&EPA
United Sates
Environmental Protection
Agency
Economic Impact Analysis of the Plastic Parts
and Products NESHAP
Final Report
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EPA-452/R-03-019
August 2003
Economic Impact Analysis of the Plastic Parts and Products NESHAP
By:
Katherine B. Heller
Jui-Chen Yang
Brooks M. Depro
RTI International*
Health, Social, and Economics Research
Research Triangle Park, NC 27709
Prepared for:
John L. Sorrels
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Innovative Strategies and Economics Group (ISEG), (C339-01)
Research Triangle Park, NC 27711
Contract No. 68-D-99-024
*RTI International is a trade name of Research Triangle Institute.
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CONTENTS
Section
1 Regulatory Background and Impacts (Costs and Emission Reductions) 1-1
1.1 Background 1-1
1.1.1 Authority for Development of National Emission Standards
for Hazardous Air Pollutants (NESHAP) 1-1
1.1.2 Criteria for Development of NESHAP 1-1
1.2 Summary of the Proposed Rule 1-2
1.2.1 Affected Source Categories 1-2
1.2.2 Characterization of Emissions 1-3
1.3 Definition of Affected Source 1-5
1.4 Emission Limits and Operating Limits 1-5
1.4.1 Emission Limits 1-5
1.4.2 Compliance Options for Meeting Emission Limits 1-7
1.4.2.1 Option 1: Compliant Materials 1-7
1.4.2.2 Option 2: Compliance Based on the Emission Rate
without Add-on Controls 1-7
1.4.2.3 Option 3: Emission rate with Add-on Controls
Option 1-8
1.4.3 Operating Limits 1-9
1.5 Continuous Compliance Provisions 1-9
1.5.1 Emission Limits 1-9
1.5.2 Operating Limits 1-10
1.6 Notification Requirements 1-11
1.7 Rationale for Selecting the Proposed Standards 1-11
1.7.1 Selection of Source Category and Subcategories 1-11
1.8 Selection of Affected Source within Selected Source Category
and Subcategories 1-14
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1.9 Beyond the Floor Alternatives 1-16
1.10 Format of the Proposed Standards 1-17
1.11 Testing and Initial Compliance Requirements 1-18
1.12 Costs and Emission Reductions of the Proposed Standards 1-18
1.12.1 Cost Estimates 1-18
1.12.2 Emissions and Emission Reductions Estimates 1-19
1.13 Health Effects from Exposure to HAP Emissions 1-20
2 Industry Profile 2-1
2.1 Introduction 2-1
2.2 Production, Costs, and Producers 2-4
2.2.1 Surface Coating of Plastic Parts 2-4
2.2.1.1 Surface-Coated Plastic Parts 2-5
2.2.1.2 Inputs 2-6
2.2.1.3 The Surface Coating Process 2-10
2.2.1.4 Emissions 2-12
2.2.2 Costs of Surface Coating 2-13
2.2.3 Suppliers of Plastics Parts Coating Services 2-14
2.3 Consumption, Value, and Consumers 2-19
2.3.1 Characteristics of Plastic Parts and Products 2-20
2.3.2 Uses of Plastic Parts and Products 2-21
2.3.2.1 Automotive and Truck Parts 2-21
2.3.2.2 Computers and Business Equipment 2-22
2.3.2.3 Miscellaneous Products 2-22
2.3.3 Substitutes 2-23
2.3.4 Elasticity 2-23
2.4 Firm Characteristics 2-23
2.4.1 Market Power of Firms 2-25
2.4.2 Firm Size by Employment and Revenue 2-26
2.4.3 Vertical and Horizontal Integration 2-26
2.4.4 Small Businesses 2-31
2.5 Markets and Trends 2-32
2.5.1 Production 2-32
2.5.2 Consumption 2-32
2.5.3 Pricing Trends 2-32
IV
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3 Economic Impact Analysis 3-1
3.1 Results in Brief 3-1
3.2 Baseline Data Set 3-2
3.2.1 Sales Data Summary 3-2
3.2.2 Profit Data Summary 3-2
3.2.3 Employment Data and Identification of Small Firms 3-4
3.3 Methods 3-4
3.4 Results 3-5
3.5 Estimated Impacts on Small Business 3-7
References R-l
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LIST OF FIGURES
Number
2-1 The Firm's Production Diagram 2-4
2-2 Powder Coating Booth 2-9
2-3 A Conveyorized Paint Finishing Booth 2-10
2-4 Example Coating Line for Three-Coat Systems 2-12
2-5 Short-Run Unit Cost Function 2-14
3-1 Distribution of Firm Sales (n=121) 3-3
3-2 Distribution of Profit Rates (n=31) 3-3
3-3 Distribution of Firm Employment (n=121) 3-5
3-4 Distribution of Cost-to-Sales Ratios (CSRs): Small and Large Firms (n=121) . 3-7
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LIST OF TABLES
Number
1-1 Emission Limits for Existing Affected Sources 1-6
1-2 Emission Limits for New or Reconstructed Affected Sources 1-6
2-1 Industries Manufacturing Surface-Coated Plastic Parts 2-2
2-2 Types of Common Thermoplastic and Thermoplastic Elastomer Resins 2-7
2-3 Types of Thermoset Resins 2-8
2-4 Production Costs of Industries Producing Coated Plastic Parts: 1997 2-15
2-5 Surface Coaters of Plastic Parts and Products, by State 2-18
2-6 Auto Parts Made of Plastic 2-24
2-7 Measurements of Concentration of Industries Manufacturing Coated
Plastic Parts: 1997 2-27
2-8 Distribution of Potentially Affected Firms by Employment: 2000 2-30
2-9 Distribution of Potentially Affected Firms by 2000 Sales 2-30
2-10 Value of Domestic Product" Shipments in Some Industries Using Surface
Coated Plastic Parts (106 $1997) 2-33
2-1 la Production and Apparent Consumption of Automotive Parts and
Accessories (NAICS 336370, 336311, 336321, 335911, 336322, 336312,
336330, 336340, 336350, 336399 [SICs 3465, 3592, 3647, 3691, 3694,
3714]) (106 $1997) 2-34
2-1 Ib Production and Apparent Consumption of Motor Vehicles and Bodies
(NAICS 336111, 336112, 336120, 336211, 336992 [SICs 3711, 3713])
(106 $1997) 2-34
2-1 Ic Production and Apparent Consumption of Motorcycles and Parts
(NAICS 334111 [SIC 37512]) (106 $1997) 2-35
2-12 Production and Apparent Consumption of Computers and Peripheral
Equipment (NAICS 334111, 334112, 334113, 334119 [SICs 3571, 3572,
3575, 3577]) (106 $1997) 2-35
2-13a Production and Apparent Consumption of Dolls, Toys, and Games
(NAICS 339931, 336991, 339932 [SICs 3942, 3944]) (106 $1997) 2-36
2-13b Production and Apparent Consumption of Sporting and Athletic Goods
(NAICS 339920 [SIC 3949]) (106 $1997) 2-36
2-13c Production and Apparent Consumption of Bicycles and Bicycle Parts
(NAICS 334111 [SIC 37511]) (106 $1997) 2-37
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2-13d Production and Apparent Consumption of Costume Jewelry and Novelties
(NAICS 339914 [SIC 3961]) (106 $1997) 2-37
2-14 Price Indices in Industries that Produce Surface-Coated Plastic Parts 2-38
3-1 Summary Statistics for SBREFA Screening Analysis: 2000 3-6
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SECTION 1
REGULATORY BACKGROUND AND IMPACTS (COSTS AND EMISSION
REDUCTIONS)
1.1 Background
1.1.1 Authority for Development of National Emission Standards for Hazardous Air
Pollutants (NESHAP)
Section 112 of the Clean Air Act (CAA) requires us to list categories and subcategories
of major sources and area sources of hazardous air pollutant (HAP) and to establish
NESHAP for the listed source categories and subcategories. The Plastic Parts and Products
(Surface Coating) category of major sources was listed on July 16, 1992 (57 FR 31576)
under the Surface Coating Processes industry group. Major sources of HAP are those that
emit or have the potential to emit equal to, or greater than, 9.1 megagrams per year (Mg/yr)
(10 tons per year [tpy]) of any one HAP or 22.7 Mg/yr (25 tpy) of any combination of HAP.
1.1.2 Criteria for Development of NESHAP
Section 112 of the CAA requires that we establish NESHAP for the control of HAP from
both new and existing major sources. The CAA requires the NESHAP to reflect the
maximum degree of reduction in emissions of HAP that is achievable. This level of control
is commonly referred to as the MACT (Maximum Achievable Control Technology).
The MACT floor is the minimum control level allowed for NESHAP and is defined
under section 112(d)(3) of the CAA. In essence, the MACT floor ensures that the standard is
set at a level that assures that all major sources achieve the level of control at least as
stringent as that already achieved by the better-controlled and lower-emitting sources in each
source category or subcategory. For new sources, the MACT floor cannot be less stringent
than the emission control that is achieved in practice by the best-controlled similar source.
The MACT standards for existing sources can be less stringent than standards for new
sources, but they cannot be less stringent than the average emission limitation achieved by
the best-performing 12 percent of existing sources in the category or subcategory (or the
best-performing five sources for categories or subcategories with fewer than 30 sources).
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In developing MACT, we also consider control options that are more stringent than the
floor. We may establish standards more stringent than the floor based on the consideration
of the cost of achieving the emission reductions, any non-air quality health and
environmental impacts, and energy requirements.
1.2 Summary of the Proposed Rule
1.2.1 Affected Source Categories
The proposed rule will apply to you if you own or operate a plastic parts and products
surface coating facility that is a major source, or is located at a major source, or is part of a
major source of HAP emissions. We have defined a plastic parts and products surface
coating facility as any facility engaged in the surface coating of any plastic part or product.
You will not be subject to the proposed rule if your plastic parts and products surface
coating facility is located at an area source. An area source of HAP is any facility that has
the potential to emit HAP but is not a major source. You may establish area source status by
limiting the source's potential to emit HAP through appropriate mechanisms available
through your permitting authority.
The source category does not include research or laboratory facilities or janitorial,
building, and facility maintenance operations, or hobby shops that are operated for personal
rather than commercial purposes. The source category also does not include coating of
magnet wire, coating of plastics to produce fiberglass boats (except post-mold coating of
personal watercraft or their parts), or the extrusion of plastic onto a part or product to form a
coating. Post-mold coating of personal watercraft and their parts is included in the source
category.
This source category also does not include surface coating of plastic parts and products
that would be subject to certain other subparts of 40 CFR part 63. In particular, it does not
include the following coating operations:
(1) Coating operations that are subject to the aerospace manufacturing and rework
facilities NESHAP (40 CFR part 63, subpart GG).
(2) Operations coating plastic and wood that are subject to the wood furniture
NESHAP (40 CFR part 63, subpart JJ).
(3) Operations coating plastic and metal parts of large appliances that are subject to
the large appliance surface coating NESHAP (40 CFR part 63, subpart NNNN, 67
FR 48254, July 23, 2002).
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(4) Operations coating plastic and metal parts of metal furniture that would be subject
to a proposed metal furniture surface coating NESHAP (67 FR 20206, April 24,
2002).
(5) Operations coating plastic and wood parts of wood building products that would
be subject to a proposed wood building products surface coating NESHAP (67 FR
42400, June 21,2002).
(6) In-mold and gel coating operations in manufacturing of reinforced plastic
composites that are subject to the proposed reinforced plastics composites
production NESHAP (66 FR 40324, August 2, 2001).
(7) Surface coating of parts that are pre-assembled from plastic and metal
components, where greater than 50 percent of the coatings (by volume,
determined on a rolling 12-month basis) are applied to the metal surfaces, that
would be subject to a proposed NESHAP for miscellaneous metal parts surface
coating. If you can demonstrate that more than 50 percent of coatings are applied
to metal surfaces, then compliance with a proposed NESHAP for miscellaneous
metal parts surface coating would constitute compliance with proposed subpart
PPPP. You must maintain records (such as coating usage or part surface area) to
document that more than 50 percent of coatings are applied to metal surfaces.
We have established four subcategories in the plastic parts and products surface
coating source category: (1) general use coating, (2) thermoplastic olefm (TPO) coating,
(3) headlamp coating, and (4) assembled on-road vehicle coating. The general use coating
subcategory includes all plastic parts and products coating operations except TPO, headlamp,
and assembled on-road vehicle coating. This includes operations that coat a wide variety of
substrates, surfaces, and types of plastic parts, as well as more specialized coating scenarios.
Each subcategory consists of all coating operations, including associated surface preparation,
equipment cleaning, mixing, storage, and waste handling.
1.2.2 Characterization of Emissions
The proposed NESHAP would regulate emissions of organic HAP. Available
emission data collected during the development of the proposed NESHAP show that the
primary organic HAP emitted from plastic parts and products surface coating operations
include methyl ethyl ketone (MEK), methyl isobutyl ketone (MIBK), toluene, and xylenes.
These compounds account for over 85 percent of this source category's nationwide organic
HAP emissions. Other organic HAP emissions identified include ethylene glycol butadiene
(EGBE) and glycol ethers. The majority of organic HAP emissions from a facility engaged
in plastic parts and products surface coating operations can be attributed to the application,
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drying, and curing of coatings. The remaining emissions are primarily from cleaning
operations. In most cases, organic HAP emissions from mixing, storage, and waste handling
are relatively small.
The organic HAP emissions associated with coatings (the term "coatings" includes
protective and decorative coatings as well as adhesives) occur due to volatilization of
solvents and carriers. Coatings are most often applied either by using a spray gun in a spray
booth or by dipping the substrate in a tank containing the coating. In a spray booth, volatile
components evaporate from the coating as it is applied to the part and from the overspray.
The coated part then passes through a flash-off area where additional volatiles evaporate
from the coating. Finally, the coated part passes through a drying/curing oven, or is allowed
to air dry, where the remaining volatiles are evaporated.
Organic HAP emissions also occur from the activities undertaken during cleaning
operations where solvent is used to remove coating residue or other unwanted materials.
Cleaning in this industry includes cleaning of spray guns and transfer lines (e.g., tubing or
piping), tanks, and the interior of spray booths. Cleaning also includes applying solvents to
manufactured parts prior to coating application and to equipment (e.g., cleaning rollers,
pumps, conveyors, etc.).
Mixing and storage are other sources of emissions. Organic HAP emissions can
occur from displacement of organic vapor-laden air in containers used to store organic HAP
solvents or to mix coatings containing organic HAP solvents. The displacement of
vapor-laden air can occur during the filling of containers and can be caused by changes in
temperature or barometric pressure, or by agitation during mixing. Volatilization of organic
HAP can also occur during waste handling.
Although most of the coatings used in this source category do not contain inorganic
HAP, a few special purpose coatings used by a few facilities in this source category contain
inorganic HAP such as chromium and lead. Although these emissions have not been
quantified, we believe that the inorganic HAP emission levels are very low. Furthermore,
emissions of these materials to the atmosphere are minimal because very few of the facilities
in this source category use spray application techniques to apply coatings that contain
inorganic HAP compounds. At this time, it does not appear that emissions of inorganic HAP
from this source category warrant Federal regulation.
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1.3 Definition of Affected Source
We define an affected source as a stationary source, a group of stationary sources, or
part of a stationary source to which a specific emission standard applies. The proposed
standards define the affected source as the collection of all operations associated with the
surface coating of plastic parts and products within each of the four subcategories (TPO,
headlamps, assembled on-road vehicle and general use). These operations include
preparation of a coating for application (e.g., mixing with thinners or other additives);
surface preparation of the plastic parts and products; coating application and flash-off; drying
and/or curing of applied coatings; cleaning of equipment used in surface coating; storage of
coatings, thinners, and cleaning materials; and handling and conveyance of waste materials
from the surface coating operations. The coating operation does not include the application
of coatings using hand-held aerosol containers.
A few facilities have coating operations in more than one subcategory. For example,
a few facilities have TPO coating operations that are in the TPO coating subcategory and
also have other plastic parts and products coating operations that are in the general use
coating subcategory. In such a case, the facility would have two separate affected sources:
(1) the collection of all operations associated with the surface coating of TPO, and (2) the
collection of all operations associated with general use coating. Each of these affected
sources would be required to meet the emission limits that apply to its subcategory.
Another example of a facility with coating operations in more than one subcategory
would be a facility that assembles and paints motor homes. The use of adhesives, caulks,
sealants, and associated materials in assembling the motor home would be in the general use
coating subcategory and would constitute one affected source. The use of coatings and
associated materials in painting the assembled motor home would be in the assembled
on-road vehicle subcategory and would constitute a second affected source.
1.4 Emission Limits and Operating Limits
1.4.1 Emission Limits
The rule will limit organic HAP emissions from each existing affected source using
the emission limits in Table 1-1. The proposed emission limits for each new or reconstructed
affected source are given in Table 1-2.
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Table 1-1. Emission Limits for Existing Affected Sources
The organic HAP emission limit you must meet, in kg
For any affected source organic HAP emitted/kg coating solids used (Ib organic HAP
applying coating to ... emitted/lb coating solids used), is:
TPO substrates 0.23
Headlamps 0.45
Assembled on-road vehicles 1.34
Other (general use) plastic parts 0.16
and products
Table 1-2. Emission Limits for New or Reconstructed Affected Sources
The organic HAP emission limit you must meet, in kg
For any affected source organic HAP emitted/kg coating solids used (Ib organic HAP
applying coating to ... emitted/lb coating solids used), is:
TPO substrates 0.17
Headlamps 0.26
Assorted on-road vehicles 1.34
Other (general use) plastic parts 0.16
and products
You can choose from several compliance options in the proposed rule to achieve the
emission limits. You could comply by applying materials (coatings, thinners and other
additives, and cleaning materials) that meet the emission limits, either individually or
collectively, during each compliance period. You could also use a capture system and
add-on control device to meet the emission limits. You could also comply by using a
combination of both approaches.
Existing affected sources would have to be in compliance with the final rule no later
than 3 years after the effective date of the final rule. The effective date is the date on which
the final rule is published in the Federal Register. This the maximum allowed by the CAA.
Most plastic parts and products sources would need this 3 year maximum period of time to
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develop and test reformulated coatings, particularly those that may opt to comply using a
different lower-emitting coating technology. In addition, time would be needed to establish
records management systems required for enforcement purposes.
For new sources, the CAA requires compliance with standards immediately upon
startup or the effective date of the final rule, whichever is later.
1.4.2 Compliance Options for Meeting Emission Limits
There are three proposed options for complying with the proposed emission limits,
and the testing and initial compliance requirements vary accordingly. You may choose to
use one compliance option for the entire affected source, or you may use different
compliance options for different coating operations within the affected source. You may
also use different compliance options for the same coating operation at different times.
1.4.2.1 Option 1: Compliant Materials
This option is a pollution prevention option that allows you to easily demonstrate
compliance by using low-HAP or non-HAP coatings and other materials. If you use coatings
that, based on their organic HAP content, individually meet the kg (pound (lb)) organic HAP
emitted per kg (lb) coating solids used levels in the applicable emission limits and you use
non-HAP thinners and other additives and cleaning materials, this compliance option is
available to you. For this option, we have minimized recordkeeping and reporting
requirements. You can demonstrate compliance by using readily available purchase records,
the amount of each material (if needed) and material safety data sheets (MSDS) or other
manufacturer's reformulation data to determine the organic HAP content. You would not
need to perform any detailed emission rate calculations. For more information on the
compliance limits and the methods to demonstrate compliance with these limits, refer to the
preamble or the proposed rule.
1.4.2.2 Option 2: Compliance Based on the Emission Rate without Add-on Controls
This option is, like Option 1, a pollution prevention option. Option 2 allows you to
demonstrate compliance based on the organic HAP contained in the mix of coatings, thinners
and other additives, and cleaning materials you use. This option allows you the flexibility to
use some individual coatings that do not, by themselves, meet the kg (lb) organic HAP
emitted per kg (lb) coating solids used levels in the applicable emission limits if you use
other low-HAP or non-HAP coatings such that overall emissions from the affected source
over a 12-month period meet the emission limits. You must use this option if you use
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HAP-containing thinners, other additives, and cleaning materials and do not have add-on
controls. You would keep track of the mass of organic HAP in each coating, thinner or other
additive, and cleaning material, and the amount of each material you use in your affected
source each month of the compliance period. You would use this information to determine
the total mass of organic HAP in all coatings, thinners and other additives, and cleaning
materials divided by the total mass of coating solids used during the compliance period. You
would demonstrate that your emission rate( in kg (Ib) organic HAP emitted per kg (Ib)
coating solids used) meets the applicable emission limit. You can use readily available
purchase records, including manufacturer's formulation data, to determine the amount of
each coating or other material you used and the organic HAP in each material. The proposed
rule contains equations that show you how to perform the calculations to demonstrate
compliance. For more information on the compliance limits and the methods to demonstrate
compliance with these limits, refer to the preamble or the proposed rule.
1.4.2.3 Option 3: Emission Rate with Add-on Controls Option
This option allows sources to use a capture system and an add-on pollution control
device, such as a combustion device or a recovery device, to meet the emission limits. While
we believe that, based on typical emission characteristics, most sources will not use control
devices, we are providing this option for sources that can use control devices. Fewer than 10
percent of the existing sources for which we have data use control devices and may continue
using the control devices for compliance with the proposed standards. Under this option,
testing is required to demonstrate the capture system and control device efficiency.
Alternatively, you may conduct a liquid-liquid material balance to demonstrate the amount of
organic HAP collected by your recovery device. The proposed rule provides equations
showing you how to use records of materials usage, organic HAP contents of each material,
capture and control efficiencies, and coating solids content to calculate your emission rate
during the compliance period.
If you demonstrate compliance based on this option, you would demonstrate that your
emission rate considering controls (in kg (Ib) organic HAP emitted per kg (Ib) of coating
solids used) is less than the applicable emission limit. For more information on the
compliance limits and the test methods to demonstrate compliance with these limits, refer to
the preamble or the proposed rule.
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1.4.3 Operating Limits
As mentioned above, you would establish operating limits as part of the initial
performance test of a capture system and control device other than a solvent recovery system
for which you conduct liquid-liquid material balances. The operating limits are the
minimum or maximum (as applicable) values achieved for capture systems and control
devices during the most recent performance test, conducted under representative conditions,
that demonstrated compliance with the emission limits.
The proposed rule specifies the parameters to monitor for the types of emission
control systems commonly used in the industry. You would be required to install, calibrate,
maintain, and continuously operate all monitoring equipment according to manufacturer's
specifications and ensure that the continuous parameter monitoring systems (CPMS) meet
the requirements in §63.4568 of the proposed rule. If you use control devices other than
those identified in the proposed rule, you would submit the operating parameters to be
monitored to the Administrator for approval. The authority to approve the parameters to be
monitored is retained by EPA and is not delegated to States. For more information on the
operating limits and the procedures to demonstrate compliance with these limits, refer to the
preamble or the proposed rule.
If you use a capture system and control device for compliance, you would be required
to develop and implement on an ongoing basis a work practice plan for minimizing organic
HAP emissions from storage, mixing, material handling, and waste handling operations.
This plan would include a description of all steps taken to minimize emissions from these
sources (e.g., using closed storage containers, practices to minimize emissions during filling
and transfer of contents from containers, using spill minimization techniques, placing
solvent-laden cloths in closed containers immediately after use, etc.). You would have to
make the plan available for inspection if the Administrator requests to see it.
If you use a capture system and control device for compliance, you would be required
to develop and operate according to a designed plan during periods of startup, shutdown, or
malfunction of the capture system and control device.
1.5 Continuous Compliance Provisions
1.5.1 Emission Limits
If you use the compliant materials option (Option 1), you would demonstrate
continuous compliance if each coating meets the applicable emission limit and you use no
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organic HAP-containing thinners, other additives, or cleaning materials. If you use the
emission rate without add-on controls option (Option 2), you would demonstrate continuous
compliance if, for each 12-month compliance period, the ratio of kg (Ib) organic HAP
emitted to kg (Ib) coating solids used is less than or equal to the applicable emission limit.
You would follow the same procedures for calculating the organic HAP emitted to coating
solids ratio that you used for the initial compliance period.
For each coating operation on which you use a capture system and control device
(Option 3) other than a solvent recovery system for which you conduct a liquid-liquid
material balance, you would use the continuous parameter monitoring results for the month
as part of the determination of the mass of organic HAP emissions. If the monitoring results
indicate no deviations from the operating limits and there were no bypasses of the control
device, you would assume the capture system and control device are achieving the same
percent emission reduction efficiency as they did during the most recent performance test in
which compliance was demonstrated. You would then apply this percent reduction to the
total mass of organic HAP in materials used in the controlled coating operations to determine
the emissions from those operations during the month. If there were any deviations from the
operating limits during the month or any bypasses of the control device, you would account
for them in the calculation of the monthly emissions by assuming the capture system and
control device were achieving zero emission reduction during the periods of deviation. Then
you would determine the organic HAP emission rate by dividing the total mass of organic
HAP emissions for the 12-month compliance period by the total mass of coating solids used
during the 12-month compliance period. Every month, you would calculate the emission rate
for the previous 12-month period.
1.5.2 Operating Limits
If you use a capture system and control device, the proposed rule would require you
to achieve on a continuous basis the operating limits you establish during the performance
test. If the continuous monitoring shows that the capture system and control device are
operating outside the range of values established during the performance test, you have
deviated from the established operating limits.
If you operate a capture system and control device with bypass lines that could allow
emissions to bypass the control device, you would have to demonstrate that captured organic
HAP emissions within the affected source are being routed to the control device by
monitoring for potential bypass of the control device.
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If you use an emission capture system and control device for compliance, you would
be required to implement, on an ongoing basis, the work practice plan you developed during
the initial compliance period. If you did not develop a plan for reducing organic HAP
emissions or you do not implement the plan, this would be a deviation from the work
practice standard.
If you use a capture system and control device for compliance, you would be required
to operate according to your designed plan during periods of startup, shutdown, or
malfunction of the capture system and control device.
For more information on continuous operating limits and the compliance procedures
necessary to meet them, please refer to the preamble or the proposed rule.
1.6 Notification Requirements
Notification requirements for this rule are taken from the General Provisions
notification requirements in subpart A of 40 CFR 63 for NESHAPs. They include: initial
notifications, notification of performance test if you are complying using a capture system
and control device, notification of compliance status, and additional notifications required
for affected sources with continuous monitoring systems. The General Provisions also
require certain records and periodic reports. For more information on the recordkeeping
requirements, notifications, periodic reporting, and for startups, shutdowns, and
malfunctions, please refer to the preamble or the ICR supporting statement in the public
docket.
1.7 Rationale for Selecting the Proposed Standards
1.7.1 Selection of Source Category and Subcategories
The surface coating of plastic parts and products is a source category that is on the
list of source categories to be regulated because it contains major sources which emit or have
the potential to emit at least 9.07 Mg (10 tons) of any one HAP or at least 22.7 Mg (25 tons)
of any combination of HAP annually. The proposed rule would control organic HAP
emissions from both new and existing major sources. Area sources are not being regulated
under this proposed rule.
The plastic parts and products surface coating category consists of facilities that
apply protective or decorative coatings and adhesive coatings to plastic parts and products
through a post-mold coating process. The surface coating of plastic parts and products
includes any facility engaged in the surface coating of plastic parts or products, including
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panels, housings, bases, covers, and other components formed of synthetic polymers. We
use the plastic parts and products lists contained in the Standard Industrial Classification
(SIC) and North American Industry Classification System (NAICS) code descriptions to
describe the vast array of plastic parts and products.
Due to the broad scope of the plastic parts and products surface coating source
category, the source category definition likewise needs to be broad in order to include the
varieties of operations and activities that might occur at these facilities. However, a broad
description has the potential to unintentionally include surface coating operations that we
would not consider to be part of the source category. We intend the source category to
include facilities for which the surface coating of plastic parts and products is either their
principal activity or an integral part of a production process that is the principal activity.
Most coating operations are located at plant sites that are dedicated to these activities.
However, some may be located at sites for which some other activity is principal, such as
automobile assembly plants that coat plastic automobile parts or accessories off the assembly
line. Co-located surface coating operations comparable to the types and sizes of the
dedicated plastic parts surface coating facilities, in terms of the coating operation and
applicable emission control techniques, are included in the source category.
We reviewed the available data and information to identify a descriptor common to
sources we intended to include in the category that would further help to describe the
category. Based on our review, we believe the quantity of coating used is the most equitable
descriptor for purposes of defining the scope of the category. This source category only
includes facilities that use at least 100 gallons of coatings. Other descriptors that could have
been used but were rejected because they would either be too difficult to implement or they
are not as equitable as coating usage include production rate, quantity of emissions, and
solvent usage.
The source category does not include research or laboratory facilities or janitorial,
building, and facility maintenance operations, or hobby shops that are operated for personal
rather than commercial purposes. The source category also does not include coating of
magnet wire, coating of plastics to produce fiberglass boats (except the post-mold coating of
personal watercraft or their parts), or the extrusion of plastic onto a plastic part or product to
form a coating. These activities and operations are not comparable to the types and sizes of
the dedicated facilities in terms of coating operations and applicable control techniques and
are regulated or are being considered for regulation as part of other source categories. Thus,
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they are not considered to be within the scope of the source category. The post-mold coating
of personal watercraft and their parts is considered within the scope of the source category.
The source category also does not include certain other coatings of plastic parts and
products that are already being, or would be, regulated by another NESHAP as part of a
different source category.
The statute gives us discretion to determine if and how to subcategorize. Once the
floor has been determined for new or reconstructed and existing affected sources for a source
category or subcategory, we must set MACT standards that are no less stringent than the
MACT floor. Such standards must then be met by all sources within the source category or
subcategory. A subcategory is a group of similar sources within a given source category. As
part of the regulatory development process, we evaluate the similarities and differences
between industry segments or groups of facilities comprising a source category. In
establishing subcategories, we consider factors such as process operations (type of process,
raw materials, chemistry/formulation data, associated equipment, and final products);
emission characteristics (amount and type of HAP); control device applicability; and
opportunities for pollution prevention. We may also consider existing regulations or
guidance from States and other regulatory agencies in determining subcategories.
After reviewing survey responses from the industry, facility site visit reports, and
information received from stakeholders meetings, we found that the plastic parts and
products surface coating industry could be grouped into four subcategories: (1) general use
coating, (2) TPO coating, (3) headlamp coating, and (4) assembled on-road vehicle coating.
The general use coating subcategory includes all plastic parts and products coating
operations except TPO, headlamp, and assembled on-road vehicle coating. This includes
operations that coat a wide variety of substrates, surfaces, and types of plastic parts, as well
as more specialized coating scenarios. Each of the subcategories includes coating
operations, including associated surface preparation, equipment cleaning, mixing and
storage, and waste handling.
The TPO coating is considered a separate subcategory from other plastic parts and
products coating operations because the surface coating of TPO substrates requires the use of
an adhesion promoter in order to apply subsequent coatings to the substrate. Headlamp
coating is considered as a separate subcategory because these coating operations require
specialized reflective argent coatings and hard clear coatings to meet U.S. Department of
Transportation Motor Vehicle Safety Standards for reflectivity, brightness, color, and other
performance criteria. Assembled on-road vehicle coating is considered a separate
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subcategory because these coating operations are performed on fully-assembled vehicles that
may contain heat sensitive parts. In addition, fully assembled on-road vehicles are physically
larger than the other parts and products coated in this source category. The large size and
presence of heat sensitive parts make certain lower-HAP technologies, such as heat-cured
waterborne coatings, not feasible for use on fully assembled on-road vehicles and make it
technically difficult for these sources to achieve the same emission level as sources that do
not coat assembled on-road vehicles. An assembled on-road vehicle coating operation is
considered part of this subcategory if greater than 50 percent of the surface being coated on a
vehicle is plastic.
1.8 Selection of Affected Source within Selected Source Category and Subcategories
When emission standards are based on a collection of emissions sources or total
facility emissions, we select an affected source based on that same collection of emission
sources or the total facility as well. This approach for defining the affected source broadly is
particularly appropriate for industries where a single emission standard encompassing
multiple emission points within the plant provides the opportunity and incentive for owners
and operators to utilize control strategies that are more cost effective than if separate
standards were established for each emission point within a facility.
The affected source for these proposed standards is broadly defined to include all
operations associated with the coating of plastic parts and products and the cleaning of
products, substrates or coating operation equipment in a subcategory (i.e., TPO coating,
headlamp coating, assembled on-road vehicle coating, or general use coating). These
operations include storage and mixing of coatings and other materials; surface preparation of
the plastic parts and products prior to coating application; coating application and flash-off,
drying and curing of applied coatings; cleaning operations; and waste handling operations.
Because we are assuming that all the organic HAP in the materials entering the
affected source are volatilized (emitted), emissions from operations occurring within the
affected source (e.g., mixing operations and storage) are accounted for in the estimate of total
materials usage at the affected source. A broad definition of the affected source was selected
to provide maximum flexibility in complying with the proposed emission limits for organic
HAP. In planning its compliance, each facility can select among available coatings, thinners
and other additives, and cleaning materials, as well as the use of emissions capture and
add-on control systems, to comply with the emission limits for each subcategory in the most
cost-effective manner. Additional information on the plastic parts and products surface
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coating operations selected for regulation, and other operations, are included in the docket
for the proposed standards.
The MACT floor analysis was performed using a sourcewide emission rate approach
for each of the four subcategories mentioned above. Because organic HAP emissions are
directly related to the materials used by these sources, and since it is very difficult to
estimate the emissions that occur in any one area within the affected source, an emission rate
approach for affected sources in each subcategory is the most feasible way to determine
emission limits. The emission rate approach covers the emissions from all areas within the
affected source for each subcategory.
To determine the existing and new source MACT floor for each subcategory, we
determined the organic HAP emission rate for each facility in units of kg (Ib) organic HAP
emitted per kg (Ib) of coating solids used for each subcategory. We then ranked the sources
in each subcategory from lowest to highest emission rate to identify the best-performing
sources. We then used information obtained from industry survey responses and subsequent
changes and clarifications received from facilities to estimate the sourcewide organic HAP
emission rate from each survey respondent. If add-on controls were reported, their capture
and control efficiencies were taken into account. Both major and "synthetic minor" sources
were included in the population for determining MACT floor emission limits.
Table 1-1 above provides the MACT floor emission limits for existing sources by
subcategory. These limits were reviewed to assess the achievability of the emissions levels
by affected sources, and it was determined that all sources could achieve the existing source
MACT floor emission rate for their subcategory. For more information, please refer to the
public docket.
Table 1-2 above provides the MACT floor emission limits for new sources by
subcategory. As one can see by comparison of Tables 1 and 2, the new source MACT floor
emission limits are the same as the existing source limits for the general use coating and the
assembled on-road vehicle coating subcategories. The new source MACT levels are more
stringent for the other two subcategories.
For the general use coating subcategory, the existing and new source MACT floors
are the same because none of the sources with emissions rates lower than the existing source
MACT floor emission rates represent a similar source that could establish a new source level
for the range of new sources in the subcategory. For the assembled on-road vehicle coating
subcategory, the existing and new source MACT floors are the same because the diversity of
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sources is such that those sources emission rates lower than the existing source MACT level
are not representative of the possible range of new sources in the subcategory. This
determination is based on review of coating operations observed by EPA during site visits
and among facilities in the MACT database.
For the TPO subcategory, the new source MACT floor is more stringent than the
existing source MACT level because the best-performing single source uses a coating
process that can be feasibly employed on TPO substrates at other facilities. For the
headlamp coating subcategory, the new source MACT floor is more stringent than the
existing source MACT level because the best-performing single source uses coating
processes that the Agency believes are feasible for new coating processes. These processes
coat automotive headlamps utilizing low-HAP, ultraviolet (UV)-cure clearcoat technology
and vacuum metallizing technology on the reflective lamp bodies.
1.9 Beyond the Floor Alternatives
The Agency is required to establish MACT floors for NESHAPs established under
Title III of the Clean Air Act Amendments of 1990. The Agency can, however, set these
standards beyond the MACT floor. We do this by identifying and considering any
reasonable regulatory alternatives that are beyond the floor, taking into account emission
reductions, cost, non-air quality health and environmental impacts, and energy requirements.
These alternatives may be different for new and existing sources, and separate standards may
be established for new and existing sources.
No options beyond the MACT floor could be identified for the general use coating
subcategory and the assembled on-road vehicle subcategory that were technically feasible for
all new or existing facilities.
For the TPO coating subcategory, we are not requiring beyond the floor emission
reductions. The use of a waterborne coating technology was identified as a beyond the floor
option, but was not recommended as such since the Agency determined that the additional
cost of going beyond the floor is not warranted at this time without a further evaluation of
health and environmental risks. This is due to the high cost of retrofitting an existing TPO
source with the waterborne coating technology and the small additional emission reduction
beyond the MACT floor level.
For the headlamp coating subcategory, we are not requiring beyond the floor
emission reductions. The use of low-HAP UV-cure clearcoat and vacuum metallizing were
considered but not recommended as beyond the floor options because requiring existing
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sources to switch to these technologies could require costly retrofits to an existing headlamp
coating operation. The Agency then determined that the additional cost of going beyond the
floor is not warranted at this time without a further evaluation of health and environmental
risks.
Add-on controls were also reviewed to identify beyond the floor options, but no
controls of this type were found to be technically feasible generally for any of the four
subcategories. Therefore, add-on controls were not considered as a beyond-the-floor option.
Therefore, we base the proposed standards for existing sources on the existing source
MACT floors for the subcategories, and the same is true for new sources.
For more information, please refer to the MACT floor memorandum in the public
docket (Burlew, 2002).
1.10 Format of the Proposed Standards
The format of the proposed standards is an emission rate expressed as the mass of
organic HAP emitted per mass of coating solids used. This format would allow coating
operators flexibility in choosing any combination of means (e.g., coating reformulation, use
of lower-HAP or non-HAP materials) that is workable to comply with the emission limits.
We selected mass of coating solids used as a component of the proposed format to
normalize the rate of organic HAP emissions across all sizes and types of facilities. We also
selected kg (Ib) organic HAP emitting per kg (Ib) coating solids used because this is
consistent with the data available though Material Safety Data Sheets and other
manufacturer's formulation data. Considering the primary means of compliance will likely
be low- and no-HAP coatings and other materials, this format best ensures comparable
control levels being achieved by all affected sources. Also, this format allows sources
flexibility to use a combination of emission capture and control systems, as well as low-HAP
content coatings and materials.
In lieu of emissions standards, section 112(h) of the CAA allows work practice
standards or other requirements to be established when a pollutant cannot be emitted through
a conveyance or capture system, or when measurement is not practicable because of
technological and economic limitations. Many plastic parts and products facilities use some
type of work practice measure to reduce HAP emissions from mixing, cleaning, storage, and
waste handling areas as part of their standard operations. However, we do not have data to
quantify accurately the emission reductions achievable by such measures.
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1.11 Testing and Initial Compliance Requirements
The proposed standards allow you to choose among several options to demonstrate
compliance with the organic HAP limits: compliant materials (i.e., coatings and other
materials with low or no organic HAPs); emission rate without add-on controls, or emission
rate with add-on controls.
For the compliant materials option, the source must document the organic HAP
content of all coatings on an as-received basis and show that each is less than the applicable
emissions limit. Manufacturer's formulation data can be used to demonstrate the HAP
content of each material and solids content of each coating. For more information on this
option and test methods used to identify organic HAP and solids content, refer to the
preamble or the monitoring rationale memo in the public docket (Burlew, 2002).
For the emission rate with add-on controls option, you would be required to conduct
an initial performance test of the system to determine its overall control efficiency using
EPA Method 25 or 25 A depending on the type of control device and outlet concentration.
Capture efficiency would also have to be determined using various EPA Methods (204 and
204A - 204F). For a solvent recovery system for which you conduct a liquid-liquid material
balance, you would determine the quantity of volatile matter applied and the quantity
recovered during the initial compliance period to determine its overall control efficiency.
For both cases, the overall control efficiency would be combined with the monthly mass of
organic HAP in the coatings and other materials used to calculate the monthly organic HAP
emissions in kg (Ib) HAP emitted. The monthly amount of coating solids in kg (Ib) would
also be determined. For more information on this option and test methods, refer to the
preamble or memos in the public docket (Burlew, 2002).
1.12 Costs and Emission Reductions of the Proposed Standards
1.12.1 Cost Estimates
The total capital cost for existing sources is estimated to be $804,000. These costs
include monitoring costs. These capital costs are primarily based on all existing source
facilities to purchase stainless steel application equipment in order to meet the emission
limits. The nationwide annualized costs include the costs for facilities to purchase
reformulating coatings along with the administrative, insurance, capital recovery, and taxes
and overhead associated with the capital investment. The annualized costs, including
monitoring, recordkeeping, and reporting, for existing sources is estimated to be about $10.7
million (1997$). This The total capital cost for new sources is estimated to be $28,000.
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These costs include monitoring costs. The nationwide annual costs, including monitoring,
recordkeeping, and reporting, for existing sources is estimated to be about $194,000 (1997$).
New sources are assumed to incur a capital cost associated with using application equipment
made of stainless steel to resist corrosion that might occur if using low-HAP, waterborne
coatings. New sources will also incur an annual cost increase associated with purchasing
reformulated lower-HAP coatings. The costs for new sources are also based on an estimate
of six new sources being constructed within 5 years after issuance of the final standards.
This estimate comes from a growth projection for new sources in this industry of 4 percent
over a 5 year period. This estimate was based on reviewing Census data for the major
SIC/NAICS codes represented in the plastic parts existing source database.
This 4 percent growth projection was applied to the number of existing sources
mapped to each model plant to determine how many new facilities are expected for each
model over the 5 year period. After rounding to discount any fractional results, this
calculation estimates six new facilities over the 5 year period. For more information on the
methodology used to estimate the number of affected new sources, please refer to the growth
methodology memo in the public docket.
These costs, as well as the emissions reductions, are calculated assuming the majority
of source would comply by using lower-HAP or non-HAP containing coatings and cleaning
materials because such materials are generally available, and add-on controls would not, as
mentioned above, be technically feasible for typical facilities. We also assumed that
facilities currently equipped with add-on controls would continue to operate these systems
and would perform the required performance tests and parameter monitoring.
1.12.2 Emissions and Emission Reductions Estimates
The 1997 nationwide baseline organic HAP emissions for the 202 existing major
source plastic parts and products surface coatings facilities of which EPA is aware are
estimated to be 9,820 tons per year. Implementation of the emissions standards as proposed
would reduce these emissions by 7,560 tons per year, or about 80 percent. As mentioned
earlier in Section 1.2.2, the major HAP emitted from the plastic parts and products surface
coating industry include MEK, MIBK, toluene, and xylenes. These compounds account for
over 85 percent of the nationwide HAP emissions from this source category. Other HAP
identified in emissions include ethylene glycol monobutyl ether (EGBE) and glycol ethers.
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For new sources, nationwide baseline organic HAP emissions are estimated at 520
tons per year. Implementation of the emissions standards as proposed would reduce these
emissions by 440 tons per year, or about 85 percent.
1.13 Health Effects from Exposure to HAP Emissions
The major HAP emitted from the plastic parts and products surface coating industry
include MEK, MIBK, toluene, and xylenes. Other HAP identified in emissions include
ethylene glycol monobutyl ether and glycol ethers. The HAP that would be controlled with
this proposed rule are associated with a variety of adverse health effects. These adverse
health effects include chronic health disorders (e.g., birth defects and effects on the central
nervous system, liver, and heart), and acute health disorders (e.g., irritation of the lung, skin,
and mucous membranes, and effects on the central nervous system).
We do not have the type of current detailed data on each of the facilities covered by
the proposed emission standards for this source category, and the people living around the
facilities, that would be necessary to conduct an analysis to determine the actual population
exposures to the HAP emitted from these facilities and potential for resultant health effects.
Therefore, we do not know the extent to which the adverse health effects described above
occur in the populations surrounding these facilities. However, to the extent the adverse
effects do occur, the rule would reduce emissions, subsequent exposures, and associated
health effects.
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SECTION 2
INDUSTRY PROFILE
2.1 Introduction
The U.S. Environmental Protection Agency's (EPA's) National Emission Standards
for Hazardous Air Pollutants (NESHAP) will regulate organic hazardous air pollutant (HAP)
emissions released during surface coating operations of plastic parts and products. The
plastic parts and products surface coating category consists of facilities that apply protective,
decorative, or functional coatings and adhesives to plastic substrates through a post-mold
coating process only. These goods fall into two major product groups:
automotive/transportation and business machines/electronics. In addition to these groups,
surface-coated plastic parts are incorporated in a wide range of miscellaneous products,
ranging from toys to signs, that are also covered by the NESHAP. Table 2-1 provides a
listing of the products produced by affected entities, and the respective six-digit North
American Industry Classification System (NAICS) codes of the industries to which those
entities belong. This table is not intended to be exhaustive, but rather provides a guide for
readers regarding entities likely to be covered by this NESHAP.
Plastic parts surface coating may be performed by
• captive operators in the same organization as the product manufacturer,
commercial suppliers that fabricate and coat plastic parts and sell them to the
product manufacturer,
commercial suppliers that surface-coat plastic parts on a toll basis for the product
manufacturer, or
commercial suppliers that coat plastic parts and products as part of refurbishment
(EPA, 1994).
The economic effects of the rule are conditional on the technology for producing the
plastic parts and their costs of production; the value of the parts to users; and the
organization of the industries engaged in plastic parts production, coating, and use. This
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Table 2-1. Industries Manufacturing Surface-Coated Plastic Parts
Includes Manufacturing of: NAICS Code
Automobile and Truck Parts
Automobile manufacturing 336111
Light truck and utility vehicle manufacturing 336112
Heavy duty truck manufaturing 336120
Motor vehicle body manufacturing 336211
Motor home manufacturing 336213
Travel trailer and camper manufacturing 336214
Vehicular lighting equipment manufacturing 336321
Other motor vehicle electrical and electronic equipment manufaturing 336322
Motor vehicle steering and suspension component (except spring) manufacturing 336330
Motor vehicle brake system manufacturing 336340
All other motor vehicle p arts manufacturing 336399
Motorcycles, bicycles, and parts manufacturing 336991
Military armored vehicle, tank, and tank component manufacturing 336992
All other transportation equipment manufacturing 336999
Business Machine and Computer Equipment Parts
Office machinery manufacturing 333313
Electronic computer manufacturing 334111
Computer terminal manufacturing 334113
Other computer peripheral equipment manufacturing 334119
Watch, clock, and p art manufacturing 334518
Lead pencil and art good manufacturing 339942
Miscellaneous Products
Plastics pipe and pipe fitting manufacturing 326122
Polystyrene foam product maufacturing 326140
Urethane and other foam product (except polystyrene) manufacturing 326150
All other plastics product manufacturing 326199
Residential electric lighting fixture manufacturing 335121
Laboratory apparatus and furniture manufacturing 339111
(continued)
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Table 2-1. Industries Manufacturing Surface-Coated Plastic Parts (continued)
Includes Manufacturing of: NAICS Code
Miscellaneous Products (continued)
Costume jewelry and novelty manufacturing 339914
Sporting and athletic goods manufacturing 339920
Doll and stuffed toy manufacturing 339931
Game, toy, children's vehicle manufacturing 339932
Sign manufacturing 339950
Musical instrument manufacturing 339992
Note: The above list is not meant to be an exhaustive list of affected industries, but rather a list to illustrate
the types of industries likely to be affected by this rule.
Source: U.S. Department of Commerce, Bureau of the Census. 1997 Economic Census: The Bridge Between
NAICS and SIC. . Last updated on June 27, 2000.
profile provides background information on these topics organized within a conventional
economic framework.
• Section 2.2 includes a description of surface coating processes for plastic parts,
with discussions of the processes and inputs, types of coated plastic parts, the
costs of coating, and the characteristics of coating facilities.
Section 2.3 describes the characteristics, uses, and consumers of surface-coated
plastic parts and substitution possibilities in consumption.
Section 2.4 discusses the industry's organization and provides information on
market structure, and companies that own potentially affected plants. Special
attention is given to data on small businesses for future use in evaluating the
impact on these entities as required by the Small Business Regulatory
Enforcement and Fairness Act (SBREFA) and the Regulatory Flexibility Act
(RFA).
Section 2.5 presents data on trends in the markets for goods for which surface-
coated plastic parts are an input. The section includes data on production,
consumption, net exports, and prices in industries affected by this NESHAP.
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2.2 Production, Costs, and Producers
The production of surface-coated plastic parts releases organic HAP emissions. This
section describes the types of coated plastic parts and products, the inputs needed for
production of those parts, the production process, and the points at which the process
generates these emissions. It describes some of the costs associated with producing surface-
coated plastic parts. Finally, it characterizes the producers of plastic parts that will be
affected by the NESHAP.
2.2.1 Surface Coating of Plastic Parts
The production process characterizes the relationship between the inputs to a
productive activity and its output(s). Figure 2-1 illustrates the productive activity of surface
coating plastic parts. The appropriate quantities of labor services, materials, energy, and
capital services are combined according to the relevant rules of production to produce a
given quantity of surface-coated parts, where pollutants (organic HAPs) are a by-product of
that activity. The quantity of pollutants that result from the surface coating process is a
direct result of the combination of inputs used in that process. The pollutants may or may
not be emitted into the atmosphere depending on the efficiency of pollution abatement
activities. This section describes the surface coating process in terms of the products that
result from the surface coating process, the characteristics of production inputs, and the
characteristics of the coating process itself.
Surface-coated part
t
Productive
noncapital inputs
(labor, materials,
energy)
w
w
Surface coating
process
t
Productive
capital
Pollutant
w
Abatement
activity
t
Abatement inputs
(labor, materials,
Emissions
energy, capital)
Figure 2-1. The Firm's Production Diagram
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2.2.1.1 Surface-Coated Plastic Parts
Surface-coated plastic parts include automobile and light duty truck parts (including
other small passenger motor vehicles like motorcycles and golf carts), business machine and
computer equipment parts, and some miscellaneous plastic parts ranging from laboratory
apparatus to toys.
Automobile and Light Duty Truck Parts. Surface-coated plastic parts are standard
components of all passenger vehicles such as cars, light duty trucks, and motorcycles. In
1994, about 8 percent of the average weight of a new passenger car was made of plastic parts
(EPA, 1995). The wide variety of automobile and light duty trucks made of plastic or plastic
composites includes coated plastic interior parts, exterior body parts, and lighting equipment
as well as more functional parts such as gas tanks. In addition, some motorcycle, golf cart,
and motor home parts are coated plastic.
Interior Parts. Instrument board assemblies, handles, seat belt parts, air bag covers,
dashboards, and door linings are often coated plastic parts.
Exterior Body Parts/Lighting Equipment. Coated plastic parts used on the exterior of
automobile bodies include
• body panels, bumpers, grills, fenders, hoods, and wheel covers;
• headlamp and taillight bezels and lamp covers, mirror housings, and windshield
frames;
• truck cabs, beds, bodies, and tops; and
• plastic handles, seats and saddles for motorcycles.
Functional Parts. Functional coated plastic vehicle parts include gas tanks, steering
assemblies, and suspension parts.
Business Machine and Computer Equipment Parts. Computers, calculating and
accounting machines, and other office machines are often encased in plastic housings.
Handles, buttons, and other external machine parts are also made of plastic.
Miscellaneous Parts. There is a wide variety of miscellaneous coated plastic parts
and products:
• coated plastic wires and plastic housings for electrical outlets;
• laboratory apparatus and furniture;
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• musical keyboard housings, piano and keyboard keys and buttons, and entire
musical instruments like recorders;
dolls and stuffed toys, game parts, toys, and children's vehicles;
• sporting and athletic goods, such as helmets, backboards, balls, bicycles, and
kayaks;
• aquarium accessories, boxes, brush handles, drums, siding, hardware, lamp bases,
tool handles, life jackets, and shutters;
• costume jewelry; and
• signs and advertising display cases.
2.2.1.2 Inputs
The surface coating process requires material inputs as well as labor, capital services,
and energy. The primary material inputs into the coating process are plastic parts and
coatings. Necessary capital equipment most often includes spray guns, spray booths,
conveyor lines, filtration systems, and curing ovens.
Material Inputs.
Plastic Parts. As an input into the coating process, the important characteristics of
plastic parts are the type of resin they are made from and their shape and size. The shape and
size of the part affect the coating process in that large parts require larger facilities, spray
booths, and curing ovens, and parts with complex shaping may require special handling for
complete and even coating coverage. The resins used to form plastic parts have certain
properties that are critical in determining how to prepare the surface for coating, how well
the various coatings will adhere to the surface, and what type of curing methods are
appropriate.
Plastic parts that are to be coated are first manufactured out of one of two types of
resins: thermoplastic or thermoset. Properties important to surface coaters include solvent
resistance and the temperature at which the material can be baked. Tables 2-2 and 2-3 list
common thermoplastic resins, thermoset resins, and the abbreviations generally used to
describe the different resins.
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Table 2-2. Types of Common Thermoplastic and Thermoplastic Elastomer Resins
Resin or Composite Abbreviation
Acetal
Acrylic
Cellulosics
Ketone-based resins
Nylon
Polyarylate
Polybutylene terephthalate PBT
Polycarbonate
Polycarbonate and polybutylene terephthalate (PBT) blend XENOY
Polyimide
Polyolefms (blends of polypropylene, polyethylene and its TPO
copolymers)
Polyethylene terephthalate PET
Polypropylene PP
Polyphenylene oxide (modified) PPO
Polyurethane TPU
Polyvmyl chloride PVC
Styrenic resins
Acrylic-styrene-acrylonitrite ASA
Acrylonitrile butadiene styrene ABS
Polystyrene
Styrenic resins (continued)
Styrene-maleic anhydride S-Ma
Styrene block copolymer SBC
Styrene butadiene-styrene SBS
Styrene-isoprene- styrene SIS
Styrene-ethylene- butylene-styrene SEES
Thermoplastic polyester TPEa
a TPE is also used as the abbreviation for the group of resins known as thermoplastic elastomers—a group of
specialty rubbers with the processing characteristics of thermoplastics and the elasticity of rubber.
Sources: U.S. Environmental Protection Agency. 1994. Alternative Control Techniques Document: Surface
Coating of Automotive/Transportation and Business Machine Plastic Parts. EPA 435/R-94-017.
Research Triangle Park, NC: U.S. Environmental Protection Agency.
Hewlett, Elizabeth. 1998. "Thermoplastic Elastomers in the Auto Industry: Increasing Use and the
Potential Implications." Industry, Trade, and Technology Review January:28-41.
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Table 2-3. Types of Thermoset Resins
Resin or Composite Abbreviation
Epoxy
Melamines
Phenolic
Polyurathanes PU
Thermoset polyester
Coatings. Coatings provide a protective, decorative, or functional film to plastic parts
and products. Coatings typically include resins or binders, pigments, carriers, and additives.
The resins or binders, pigments, and additives are dissolved in the carrier (i.e., water or
solvent) and form the film following evaporation of the carrier.
Resins or binders form the coating film, which adheres flexibly to the surface of the
plastic part. Resins or binders are most often polymers—the same types of organic
molecules that make up the resins used to form plastic parts.
Pigments are insoluble solids that provide opacity to obscure the surface of a plastic
part and add color.
Carriers are organic solvents, liquid carbon dioxide, or water, which facilitate the
transference of the other, often solid, coating components to the plastic part.
Additives improve properties such as coalescence, flow, and other properties
(University of Missouri-Rolla, 1999). Additives may
affect the rheological properties of coatings (i.e., their ability to flow),
• speed the curing process,
• ensure pigment dispersion,
• reduce the surface tension of the coating to ensure complete coverage of the part,
serve as defoamers so that the dried coating surface is free of bubbles, and
• serve as fungicides or bactericides ("Surface Coating," Encyclopedia Britannica).
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Capital Inputs. The coating process involves capital inputs including coating
equipment such as spray booths, filtration systems, spray guns, conveyor lines, and curing
ovens and investment in pollution-abatement equipment.
Coating Equipment. Parts to be coated may enter a partially or totally enclosed spray
booth either manually or by way of a conveyor. Application of the coating may be
accomplished through manual or robotic methods. Figure 2-2 shows powder coating being
applied manually in a partially enclosed spray booth. Figure 2-3 shows a spray booth to
which parts are delivered by way of a conveyor.
Exhaust
I
< Parts
Dry filters
Figure 2-2. Powder Coating Booth
Source: .
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Figure 2-3. A Conveyorized Paint Finishing Booth
Source: OBI Spray Booths and Systems Catalog #201-2. Inside Cover.
Pollution-Abatement Equipment. To manage organic HAP emissions resulting from
the coating process, additional equipment may be used at some plastic parts surface coating
sources. Spray booth filtration systems may be connected to scrubbing towers or carbon
absorption filters to extract the emissions from the filtered air. The extracted solvents then
are incinerated to keep them from escaping into the atmosphere. The capital equipment
associated with managing the solvents released in the coating process requires other inputs
such as fuel, energy, and chemicals.
2.2.1.3 The Surface Coating Process
The surface coating of plastic parts includes the following steps:
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• preparation of the coating (i.e., mixing with thinners or other additives),
• surface preparation,
• coating application and flash-off,
drying and/or curing, and
cleaning of equipment used in surface coating.
Surface Preparation. Once a part is formed, it may require surface preparation to
correct flaws, clean residue from the surface, and/or to prepare the surface to receive the
coating. Correcting surface flaws is necessary to provide an even surface for the coating, to
achieve an aesthetically pleasing final product, and, in some cases, to improve the eventual
performance of functioning parts. Correcting surface flaws may involve sanding, puttying,
and gassing out plastic parts. Cleaning may include wipe-down (dry or solvent), multistage
washing cycles, or deionized water rinses. Finally, masking may be used to prevent
unwanted surface coating on specific areas of the part or product.
Coating Application. Coating application methods for plastic parts include brush,
dip, flow, spray, vacuum metallizing, and others. Immediately following application plastic
parts are usually introduced to a flash-off zone. The flash-off zone is an area where the
coating completes its flowing or leveling prior to curing. Figure 2-4 shows an example
coating line for a three-coat system.
Drying and/or curing. The drying and/or curing processes for plastic parts includes
ambient, elevated temperature, forced-air, radiation-cure, and ultraviolet light. The proper
curing conditions for each coating, including temperature, residence time in an oven or under
a lamp, and humidity depend on the type of coating used and the characteristics of the
substrate coated. After curing at elevated temperatures, coated parts enter a cool-down zone
where they remain until cool enough for further handling (EPA, 1998).
Equipment Cleaning. Cleaning is performed on the equipment for a variety of
reasons to include flushing of the paint lines and application equipment for color changes,
housekeeping, etc. The specific solvent used to clean the equipment will vary depending on
the type of material (i.e., waterborne, solventborne, etc.) being applied with the equipment.
Commonly used cleaning materials include water, butyl acetate, acetone, xylene, and
water-based peel-off cleaner.
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Oven
Coated
Part
Flash-Off Area
<,
Flash-Off Area
Flash-Off
Area
Figure 2-4. Example Coating Line for Three-Coat System
Source: U.S. Environmental Protection Agency. 1994. Alternative Control Techniques Document: Surface
Coating of Automotive/Transportation and Business Machine Plastic Parts. EPA 435/R-94-017.
Research Triangle Park, NC: U.S. Environmental Protection Agency.
2.2.1.4 Emissions
Solvents used in the surface coating of plastic parts and products contain organic
HAP that may evaporate into the atmosphere. Generally, 100 percent of the organic HAP in
the materials used for surface coating of plastic parts and products are emitted. However, in
some adhesives a portion of the organic HAP may become part of the film through a
chemical reaction and are not emitted. Finally, some of the affected entities may capture and
incinerate the organic HAP emissions.
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2.2.2 Costs of Surface Coating
The (opportunity) costs of production depend on whether the productive activity is
characterized by the existence of a fixed factor such as plant and equipment whose quantity
cannot be varied over the time frame of analysis or whether the activity is in the planning
stage. In the former short-run case, there is no cost to using the fixed input and for any
output rate, the (minimum) total costs of production are simply
Cx = PnQnx*+PmQmx* + PgQgx*, (2.1)
assuming that the fixed factor is capital. However, although the cost of the fixed factor is not
included in the costs of production, the cost is conditional on the quantity of the fixed input
available since it influences the productivity of the other inputs. The * denotes that these are
the minimum cost quantities of the inputs for a given output rate. The abatement costs for
existing controls are similarly calculated.
In the planning long-run case, all costs are variable and the cost of the fixed factor
(e.g., capital services) must be included: PkQkx*. In the intermediate-run case when there is
the opportunity to use the fixed input in another application, this foregone opportunity is also
part of the cost of production.
The cost function describes the relationship between the minimum costs of
production and alternative output rates. Figure 2-5 shows a typical textbook characterization
of a short-run unit cost function.
For existing suppliers of surface coating services, the primary fixed input is the
capital equipment used. This includes washing systems, spray booths and/or plating vats,
conveyor lines and hoists, spray guns and pumping systems, filtration systems, reclaim
systems, curing ovens and incinerators, and other pollution abatement equipment.
Variable inputs include labor used for both production and pollution abatement,
coatings and other chemical solutions, uncoated plastic parts and products, fuels, and
purchased electricity. Total costs of the variable inputs used by industries that produce, coat,
and use plastic parts and products are provided in Table 2-4. Plastic parts and products
prices are not included because they are usually produced in-house or delivered to the coater
for coating on a toll basis, so the price for the parts is not readily available. Note that the
table provides industry data on costs rather than costs only for firms that coat plastic parts
and products. The costs reported are much larger than the actual costs of surface coating.
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Average
Costs ($)
Average
Total Cost
Average
Variable Cost
Average
Fixed Cost
Quantity
Figure 2-5. Short-Run Unit Cost Function
For any existing supplier of plastic parts surface coating services, the costs of
production depend on the supplier's purchase of variable inputs and the opportunity cost of
owning capital equipment. EPA regulations result in changing a facility's minimum cost
quantities of some inputs, often both variable inputs and capital equipment.
2.2.3 Suppliers of Plastics Parts Coating Services
EPA has identified 202 existing facilities that coat plastic parts and products, which
would be directly affected by the rule. Of these 202 facilities, EPA had sufficient data to
allow costs to be estimated for 185 facilities. These 185 facilities are the facilities covered
by this study. Table 2-5 shows the location of the facilities by state.
These suppliers of plastic parts coating services are as varied as the parts themselves.
They range from small single-facility firms with annual revenues in the hundreds of
thousands of dollars to facilities owned by large automobile manufacturers with total
revenues in the hundreds of billions of dollars.
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Table 2-4. Production Costs of Industries Producing Coated Plastic Parts: 1997
Industry NAICS Code
Automobile and Truck Parts
Automobile manufacturing
Light truck and utility vehicle manufacturing
Heavy duty truck manufacturing
Motor vehicle body manufacturing3
Motor home manufacturing
Travel trailer and camper manufacturing
Gasoline engine and engine parts manufacturing
Vehicular lighting equipment manufacturing
Other motor vehicle electrical and electronic equipment
manufacturing13
Motor vehicle steering and suspension component (except
spring) manufacturing
Motor vehicle brake system manufacturing
Motor vehicle transmission and power train parts
manufacturing
All other motor vehicle parts manufacturing0
Motorcycles, bicycles, and parts manufacturing
Military armored vehicle, tank, and tank component
manufacturing11
All other transportation equipment manufacturing
336111
336112
336120
336211
336213
336214
336312
336321
336322
336330
336340
336350
336399
336991
336992
336999
Labor
Total
Employment
114,060
94,033
28,214
1,722
17,936
32,036
81,160
16,506
30,489
48,625
43,147
111,955
173,229
17,074
5,982
19,290
Total Payroll
($103)
6,411,952
5,361,980
1,190,164
54,000
503,294
770,504
3,550,770
628,534
1,048,438
2,323,579
1,486,119
5,516,801
5,442,190
567,520
238,241
504,886
Cost of
Materials ($103)
66,546,225
70,927,268
10,306,435
200,324
2,679,768
2,724,961
17,847,864
1,686,309
4,096,932
5,473,746
6,407,923
19,567,915
18,656,740
1,797,470
495,679
2,875,923
Total Capital
Expenditures
($103)
3,355,800
1,769,649
120,735
8,086
49,753
62,502
1,750,675
169,235
239,147
552,144
473,867
1,902,483
1,600,988
103,730
17,819
98,858
(continued)
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Table 2-4. Production Costs of Industries Producing Coated Plastic Parts: 1997 (continued)
to
Industry
Business Machine and Computer Equipment Parts
Office machinery manufacturing
Electronic computer manufacturing
Computer terminal manufacturing
Other computer peripheral equipment manufacturing
Watch, clock, and part manufacturing6
Lead pencil and art good manufacturingf
Miscellaneous Products
Plastics pipe and pipe fitting manufacturing8
Polystyrene foam product manufacturing
Urethane and other foam product (except polystyrene)
manufacturing
All other plastics product manufacturing11
Residential electric lighting fixture manufacturing1
Current carrying wiring device manufacturing
Laboratory apparatus and furniture manufacturing
Costume jewelry and novelty manufacturing j
Sporting and athletic goods manufacturing
NAICS Code
333313
334111
334113
334119
334518
339942
326122
326140
326150
326199
335121
335931
339111
339914
339920
Labor
Total
Employment
10,492
105,383
5,764
93,130
6,332
1,210
4,058
26,983
37,129
523,192
74
44,907
16,833
13,975
68,920
Total Payroll
($103)
327,913
4,251,722
253,087
4,563,858
178,481
29,408
100,969
756,131
1,002,055
13,989,931
1,973
1,293,583
616,819
314,581
1,799,871
Cost of
Materials ($103)
1,180,516
40,239,744
941,879
16,981,173
380,468
82,640
261,268
2,447,473
3,851,626
30,344,499
2,405
2,326,114
909,818
448,479
4,679,110
Total Capital
Expenditures
($103)
97,724
1,053,379
34,716
980,417
26,214
8,821
39,467
318,445
216,477
3,449,409
173
219,293
58,880
19,325
345,602
(continued)
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Table 2-4. Production Costs of Industries Producing Coated Plastic Parts: 1997 (continued)
Industry
Miscellaneous Products (continued)
Doll and stuffed toy manufacturing
Game, toy, children's vehicle manufacturing
Sign manufacturing
Musical instrument manufacturing
NAICS Code
339931
339932
339950
339992
Labor
Total Total Payroll
Employment ($103)
3,392
29,375
82,246
13,286
63,722
767,211
2,367,259
359,101
Cost of
Materials ($103)
104,698
1,870,746
3,314,770
493,019
Total Capital
Expenditures
($103)
3,939
136,243
234,572
36,262
Excludes 707 firms classified under truck and bus bodies (NAICS 336211).
b Excludes 252 firms classified under electronic components, n.e.c. (NAICS 34418, 34419), and 570 firms classified under engine electrical
equipment (NAICS 336322).
0 Excludes 6 firms classified under internal combustion engines, n.e.c. (NAICS 333618) and 1 firm under all other manufacturing industries
(NAICS 339999).
d Includes 38 firms classified under the tanks and tank components (NAICS 336992).
e Includes 2 firms classified under wire springs (NAICS 332612), and 128 firms under watches, clocks, and watch cases (NAICS 334518).
f Excludes 17 firms classified under public building and related furniture (NAICS 337127), and 143 firms under lead pencils and art goods
(NAICS 339942).
8 Excludes 349 firms classified under plastics pipe (NAICS 326122).
h Excludes 140 firms classified under all other manufacturing industries, n.e.c. (NAICS 339999).
1 Excludes 497 firms classified under residential lighting fixtures (NAICS 335121), and 53 firms under all other manufacturing industries, n.e.c.
(339999).
j Excludes 17 firms classified under metal coating and allied services (NAICS 332812) and 80 firms under fabricated metal products, n.e.c.
(NAICS 332999).
Source: U.S. Department of Commerce, Bureau of the Census. 1999aa-1999nn. Manufacturing—Industry Series, 1997 Economic Census.
Washington, DC.
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Table 2-5. Surface Coaters of Plastic Parts and Products, by State
State Number of Facilities
Arkansas 2
California 3
Connecticut 2
Florida 1
Georgia 1
Iowa 2
Illinois 5
Indiana 11
Kansas 3
Kentucky 2
Louisiana 1
Massachusetts 2
Michigan 54
Minnesota 3
Missouri 5
North Carolina 3
North Dakota 1
New Hampshire 1
New Mexico 1
New York 1
Ohio 31
Oklahoma 1
Pennsylvania 4
South Carolina 3
South Dakota 1
Tennessee 6
Texas 1
Virginia 3
Wisconsin 9
NA 22
Total 185
Source: U.S. Environmental Protection Agency (EPA). 2001. ICR Survey Responses. Washington, DC: U.S.
Environmental Protection Agency.
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The organization of a production process varies according to the benefits of team
production1 and the costs of monitoring shirking amongst team members. Firms that produce
products comprising surface-coated plastic parts use team production to perform the actual
coating process. However, only some of the firms find it efficient to combine surface
coating services with the actual manufacture of plastic parts or with the assembly process of
coated parts and other inputs used as components in another downstream good. Three types
of production organization are used in surface coating:
captive facilities in the same organization as the product manufacturer,
commercial suppliers that fabricate and coat plastic parts and sell them to the
product manufacturer,
commercial suppliers that surface-coat plastic parts on a toll basis for the product
manufacturer, or
commercial suppliers that coat plastic parts and products as part of refurbishment
(EPA, 1994).
2.3 Consumption, Value, and Consumers
Surface coating is a value-adding process demanded for its ability to increase a
plastic part's or product's aesthetic value, conductivity, and durability. Surface-coated
plastic parts and products are most often intermediate goods incorporated into final products
ranging from automobiles to toys, although they may be final products themselves. The
demand for surface-coated plastic parts and products is based on their value to consumers as
part of a final good. The demand for surface coating services is directly related to the
demand for those parts and products.
This section characterizes the demand side of the market for surface-coated plastic
parts. It describes the characteristics of the various types of coated plastic parts and the value
to consumers of each of four different types of final consumer goods: automobiles and light
duty truck parts, heavy duty truck parts, business machine and computer equipment parts,
and miscellaneous parts and products. The behavioral response of consumers to a change in
'Team production occurs when several types of resources are used together to produce a product which is not a
sum of separable outputs of each cooperating resource and where resources do not all belong to one person.
Team production is beneficial when a "team" can produce goods and services which an individual could
never produce alone or when the marginal product of a team is greater than the sum of individual marginal
products of team members.
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the price of plastic parts, quantified in economics as the elasticity of demand, is also
discussed.
2.3.1 Characteristics of Plastic Parts and Products
The demand for a commodity is not simply for the good itself but instead for a set of
characteristics and properties that is satisfied by a particular commodity. Commodities can
thus be described as bundles of attributes that provide services (Lancaster, 1966). The
production processes of surface-coated plastic parts allow room to vary the characteristics of
the final product. Frequently, gains in one particular characteristic demand sacrifices of
another or increased materials and/or processing costs. Also, users of different types of
plastic parts do not all require the same set of attributes. For example, electronic and office
equipment manufacturers coat plastics with metallic substances to make them conductive and
protect them from electromagnetic/radio frequency interference signals. However, children
playing with plastic toys and dolls are interested in the appearance of the toy; the parents
may value its safety and durability. Some of the various characteristics of surface-coated
plastic parts are
• flammability,
• recyclability,
• expected lifetime (i.e., durability, susceptibility to UV rays),
environmental attributes (i.e., safety of disposal and end of life),
• weight,
• safety (i.e., protection provided in an automobile accident),
• aesthetics,
• thermal properties (i.e., heat tolerance),
• flexibility/rigidity, and
• conductivity.
While many of the above characteristics of plastic parts and products will be determined
primarily by the composition of the uncoated part itself, coatings influence almost all of the
above characteristics to some degree, though mostly indirectly. Primary characteristics that
can be directly affected by the coating part are
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durability (scratch and chemical resistance);
• aesthetics (the color and texture of the part);
• conductivity (of electromagnetic/radio frequency interference signals); and
• the presence of some functional capabilities, such as reflective properties.
2.3.2 Uses of Plastic Parts and Products
As described in Section 2.2, surface-coated plastic parts are vital components of a
wide range of products, including transportation equipment, business machines and
computers, and a multitude of miscellaneous products. The uses of parts and characteristics
of interest to their consumers vary across those product groups. Because coated plastic parts
are an intermediate good used in the production of a final good such as a complete
automobile or a complete copier machine, the use of plastic parts is often dictated by a
manufacturer's interpretations of consumer preferences rather than directly by the consumer
himself.
2.3.2.1 Automotive and Truck Parts
Plastics are used increasingly to produce transportation equipment parts. By 1993,
manufacturers were using over 250 pounds of plastic in the average vehicle (SPI, 1999). Car
interiors alone represent a value of about $1,200 per vehicle, of which $500 is due to the
value of plastic components (Modem Plastics Encyclopedia, 1999a). Automobile and other
transportation equipment purchasers are concerned with the performance, safety, appearance,
and longevity of transportation products. Accordingly, auto makers are especially concerned
with the durability, corrosion resistance, and resiliency of plastic parts, which affect the
expected lifetime of the product. They often choose the coating of a part based on the
eventual location of the part on the vehicle. For example, the lower a part is on a car, the
more resistant it must be to damage from particles that might fly up from the road. The UV
resistance of interiors is becoming increasingly important to automakers as they find
consumers demanding longer warranties on the color retention and other properties of auto
interiors at the same time that interior exposure to UV is increasing along with an increase in
window areas (Modern Plastics Encyclopedia, 1999a). Auto makers also consider the
aesthetic properties of the part—its color and texture—since the appearance of a vehicle
affects its value to consumers. Plastics may be easily molded into new and exciting
aerodynamic shapes. The light weight of plastic parts contributes to fuel efficiency and is a
factor often considered in making decisions to substitute plastic parts for those made of glass
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or metal. Plastics have another important advantage over metal parts—the ease of
processing them into unique shapes.
2.3.2.2 Computers and Business Equipment
Like the consumers of automotive and truck parts, consumers of computers and
business equipment value performance, safety, appearance, and longevity. Coatings affect
the safety, appearance, and longevity of products. Although the range of aesthetic
characteristics seems narrower for products in this segment than those in the automotive
segment, consumers of computers and business equipment do place a value on appearance.
Manufacturers are aware of the aesthetic value consumers place on computer and business
machine housings and often make their production choices accordingly. For example, Sun
Microsystems invested many resources in finding an exciting design for the housing of their
Starfire server. Sun's Kathleen McLaurin observed: "It was especially important that the
product appeal visually to the design-sensitive commercial users we were targeting" (Fox,
1998). The same sentiment guided Macintosh in its design of the i-Mac. No matter how the
performance of the computer is evaluated, no one denies its eye-catching appearance. Even
less innovative manufacturers find it necessary to at least color-match plastic parts to coated
metal parts and use molded-in texture to find a market for their product. In addition,
coatings serve the purpose of hiding any flaws in a part's substrate (EPA, 1994).
Business equipment users are also interested in the safety of the equipment.
Manufacturers can increase the safety of machines by using selected resins that do not easily
ignite and/or that are capable of self-extinguishing. In some cases, fire-retardant chemicals
may be added to the resins to increase safety, although some European regulations preclude
the use of many of these chemicals, thus limiting the choices of exporting manufacturers
(Modern Plastics Encyclopedia, 1999b). EMI/RFI (Electromagnetic Interference/Radio
Frequency Interference) shielding is necessary to prevent a machine or computer from
interfering with other electronic equipment and to prevent airwaves from outside the
equipment from interfering with its performance. Shielding is best accomplished with
grounded, high-conductivity coatings containing nickel or copper.
2.3.2.3 Miscellaneous Products
Like consumers of the other two categories of products described above, consumers
of miscellaneous products are concerned with the appearance, safety, and longevity of plastic
parts, all of which can be improved with the application of coatings. Consumers of
construction materials desire plastic parts that can withstand the elements and that be coated
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to match numerous architectural coatings. Consumers of plastic laboratory apparatus and
furniture desire durable products that will not degenerate when cleaned with cleaning
solvents. Consumers of sports equipment want durable plastic products that can withstand
impacts and have aesthetic appeal. Consumers of toys desire products that are attractive,
safe (i.e., nontoxic), and durable.
2.3.3 Substitutes
In most of the products described above, coated plastic parts have often replaced
glass or metal parts, because they are lightweight, cheaper to produce than similar metal or
glass parts, and sometimes safer to use than metal or glass substitutes. Currently, depending
on the part in question, glass or metal are the only viable substitutes for coated plastic
automobile parts. Table 2-6 lists auto parts that may be made out of coated plastic parts and
indicates whether the part could also be made of glass and/or metal. Because plastic parts
are much cheaper and lighter than glass or metal, it is unlikely that vehicle manufacturers
will switch from plastic parts back to metal parts. As in the automotive industry, computer
and business machine parts and toys could be constructed of metal rather than plastic.
However, requirements for safety, the need to produce parts with unique shapes, and the
relatively higher cost of using metals limit the possibilities for substitution.
2.3.4 Elasticity
The elasticity of demand for coated plastic parts and products is a measure of the
responsiveness of the quantity of coated products demanded to a change in the price of those
products. The responsiveness of quantity demanded to price increases with the availability
of substitutes, the time frame of adjustment, the price proximity of substitutes, and the price
of a good in relation to a consumer's budget. The more inelastic the demand, the more easily
firms will be able to pass the costs of regulation on to consumers. The demand for coated
plastic parts may be relatively inelastic because plastic parts are generally much cheaper than
metal and glass substitutes.
2.4 Firm Characteristics
The economic impacts regulating surface coating facilities are related to the
ownership structure of those facilities. The market power, size, and integration of firms
affect their ability to pass the costs of regulation on to consumers and/or absorb those costs
without significant harm to their financial position. The 185 surface coating facilities
included in this analysis are owned by 130 firms. Firms owning facilities that coat motor
vehicle or business machine parts appear to have somewhat more market power than those
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Table 2-6. Auto Parts Made of Plastic
Type of Part
Possible Materials for Use in Constructing Part
Interior Parts:
Instrument panel
Console
Heater/AC controls
Speaker grille
Dome light
Ash tray
Van/utility vehicle rear
Airbag cover
Exterior Parts:
Grille
Wheel cover
Lighting
Headlamp or taillamp reflector
Headlamp lense
Facia cladding
Window encapsulation cladding
Body sides, fenders
Bumper
Functional Parts:
Engine fan
Fuel tank
Housings
Plastic, steel
Plastic
Plastic, steel, aluminum
Plastic, metal
Plastic, glass
Plastic, metal
Plastic, metal
Plastic
Plastic, metal
Plastic, metal
Plastic, glass
Plastic, glass
Plastic, glass
Plastic
Plastic
Plastic, steel, aluminum
Plastic, steel, aluminum
Plastic, steel
Plastic, steel
Plastic, metals
Sources: U.S. Environmental Protection Agency, Office of Compliance, Office of Enforcement and
Compliance Assurance. 1995. EPA Office of Compliance Sector Notebook Project—Profile of the
Motor Vehicle Industry. EPA/310-R-95-009. Washington, DC: U.S. Environmental Protection
Agency.
Fettis, Gordon. 1995. Automotive Paints and Coatings. Weinheim, Germany: Verlagsgesellschaft
mbH.
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that coat miscellaneous parts. The relatively larger degree of concentration might not be so
obvious if it were possible to further specify the product markets for miscellaneous parts and
products. However, it is intuitively obvious that specific requirements that original
equipment manufacturers (OEMs) impose on their suppliers of plastic vehicle and business
machine parts would make it more likely that coating facilities would have close
relationships with their customers and hence more market power than the facilities that coat
miscellaneous plastic parts and products.
This section describes the ownership structure of surface coating facilities, including
the overall concentration levels in industries affected by the Plastic Parts and Products
NESHAP, the number and size of firms owning affected surface coating facilities, the
vertical and horizontal integration of those firms, and the current number of small businesses
affected by the NESHAP. The terms facility and establishment are used synonymously in
this analysis and refer to the physical location where products are coated. Likewise, the
terms company and firm are used synonymously and refer to the legal business entities that
own facilities.
2.4.1 Market Power of Firms
The ownership concentration of surface coating facilities is important because it
affects the firms' ability to influence the price of surface coating services or the price of
inputs they purchase. If an industry is perfectly competitive, then individual producers are
not able to influence the price of the output they sell or the inputs they purchase. This
condition is most likely to hold if the industry has a large number of firms, the products sold
are undifferentiated, and entry and exit of firms are unrestricted. Product differentiation can
occur both from differences in product attributes and quality and from brand name
recognition of products. Entry and exit of firms are unrestricted for most industries except,
for example, in cases when government regulates who is able to produce, when one firm
holds a patent on a product, when one firm owns the entire stock of a critical input, or when a
single firm is able to supply the entire market.
When compared across industries, firms in industries with fewer firms, more product
differentiation, and restricted entry are more likely to be able to influence the price they
receive for a product by reducing output below perfectly competitive levels. This ability to
influence price is referred to as exerting market power. At the extreme, a single
monopolistic firm may supply the entire market and hence set the price of the output. On the
input market side, firms may be able to influence the price they pay for an input if there are
few firms, both within and outside the industry, that use that input. At the extreme, a single
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monopsonist firm may purchase the entire supply of the input and hence set the price of the
input.
Surface coating is a competitive industry in that surface coating is not a differentiated
product but rather a process that is extremely similar across a wide range of products. In
addition, surface coating facilities are owned by a large number of firms, and the cost of
surface coating equipment is low enough that entry into the market is not extremely difficult.
Although surface coaters make up small portions of the industries in which they are
classified, the differing levels of concentration in those industries may indicate the relative
degrees of market power among surface coaters in different industries. Table 2-7 presents
several different measures of concentrations in industries that coat plastic parts and products,
including four-firm concentration ratios and Herfindahl index numbers for each industry. A
four-firm concentration ratio greater than 50 percent is often considered high. The
Department of Justice's Horizontal Merger Guidelines claim that a Herfindahl index number
less than 1,000 indicates an unconcentrated industry while a Herfindahl index number
between 1,000 and 1,800 indicates a moderately concentrated industry and an index number
above 1,800 indicates a highly concentrated industry. As Table 2-7 shows, industries that
produce motor vehicles and business machines do appear to be more concentrated than those
producing miscellaneous plastic parts.
2.4.2 Firm Size by Employment and Revenue
It is likely that large firms will be better able to absorb the financial impacts of the
regulation. Hence, firm size is a factor in the distribution of the regulation's economic
impacts. The 130 firms owning the 185 surface coating facilities have yearly revenues as
low as $1.3 million and as high as $180 billion. Employment at the firms ranges from 15
employees to 386,000. Tables 2-8 and 2-9 illustrate the distribution of employment and
revenues across firms owning surface coating facilities. Table 2-8 shows that 38 percent of
firms employ fewer than 500 people, and 38 percent of firms are relatively large and employ
over 1,000 people. Table 2-9 shows that many firms are large based on employment criteria,
but the majority (70 percent) have annual revenues less than $500 million.
2.4.3 Vertical and Horizontal Integration
Vertical integration is a potentially important dimension in analyzing firm-level
impacts because the regulation could affect a vertically integrated firm on more than one
level. For example, the regulation may affect companies for whom surface coating of plastic
2-26
-------
Table 2-7. Measurements of Concentration of Industries Manufacturing Coated Plastic Parts: 1997
to
Percentage of the Value of Shipments Accounted for
by x Largest Companies
Industry
Automobile and Truck Parts
Automobile manufacturing
Light truck and utility vehicle manufacturing
Heavy duty truck manufaturing
Motor vehicle body manufacturing1
Motor home manufacturing
Travel trailer and camper manufacturing
Gasoline engine and engine parts manufacturing
Vehicular lighting equipment manufacturing
Other motor vehicle electrical and electronic
equipment manufacturing13
Motor vehicle steering and suspension
component (except spring) manufacturing
Motor vehicle brake system manufacturing
Motor vehicle transmission and power train parts
manufacturing
All other motor vehicle parts manufacturing0
Motorcycles, bicycles, and parts manufacturing
Military armored vehicle, tank, and tank
component manufacturing11
All other transportation equipment
manufacturing
NAICS
Code
336111
336112
336120
336211
336213
336214
336312
336321
336322
336330
336340
336350
336399
336991
336992
336999
Number of
Companies
173
84
75
747
75
761
810
99
890
183
203
427
1,271
373
37
349
Value of
Shipments
(S106)
95,366
110,178
14,509
9,009
3,894
4,601
25,787
3,336
18,297
10,633
10,981
30,106
35,511
3,383
1,064
4,437
x=4
79.5
99.3
74.4
34.4
52.2
26.0
67.5
58.3
53.4
60.1
59.2
60.0
27.2
67.5
85.0
50.7
x=8
96.3
99.9
90.3
43.9
75.4
35.3
75.5
76.5
64.2
72.3
77.2
79.1
38.3
76.7
92.4
75.3
x=20
99.5
99.9
98.5
59.4
94.5
49.8
84.8
92.7
75.9
85.6
89.2
90.9
54.8
85.9
99.0
83.0
x=50
99.9
99.9
99.8
74.9
99.7
67.1
92.8
99.1
87.1
97.1
96.5
96.2
70.6
92.3
100.0
90.6
Herfindahl-
Hirschmann
Index
2,349.7
NA
1,597.1
694.7
980.2
262.2
1,425.1
1,164.4
1,615.3
1,415.6
1,101.0
1,056.6
266.4
2,036.5
NA
885.2
(continued)
-------
Table 2-7. Measurements of Concentration of Industries Manufacturing Coated Plastic Parts: 1997 (continued)
Percentage of the Value of Shipments Accounted for
by x Largest Companies
Industry
Business Machine and Computer Equipment
Parts
Office machinery manufacturing
Electronic computer manufacturing
Computer terminal manufacturing
Other computer peripheral equipment
manufacturing
Watch, clock, and part manufacturing"
Lead pencil and art good manufacturing5
to
flj Miscellaneous Products
oo
Plastics pipe and pipe fitting manufacturing8
Polystyrene foam product manufacturing
Urethane and other foam product (except
polystyrene) manufacturing
All other plastics product manufacturing11
Residential electric lighting fixture
manufacturing1
Current carrying wiring device manufacturing
Laboratory apparatus and furniture
manufacturing
Costume jewelry and novelty manufacturing^
Sporting and athletic goods manufacturing
NAICS
Code
333313
334111
334113
334119
334518
339942
326122
326140
326150
326199
335121
335931
339111
339914
339920
Number of
Companies
158
531
141
1,015
145
171
317
379
447
7,522
543
446
371
917
2,477
Value of
Shipments
(S106)
3,163
66,302
1,487
26,911
922
1,279
4,792
4,899
6,665
65,632
2,255
5,878
2 221
1,288
10,634
x=4
53.0
45.4
39.4
45.3
48.1
52.4
23.9
41.4
32.3
5.0
24.5
21.2
19.0
25.2
21.4
x=8
68.2
68.5
64.5
60.2
62.7
65.6
37.4
50.0
43.5
8.1
36.5
35.0
33.3
41.2
29.2
x=20
81.2
91.4
87.2
73.0
86.9
83.7
59.8
65.5
62.9
13.7
55.8
59.1
55.1
55.3
43.6
x=50
93.5
97.2
96.5
85.4
96.9
94.6
78.8
82.7
78.8
23.3
73.6
80.3
74.4
69.0
59.7
Herfindahl-
Hirschmann
Index
1,208.3
727.9
645.4
659.7
750.2
1,047.9
260.2
665.4
403.1
14.9
266.3
232.0
202.5
256.3
161.1
(continued)
-------
Table 2-7. Measurements of Concentration of Industries Manufacturing Coated Plastic Parts: 1997 (continued)
to
VO
Percentage of the Value of Shipments Accounted for
by x Largest Companies
Industry
Miscellaneous Products (continued)
Doll and stuffed toy manufacturing
Game, toy, children's vehicle manufacturing
Sign manufacturing
Musical instrument manufacturing
NAICS
Code
339931
339932
339950
339992
Number of
Companies
239
756
5,580
552
Value of
Shipments
(S106)
301
4,463
7,998
1,325
x=4
31.1
42.7
7.9
32.6
x=8
51.1
53.1
12.2
45.5
x=20
72.2
66.0
19.5
68.1
x=50
89.6
80.1
30.9
83.3
Herfindahl-
Hirschmann
Index
403.9
564.0
34.5
420.8
* Includes 707 firms classified under the truck and bus bodies (SIC 3713).
b Includes 252 firms classified under the electronic components, n.e.c. (SIC 3679), and 570 firms classified under the engine electrical equipment (SIC 3694).
c Includes 6 firms classified under the internal combusion engines, n.e.c. (SIC 3519) and 1 firm under the all other manufacturing industries (SIC 9994).
d Includes 38 firms classified under the tanks and tank components (SIC 3795).
e Includes 2 firms classified under the wire springs (SIC 3495), and 128 firms under the watches, clocks, and watchcases (SIC 3873).
f Includes 17 firms classified under the public building and related furniture (SIC 2531), and 143 firms under the lead pencils and art goods (SIC 3952).
8 Includes 349 firms classified under the plastics pipe (SIC 3084).
h Includes 140 firms classified under the manufacturing industries, n.e.c. (SIC 3999).
1 Includes 497 firms classified under the residential lighting fixtures (SIC 3645), and 53 firms under the manufacturing industries, n.e.c. (SIC 3999).
j Includes 17 firms classified under the metal coating and allied services (SIC 3479) and 80 firms under the fabricated metal products, n.e.c. (SIC 3499).
Source: U.S. Department of Commerce, Bureau of the Census. 1999. Manufacturing—Industry Series, 1997 Economic Census. Washington, DC.
U.S. Department of Commerce, Bureau of the Census. 2001a. Economic Census—Concentration Ratios.
-------
Table 2-8. Distribution of Potentially Affected Firms by Employment: 2000
Employment Range
0-500
500-1,000
>1,000
NA
Total
Number of Firms
50
22
49
9
130
Share of Total
38%
17%
38%
7%
100%
Source: Dialog Corporation. 2001. U.S. Company Profiles, . As obtained August 29,
2001.
Dun and Bradstreet. 2001. D & B Million Dollar Directory: America's Leading Public and Private
Companies. Bethlehem, PA: Dun & Bradstreet.
Hoover's Online. 2001. Company Capsules, . As obtained June 25, 2001.
Infausta Incorporated. 2001. References [computer file]. Omaha, NE: Infausta, Inc.
U.S. Bureau of the Census. 2001b. Quarterly Financial Report for Manufacturing, Mining, and Trade
Corporations. First Quarter, 2001, Series QF/01-Q1. Washington, DC: U.S. Government Printing
Office.
Table 2-9. Distribution of Potentially Affected Firms by 2000 Sales
Company Sales
Less than $5 million
$5 million to $50 million
$50 million to $500 million
$500 million to $1,000 million
$1 billion or greater
NA
Total
Number of Firms
8
38
45
8
22
9
130
Share of Total
6%
29%
35%
6%
17%
7%
100%
Source: Dialog Corporation. 2001. U.S. Company Profiles, . As obtained August 29,
2001.
Dun and Bradstreet. 2001. D&B Million Dollar Directory: America's Leading Public and Private
Companies. Bethlehem, PA: Dun & Bradstreet.
Hoover's Online. 2001. Company Capsules, . As obtained June 25, 2001.
Infausta Incorporated. 2001. References [computer file]. Omaha, NE: Infausta, Inc.
U.S. Bureau of the Census. 2001b. Quarterly Financial Report for Manufacturing, Mining, and Trade
Corporations. First Quarter, 2001, Series QF/01-Q1. Washington, DC: U.S. Government Printing
Office.
2-30
-------
parts is only one of several processes in which the firm is involved. A company that coats
plastic parts, for example, may also be involved in manufacturing automobiles, aircraft,
sporting goods, and appliances. This firm would be considered vertically integrated because
it is involved in more than one level of production including surface coating. A regulation
that increases the cost of coating plastic parts and products will also affect the cost of
producing the final products that use coated plastic parts and products in the production
process. Firms that manufacture and coat plastic parts and then use those parts as
components in other goods, such as automobiles, are vertically integrated. Firms comprising
facilities that coat and manufacture plastic parts are somewhat vertically integrated. Firms
with a single coating facility are not vertically integrated.
Horizontal integration is also a potentially important dimension in firm-level impact
analysis because a diversified firm may own facilities in unaffected industries, giving them
resources to spend on complying with this regulation—if they so choose. The 130
potentially affected firms described in Section 2.4.2 demonstrate little diversification. Most
of the larger firms are oriented in a single industry, usually motor vehicle manufacturing.
Many independent single-facility firms may produce a wide variety of products. However,
because the Plastic Parts and Products NESHAP is regulating a production process used for
all those products, those firms will find almost all products are affected by the regulation.
2.4.4 Small Businesses
Although the rule affects firms of all sizes, small businesses may have special
problems with compliance. The Regulatory Flexibility Act (RFA) of 1980, as amended by
the Small Business Regulatory Enforcement Fairness Act (SBREFA), requires that special
consideration be given to these entities. The Agency classified 67 potentially affected
companies as small using the approach outlined below:
• Standard Industrial Classification (SIC) code data were available for 105
companies (81 percent). These codes were mapped to NAICS industries to
determine the appropriate size standard. In cases where mapping resulted in two
or more NAICS codes, we used the highest size standard.
Of the remaining 25 companies, 16 companies either had employment greater
than 1,500 employees (therefore large under any manufacturing size standard) or
had employment less than 500 employees (small under any manufacturing size
standard).
2-31
-------
• We assumed firms without employment data (nine firms) are small in this
analysis. This assumption may potentially overstate the number of small firms in
the analysis.
2.5 Markets and Trends
Because plastic parts are used in such widely varied products as automobiles,
computers, and toys, surface-coated plastic parts and products are found in many markets.
The demand for surface coating services is driven by all of these markets. This section
describes some of the major trends in these markets, including domestic production and
consumption, changes in net exports, and price trends.
2.5.1 Production
Parts coated for use in computer equipment are likely to have experienced the largest
increase in production in the past years, since the computer and peripheral equipment
industry has been expanding rapidly, as shown in Table 2-10. Table 2-10 also illustrates that
the automobile and light duty truck industries have been growing and that the miscellaneous
product industries have been decreasing production fairly steadily.
2.5.2 Consumption
Tables 2-11 through 2-13 indicate how much the above increases and decreases in
production can be accounted for by changes in domestic and foreign consumption. Most
notably, net exports of goods decreased for all industries described. At least some of this
decrease is due primarily to the rapid growth of the U.S. economy (and domestic demand for
goods) relative to other economies rather than to an increase in the total share of foreign
producers in the market. Apparent domestic consumption increased for every industry
shown except for costume jewelry.
2.5.3 Pricing Trends
Prices for products manufactured by the transportation industries and miscellaneous
manufacturing industries have risen while prices for office, computing, and accounting
machines have dropped 37.6 percent from 1990 to 1999, as shown in Table 2-14. This fact,
along with the tremendous increase in the value of domestic product shipments in the
computer industry, suggests that the volume of plastic parts used as inputs into business
machines and computers has increased dramatically over the past 5 years, even more so than
indicated solely by the data on value of shipments. Table 2-14 shows price changes for all
three industry groups that produce a large number of surface-coated plastic parts.
2-32
-------
Table 2-10. Value of Domestic Product" Shipments in Some Industries Using Surface
Coated Plastic Parts (106 $1997)
1995
1996
1997"
1998"
1999C
Change
from 1995
to 1999 (%)
Automobile and Light Duty
Truck Parts
Automotive Parts and
Accessories (NAICS 336370,
336311,336321,335911,
336322,336312,336330,
336340,336350, 336399)
Motor Vehicles and Bodies
(NAICS 336111, 336112,
336120,336211,336992)
Motorcycles and Parts
(NAICS 334111)
Business Machine and
Computer Equipment Parts
Computers and Peripherals
(NAICS 334111, 334112,
334113,334119)
Miscellaneous Products
Dolls, Toys, and Games
(NAICS 339931,336991,
339932)
Sporting and Athletic Goods
(NAICS 339920)
Bicycles and Bicycle Parts
(NAICS 334111)
Costume Jewelry and
Novelties (NAICS 339914)
$145,926.6 $148,090.6 $167,600.0 $258,228.0 $196,015.3 34%
$208,599.5 $205,776.5 $215,359.0 $306,998.6 $224,644.9
$1,442.0 $1,623.2 $1,658.7 $1,770.5 $1,924.3 33%
$60,533.8 $68,334.7 $84,300.0 $106,301.6 $123,742.3 104%
$4,605.7 $4,193.0 $4,261.0 $4,195.2 $4,175.9 -9%
$9,018.7 $9,289.4 $9,510.0 $9,299.5 $9,256.7 3%
$1,024.6 $969.5 $975.0 $859.2 $694.9 -32%
$278,893.6 $2,052.6 $71,611.5 $11,842.9 $10,167.3 -35%
1 Product shipments include all specific products classified within the industries listed regardless of whether the
establishments producing those products fall within the industry classification.
b Estimate
c Forecast
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade Outlook 2000.
New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision—Current
Series, Series pcu37 #, pcu357_#, pcu39 #, pcu3751#l, and pcu3751#2. . As obtained
on July 12,2000.
2-33
-------
Table 2-1 la. Production and Apparent Consumption of Automotive Parts and
Accessories (NAICS 336370, 336311, 336321, 335911, 336322, 336312, 336330, 336340,
336350, 336399 [SICs 3465, 3592, 3647, 3691, 3694, 3714]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999f%)
Domestic Production
$145,926.6
$148,090.6
$148,201.0
$258,228.0
$196,015.3
34%
Apparent
Domestic
Consumption
$144,381.7
$147,572.0
$147,682.0
$256,981.7
$197,012.3
36%
Net Exports
$1,544.9
$518.6
$519.0
$1,246.4
-$997.0
-165%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry
Trade Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu37 #. . As obtained on July 12, 2000.
Table 2-1 Ib. Production and Apparent Consumption of Motor Vehicles and Bodies
(NAICS 336111, 336112, 336120, 336211, 336992 [SICs 3711, 3713]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999f%)
Domestic Production
$208,599.5
$205,776.5
$215,359.0
$306,998.6
$224,644.9
8%
Apparent
Domestic
Consumption
$272,191.6
$269,973.7
$283,891.0
$416,267.3
$310,041.2
14%
Net Exports
-$63,592.0
-$64,197.1
-$68,532.0
-$109,268.7
-$85,396.3
-34%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index
Revision— Current Series, Series pcu37. . As obtained on July 12, 2000.
2-34
-------
Table 2-llc. Production and Apparent Consumption of Motorcycles and Parts (NAICS
334111 [SIC 37512]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
tol999f%)
Domestic Production
$1,442.0
$1,623.2
$1,658.7
$1,770.5
$1,924.3
33%
Apparent
Domestic Consumption
$2,033.5
$2,134.3
$2,102.7
$2,428.3
$2,869.4
41%
Net Exports
-$591.5
-$511.0
-$444.1
-$657.9
-$945.1
-60%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu37 #, and pcu3751#2. . As obtained on July 12,
2000.
Table 2-12. Production and Apparent Consumption of Computers and Peripheral
Equipment (NAICS 334111, 334112, 334113, 334119 [SICs 3571, 3572, 3575, 3577]) (106
$1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999(%)
Domestic Production
$60,533.8
$68,334.7
$84,300.0
$106,301.6
$123,742.3
104%
Apparent
Domestic Consumption
$71,611.5
$84,088.1
$106,100.0
$132,433.7
$156,812.2
119%
Net Exports
-$11,077.7
-$15,753.4
-$21,800.0
-$26,132.1
-$33,069.9
-199%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu357_#. . As obtained on July 12, 2000.
2-35
-------
Table 2-13a. Production and Apparent Consumption of Dolls, Toys, and Games
(NAICS 339931, 336991, 339932 [SICs 3942, 3944]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999(%)
Domestic Production
$4,605.7
$4,193.0
$4,261.0
$4,195.2
$4,139.3
-10%
Apparent
Domestic Consumption
$11,907.1
$12,899.0
$15,351.0
$16,170.3
$16,548.2
39%
Net Exports
-$7,301.5
-$8,706.0
-$11,090.0
-$11,975.0
-$12,408.9
-70%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu39 #. . As obtained on July 12, 2000.
Table 2-13b. Production and Apparent Consumption of Sporting and Athletic Goods
(NAICS 339920 [SIC 3949]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999(%)
Domestic Production
$9,018.7
$9,289.4
$9,510.0
$9,299.5
$9,415.1
4%
Apparent
Domestic Consumption
$10,269.8
$10,459.3
$10,675.0
$10,854.1
$10,981.3
7%
Net Exports
-$1,251.1
-$1,169.9
-$1,165.0
-$1,554.6
-$1,566.2
-25%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu39 #. . As obtained on July 12, 2000.
2-36
-------
Table 2-13c. Production and Apparent Consumption of Bicycles and Bicycle Parts
(NAICS 334111 [SIC 37511]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999(%)
Domestic Production
$1,024.6
$969.5
$975.0
$859.2
$694.9
-32%
Apparent
Domestic Consumption
$1,719.8
$1,563.2
$1,644.0
$1,681.5
$1,722.4
0%
Net Exports
-$695.1
-$593.7
-$669.0
-$822.2
-$1,027.5
-48%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu3751#l. Available atwww.bls.gov. Obtained on July 12, 2000.
Table 2-13d. Production and Apparent Consumption of Costume Jewelry and
Novelties (NAICS 339914 [SIC 3961]) (106 $1997)
Year
1995
1996
1997
1998
1999
Change from 1995
to!999(%)
Domestic Production
$1,813.6
$1,681.6
$1,229.0
$1,195.5
$1,170.2
-35%
Apparent
Domestic Consumption
$2,195.8
$2,041.0
$1,552.0
$1,569.5
$1,571.2
-28%
Net Exports
-$382.2
-$359.3
-$323.0
-$374.0
-$401.0
-5%
Sources: U.S. Department of Commerce, International Trade Administration. 2000. U.S. Industry & Trade
Outlook 2000. New York: The McGraw-Hill Companies.
Prices adjusted using data from the U.S. Bureau of Labor Statistics, Producer Price Index Revision-
Current Series, Series pcu39 #. . As obtained on July 12, 2000.
2-37
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Table 2-14. Price Indices in Industries that Produce Surface-Coated Plastic Parts
Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Change in price from
1990tol999(%)
Transportation
Equipment (NAICS
[SIC 37])
115.6
119.8
123.0
126.3
130.1
132.2
134.2
134.1
133.6
134.5
16.3%
Office, Computing, and
Accounting Machines
(NAICS 333, 334, 339
[SIC 357])
NA
NA
NA
NA
NA
70.5
63.4
55.9
48.8
44.0
-37.6%a
Miscellaneous
Manufacturing
Industries (NAICS 339
[SIC 39])
114.9
117.5
119.6
121.5
123.3
125.9
127.8
129.0
129.7
130.3
13.4%
NA = not available
a This is the percentage change from 1995 to 1999.
Source: U.S. Bureau of Labor Statistics, Producer Price Index Revision—Current Series, Series pcu37 #,
pcu357_#, and pcu39 #. . As obtained on July 12, 2000.
2-38
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SECTION 3
ECONOMIC IMPACT ANALYSIS
Under the authority of Title III of the Clean Air Act, the U.S. Environmental
Protection Agency (EPA) is currently developing a regulation to reduce organic hazardous
air pollutants (HAPs) from the application of coatings to various plastic parts and products in
over 20 different industries. Although the rule affects firms of all sizes, small businesses
may have special problems with compliance. The Regulatory Flexibility Act (RFA) of 1980,
as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA),
requires that special consideration be given to these entities. Therefore, this section focuses
on the compliance burden for small businesses to determine whether this rule is likely to
impose a significant impact on a substantial number of the affected small entities (SISNOSE)
within this source category.
3.1 Results in Brief
The National Emission Standards for Hazardous Air Pollutants (NESHAP) is
projected to increase the costs of surface coating of plastic parts by approximately $10.8
million (1998 dollars). Of these costs, $8.6 million are projected to be incurred by 63 large
firms, while $2.3 million in costs are projected to be incurred by 67 small firms. EPA's
economic impact analysis focused on assessing impacts to small businesses. EPA estimates
that companies in 32 NAICS codes will be affected by the rule. The number of small
businesses in each NAICS code was determined based on the size standards defined by the
Small Business Administration (SBA) for that NAICS code. The mean costs incurred by
small businesses ($34,300) are much smaller than the mean costs estimated for large
businesses ($136,000).
EPA assessed the economic impacts of the regulation by comparing the engineering
cost estimates to baseline company sales. For small companies, the cost-to-sales ratio (CSR)
averages 0.26 percent. The maximum CSR for a small company is 1.83 percent. For large
companies, the average CSR is 0.03 percent, and the maximum CSR is 0.43 percent. No
company, large or small, is projected to incur costs exceeding 2 percent of baseline sales.
3-1
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EPA concludes that the rule will not result in significant impacts to a substantial
number of small entities. Although EPA does not project disproportionate or significant
impacts for small businesses, the Agency has tried to reduce impacts on small entities by
affording them extensive flexibility in demonstrating compliance through pollution
prevention rather than use of add-on control technology, and has sought input from small
entities throughout its outreach to affected industries.
3.2 Baseline Data Set
The engineering analysis determined costs for 185 facilities potentially affected by
the plastic parts NESHAP. Using facility names and addresses (where available), EPA
identified 130 ultimate parent companies in publically available company databases1 and
collected sales, profit, and employment information. The following sections describe the
results of the data collection.
3.2.1 Sales Data Summary
Companies owning facilities potentially affected by the plastic parts NESHAP
reported a broad range of annual sales (see Figure 3-1). In 2000, sales revenue ranged from
$1.3 million to over $185 billion with a median value of $88 million. Sixteen companies (13
percent) reported less than $10 million in annual sales.
3.2.2 Profit Data Summary
Companies affected by the plastic parts NESHAP appear to be less profitable on
average than the manufacturing sector.2 Broad industry profitability measures reported in the
Quarterly Financial Reports (QFK) (Bureau of the Census, 2001) show the manufacturing
sector's profit rate3 was 8.4 percent for the four quarters of 2000 compared to 6.9 percent for
industries potentially affected by the rule. However, the use of aggregate two-digit SIC data
may actually understate this difference. Profitability data available for 32 companies show
an average (median) profit rate of 3.0 (2.56) percent, with 54 percent of the sample reporting
rates below 3 percent for 2000 (see Figure 3-2). The sample consists of 30 large firms and
two small firms, suggesting inferences about profitability drawn from this sample are
'These include Dialog Corporation (2001), Dun & Bradstreet (2001), Hoover's (2001), and InfoUSA (2001). In
addition, these data were supplemented by ICR survey responses.
2The manufacturing sector includes North American Industry Classification System (NAICS) codes 311 to 339.
3The profit rate is computed as income before income taxes divided by net sales.
3-2
-------
OKO/ _
*T" ono/.
>
o
C I^OA
o3 I0/0
o-
0)
2. -|n%
COA
no/, _
7%
6%
26%
13%
94%
7%
3 Total
Firm,
18%
5
<$5 $5-9
$10-49 $50-99 $100-499 $500-1,000 > 1,000
Sales Range ($Millions)
Figure 3-1. Distribution of Firm Sales (n=121)
oo /o
on%
OEIO/ _
>
- 70% -
0)
3
5f ici% -
ul
m%
CO/
n% -
6%
<0
16%
~ 32%
29%
16%
0-1% 1-3% 3-5% >5%
Profit Rate
Figure 3-2. Distribution of Profit Rates (n=31)
3-3
-------
applicable to large firms. The only two profit data observations for small firms show profit
rates of 0.8 percent and -3.7 percent.
Given the limited profitability data for small firms, we examined QFR data and
compared the industry profitability rates to those of firms with less than <$25 million in
assets (proxy for small firms). The rates are very similar, and in some cases, smaller firms
were actually more profitable in 2000. However, we concede that QFR data are reported at
the two-digit SIC level and it is unclear whether we would find the same relationships
between small and large companies in the source category.
3.2.3 Employment Data and Identification of Small Firms
Using the SBA's size standards for NAICS codes standards, we identified 67
companies (52 percent) as small for this analysis.4 Company employment ranged from 15 to
386,000 employees with a median value of 679 employees (see Figure 3-3). These data also
suggest the affected sources may include small specialty coating companies as well as large
vertically integrated firms such as automobile manufacturers.
3.3 Methods
EPA assessed the economic and financial impacts of the rule using the ratio of
compliance costs to the value of sales (cost-to-sales ratio or CSR) using revenues, control
costs, and accounting measures of profit. The analysis assesses the burden of the rule by
assuming the affected firms absorb the control costs, rather than passing them on to
consumers in the form of higher prices. One drawback for this approach is that it does not
consider interaction between producers and consumers in a market context. Therefore, it
likely overstates the impacts on firms affected by the rule and understates the impacts on
consumers. We used the following equation to compute the CSR:
ETACC
CSR(%) = -^
TR.
Standard Industrial Classification (SIC) code data were available for 105 companies (81 percent). These codes
were mapped to NAICS industries to determine the appropriate size standard. In cases where mapping
resulted in two or more NAICS codes, we used the highest size standard. Of the remaining 25 companies,
16 companies either employed more than 1,500 employees (therefore large under any manufacturing size
standard) or employed fewer than 500 employees (small under any manufacturing size standard). We
assumed firms without employment data (nine firms) are small in this analysis. This assumption may
potentially overstate the number of small firms in the analysis.
3-4
-------
JU /O
A no/
4Uvo
2- -?no/ _
^^
o
1,000
Figure 3-3. Distribution of Firm Employment (n=121)
where
TACC = total annual compliance costs,
i = indexes the number of affected plants owned by company],
n = number of affected plants, and
TRj = total revenue of parent company].
Given the profitability data presented in previous sections, we selected 1 and 3 percent CSR
thresholds as indicators of significant economic impact.
3.4 Results
Small firms do not bear a disproportionate share of the total annual compliance costs
(TACC). As shown in Table 3-1, small companies account for approximately 21 percent of
3-5
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Table 3-1. Summary Statistics for SBREFA Screening Analysis: 2000
Total number of companies
Total annual compliance
Small
67
$2,301,368
Large
63
$8,580,662
Total
130
$10,882,030
Costs ($TACC)
Average ($TACC) per
company
$34,349
$136,201
$83,708
Distribution of Cost-to-Sales
Companies with sales data
Compliance costs are <1%
Number
58
55
Share
87%
95%
Number
63
63
Share
100%
100%
Ratios
Number
121
118
Share
93%
98%
of sales
Compliance costs are 1% to
3% of sales
Compliance costs are >3%
of sales
0%
0%
0%
2%
0%
Compliance Cost-to-Sales Ratios
Mean
Median
Maximum
Minimum
0.260%
0.081%
1.834%
0.003%
0.032%
0.008%
0.425%
0.000%
0.141%
0.029%
1.834%
0.000%
the rule's $10.8 million TACC. In addition, the average small company's TACC is much
smaller than large firms ($34,000 per company compared to $136,000).5
The results of the screening analysis show that three small firms are projected to
incur compliance costs that are between 1 and 3 percent of sales. This represents
approximately 5 percent of the affected small firms with data. No small firm is projected to
incur costs greater than 3 percent of sales. For small firms with sales data, the average
(median) CSR is 0.26 percent (0.08 percent). In contrast, none of the 62 large firms are
affected at greater than 1 percent of sales. The average (median) CSR is 0.03 percent
5For more information on costs, see Teal and Burlew (2001).
3-6
-------
(0.01 percent) for all large firms with data. Figure 3-4 summarizes the distribution of
impacts by firm size.
100%
Qno/,
pnoA
70% -
o? KC\0/ -
>,
O
c 50% -
o ou/°
D
of 40% -
LL.
?n% -
90% -
10% -
OCA .
8
1%
D Small Firms
D Large Firms
14%
n
5%
0% >0-0.5% >0.5-1% >1-3% >3-5% >5-7% >7-10% >10-15% >15-20% >20%
CSR Range
Figure 3-4. Distribution of Cost-to-Sales Ratios (CSRs): Small and Large Firms
(n=121)
3.5 Estimated Impacts on Small Businesses
The RFA generally requires an agency to prepare a regulatory flexibility analysis of
any rule subject to notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities. Small entities include
small businesses, small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's rule on small entities, a small entity
is defined as (1) a small business whose parent company has fewer than 500 or 1,000
employees, depending on the size definition for the affected North American Industry
Classification System (NAICS) code; (2) a small governmental jurisdiction that is a
government of a city, county, town, school district, or special district with fewer than 50,000
3-7
-------
people; and (3) a small organization that is any not-for-profit enterprise that is independently
owned and operated and is not dominant in its field. It should be noted that companies in 32
NAICS codes are affected by this rule, and the small business definition applied to each
industry by NAICS code is that listed in the Small Business Administration (SBA) size
standards (13 CFR 121).
After considering the economic impacts of today's rule on small entities, EPA
certifies that this action will not have a significant economic impact on a substantial number
of small entities. We have determined that 67 of the 130 firms, or 51 percent of the total,
affected by this rule may be small. While the number of small firms appears to be a large
proportion of the total number of affected firms, the small firms only experience 21 percent
of the total national compliance cost of about $11 million (1997$). Of the 67 affected small
firms, only three firms are estimated to have compliance costs that exceed 1 percent of their
revenues. The maximum impact on any affected small firm is a compliance cost of 1.8
percent of its sales. Finally, while there is a difference between the median compliance cost-
to-sales estimates for the affected small and large firms (0.08 percent compared to 0.01
percent for the large firms, and 0.03 percent across all affected firms), no adverse economic
impacts are expected for either small or large firms affected by the rule. Therefore, the
affected small firms are not disproportionately affected by this rule as compared to the
affected large firms.
Although this rule will not have a significant economic impact on a substantial
number of small entities, EPA nonetheless has tried to reduce the impact of this rule on small
entities. Small entities will be afforded extensive flexibility in demonstrating compliance
through pollution prevention rather than the use of add-on control technology. Pollution
prevention methods of compliance will not only minimize capital and operating costs but
will result in reduced burden associated with recordkeeping and reporting. The Agency has
also reached out to stakeholders that are small entities or that represent small entities as part
of our outreach to affected industries.
-------
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TECHNICAL REPORT DATA
(Please read Instructions on reverse before completing)
1. REPORT NO.
EPA-452/R-03-019
3. RECIPIENT'S ACCESSION NO.
4. TITLE AND SUBTITLE
Economic Impact Analysis of the Plastic Parts and Products NESHAP:
Final Report
5. REPORT DATE
August 2003
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
8. PERFORMING ORGANIZATION REPORT NO.
RTI Project Number 7647-004-392
9. PERFORMING ORGANIZATION NAME AND ADDRESS
10. PROGRAM ELEMENT NO.
RTI International
Center for Regulatory Economics and Policy Research, Hobbs Bldg.
Research Triangle Park, NC 27709
11. CONTRACT/GRANT NO.
68-D-99-024
12. SPONSORING AGENCY NAME AND ADDRESS
Director
Office of Air Quality Planning and Standards
Office of Air and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, NC 27711
13. TYPE OF REPORT AND PERIOD COVERED
14. SPONSORING AGENCY CODE
EPA/200/04
15. SUPPLEMENTARY NOTES
16. ABSTRACT
This report evaluates the economic impacts of the Surface Coating of Plastic Parts and Products NESHAP. The
report includes an industry profile and assesses the impact of the regulation by comparing the engineering
cost estimates to baseline company sales. The report also provides the screening analysis for small business
impacts.
17.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b. IDENTIFIERS/OPEN ENDED TERMS
c. COSATI Field/Group
economic impacts
small business impacts
social costs
Air Pollution Control
Economic Impact Analysis
Regulatory Flexibility Analysis
18. DISTRIBUTION STATEMENT
Release Unlimited
19. SECURITY CLASS (Report)
Unclassified
21. NO. OF PAGES
83
20. SECURITY CLASS (Page)
Unclassified
22. PRICE
EPA Form 2220-1 (Rev. 4-77) PREVIOUS EDITION IS OBSOLETE
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United States Office of Air Quality Planning and Standards Publication No. EPA-452/R-03 -019
Environmental Protection Air Quality Strategies and Standards Division August 2003
Agency Research Triangle Park, NC
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