted by
this neticce. enter the bona tide request number assigned by EPA
Mark IX)
‘ “°“ 0 —
5. Typ. of Notice — Mark IX) Q Manufacture 0 Import
—
CONTINUE WITH PART I ON PAGE 3.
-------
Part I — GENERAL INFORMATiON — Continued
SectIonB—CHEMICALIDENTITY
Mark (XJ the “Con fidsntial” box next to any item you claim as con1ident al.
Complei either ttm I or 2 as appropriate. Complete ad other Items .
If another person wilt submit chemical identity information for you. mar (i CX) the box at the right.
Identify the name, company, and address of that person in a coflWluEOOfl sheet.
I. Class I or 2 chemical substance (for definitions of class I and 2 substances. see the luis ucduns Mansasi)
Mark (X) e1 of substance i 0 Class 1 2 0 Class 2
a. Chemical name (preferably CAS or IUPAC nomenclaturel
b. Molecular formula and CAS Regisoy Number (if kriownl -.
c. For a class 1 suostance. provide a structural diagram. For a class 2 substance — (1) List the immediate precursor substances with th
respective CAS Registry Numbers. (2) Describe the nature of the reaction of process. (3) Indicate me range of composition and the
typical composition (where appropriate). (4) Provide a representative svuctura diagram (if possiblei.
A — — JAJI L. -
-------
_ . ._fl.___
Part I — (j NtIt I. ir rsr ’vi ’
Section B — CHEMICAL IDENTiTY — Contiflud
C
d
Polymer.
intend to manufacture. Estimate the
a. Estimate the IOwu number-average molecular weight composition of the polymer you
maximum weight percent of low molecular weight apeass below 500 and below 1000 absolute molecular weight. Describe
the method øf measurement or the bases for your estimates.
O Mark (X) this box if you attach a continuation sht.
—
b. (1) —
(2) —
(3) —
Provide chemical names and CAS Registry Numbers of monomers and other reactants used in the manufacture of the posymer.
Provide the typical composition of the monumer or reactant in the polymer in percent (by weight). -
Mart IX) the icernity column if you want a monomer used at two percent (by weight) or less to be listed as pert of the
polymer description on the Chemical Substance Inventery.
(4) — Estimate the maximum amount of the monomer or reactant in per ant (by weight) that may be present as a residual in
the polymer as distribUted in comtnei’ca.
Monomer or reactant and CAS Regcuy Number
(1) (2)
3 )
(4)
Is
:
. I
:i:
L
“
)‘
.
-
%
—
- --
%
-. --
-
%
—
0 Mark (XI this box if you attach a coriti uitiCfl sheet.
a. Provide a representative structural diagram of the polymer. if possible.
0 M oxdyauarrachacontiflUati0 3i t
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Part 1 — GENERAL INFORMATION — Continued
Section B — CHEMICAL IDENTITY — Continued
3. ImpurIties
(a) — List each impurit’y, including CAS Registry Number, that may reasonably be antczpated to be present m the chemical
substance as t will be manufactured for commercaai purposes.
— Estimate the maximum percent (by weight) of each impurity. If there are unidentified impurities, estimate the percent of
unidentified impurities (by weight).
—
Impurity and CAS Registry Number M aXW
(al ______
—
II
O Mark (X) this box if you attach a continuation sheet
4. Synonyms — Enter any synonyms for the new chemical substance named in subsections 1 or 2.
o Mark (X) this box if you attach a continuation sheet.
5. Trod. ld.nilflcaden — List ade names for the new chemical substance named in subsections 1 or 2.
0 Mark (X) this box if you attach a continuation sheet.
B • Generic eflemical n.m• — If you claim chemical identity as confidential, enter the generic chemical name that was accepted by EPA in
prenotice communication or provide a generic name that reveals the specific chemical identity of the new
chemical substance to the maximum extent possible. Read the Inefluction. Manual for guidance on
developing generic names.
O Mark IX) this box if you attach a continuation sheet.
7. Byproducts— Describe any byproducts associated with the manufacture, processing, use, or disposal of the new chemical substancr
Provide the CAS Registry Number if available.
Byproduct
•
CAS Registry NurTibet
(1)
(2)
O Mark (X) this box if you attach a continuation sheet.
FORM €PA.771Q.2 t
-------
Part I— GENERAL INFORMATION — Continued
Section C — PRODUCTION, IMPORT. AND USE DATA
Mark (X I the ‘Confidenhiai” box next to any item you cfeür? as conY idenvai.
of
Also provide an estimate of tne
de,
=
Provice an estimate of tne maximum production volume during the first monttts
production.
maalmum 1 2-month production volume during the first three r s .
Maximum first 12-month production (kg/wi Maximum 1 2-month production (kg/yrl
Use lnfom .don
You must make separate confidentiality claims for the d.sCrititiOfl at the ccatsgorv of use. the formulation of the new substance as
distributed in commerce, and other use information. Mark (X3 the Confidential” box next to any item you claim as confidential.
the of total production for the first three
a. Describe the intended caeganes of use by function and application.
years devoted to each category of use. Estimate the pe. .. frt of the new substance as formulated in mixtures. susoenszofls. emul-
sions. solinions. or gels as distributed lfl commerce. Mark (X whither the use is site-limited. industrial. commercial. or consumer.
Mark more than one box if aporoonats. Read the lns uctlans Manual for examples.
Category of use
0
Mark (XI this box if you attach a continua von sheet
confidential, enter a enenc description
b.
0
Generic If you claim any category of use description in subsection 2. item (al as
use of that category. Read th. lnanuGtIans Manual for examples of genenc descriptiOns.
description
Mark (X I this box if you attach a continuation sheet.
3. Hazard Information — Include in the notice any copy or reasoneole facsimile of any hazard warning statement. lead, material safari
data sheet, arid other information which will be provided to any person regarding the safe handling. tiansport.
us .. or disposal of th. new chemical substaflce. 1.1st in part Ill any hazard information you include.
-------
- Section A — INDUSTRIAL SITES CONTROLLED BY THE SUBMITTER
Complete s.ctlo,, A for each typ. of manufactie, piocsasdnq, or ue operudon lnbOIvluIq th.n.w chemical
substance at Industrial sites you control.
Mark (X) the “Confidential ” box next to any item you claim as can fidenval.
1. Operation dSsCTIpUO - -
a. Identity— Enter the identity of the site at which the operation will occur.
Name
Site address (number and sti’eet)
City, County. State. ZIP’ccde
If th. same operation will occur at more than 1 site, enter the number of sites.
Identify the additional sites en a continuation sheet.
0 Mark IX ) this box if you attach a continua von sheet.
.•
b. Typ — c.Mar k(X)
Mark fX)
I 0 Manufacturing 20 Proceasing 0 Use• I 0
Continuous
2 0
Batch
d. Amount and Maximum kg/batch Hours/batch
Duration Batch I
Mark(X) I
Batches/year
I
I
Maximum kg/day Hours/day
Continuous I
Days/year
I
I
I
•. Process description
(1) Diagram tne maser unit operations steps and chemical conversien*.
(2) Provide the identity, the approximate weight (by kg/day or kg/batch), and entry point of all feedstocks (including reactants,
solvents, and cacaIysts .
(3) Identify by number the points of release of the new chemical substance.
0 Mark(X) this box if you attach a continuation sheet.
FORM E PA-77 10-15112 .20-821
— 323 -
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Part II— HUMAN EXPOSURE AND ENVIRONMENTAL RELEASE — Continued
Section A — INDUSTRiAL SITES CONTROLLED BY THE SUBMITTER — Continued
Occupational E.xpor S
You must make seO Tit5 canfideridalitv claims for the des iPUQfl of worker activity. physical fornt of the new chemical substance. and
other exposure information. Mark (Xi the “ConfidentIal” box next to any item you claim as confidentIal.
exposed to the new chemical substance. Include activities in which w tkais
1) — Oescnbe the activities in which workers may be
wear protective equipment.
(2) — Indicate the physical form(s) of the new chemical substance at the time of exposure.
in each activitY. Co
(3) — Enter the maximum number of workers
for any worker in hours per day and days per year. o cr
-—
(4) and (5) — Enter the maximum duration of the
I
Maximwn duration
Worker activity Confi- Physical form(s) Confi.
dent ia l dental
I (2)
-
num..er Hrs.lday Qayalyr.
(31 (4) (5) —
(1)
- 4.
,
I
0 Mar* IX) this box if you .tWCt) S co ntinuation sheet. -
I. En nmsn1ad Release and Disposal -
You must make separate confidentiality claims for the release number and amount of new chemical substance released and other
release and disposal information. Mark IX) the “Confidential” box next to each item you claim as confidential.
in
II, section A. item a.
(1) — Enter the number of each release point identified
part
released into control technology in kilograrTis per day or kilograms per batch.
(2) — Enter the amount of new chemical substance
which the new substance will be released from that point.
(3) — Identify the media (air, land, or water) to
wail be used to limit the release of the new substance tti the environiTient. For
(4) — Describe control technology, if any, that
releases disposed on land, characterize the disposal method.
(5) — Mark IX) the destination(s) of releases to water.
Control tectulolOgy -
Release
Number
(1)_
Amount of new substance
releasad
(2)
C f l
on
dental
Media of
release
(Type)
(4) -
(5) Mark (Xi the
d nn rion sl of
1 QTW (Publicly Owned Treatment Works) D Oti er — sp.cn’y
-------
Section B — INDUSTRIAL SITES CONTROLLED BY OTIIERS
Co.iip st. seadon B for .sch typ of prc:-’ g or ‘. s operodon IoroMng the user chem&eaI aubetause at aft.. you do n .nU
Mark (XJ the ‘Conflderitial” box if you claim thu section as confidential.
1. Operation description
Briefly describe the typical opereden. Estimate the number of sites at which the OpetatIOfl will occur. Ident ify situations in which
worker exposure to and/er environmental release of the new chemical substance will occur. Estimat. the percent formulation of
the new chemical substance as processed or used in ti’e operation. Estimate the number of workers exposed and the duration of
exposure. Identify corrvola which limit worker exposur. arid environmental release if typicaUy used. Identify byproducts which
may rssutt from the operation.
o Mark (XJ this box if you attach a continuation sheet
FORMEPA-771 045(12.2 0 .. aa3 — 330 —
-------
Part 2fl US7 OF ATTACaMZ’d73
‘S
—
Attach any continuation sheet for sectons of the form, test data and other data (including physical/chemical properties and
structurelacnvny information), and optional information, after The last oage of the form. Clearly identify me attachment and the section
to which it relates, if appropriate. Number consecutively the pages of the attacflmenta. In the column below, enter The inc lusive page
numbers of each attachment.
Mark (X the “Ccnfldential” box next to any attachment name you claim as confidential. Read the Instructions Manual for
guidance on how to claim any information in an attachment as confidential. You must include with the sanitized copy of Vie notice
a sanitized version of any attachment in which you claim information as confidential.
Attachment name
Attachment
page numbeils)
—
—
—
S
S
. .t. .
.I
0 Mark (XI this box if you attach a continuation sheet. Enter the attachment name and number.
-------
APPENDIX H
ANALYSIS OF TEST-MARKETING EXE 1PTION PROVISION OF THE PMN RULE
A. INTRODUCTION
Section 5(h)(l) of the Toxic Substance Control Act authorizes EPA to
grant exemptions from any requirements of section 5(a) or 5(b) of the Act for
test-marketing purposes. To grant a test-marketing exemption (TME), the
Agency must find that the test marketing will not present any unreasonable
risk of injury to health or the environment. Section 5(h)(6) provides that
EPA must either approve or deny the application within 45 days of its receipt
and must publish a notice of its decision in the Federal Register . EPA may
impose restrictions on the test-marketing activities if it grants an exemption.
In order to grant a test-marketing exemption the Agency must find that
the chemical will not present any unreasonable risk of injury to health or
the environment. In contrast, EPA need not make this affirmative finding when
it reviews a PMN. Instead, EPA does not act on a PMN chemical (and allows
manufacture to begin) unless if finds that the chemical may present an
unreasonable risk to society. Thus, the rigor of analysis needed to make the
TME finding exceeds that needed to allow a PMN chemical to proceed into
production. In the case of ThE applications, TSCA clearly places the burden
of proof on the company. Because the company must make this case, some THE
applications can be more costly than PMNs.
In the PMN RIA, four costs associated with the information requirement
were derived. These cost elements were form-filing costs, delay costs,
confidentiality costs, and costs of restrictive actions. In addition,
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incremental benefits associated with alternative information requirements were
determined.
At first glance, it seems that TME applications result in the same set of
costs and benefits as PMNs and can be analyzed in the same manner P iNs were.
However, several factors unique to ‘fliEs undermine this approach. As mentioned
above, EPA must make a finding of no unreasonable risk for ThE chemicals, but
not for PMN chemicals. This requirement means it is possible that review of a
ThE chemical will result in a request for additional information which leads
the company to withdraw the ThE and file a PMN (this situation has actually
occurred). The PMN may subsequently be allowed to go into production without
further scrutiny. This problem complicates the process of estimating benefits
of the TME program. That is, the ThE program resulted in the withdrawal of
the chemical from a test-marketing program only to have it be allowed to go
into commercial production (if the product is actually manufactured).
Obviously, no health benefit is gained by society from this result.
Second there is the problem of defining specifically what the information
requirement is. For PMNs, a form must be completed, but the final rule
requires only that a ThE applicant provide certain information in any form it
chooses. The information requirements of the rule are suggestive, not truly
definitive, and the Agency may request that the applicant provide additional
information so EPA can make its determination. Because no form exists and
because the required information varies with the particular chemical, use of
the PMN costing approach (an approach based on how much time it takes to
complete various information segments specified in the regulation) is
misleading. Instead, direct analysis of information required to assess TMEs
in the past is more appropriate.
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The third complexity associated with ThE analysis concerns delay costs.
For a PMN, the delay elements consisted of the time required for the company
to complete the PNN arid the time required for EPA review. Every PMN chemical
that entered production within 30 days of the end of the review period was
assumed to have been delayed. Because ThE chemicals are going into test
marketing, not full-scale production, the use of this approach to measure
delay costs results in no delay costs (none have entered production). On the
other hand, it does take time to provide EPA with information, and TSCA allows
EPA 45 days in which to make a finding.
Because of these problems, it appears that only two of the five elements
explored in the PMN analysis can be approached in a manner consistent with the
PMN approach. Restrictive action costs are by far the most important cost
element.
The rest of this paper explores the costs and benefits of the TME
provisions in the final rule. Before determining the costs and benefits of
the rule, we examine a sample of approximately 40 TtlEs out of the total (175)
submitted between July 1979 and December 1982 to determine the characteristics
of TMEs (who submits them, what are typical production volumes, what kinds of
actions are taken by the Agency, etc.), and through this characterization
define an analysis appropriate to THEs. Using the sample as the basis for our
analysis, we determine filing costs, delay costs, confidentiality costs, and
restrictive action costs. This is followed by a discussion of the benefits of
the THE process. We conclude by comparing and summarizing the costs and
benefits.
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B. CHARACTERISTICS OF TEST MARKETING EXEMPTIONS
This section describes the characteristics of test-marketing exemption
chemicals (ThEs). It begins with a description of the methodology used to
determine tFiese characteristics. This description is followed by a summary of
the results of the analysis.
About 40 THE applications submitted by more than 20 firms were selected
at random from the total number submitted to EPA duri ig the period July 1979
to December 1982. The information collected for each THE application included
production volume, firm name and size, whether or not the chemical was
imported, use of the chemical, and details of any EPA action or voluntary
action by the applicant. This information was tabulated and analyzed in order
to reveal any trends or correlations which might be characteristic of ThEs.
The results of this analysis are discussed in turn.
The tabulation of the production volumes of the TilEs reveals that these
chemicals are generally produced in small amounts (see Exhibit H-i). Nearly
half (46 percent) of the forty-one THE applications specified production
volumes less than one thousand kilograms. Twenty-two percent of the TilEs had
production volumes between one thousand and five thousand kilograms. The
remaining third of the applications indicated production volumes greater than
five thousand kilograms (10 percent between five and ten thousand kilograms;
twenty-two percent greater than ten thousand kilograms), up to a maximum of
fifty-one thousand kilograms.
The analysis shows that most of the firms applying for exemption are
relatively large (see Exhibit H-2). None of the companies had sales under two
hundred million dollars per year. Only one of twenty-four firms reported
annual sales under five hundred million dollars. Only 13 percent of the
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EXHIBIT H-i
DISTRIBUTION OF PRODUCTION VOLUMES
Production
Volume (Kilograms) Percent of Sample
0-999 46
1000 - 4999 22
5000 - 9999 10
10000 or more 22
EXHIBIT H-2
DISTRIBUTION OF FIRM SIZES
Annual Sales
( millions of $) Percent of Sample
0-199 0
200 - 499 >5
500 - 999 13
1000 - 1999 25
2000 - 4999 29
5000 or more 29
companies had sales between five hundred million and one billion dollars.
Over eighty percent of the companies had sales of one billion dollars or
more. Almost thirty percent of the firms reported sales exceeding five
billion dollars, up to a maximum of twenty-five billion dollars.
The distribution of intended uses for the TIlE chemicals resembles the
distribution of uses for premanufacture notifications (see Exhibit H3). The
largest single use category for both TIlE and PMN chemicals is paints and
coatings, followed by chemical intermediates and plastics. The two use
distributions, however, do diverge in several respects. For example, a much
greater proportion of TIlE chemicals are used in inks and to produce other
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EXHIBIT H-3
DISTRIBUTION OF USES
Use Number of TMEs Percent of Sample Percent of PMNs 1
Chemical Intermediate 7 29 18
Wood Treatment <5 <10 <1
Paper Processing <5 <10 <1
Petroleum Production <5 <10 1
Plastics <5 10 12
Rubber and Elastomers <5 <10 1
Chemical Production 5 12 2
Dyes and Pigments <5 <10 7
Inks and Printing <5 <10 1
Photographic Chemicals <5 <10 4
Paints and Coatings 9 22 24
Coatings Additives <5 <10 6
Automotive Chemicals <5 <10 2
Unknown <5 <10 3
These percent figures do not total 100 percent because the uses of the
THE chemicals in the sample do not cover the whole spectrum of uses for PMN
chemicals.
chemicals than the proportion of PMN chemicals put to the same uses.
Conversely, more PMN chemicals than THE chemicals are used as dyes.
The analysis also includes the nature and frequency of EPA actions and
voluntary actions on the part of the firm (see Exhibit H-4). In the vast
majority of the cases examined (85 percent), EPA granted the THE without
taking any action (i.e., denying the application or asking the applicant for
additional data). Based on information provided in the THE application, EPA
was usually able to make the decision that the test-marketing activity did not
present any unreasonable risk to health or the environmen-t. In one case, EPA
took no action because the applicant was not the manufacturer, and in another,
the manufacturer requested that the application be withdrawn. EPA requested
additional information for five of the THE chemicals. Three of the applicants
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supplied the information requested; these THE applications were subsequently
granted. The other two applicants did not supply the additional information
even after repeated requests. EPA denied these THE applicants, having
insufficient information to positively determine that no unreasonable risk
would occur. One of the latter two applicants intended to submit a P!IN in the
near future. EPA requested one of the applicants to submit a revised Material
Safety Data Sheet (MSDS). The applicant complied, and EPA granted the
exempt ion.
EXHIBIT H-4
EPA ACTIONS ON THE APPLICATIONS IN SAMPLE
EPA Action Number Percent Voluntary Granted Denied Withdrawn Inva’
of ThEs of Sample Action
No Action 36 85.4 0 34 0 1
Requested
Information 5 12.2 3 3 2 0 0
Requested -
MSDS Change <5 <5 <5 <5 0 0 0
Almost ten percent of the ThE applicants planned to import their product.
All four were granted exemptions without additional EPA action. There are no
observable correlations in the production volumes, firm sizes, or uses of the
imported chemicals.
Several cross-tabulations were performed on the data to identify possible
correlations between various aspects of the information. There is no
correlation between production volume and EPA action, use and EPA action, or
production volume and voluntary action. The absence of observable
correlations between these specific data may be a function of the small sample
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size. It seems possible that a correlation between SAT score (level of
concern) and EPA restrictive action exists, although Structure Activity Term
(SAT) scores for some TME chemicals could not be obtained.
The analysis presente i here may be used to characterize THE chemicals.
According to this analysis, TME applications are usually submitted by large
firms for relatively small volumes of the chemical. Most of the exemptions
are granted without any additional EPA action, indicating that most of the
applicants submit sufficient information for EPA to determine that the test
marketing will not pose an unreasonable risk to health or the environment.
The distribution of uses for the ThE chemicals resembles that of PMN chemicals.
The fact that this profile of TME applications was developed from a study
of about forty of 175 THE applications received from 1980 to 1982 could limit
its accuracy and usefulness. Despite the limited sample size, however, the
results of this analysis seem to make sense. Test marketing, by definition,
involves a small number of customers. It is reasonable to expect that the
production volumes would be small. Under TSCA, EPA has only forty-five days
to decide whether to grant a THE. As a result, the burden is upon the
applicant to prove that the test-marketing program would not present an
unreasonable risk to health or the environment. It seems reasonable to expect
that EPA would have time only to grant or deny the exemption in the majority
of cases, rather than enter potentially protracted activities to determine or
limit exposure. The high proportion of exemptions granted could be related to
the relatively iow production volumes, which reduce the potential for exposure
to the THE chemicals. Thus, despite the small sample size, the profile
developed from this analysis provides a useful qualitative characterization of
TMEs.
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C. COSTS
1. Filing Costs
One part of the cost analysis of ThE applications is determining the
amount of information provided by appitcants, and the cost to provide it. As
discussed in the introduction, the information requirement is open-ended.
There is no standard form for THE submissions and the rule requires only that
the submitter provide enough information so that EPA can ascertain that there
will be no possibility of unreasonable risk to human health or the
environment. Thus, for this analysis, the cost estimate is based on a
retrospective examination of information provided by submitters both initiali
and as required by the Agency during its review of the THE.
Submitters of TMEs in our sample generally provided considerable
information using either the EPA79 PMN form or on a modified version of it.
By matching sections of the EPA79 form with the data provided by individual
submitters, previous costing methodologies (ADL 1979 pp. 32-38 and Chapter IV
of this paper) were used to estimate the cost to submit the typical TME
application. The approach taken was to determine which pieces of information
each of the submitters provided and to then determine the total cost for that
submitter to submit the THE, assuming that it took the amount and type of
labor estimated for that section in earlier studies. The guidelines for
determining whether a submitter had provided a section of information were:
(1) If, in a given section, the submitter could complete
either one subsection or another subsection, but not both,
then the section was considered completed if either was
provided. This results in neither an overestimate nor an
underestimate of the cost.
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(2) Except for the chemical identification section, if any
subsection of a section was filled out, then the section
was considered completed. Filling out the chemical identi-
fication section is more complicated in that information
in any one of the subsections is not necessarily indicative
of the time requirement for supplying chemical identifica-
tion. Therefore, only the submitters that supplied it
least the specific chemical name were counted as filling
out the chemical identification section. By accounting
for only the submitters that supplied a specific chemical
name, a more accurate view of the costs for the chemical
identification section was seen. This causes an
overstatement of the costs.
(3) If any information was provided for a section it was
considered completed, regardless of whether it was a
substantial amount of information or not. This also
causes the costs to be overstated.
The net effect of these rules is to overestimate the filing costs.
Exhibit H-5 shows the fraction of the TtlEs providing information in each
section and computes an adjusted hour completion estimate for the typical ThE
application.
As shown in Exhibit I{-5, the percent of submitters that filled out the
various parts of the form was tabulated and these percentages were used to
derive ThE labor hour requirements. The labor cost estimates of $17/hour
clerical, $43/hour technical, and $67/hour managerial (Appendix A) were
multiplied by the hours to create a range of costs for TME submissions.
Exhibit H-6 shows these results:
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EXHIBIT H-5
C’
LABOR REQUIREMENTS FOR TNE APPLICATIONS
Fraction of % of Adjusted # of Hours
Section of Notice Total (41) Total Clerical Technical Management
I. General Information 41/41 100 2-10
A. Manufacturer Identification 41/41 100 1-8
B. Chemical Identity b/
1. Class I Chemical
Substance a/ 34/41 083 0.8-3.3
2. Class II Chemical
Substance a/
3. Polymers a/
4. Impurities 13/41 032 0.3-2.6
C. Generic Names 13/41 032 0-1.3 0-0.3
D. Production and Marketing
Data b/ 26/41 063 0.6-1.3
1. Production Volume 26/41 - 063 0.6-2.5
2. Category of Use 26/41 063 0.6-5.0
3-4. Previous Manufacture
and Hazardous
Warnings 7/41 017 0.2
5. Customers 12/41 029 0-2.3
E. Transport 9/41 022 0.2
F. Risk Assessment 16/41 039 0-6.2 0-0.8
G. Detection Methods 0/41 0 0
c/Based on analysis of similar data segments found in the EPA79 PMN form.
a/Every chemical is either in Class I, Class II, or is a polymer and therefore, only
one of subsections I.B.1, I.B.2, and I.B.3 will be submitted. Thus, only one of these
subsections was filled because it reflects both the minimum and the maximum possible
labor requirements needed for a chemical substance.
b/At least some information provided.
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EXHIBIT H-5
(continued)
LABOR REQUIREt’IENTS FOR ThE APPLICATIONS
Fraction of % of Adjusted # of Hours
Section of Notice Total (41) Total Clerical Tethnical 1anagement
‘. Human Exposure and Environ-
mental Release d/ e/ 22/41 049 2.2-10.8
A. Industrial Sites Con-
trolled by the
Submitter 22/41 054 1.1-3.2
1. Process Information 22/41 054 0.5-2.2
2. Block Diagram 11/41 027 0.3-6.5
3. Occupational Exposure
3.1-3.2 Identity of Site
and Occupational
Exposure at Site d/ 16/41 039 0.8-6.2
3.3-3.5 Direct Exposure,
Physical State,
and Other
Substances d/ 14/41 034 0.7-5.4
4. Environmental Release
and Disposal d/ 15/41 036 0.4-4.3
B. Industrial Sites Controlled -
by Others 5/41 012 0-0.2
1. Process Information--
Identity of Site 2/41 005 0-0.1
2. Process Description 4/41 010 0-1.4
3. Occupational Exposure 5/41 012 0-2.4
4. Environmental Release
and Disposal 2/41 005 0-0.4
C. Consumer and Commercial
User Exposure 7/41 017 0-0.3
1. Table--Route, Frequency
and Number Exposed 7/41 017 0-2.7
2. Exposure Levels 0/41 0
3. Product Aspect Affecting
Consumer Exposure 7/41 017 0-0.7
4. Byproducts of Use 0/41 0 0
d/At least some information provided.
e/Taken as maximum number of applicants submitting any of the information in
Section II.
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EXHIBIT H-5
(continued)
LABOR REQUIRENENTS FOR ThE APPLICATIONS
Fraction of % of Adjusted # of Hours
Section of Notice Total (41) Total Clerical Technical Ia agement
III. List of Attachments 30/41 073 0.7-5.8
A. Physical and Chemical
Properties Data 25/41 061 2.4-9.8 0.6-2.4
B. Health and Environmental
Effects Data 30/41 073 5.8-29.2 1.5-5.8
C-D. Notice Attachments, Con-
fidentiality Attach-
ments and Voluntary
Attachments 0
IV. Federal Register Notice 30/41 073 0.7-1.5 0.7-5.8 0.7-1.5
Total (rounded) 6-28 14-101 6-24
At least some information provided.
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EXHIBIT H-6
FILING COSTS FOR ThE APPLICATIONS
Clerical Technical Managerial
Hours to complete form 6 - 28 14 - 101 6 - 24
Dollars per hour $17 $43 $67
Total dollars to complete $102 - $476 $602 - $4343 $402 - $1608
form
Grand Total $1106 - $6427
By multipling this cost by the number of TMEs expected annually, an
annual form-filing cost is created. The rate at which TNEs have been arriving
at the Agency has been ste adi1y rising. In 1982 it was 73. Because we used
the 1982 rate of submissions of PMNs (900) for estimating PMN costs, we use
the 1982 rate for THE applications to estimate annual TIlE application filing
costs. Based on an annual submission rate of 70 TIlEs per year, the total
annual filing cost to the chemical industry .for TIlE applications is in the
range of $77,420 to $449,890.
2. Confidentiality Cost for THE Applications
The confidentiality costs associated with THE applications are very
similar to the estimated confidentiality costs of P 1114 submissions estimated
using the EPA82 form. Submitters of THE applications are required to give
only generic chemical identity and generic chemical use if they wish their THE
to be confidential. Substantiation of confidentiality claims is not required
unless an FOIA request is filed. Therefore, the cost of confidentiality
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depends on the frequency of FOIA requests, as well as the cost to provide
generic chemical use and identity information.
In Chapter IV, the cost of providing generic chemical identity was
estimated to be $80 and the cost of providing a generic chemical use $28. If
all THE applicants claimed use and chemical identity confidential, then the
total cost per TME would be $108. However, EPA staff estimated that only 80
percent of THE applicants claim chemical identity confidential and 60 percent
claim use confidentia1. 2 Thus, the average THE applicant incurs costs of
$81 ($80 x .8 plus $28 x .6) in claiming identity or use confidential.
The cost of substantiating confidentiality claims after a Freedom of
Information Act request (FOIA) is made by a member of the public is also a
factor to be considered. The best estimate of these costs was developed in
the CHA survey of 1980 (CHA 1980). As reported in Chapter IV, the costs to
perform all activities (i.e., providing generic names and substantiating the
claims) surrounding claims is $1,755. By subtracting the expected value of
the cost for providing generic use and generic chemical identity from the
total cost to perform all activities related to confidentiality, the expected
cost of the other activities is determined. This expected cost of $1,674
($1,755 minus $81) is then multiplied by the percentage of THE applications
for which substantiation is necessary (5.1 percent according to EPA
records) 3 to obtain the average expected cost per THE for performing other
2 EPA staff estimates.
3 Percentage of THE applications that had FOIA requests was estimated
to be 5.1 percent (phone call with Tim Knutson). Nine THE applications out of
175 had FOIA requests from 1980 through 1982.
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confidentiality tasks -- $85. Therefore the confidentiality cost per ThE
application is $166 ($81 + $85). For seventy TNE applications per year,”
total annual confidentiality costs for TME applications are approximately
$11,620.
3. Delay Costs for ThE Applications
For the PMN cost analysis, delay was defined as the number of days
required to complete the information requirement plus the number of days
necessary for EPA ’s review. Delay was experienced only by those chemicals
that commenced manufacture within 30 days of the expiration of the P 1N
review. Delay was measured as the reduction in the net present value of
profits caused by earning those profits a certain number of days later than
they otherwise would have been earned in the absence of PMN review.
Applying this approach to estimate the delay costs of TMEs is probably
inappropriate. The fact that the company chose to submit a TME application
(rather than immediately submit a PMN) generally suggests that the product is
moving gradually through the research and development process, and that the
TME review could have been anticipated and scheduled so as not to be on the
critical path in the development process. Additional support for this
hypothesis is the fact that all TMEs in the sample were submitted by large
firms who have highly formalized new product development programs that usually
do not move quickly. It is important to note here, that for the above
reasons, the analysis may significantly overstate the cost impacts.
“ The annual submission rate of 70 TIlE applications is based on the
1982 annual number of submissions (73).
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However, a case can be made that an occasional chemical must be test
marketed at a particular moment and that the delay to obtain a THE would be a
burden. The information provided in the sample of 41. THEs analyzed indicates
that none of the sample chemicals have this characteristic. Thus, to approxi-
mate this effect we must create a hypothetical framework. One approach is to
assume that the percentage of PMNs commencing manufacture within 30 days of the
close of the PMN review period is the same as the percentage of THE chemicals
for which the application is on the critical path to commercialization. By
further assuming that the THE pre-submission delay (see Chapters III and IV)
is 30 days, as it may be for the PMN, that post-submission delay is 45 days,
(the maximum review period under TSCA), and that chemicals entering the THE
process have the same profit expectations on average as do all new chemicals,
we can estimate the annual cost of delays as:
.0]. (reduction in present value due to 75-day delay) x $438,500
(expected profits per chemical) x .1817 (percent of PMNs commencing
manufacture within 30 days) x 70 (number of THEs per year).
The resulting product is approximately $55,800 annually. This result
must be adjusted because not all THE chemicals will be successful in test
marketing, and therefore will not enter commercial production and earn
prof its. The Snell survey in 1975 showed 3,300 new substances entering custom
tests with 1,400 introduced commercially (or to the market), for a 42.4
percent success rate between custom tests and public introduction. Assuming
this success rate is appropriate for THEs, multiplying the overall $55,000
annual cost by 42.4% yields annual THE delay costs of $23,600.
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4. Restrictive Action Costs
In addition to the direct filing, delay, and confidentiality costs,
other costs are incurred by the TNE applicant due to restrictive actions taken
by EPA in the test-marketing exemption program. This section examines the
restrictive actions taken on the sample 41 TME chemicals and analyzes the
costs of each.
For the purposes of this analysis, restrictive action is defined as any
EPA action which serves to disallow, delay, or modify the test-marketing plans
of the applicant. Thus, exemption denials, ThE withdrawals, and MSDS changes
are considered restrictive actions. EPA requests for information leading
directly to TME approval are not restrictive actions since they do not
disallow or delay the test marketing p1ans. 5
Of the 41 TME applications examined during this analysis, a total of
four, or less than ten percent were subject to restrictive actions (two
denials, one withdrawal, and one MSDS change). Adjusting this value to
reflect an annual submission rate of 70 ThEs (based on the number of TNEs
submitted in 1982) results in an expected level of seven restrictive actions
per year. Thus, three exemption denials, two withdrawals, and two 1SDS
changes could be expected to occur each year. The costs of the actions can be
calculated based on the quantitative analysis presented in Chapters III and IV.
Using the $438,500 to $560,400 range estimate of the lost profits per
innovation (Chapter III), three denials can be estimated to cost industry
‘ This assumes that the requested information can be generated within
the 45 days allotted for the TIlE process. All denial and exemption decisions
for the sample TIlE applications were rendered within the 45-day period.
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$1,315,500 to $1,681,200 annually. ’ - 1 However, it is necessary to qualify
these values somewhat. The costs to industry would approximate the estimates
only if the test-marketed chemical would have proven to be economically
viable. If on the other hand, the chemical had actually proven to be
uzunarketable or unfeasible, the costs to industry would be virtually zero and
perhaps result in a savings.
The costs of withdrawals to industry can also be estimated using the
figures above. The costs of two withdrawals would be $877,000 to $1,120,800
annually. However, in addition to the same qualifications given for the
denial costs, one further qualification must be made. The withdrawal which
appears in our sample occurred after the PMN for the substance was dropped and
manufacture had begun. Thus although the THE was withdrawn, the restrictive
action cost to industry is debatable because the chemical was being
manufactured.
One of the sample THE chemicals and an estimated two annually require a
change in the MSDS. Based on a draft regulatory impact analysis done for OSHA
(See Chapter IV) the cost for two HSDS changes is $42.40 annually.
The total annual costs of restrictive actions in the THE program is
approximately $2,192,500-$2,802,000, if all the qualifications discussed
previously are ignored. However, if these quaifications (unmarketability,
simultaneous PMN approval) are taken into consideration, the costs to industry
are much lower.
‘The 90 percent confidence interval about the $438,000 estimate is $0
to close to $1,500,000 and cannot be estimated about the $560,400 figure.
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D. HEALTH BENEFITS OF THE THE PROGRAII
The following section addresses the likely health implications of the
restrictive actions taken by EPA on four THE chemicals of the sample 41
examined by ICF. As mentioned previously, these actions ranged from direct
denials to a simple change in a HSDS. The assessments which follow contain a
brief description of the THE chemical and its use, the type of health concerns
raised, and the likely health impacts of the restrictive action taken. The
ecotoxic effects of the four chemicals are not examined here because they were
not a factor in these particular restrictive actions.
1. ThEA
Total production of THE A during the test-marketing period was
expected to be less than 100 kg. The submitter estiniated that less than 100
persons would be exposed to the mixture during manufacture, and that several
more persons would be exposed during test-marketing use. More specific
exposure information and additional information on the substance’s use,
physical and chemical properties, and toxicity were not supplied by the
applicant. EPA did express concern that the chemical resembles known mutagens
and carcinogens, and that its analogs are known to have neurological effects
on both the central and peripheral nervous systems (CNS and PNS). These
concerns, coupled with the general lack of data provided in the THE, caused
EPA to deny the exemption.
The health benefits generated in this case are difficult to quantify.
Through its action, the Agency prevented the manufacture of a substance which
could reasonably be expected to pose a health risk to exposed persons, and
perhaps prevented some cancers, mutations or nervous system effects. In light
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of the very low production volume however, the number of cases avoided is
expected to be very small. The general lack of data on exposure, metabolism,
toxicity and dose response makes a specific estimate impossible.
2. TMEB
This TME substance was intended for use in the production of a
coating polymer. The chemical was expected to reach a production volume of a
few hundred kilograms during one year of test marketing. EPA estimated 25
persons would be dermally exposed to a concentrated percent solution of the
chemical 3-4 days during the manufacture of each batch (number of batches/year
not given). An additional 50-100 persons would be dermally exposed to a
dilute polymer solution during processing. Health concerns centered on the
substance’s eye irritation, mutagenic, and possibly carcinogenic properties.
In addition, the submitter provided negligible information on worker
exposure. In the absence of better information on which to base a decision,
the Agency denied the TNE.
Again, because exact data on exposure are missing, quantification of the
health benefits derived by EPA’s action is not possible. The den ia1 may
prevent some cases of eye irritation, mutation, or cancer, although this
number can be anticipated to be small due to the low production level.
3. TMEC
The ThE substance in this case is a fabric dye. Several thousand
kilograms were expected to be produced during test marketing. During
manufacture one worker would be dermally exposed for 8 hours/day, 45
days/year, and during processing an additional 48 persons would be exposed
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2 hours/day, for 28 to 110 days/year. Several health concerns were raised by
EPA. First, the substance is highly toxic via oral routes, and is readily
absorbed through the GI tract. Secondly, the chemical’s metabolic breakdown
products and/or analogs are known or suspected carcinogens. The Agency had
reason to believe that even low levels of dermal absorption could lead to
significant carcinogenic risks. In light of these concerns, EPA recommended
the ThE be denied. The denial recommendation was sent to 0MB for review and
during this time the PMN for the same substance was dropped from further
review on the condition that the chemical would only be sold to customers with
closed metering equipment. Manufacture commenced, and the applicant withdrew
the TME because it was no longer relevant.
In this case, the health benefits associated with the actions may only be
the benefits of delaying introduction for three months. It is possible that
during this time exposures to workers using open dye systems were avoided, and
perhaps a small number of toxic or carcinogenic health effects were avoided.
However, this was the result of EPA’s denial recommendation and not the
specific restrictive action in this case -- i.e., the withdrawal. The health
benefits of the withdrawal itself were nil because manufacture had already
begun.
4. TMED
The manufacturer of the THE D intended to produce <10 kg of the
substance for use as a chemical intermediate in a photographic process. Exact
estimates of worker exposure were not given although, because of the low
production volume, exposure was expected to be minimal. The Agency recognized
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the ability of the substance to become an eye irritant if converted to its
free acid form, but the lack of any known toxicological activity created a
basis for minimal health concern. The potential for absorption of an
unavoidable in purity (an acute toxin and carcinogen by skin assay) was a point
of concern for EPA. The Agency suggested that the MSDS be revised to reflect
this concern. The MSDS was also reworded to convey the necessary, rather than
discretionary, use of a full face piece respirator. The applicant agreed to
the MSDS suggestions and the ThE was granted.
The health benefits associated with the MSDS change are a possible
reduction in the number of cases of eye irritation (by the free acid form) and
perhaps a more cautionary use of the chemical as a result of the revised
MSDS. However because of the extremely low production volume in this case,
these benefits cannot be anticipated to be very great. 7
E. CONCLUSIONS
The annual costs of the ThE program are between $2,281,500 and $3,287,100
as shown in Exhibit H-7. More than 95 percent of these costs are due to
restrictive actions.
7 A similar MSDS change accompanied the PMN of this substance (PMN D in
Chapter 7). However, since the ThE and PMN actions did not occur
simultaneously, the health benefits from the two actions are analyzed
separately. It should be noted that three of the four chemicals analyzed here
were subsequently not manufactured commercially. The outcome of their PMN
review was that they were not regulated during P 1114 review. No P1114 has yet
been received on the fourth chemical.
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EXHIBIT H-7
ANNUAL COSTS TO INDUSTRY OF ThE PROGRAM
(1981 Dollars)
Filing $77,400 - $449,000
Confidentiality $11,600 - $11,600
Delay $0 - $23,600
Restrictive Actions S2,192,300 - S2,802,000
Total $2,281,500 - $3,287,100
As was the case with the majority of the PMNs reviewed in Appendix F, a
quantitative assessment of benefits (i.e., number of cancers avoided) cannot
be performed due to the lack of more specific exposure and toxicity data. The
two THE applications denied (TME chemicals A and B) were both suspected
mutagens and/or carcinogens and some avoidance of negative health effects can
be hypothesized but not quantified. THE chemical A also represents a possible
peripheral nervious system (PNS) and central nervous system (CNS) depressant,
and THE chemical B a primary eye irritant. Although these possible negative
effects were avoided, the health benefits must necessarily be viewed within
the context of exposure and production volumes. Since both of these substance
were to be produced in low quantities, the negative health benefits avoided
may be quite small. A similar case exists with THE chemical D. A change in
the MSDS may have generated health benefits but the production volume was so
small that the benefits may be negligible for the test marketing period. THE
chemical C, the substance with the most significant production volume, had
very serious toxicity and carcinogenic concerns. THE C was withdrawn when
production began after the PNN for the substance was “dropped” by the Agency.
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Although the health- benefits generated under the TNE program and examined
in this analysis do not appear large, they are not necessarily a reflection on
the entire program. The deterrent effect (that is, firms refraining from
applying for TME for substances they know to be hazardous) of the TME program
has not been measured here.
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