Protection of Stratospheric Ozone: Administrative Changes to Final Rule to Phase Out Ozone-Depleting Chemicals
Federal RegisterMay 10, 1995
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SUMMARY: With this action, EPA amends the current regulation to phase
out the production and consumption of most ozone-depleting substances.
This action clarifies aspects of the regulation as provided under
section 604 and 606 of the Clean Air Act Amendments of 1990 (CAA). To
ensure an orderly phaseout of the production and consumption of
chlorofluorocarbons (CFCs), carbon tetrachloride, methyl chloroform and
hydrobromofluorocarbons in 1996, and of halons after 1994, this action
alters the administrative requirements of the regulations so companies
may continue to produce for special exempted uses. Today's action also
clarifies administrative procedures to improve the efficiency of
current reporting requirements and to reduce the burden on the affected
companies. These actions continue to ensure compliance with Title VI of
the CAA in a manner consistent with the United States' obligations
under the Montreal Protocol on Substances that Deplete the Ozone Layer,
as amended.
Specifically, EPA changes the requirements for the post-phaseout
period for transformation and destruction of ozone-depleting
substances; establishes the framework for the post-phaseout production
of exempted essential uses; revises the controls for imports of
controlled substances that are used or recycled; eases the requirements
for exporting substances to Article 5 countries; changes the allowance
requirements for exports of ozone-depleting substances; clarifies the
requirements for heels remaining in containers that are returning to
the U.S.; provides a period of reconciliation in which allowance
balances may be adjusted; and simplifies the recordkeeping and
reporting requirements.
The changes made in this rule ease the burden on industry, and will
therefore limit the negative economic impact associated with the
regulations previously promulgated under Sections 604 and 606, while
maintaining the environmental benefits of the accelerated phaseout.
DATES: This rule is effective on May 10, 1995. Amendments to the
requirements specifically addressing 1995 apply to the entire 1995
control period.
FOR FURTHER INFORMATION CONTACT: The Stratospheric Ozone Protection
Hotline at 1-800-296-1996, or Tom Land, U.S. Environmental Protection
Agency, Stratospheric Protection Division, Office of Atmospheric
Programs, 6205J, 401 M Street, SW., Washington, DC 20460 (202) 233-
9185.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Administrative Changes in the Stratospheric Protection Program
A. Program Requirements for Continued Post-Phaseout Production
and Importation after January 1, 1996
1. Post-Phaseout Requirements for Transformation and Destruction
of Controlled Substances
2. Post-Phaseout Requirements for Essential-Uses
B. Imports of Used Controlled Substances
C. Program Adjustments and Clarifications to Become Effective in
the 1995 Control Period
1. Changes in Requirements for Export to Article 5 Countries
2. Administrative Changes to the Consumption Allowance
Requirements for Exports
3. Administrative Changes to Production Allowance Requirements
for Exports that are Transformed or Destroyed
4. Treatment of Controlled Substances Remaining in Emptied
Containers, i.e. ``Heels''
5. Clarification of the Definition of Transhipment
6. Provision for Account Reconciliation Period through Inter-
Pollutant Transfers
7. Additional Clarifications
8. Clarification of Reporting and Recordkeeping Requirements
III. Summary of Supporting Analysis
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Enhancing the Intergovernmental Partnership under Executive
Order 12875
I. Background
The current regulatory requirements of the Stratospheric Ozone
Protection Program that limit production and consumption of ozone-
depleting substances were promulgated by the Environmental Protection
Agency (EPA) in the Federal Register on December 10, 1993 (58 FR
65018), and on December 30, 1993 (58 FR 69235). The requirements
contained in these rules set out an Allowance Program (the Program)
that was described in the notice of proposed rulemaking (NPRM)
published in the Federal Register on November 10, 1994 (59 FR 56275).
The preamble to the November 10, 1994 proposed rulemaking describes the
history of the Program, the current requirements and the proposed
amendments.
The Allowance Program was designed to ensure that the U.S. meets
its obligations under the Montreal Protocol on Substances that Deplete
the Ozone Layer, as amended, (the Protocol) and to ensure compliance
with Title VI of the Clean Air Act Amendments of 1990 (CAA). The
Protocol and the CAA require the control and phaseout of production and
consumption of ozone-depleting substances. In the Program, companies
expend ``allowances'' when they produce or import ozone-depleting
substances. With certain restrictions, the allowances can be traded
among companies both domestically and internationally (between
countries that are Parties to the Protocol). To control production, the
Agency allocated baseline production allowances to producers of
specific ozone-depleting chemicals. To control consumption, the Agency
allocated baseline consumption allowances to producers and importers of
specific ozone-depleting chemicals. Allowances for class I substances
are currently provided to companies on an annual basis, except for
halons whose production was phased out on January 1, 1994. The
allowances are assigned to companies according to production and
importation during base years.
In the context of the Program, the use of the term consumption may
be misleading. It is not the ``use'' of these substances that is
controlled through regulation but rather the amount of the substance
available for U.S. domestic consumption, defined as production plus
imports minus exports of bulk virgin chemicals. Controlled substances
produced or imported through the use of allowances prior to 1996 (1994
for halons) can continue to be used by industry and the public after
the phaseout.
II. Administrative Changes in the Stratospheric Protection Program
The administrative changes in today's action modify the current
regulation to ensure an orderly phaseout in 1996, so that companies may
continue to produce for specified exempted uses permitted under the
Protocol and the CAA. In addition, the Agency is seeking to improve the
efficiency of the requirements and to reduce the burden on the affected
companies while ensuring continued compliance with Title VI of the CAA
and the Montreal [[Page 24971]] Protocol. In light of these objectives,
the Agency is promulgating the following administrative changes to
improve the Program.
The NPRM published in the Federal Register on November 10, 1994,
proposed changes to begin on January 1, 1996 for the post-phaseout
period and also proposed changes for the 1995 control period.
Under the current regulation, the phaseout of the production and
consumption of the class I controlled substances (except Group VI,
methyl bromide) will be complete by January 1, 1996. A list of the
specific class I ozone-depleting chemicals in each Group can be found
in appendices A and F to subpart A. The schedule for the phaseout of
hydrochlorofluorocarbons was published in the Federal Register on
December 10, 1993, and is unchanged in this final rule.
Due to the phaseout, beginning January 1, 1996, production and
consumption allowances for all class I controlled substances, except
Group VI, methyl bromide, will no longer be used. Despite the
discontinuation of such production and consumption allowances for class
I controlled substances (except methyl bromide), the Agency envisions
that the manufacture of class I controlled substances may continue
after January 1, 1996, provided the substances are:
Either transformed or destroyed,
Produced for export to Article 5 countries,
Produced for essential uses as authorized by the Protocol
and CAA and consistent with essential-use allowances, or
Produced with destruction and transformation credits.
In addition, EPA envisions that the import of class I controlled
substances (except methyl bromide) may continue after January 1, 1996,
without the need for consumption allowances, if the substances are:
Either transformed or destroyed,
Previously used (including recycled or reclaimed),
Imported for essential uses as authorized by the Protocol
and CAA and consistent with essential-use allowances,
Transhipped through the United States to another Party to
the Protocol, or
Imported using destruction and transformation credits.
Through today's final rule the Agency will:
(1) Maintain a category of Article 5 allowances (previously called
potential production allowances),
(2) Create a new category of essential-use allowances, and
(3) Create narrow procedures for granting destruction and
transformation credits.
EPA received twenty-two comments on the proposed rulemaking
published in the Federal Register on November 10, 1994, as well as
several additional submissions following the close of the comment
period. All comments were reviewed and considered. Comments most
relevant to today's action are responded to in the preamble and
additional responses to comments are available in the Air Docket No. A-
92-13.
A. Program Requirements for Continued Post-Phaseout Production and
Importation After January 1, 1996
1. Post-Phaseout Requirements for Transformation and Destruction of
Controlled Substances
The following paragraphs discuss requirements for the destruction
and transformation of controlled substances after the January 1, 1996
phaseout date. EPA would like to be informed of new technologies for
destruction of controlled substances that have been developed or are
being developed since the Parties to the Protocol first approved the
current list of destruction technologies. EPA would like to anticipate
the future review of new technologies for destruction by the Parties to
the Protocol.
Definition of Emissive Use. In the preamble of the proposal (59 FR
56278), EPA discussed a definition of ``emissive use'' that the Agency
decided was unnecessary for today's action and provided no additional
clarity to the regulation.
a. Production or Importation of Controlled Substances Explicitly
for Uses that Result in Transformation or Destruction after January 1,
1996. In today's action, EPA permits companies to produce or import
controlled substances if explicitly produced or imported for uses that
will result in transformation or destruction in the United States or in
a Party, after January 1, 1996.
In the 1995 control period, controlled substances may continue to
be produced explicitly for uses that result in transformation or
destruction in the U.S. without the expenditure of allowances, as under
the current regulation. Section C.3., ``Administrative Changes to
Production Allowance Requirements for Exports that are Transformed or
Destroyed,'' of this preamble discusses controlled substances produced
in 1995 explicitly for export that results in transformation or
destruction.
Response to Comments: EPA received one comment that did not
entirely support EPA's proposal to permit a company to produce or
import after January 1, 1996, if explicitly for transformation or
destruction. The commenter objected to maintaining procedures, after
January 1, 1996, for companies that produce or import controlled
substances explicitly for destruction in the U.S. (59 FR 56278). The
commenter questioned the need for production, and especially
importation, of controlled substances for destruction in the United
States after the 1996 phaseout. This same commenter, however, did
support the proposal to permit production and importation, after
January 1, 1996, for transformation in the U.S.
EPA is permitting production and importation explicitly for
destruction after January 1, 1996, because industry commonly uses
carbon tetrachloride and other controlled substances in chemical
reactions until they lose their effectiveness and must be destroyed. In
many chemical reactions, carbon tetrachloride is used as a catalyst or
stabilizer. Once the reaction is complete, the carbon tetrachloride is
withdrawn from the chemical being produced and used in the reaction of
the next batch. Through these reactions, carbon tetrachloride loses its
effectiveness as a catalyst or stabilizer and must eventually be
destroyed. Many manufacturing processes rely on the unique
characteristics of carbon tetrachloride, and other controlled
substances, as catalysts or stabilizers but these chemical eventually
need to be destroyed. EPA wishes to allow these manufacturing uses of
controlled substances to continue after January 1, 1996, because they
are not emissive uses, pose no significant threat to the environment
and are vital to the U.S. economy.
EPA received three comments seeking clarification of the
requirements for production for export resulting in transformation
after January 1, 1996. The proposal included a discussion, in section
C.3.d. ``Administrative Changes to Production Allowance Requirements
for Exports that are Transformed or Destroyed,'' (59 FR 56289) of
requirements for the 1995 control period. However, the proposal did not
explicitly define export requirements for the post-phaseout period.
With this action, EPA permits production of class I controlled
substances (except methyl bromide) after January 1, 1996, if the
substance is explicitly produced for export or domestic uses resulting
in transformation or destruction. As a [[Page 24972]] result, EPA
requires producers and importers to receive an IRS certification of
intent to transform or a destruction verification from all second- or
third-party transformers or destroyers, whether the transformer or
destroyer is domestic or foreign. Several U.S. companies commented that
they currently use the IRS certificate of intent to transform in
transactions with foreign transformers. For the sake of simplicity,
these commenters suggested that the IRS certificate be required for all
production and importation explicitly for uses resulting in
transformation, whether they be foreign or domestic.
Today's rule maintains the current requirement that producers and
importers submit to EPA the IRS certificates of intent to transform, or
the destruction verifications, with the quarterly reports (see Section
C.7., Recordkeeping and Reporting). In response to comments and to ease
the reporting burden on industry, EPA permits producers and importers
to submit a one-time-per-control period IRS certificate for each
customer. Quarterly reports may reference the original IRS certificate
submitted for each transformer and simply list the quantity of
subsequent sales.
With today's rule, EPA maintains the current requirement published
in the Federal Register on December 10, 1993, that quantities of class
II controlled substances transformed or destroyed must be reported on a
quarterly basis. EPA maintains the requirement to meet U.S. obligations
under the Protocol to accurately monitor production of class II
controlled substances.
b. Production or Importation of Controlled Substances for Emissive
Uses that are Subsequently Transformed or Destroyed. With today's
action, EPA eliminates the specific provisions that grant additional
production and consumption allowances, beginning January 1, 1996, for
all class I controlled substances, except methyl bromide, produced for
emissive uses but later transformed or destroyed. After January 1,
1996, there will no longer be production or consumption allowances for
class I controlled substances, except methyl bromide. After January 1,
1996, a producer or importer of methyl bromide who expends production
or consumption allowances and subsequently transforms or destroys the
methyl bromide will still be able to petition the Agency for additional
production and consumption allowances until the phaseout on January 1,
2001.
EPA maintains, for the 1995 control period, the provisions allowing
producers and importers to petition the Agency for production and
consumption allowances if the controlled substance was produced or
imported with expended allowances and subsequently transformed or
destroyed.
Response to Comments: EPA received no comments regarding the
proposal to eliminate procedures after January 1, 1996, that grant
additional production and consumption allowances for class I controlled
substances that are transformed or destroyed (except methyl bromide)
(59 FR 56278). After January 1, 1996, additional production and
consumption allowances may be sought for methyl bromide that is
transformed or destroyed if it was originally produced with expended
allowances.
c. The Post-Phaseout Procedures for Granting Destruction and
Transformation Credits. In today's action, EPA creates limited
destruction and transformation credits to be granted after January 1,
1996, for the destruction or the transformation in the United States of
class I controlled substances (except methyl bromide) taken from a use
system in the United States under certain circumstances. Destruction
and transformation credits can only be obtained by entities whose
applications are nominated by the U.S. government to the Protocol
Secretariat for essential-use exemptions. The transformation and
destruction credits are granted for the calculated amount of controlled
substance transformed or destroyed minus a 15 percent offset.
With today's action, an eligible person granted destruction and
transformation credits by EPA for the destruction or transformation of
an amount of a controlled substance taken from a U.S. use system may
use the credits to newly produce or import the class I controlled
substance for which they were nominated for an essential-use exemption.
Today's action requires reporting on the source of material imported
with credits. The reporting requirement is designed to deter abuse of
credits as a means of illegally importing material as discussed in
section B., ``Imports of Used Controlled Substances.''
Response to Comments: EPA received six adverse comments, and three
supportive comments to the proposal. EPA proposed (59 FR 56279) to
grant destruction and transformation credits after January 1, 1996 to
anyone who documents destruction or transformation of class I
controlled substances (except methyl bromide) taken from a use system
in the U.S.
The comments challenging EPA's proposal expressed concern that
granting destruction and transformation credits which can be used to
produce or import virgin class I controlled substances (except methyl
bromide) contradicts EPA's message of phasing out ozone-depleting
substances and making the transition to alternatives. Four of the
comments not supporting credits were from industry and the other two
were from environmental groups.
The comments challenged the proposed credits as violating U.S.
obligations under the Protocol because they encourage production and
importation of class I substances beyond the phaseout dates agreed to
by Protocol Parties. The commenters challenged EPA's claim that
environmental benefits would result from a scheme allowing continued
production and importation beyond the phaseout, even if more than an
equivalent amount of controlled substance were destroyed or
transformed. EPA believes the Protocol allows production beyond the
phaseout if the amount produced is equivalent to the amount destroyed
by technologies approved by the Parties, as explained in the proposal's
discussion (59 FR 56280) of the Protocol's definition of production.
The proposal also discusses the environmental benefits of preventing
release to the atmosphere of material by encouraging destruction or
transformation of unwanted material in exchange for the production of
material that will be used (59 FR 56281).
A commenter cited Congressional legislative history from the
drafting of the CAA that was unfavorable regarding destruction.
Congressional debate included a statement that ``the Protocol's
exclusion for manufactured substances that are subsequently destroyed
is too broad and does not include adequate safeguards to preclude
abuse.'' EPA recognizes the concerns expressed in the legislative
history for the CAA and intends to offer these credits to a very
limited universe of people.
A commenter also pointed out that substances produced or imported
with credits would be subject to the excise tax, eliminating the
incentive to destroy or transform a material. A person would be paying
a double tax. The tax would be paid on the original material and there
would be a tax on the new material produced or imported with the
credits. A commenter suggested that a tax credit or tax deduction would
provide a greater financial incentive than the proposed credits. EPA
acknowledges concerns about taxes and will therefore only grant credits
when they are absolutely necessary.
In response to comments on destruction and transformation credits,
EPA is significantly limiting the [[Page 24973]] circumstances under
which a person can obtain credits. With today's action, only a person
that has exhibited an essential need for controlled substances beyond
the phaseout date will be able to obtain destruction and transformation
credits. EPA believes that only a person who has an essential need for
a controlled substance should be eligible for credits that allow an
exchange of destroyed or transformed existing material for the
production or importation of new material.
EPA today defines a person who has demonstrated the essential need
for controlled substances beyond the phaseout, and can, therefore,
obtain credits, as a person whose application was nominated by the U.S.
government to the Protocol for an essential-use exemption. The
nomination by the U.S. government defines eligibility for the credits,
not the acceptance of the nomination by the Parties to the Protocol.
For example, the U.S. Air Force's Titan Rocket has been nominated by
the U.S. government for an essential use exemption and is therefore
eligible for credits. A person who has been nominated to the Protocol
for an essential-use exemption is eligible to be granted destruction
and transformation credits after January 1, 1996, upon the destruction
or transformation of a controlled substance taken from a use system in
the U.S. Only for the control period(s) for which the U.S. government
made nominations to the Protocol is a person eligible for the credits.
If for some reason the nomination is revoked, the person's eligibility
for credits is also revoked.
EPA received three comments that suggested a larger offset than the
15 percent proposed for destruction and transformation credits. The
commenters challenged the 15 percent as being too small to provide an
environmental benefit in a system that permits production or
importation of new controlled substances after the phaseout. All three
commenters suggested a 50 percent offset to ensure environmental
benefits from the use of credits in the production or importation of
new ozone-depleting substances. EPA justified the use of a 15 percent
offset in the proposal citing environmental benefits (59 FR 56280) and
basing the offset on current destruction capacity in the U.S (59 FR
56281). EPA believes that today's action significantly limits the
universe of people who can obtain credits. The limitation of who can
obtain credits to those with a critical need, as defined by their
essential-use nomination to the Protocol, significantly reduces the
amount of production or importation of new material that will occur
after the phaseout. EPA anticipates credits will only be sought and
used in situations when one of the small number of people with critical
needs encounters unforeseen circumstances or a catastrophic loss of
material produced with essential-use allowances. With today's action,
EPA will allocate credits equal to the calculated level of controlled
substance destroyed or transformed minus the 15 percent offset. The
destruction must occur in an approved destruction technology. An
eligible person may request credits equal to 85 percent of the
calculated level of controlled substance destroyed or transformed.
EPA believes a person with an essential need for a controlled
substance, as defined by a U.S. nomination to the Protocol, will view
today's system of credits as an opportunity to satisfy critical needs,
especially if material produced with essential-use allowances is lost
to a catastrophe. EPA views today's action as a method to encourage the
destruction or transformation of unwanted controlled substances that
were taken from a use system in the U.S. that might otherwise be
released to the atmosphere.
EPA received many comments, from both industry and Federal
agencies, challenging the use of credits for importing controlled
substances after the phaseout as yet another opportunity for illegal
imports. As discussed in the proposal (59 FR 56285), and below in this
rulemaking, EPA is working to confront the illegal import of controlled
substances. In 1994, EPA formed an inter-government task force with the
Internal Revenue Service and the Customs Service to investigate illegal
imports. An industry coalition formed a special committee to assist
Federal agencies in investigating illegal imports. The efforts of
government and industry have focused on the mislabelling of controlled
substances and the submission of fraudulent documents that allow the
illegal entry of imported controlled substances into U.S. commerce. In
commenting on the proposed rule, both government and industry expressed
concern that the use of credits for imports would be another chance for
the submission of fraudulent documents. In response to these comments,
EPA is requiring documentation of the source of imported material as
required in Sec. 82.13(g)(2), where applicable.
Clean Air Act Restrictions on the Use of Credits: With today's
action, EPA limits the total amount of transformation credits and
destruction credits that can be used in a control period to the
production caps in the phaseout schedule of section 604 of the CAA,
outlined in Table I.
Table I.--Title VI of the Clean Air Act Amendments of 1990
[Pre-Accelerated Phaseout Schedule for Production of Ozone-Depleting
Substance]
------------------------------------------------------------------------
Other
Carbon Methyl class I
Date Tetrachloride Chloroform substances
(percent) (percent) (percent)
------------------------------------------------------------------------
1996............................. 15 50 40
1997............................. 15 50 15
1998............................. 15 50 15
1999............................. 15 50 15
2000............................. ............. 20 ..........
2001............................. ............. 20 ..........
------------------------------------------------------------------------
Response to Comments--Clean Air Act Restrictions on the Use of
Credits to Produce or Import: EPA received no comments challenging the
CAA limits on the use of destruction and transformation credits. EPA
explained in the proposal (59 FR 56276) that the provisions of the CAA
are more stringent than the Protocol in defining limits on production
after January 1, 1996. The proposal also explained the interaction of
authorities under the Protocol and the CAA that allow credits to be
granted for transformation or destruction of controlled substances that
could be used for subsequent production or importation, within the CAA
phaseout caps. EPA believes that these limits represent legally binding
ceilings, but that actual production or importation under the category
of credits and allowances will be substantially below the limitations
established by today's rule.
Procedures for Requesting Credits: With today's action, EPA creates
a system for granting destruction and transformation credits as an
incentive to destroy and transform controlled substances recovered from
U.S. use systems and to provide critical supplies to those who have
been nominated for essential use exemptions. In today's rule, a person
may submit a request to the Agency after January 1, 1996, for credits
based on the destruction or transformation of a quantity of controlled
substances taken from a use system in the United States. The
destruction must have occurred in an approved destruction technology as
under Sec. 82.3. The eligible person must present a sales receipt
demonstrating the material was purchased from the owner of a use system
in the U.S. or documenting that the material produced or imported with
essential-use allowances became unusable due to an
[[Page 24974]] unforeseen event. The person requesting the credits
needs to identify the amount of controlled substance that was destroyed
or transformed and the previous use of the controlled substance. In
addition, the person needs to submit to EPA a copy of the destruction
efficiency certification as under Sec. 82.13(k) or the IRS certificate
of intent to transform. Upon approval, EPA would grant the person
credits equal to the amount of the specific controlled substance they
destroyed or transformed minus a 15 percent offset. Approval will be
based upon a review of the completeness and accuracy of the
documentation. The credits may be used for the production or
importation of an equivalent calculated level of the controlled
substance for which the eligible person was nominated to the Protocol.
For example, the U.S. Air Force's Titan Rocket was nominated by the
U.S. Government for an essential use exemption for methyl chloroform
and could therefore use credits to produce or import methyl chloroform.
Consistent with the Protocol limits on net production for control
periods, EPA restricts the use of credits to the control period in
which the transformation or destruction occurred. Credits can not be
carried over from one control period to the next. The recordkeeping and
reporting requirements associated with the credits described in these
paragraphs are outlined below in section C.7., ``Reporting and
Recordkeeping for Destruction and Transformation Credits.''
The Agency will create a balance of credits for the person upon
approval of a request for credits. The holder of the credits may write
a letter to a producer or importer conferring the right to produce or
import an amount of the class I controlled substance for which they
were nominated to the Protocol for an essential-use exemption.
Producers and importers will submit the letters from credit holders
conferring rights to produce or import with their quarterly producer's
report. Deductions will be made from the credit holder's balance, when
the quarterly production and importation reports are submitted to EPA.
Inter-pollutant transfers of credits, as currently defined in
Sec. 82.12, will be permitted within the Groups of class I substances
listed in appendices A and F to subpart A, subtracting the one percent
offset. Inter-company transfers of credits will also be permitted, as
currently defined in Sec. 82.12, subtracting the one percent offset.
The preamble of the proposal misstated that inter-Party trades of
credits would be permitted (this was not included in the proposed
regulatory language). EPA is not permitting inter-Party trades of
destruction and transformation credits under today's rule because the
credits are designed to meet the essential needs of U.S. companies for
controlled substances and these needs can be met through U.S.
production or imports.
2. Post-Phaseout Requirements for Essential-Uses
The Federal Register NPRM published on November 10, 1994, discussed
Protocol decisions regarding essential uses and the U.S. process for
accepting requests and making nominations to the Protocol Secretariat.
The NPRM also proposed a U.S. program for implementing essential-use
exemptions domestically after the phaseout on January 1, 1996 (59 FR
56282).
The November 10, 1994 proposal distinguished between essential-use
nominations for specific entities for specific uses and the global
essential-use exemption for laboratory and analytical applications. All
the nominations and the quantities presented in the proposed rulemaking
(59 FR 56284), both specific and global, were adopted at the Sixth
Meeting of the Parties to the Protocol in October 1994.
EPA would like to note that information required by today's action
to monitor the production and consumption of essential-use controlled
substances will be treated in accordance the provisions of 40 CFR Part
2, Subpart B governing confidential business information if so claimed
by the company in a letter or on the submitted documents.
Creation of Essential Use Allowances: With today's action, EPA
creates a new class of allowances called ``essential-use allowances,''
to be allocated for designated control periods beginning January 1,
1996. EPA received no comments that challenged the proposed creation of
essential-use allowances during the post-phaseout period. To
effectively implement a program of essential-use allowances, EPA is
including a definition of ``unexpended essential use allowances''.
Allocation of Essential Use Allowances: EPA allocates essential-use
allowances and exemptions based on the nominations agreed to by the
Parties to the Protocol at the Sixth Meeting in October 1994. As
indicated on the table below, EPA allocates essential use allowances
for specified controlled substances for the years 1996 and 1997.
Although the Technology and Economic Assessment Panel received
nominations for essential-use exemptions beyond 1997, today's action
only includes those exemptions for 1996 and 1997 agreed to by the
Parties at the October 1994 meeting. A manufacturer of metered dose
inhalers (MDIs) who was listed in the proposal (59 FR 56284), and whose
nomination for an essential-use exemption was agreed to by the Parties,
was sold to two other companies late in 1994. The essential-use
allowances for this company are today allocated to the two purchasing
companies according to the proportionate need for the controlled
substances to manufacture specific products. EPA reserves the right to
revise the allocation of essential-use allowances and other essential-
use exemptions based on future decisions of the Parties to the
Protocol.
Essential Uses Agreed to by the Parties to the Protocol at the Sixth Meeting in October 1994
--------------------------------------------------------------------------------------------------------------------------------------------------------
Company Year Chemical Quantity (metric tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Metered Dose Inhalers--Aerosols
--------------------------------------------------------------------------------------------------------------------------------------------------------
Members of the International Pharmaceutical & Aerosol 1996 CFC-11 .................................... 749.8.
Consortium (IPAC)*.
Abbot Laboratories..................................... ........... CFC-12 .................................... 2353.2.
Armstrong 1997......................................... ........... CFC-114.................................... 314.1.
Boehringer Ingelheim................................... 1997 CFC-11 .................................... 658.3.
Glaxo.................................................. ........... CFC-12 .................................... 2166.5.
3M..................................................... ........... CFC-114.................................... 311.4.
Rhone Poulenc Rorer
Schering Corporation
Miles Inc.................................................. 1996 CFC-12 .................................... 5.1.
........... CFC-114.................................... 10.2.
[[Page 24975]]
1997 CFC-12 ................................... 5.2.
CFC-114.................................... 10.5.
Sankofi Winthrop, Inc...................................... 1996 CFC-12 ................................... 5.0.
CFC-114.................................... 19.4.
1997 CFC-12 .................................... 5.3.
CFC-114.................................... 21.2.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(ii) Space Shuttle--Solvent
--------------------------------------------------------------------------------------------------------------------------------------------------------
NASA/Thiokol............................................... 1996 Methyl Chloroform.......................... 56.8.
1997 Methyl Chloroform.......................... 56.8.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(iii) Laboratory and Analytical Applications
--------------------------------------------------------------------------------------------------------------------------------------------------------
Global Exemption........................................... 1996 Class I (except Group IV).................. No quantity specified.
1997 ......do................................... Do.
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*IPAC consolidated requests for an essential use exemption to be nominated to the Protocol as an agent of its member companies for administrative
convenience. By means of a confidential letter to each of the companies listed above, EPA will allocate essential-use allowances separately to each
company in the amount requested by it for the nomination.
Response to Comments--Allocation of Essential Use Allowances: EPA
received one comment from a manufacturer of generic MDIs that
challenged the specific allocation of essential-use allowances for
MDIs. The commenter claimed that EPA is unwittingly excluding companies
that produce generic-brand MDIs from competing in the market because
they are not included in today's allocation. EPA did not exclude
companies that produce MDIs but only included those companies/entities
that did apply for essential-use exemptions. EPA did not receive an
application for essential-use exemptions for class I controlled
substances from the commenter or any other manufacturer of generic MDIs
in response to the initial call for applications, published in the
Federal Register on May 20, 1993. The commenter did apply for an
essential-use exemption in response to EPA's notice in the Federal
Register on October 18, 1994. EPA believes the procedures followed in
publishing Federal Register notices for essential-use exemptions
provides an open forum for the participation of any interested person.
Therefore, the fact that the commenter did not submit an application
for an essential-use exemption in response to the May 20, 1993 request
is not a deficiency on the part of the Agency. Fortunately, in
accordance with the provisions of the Protocol, EPA may adjust the U.S.
allocation of essential-use exemptions and essential-use allowances in
the future based on future actions by the Parties to the Protocol. In
reviewing the responses to the October 18, 1994 Federal Register
notice, the U.S. government nominated the commenter's application for
an MDI essential-use exemption to the Montreal Protocol Secretariat. As
stated above, EPA reserves the right to adjust the allocation of
essential-use allowances and exemptions based on future decisions of
the Parties.
A consortium of MDI manufacturers that received essential-use
allowances requested that EPA give the consortium discretion to
allocate essential-use allowances among the member companies of the
consortium based on their confidential estimates of market need. EPA
requires the consortium to submit a listing of the percentage
allocation of essential-use allowances to each member company so the
Agency can monitor compliance with today's requirements. EPA
understands the consortium will take responsibility for coordinating
recordkeeping and reporting on behalf of its members. EPA retains the
right to review and alter the consortium's discretion to allocate
essential-use allowances among its members through a formal notice.
A commenter suggested EPA create a system for supplemental
allowances in cases when a quantity of material, produced or imported
with essential-use allowances, becomes unusable due to unforeseen
events. Citing the potential risks of fire, earthquake and flood, the
commenter suggested that a recipient of essential-use allowances would
document the event that made the controlled substance unusable in order
to obtain the ``supplemental'' allowances. EPA believes that a
provision for supplemental allowances is unnecessary given today's
creation of transformation credits and destruction credits in A.1.c.,
``The Post-Phaseout Procedures for Granting Destruction and
Transformation Credits.'' In the event of some unforeseen event that
makes the substance produced or imported with essential-use allowances
unusable for the essential application, the eligible company could
obtain transformation credits or destruction credits in order to
replace the lost material. The procedures for obtaining the credits are
the same as those described above in A.1.c. The credits would be
granted for the destruction (in an approved destruction technology) or
the transformation of the specific controlled substance that became
unusable due to the unforeseen event, or for the destruction or
transformation of a quantity of recovered class I controlled substance
that was purchased from the owner/operator of a U.S. use system. Only
companies that the U.S. government nominated to the Protocol
Secretariat for essential-use exemptions, will be able to obtain
destruction and transformation credits after the January 1, 1996
phaseout.
EPA received no comments on the allocation of essential-use
allowances to NASA/Thiokol. The comments on the global exemption for
laboratory and analytical applications is discussed below.
CAA Limits on Essential Use Allowances: In today's action, EPA
authorizes continued production or importation after the phaseout for
the essential uses and exemptions permitted under the Montreal Protocol
and allocated in today's action, but not to exceed the maximum
allowable limits set forth in section 604(a) of the CAA. A more
detailed discussion of the [[Page 24976]] authorization for production
and importation after the phaseout for essential uses under the
Protocol and CAA, with limits set by section 604 of the CAA, is
contained in the proposed rulemaking published November 10, 1994.
Specific references to the authorization and limits are found in the
sections on destruction and transformation credits (59 FR 56479) and
essential-use allowances (59 FR 56283). The Section 604(a) phaseout
schedule in the CAA that limits production and importation of class I
controlled substances is shown in TABLE I of today's preamble.
Response to Comments--CAA Limits on Essential Use Allowances: A
commenter noted that the proposal's discussion of CAA essential-use
exceptions failed to include the exemptions for production of halon-
1211, halon-1301 and halon-2404 for fire suppression or explosion
prevention under section 604(g)(1) and for fire suppression or
explosion prevention in association with domestic production of crude
oil and natural gas energy on the North Slope of Alaska under section
604(g)(3). EPA wishes to acknowledge all exceptions for essential uses
that are cited in section 604 of the CAA, including uses for fire
suppression or explosion prevention, and for fire suppression or
explosion prevention in association with domestic production of crude
oil and natural gas energy on the North Slope of Alaska. The exceptions
for essential uses cited in the CAA can be authorized by EPA, after due
consideration specified in the CAA, beyond the phaseout schedule
originally set forth in section 604(a), which for class I substances
(except methyl bromide) is 2000 (2002 for methyl chloroform) but can
only be done consistent with actions permitted under the Montreal
Protocol. With today's action, EPA is initiating the domestic
essential-use program as authorized under the accelerated phaseout
schedule of the Protocol, within the limits placed on total production
and importation as under the phaseout schedule in section 604(a) of the
CAA.
A commenter stated their belief that EPA has discretion, under the
CAA, to allow production and importation beyond the phaseout for
essential uses without imposing the percentage limitations of the
phaseout schedule in section 604. According to the commenter's
interpretation, the CAA is ``ambiguous regarding whether the schedule
in section 604 remains in force after the phaseout has been accelerated
pursuant to section 606.'' Given the ambiguity, the commenter suggested
that EPA's acceleration of the schedule under section 606 would
supplant the 604 limitations and the 604 schedule would no longer have
legal effect. EPA does not believe that the CAA is ambiguous. EPA
believes that section 606 authorizes EPA to accelerate the phaseout
schedule to be ``more stringent than set forth in section 604'' but
that exercise of this authority does not diminish the legal relevance
of section 604. In addition, EPA does not believe that section 604(d)
is ambiguous about the granting of essential use exceptions. Section
604(d) specifically refers to ``the termination of production required
by subsection (b),'' which is the phaseout date of January 1, 2000, for
class I controlled substances (2002 for methyl chloroform). EPA is
legally compelled by the CAA to apply the percentage limitations in 604
on production and importation for essential-uses.
A commenter pointed out that the regulatory language in the
proposal (59 FR 56297), under Sec. 82.4, did not reflect the preamble
discussion of a national limit on production based on the phaseout
schedule under section 604(a) of the CAA. Although Sec. 82.4 in the
proposal refers to individual levels, when aggregated they would
reflect a national production limit as set in the CAA. With today's
action, EPA clarifies the regulatory language to reflect a national
limit, not a limit for each producer, based on the percentage
limitation as defined in section 604(a) of the CAA.
A commenter pointed out that the regulatory language in the
proposal (59 FR 56297) did not correspond with the preamble discussion
of using essential-use allowances for the import of controlled
substances. With today's action EPA corrects the inadvertent omission
of regulatory text language permitting the use of essential-use
allowances to import controlled substances.
A commenter suggested that the proposal's (59 FR 56297) discussion
of limits on total production and importation based on a combination of
essential use allowances, transformation credits and destruction
credits should give a priority to essential use allowances. As
discussed above, EPA allocates transformation and destruction credits
only to those entities that have been nominated by the U.S. to the
Protocol. Therefore, EPA believes entities allocated essential-use
allowances will have preference, by virtue of their demonstrated need
for controlled substances beyond the phaseout as acknowledged in
nominations to the Protocol. In today's action, only those essential
uses nominated by the U.S. to the Protocol will be able to destroy or
transform to obtain credits. Given the small size of these essential
use nominations, EPA believes it is unnecessary to grant a priority to
essential uses allowances within the limits established by the CAA in
the section 604(a) phaseout schedule (see TABLE 1).
Procedures for Specific Essential-Use Allowances: With today's
action, EPA creates a system in which entities receiving essential-use
allowances for specific essential uses, i.e., metered dose inhalers and
NASA/Thiokol, confer to a producer or importer the right to produce or
import a specific quantity of the specific controlled substance. The
company conferring the essential-use allowances must certify to the
producer or importer that the controlled substance will only be used
for the specified essential use and not resold. The producer or
importer will include with their quarterly report the quantity produced
or imported for essential uses and submit the letters from recipients
of essential-use allowances that confer the right to produce or import.
With today's action, EPA limits the use of essential-use allowances
to production and importation. EPA prohibits essential-use allowances
from inter-pollutant and inter-company transfers and inter-Party
trades. EPA received no unfavorable comments on these limitations
during the comment period. However, EPA received one comment after the
comment period requesting permission for inter-pollutant transfers of
essential-use allowances. The commenter requested inter-pollutant
transfers to meet shifts in market demand for MDIs that cannot be
predicted. EPA believes that quantities requested for MDIs by the
consortium are large enough to meet market demand and contingencies can
be addressed through destruction and transformation credits.
Global Essential Use Exemption for Laboratory Applications: With
today's action, EPA creates a global exemption for laboratory and
analytical essential uses of CFCs, methyl chloroform and carbon
tetrachloride for the 1996 and 1997 control periods. The global
exemption neither defines specific quantities, nor does it identify
specific companies or entities. A list of possible analytical and
laboratory procedures for which controlled substances might be used is
found in appendix G to subpart A, but this list is neither exhaustive,
nor restrictive. With today's action, EPA creates a system for
implementing the global laboratory essential-use exemption agreed to by
the Parties to the Protocol at the 1994 meeting. The
[[Page 24977]] system is designed to ensure that the United States
meets its obligations under the Montreal Protocol to monitor and report
the quantities produced and imported for laboratories, as well as to
collect information on the types of laboratory applications that use
the specified class I controlled substances.
Restrictions on the Global Essential Use Exemption for Laboratory
Applications: With this action, EPA adopts the restrictions for the
implementation of the global exemption for laboratory essential-uses
agreed to by the Parties to the Protocol and described in appendix G to
subpart A of 40 CFR part 82. Class I controlled substances can only be
sold for laboratory or analytical applications under the global
essential-use exemption for 1996 and 1997, at or above the specified
purities and within the size restrictions listed in appendix G, (the
size restriction differs if for sale by a producer or importer to a
distributor or packager of laboratory supplies).
With today's action, EPA adopts the size and purity restrictions
agreed to by the Parties for the global laboratory essential-use
exemptions as defined in appendix G. Class I controlled substances
(except methyl bromide) for ultimate sale for laboratory or analytical
applications during 1996 and 1997 can only be supplied in reclosable
containers or high pressure cylinders smaller than three litres, or in
10 millilitre or smaller glass ampoules at the purity levels listed in
appendix G.
Response to Comments--Restrictions on the Global Essential Use
Exemption for Laboratory Applications: EPA received one comment
suggesting alternative size restrictions for the sale of controlled
substances under the global laboratory essential-use exemption. With
today's action, EPA adopts the size restrictions for ultimate sale,
agreed to by the Parties to the Protocol at the Sixth Meeting in
October 1994, as listed in appendix G.
EPA received one comment that pointed out a common industry
practice of re-distilling newly produced material to achieve higher
purities. After January 1, 1996, a person re-distilling must purchase
newly produced or imported material that meets the purity standards as
outlined in appendix G, but may receive the substance in containers
larger than the size restrictions in appendix G. Thus, a producer or
importer can only sell newly produced controlled substances during 1996
or 1997 that meet the purity standards. If sold to a re-distiller for
laboratory applications, or to a distributor of laboratory supplies,
the producer or importer may sell the controlled substance in
containers larger than the appendix G size restrictions.
Procedures for Monitoring the Global Essential Use Exemption for
Laboratory Applications: With today's action, EPA authorizes producers
and importers to sell controlled substances that meet the prescribed
purity standards in appendix G to: (1) Laboratory customers that
certify the controlled substance will only be used for laboratory
applications and not resold or used in manufacturing; or (2)
distributors that certify they will only sell the substance to
customers who in turn certify it will only be used for laboratory
applications and not resold or used in manufacturing. Producers and
importers must sell the controlled substances under the global
laboratory essential-use exemption for 1996 and 1997 to laboratory
customers in the prescribed size containers at the prescribed purities,
as defined in appendix G. However, producers and importers may sell the
controlled substances under the global laboratory essential-use
exemption for 1996 and 1997 in larger sized containers and at the
prescribed purities in appendix G to distributors of laboratory
supplies (or re-distillers of materials for laboratories). The producer
and importer will report to EPA each quarter the quantity of each
controlled substance sold under the global exemption, including the
name of the laboratory customer or the distributor that purchased the
material and the amount they purchased.
Response to Comments--Procedures for Monitoring the Global
Essential Use Exemption for Laboratory Applications: EPA received five
comments on the proposed procedures for the global essential-use
exemptions for laboratory and analytical applications. The commenters
agreed with the procedures outlined in the proposed rulemaking (59 FR
56284) for producers and importers. However, the commenters suggested
that distributors and/or marketers of laboratory products be added to
the list of entities from whom labs can purchase controlled substances
during 1996 and 1997 under the global laboratory essential-use
exemption. The commenters pointed out that laboratories generally
purchase controlled substances from distributors, and not directly from
the producers or importers. As a result of the comments, EPA is
including distributors of laboratory supplies in the procedures for
monitoring the sale of the controlled substances for the global
laboratory essential-use exemption during 1996 and 1997.
Distributors can repackage the substance in prescribed size
containers to be sold to laboratory customers. Distributors must
certify to producers or importers that they will only sell the
substance to laboratory customers that certify that they will use the
substance for laboratory and analytical uses and will not resell the
substance nor will they use it for manufacturing.
With the addition of distributors to the chain of entities under
the global laboratory essential-use exemption, EPA revised the
reporting requirements accordingly. In addition, EPA received comments
suggesting improvements in the proposed reporting procedures to reduce
the overall administrative burden and to clarify the reporting of
information proposed in Sec. 82.13(u). To reduce reporting burden, a
laboratory purchasing the same controlled substances routinely under
the global laboratory essential-use exemption will certify once-per-
year to the producer or importer, or to the distributor, that the
substance is being purchased for laboratory uses and will not be resold
or used for manufacturing. The once-per-year reporting by laboratories
will reduce the administrative burden for the labs and the supplier of
the controlled substance. On the form certifying a purchase for
laboratory use, the laboratory customer will estimate the percent of
the amount purchased that will be used for each type of laboratory
application on the form's printed list.
Each quarter of 1996 and 1997, the distributor of laboratory
supplies will submit to EPA a summary of the amounts of controlled
substances purchased from producers or importers under the global
laboratory essential-use exemption. In addition, distributors will
submit each quarter a copy of the once-per-year certificate from each
laboratory making its first purchase during that quarter. Distributors
will also submit quarterly a summary of the quantities of each
controlled substance purchased by each laboratory for whom certificate
forms were already filed in previous quarters. EPA will use the
quantity of material purchased by each laboratory and their estimate of
the percent used for each type of laboratory application to generate
the United States report for the Protocol Secretariat on the global
laboratory essential-use exemption.
B. Imports of Used Controlled Substances
Proposal
In the proposal (59 FR 56285), EPA described the provisions of the
Montreal Protocol governing previously used and recycled materials. The
proposal also described the requirements promulgated in the Federal
Register on December 10, [[Page 24978]] 1993, that allowed the
importation of used or recycled controlled substances without
allowances (Sec. 82.4 (a) and (b)). As stated in the proposal (59 FR
56285), EPA is investigating many cases of potential fraud and illegal
importation of material claimed to be used or recycled. Today's action
is designed to mitigate the illegal import of controlled substances by
amending the regulatory Program.
Definition of Used Controlled Substance: EPA changes the definition
of used and recycled controlled substances to include only the term
``used.'' A controlled substance is considered used if it was recovered
from a use system, regardless of whether it was subsequently recycled
or reclaimed. The change in the definition simplifies references to
used substances without introducing confusion about their subsequent
treatment. As stated in the proposal (59 FR 56285), EPA intends for
recycled and reclaimed substances to be considered used controlled
substances.
Response to Comments--Definition of Used Controlled Substance: EPA
received only supportive comments for the change in the definition of
used controlled substances. However, two commenters suggested
additional language to further specify the need for reclamation. They
suggested that the definition of used controlled substances include a
phrase such as, ``cannot be reused without reclamation.'' EPA believes
the commenters assumed all controlled substances are used as
refrigerants. The section 608 recycling regulation requires reclamation
of refrigerants before they can be resold but there is no similar
requirement for halons, foam blowing agents, solvents or other uses of
controlled substances. EPA believes requiring reclamation of all used
controlled substances is unnecessarily restrictive because not all
controlled substances are used as refrigerants.
Two commenters suggested that EPA treat reclaimed material as newly
produced material and require that consumption allowances be expended
for importation. The comments were made to further deter fraudulent
imports. With today's action, EPA requires importers of reclaimed
material to document the foreign site of reclamation. EPA knows which
Parties have reclamation facilities and can verify reclamation of a
controlled substance. In addition, there will be no consumption
allowances available to import controlled substances after January 1,
1996, and EPA believes only a small quantity of reclaimed material is
entering the U.S. Therefore, EPA is maintaining the exemption from the
allowance requirements for imported reclaimed materials.
Information Requirements: With today's action, EPA requires the
following additional information from persons importing used controlled
substances:
The name and quantity of the used controlled substance to
be imported (including material that has been recycled or reclaimed),
The name and address of the importer, the importer I.D.
number, the contact person, and the phone and fax numbers,
Name and address of the source facility (facilities) of
the used controlled substance, including a description of the previous
use(s), when possible;
Name and address of the exporter and/or foreign owner of
the material,
The U.S. port of entry for the import, the expected date
of shipment and the vessel transporting the chemical,
The intended future use of the used controlled substance,
The name, address and contact person of the U.S.
reclamation facility, where applicable,
A certification that the purchaser of the used controlled
substance being imported is liable for payment of the tax.
EPA requires that the information listed above be submitted as part
of a petition to import used controlled substances as described below.
The petition with the information listed above must be submitted to EPA
15 working days before leaving the country of export and must accompany
the used controlled substance. If EPA does not respond to the petition
within 15 working days, the import is automatically allowed as
described below. The petition must also accompany the import through
U.S. Customs. EPA determined that requiring the petition 15 days before
the shipment is exported, rather than 15 days before it is imported, as
proposed, will prevent the material from being stranded if the petition
to import is denied.
If the imported controlled substance was reclaimed in a Party
country, the importer must provide the name and address of the foreign
reclamation facility, as well as the contact person at the facility and
their phone and fax number. The name of the foreign reclamation
facility should be included with the information listed above,
accompanying the import through U.S. Customs, and with a petition to
import as described below.
If the imported used controlled substance is intended to be sold as
a refrigerant, and has not been reclaimed upon entry into the U.S., EPA
also requires that the importer identify the name and address of the
U.S. reclaimer to whom the refrigerant will be sent to comply with the
standard specified in Sec. 82.152(g). An EPA regulation published in
the Federal Register on Friday August 19, 1994, (59 FR 42949) states
that, ``no person may sell or offer for sale for use as a refrigerant
any class I or class II controlled substance consisting wholly or in
part of used refrigerant unless * * * it has been reclaimed as defined
in Sec. 82.152(g).''
Response to Comments--Information Requirements: EPA received many
comments supporting new information requirements as the means of
discouraging fraudulent activities and actively monitoring imports of
used controlled substances. EPA received comments that some of the
information requirements listed in the proposed rulemaking (59 FR
56285) would be difficult to obtain and/or provide to EPA. In some
cases, the commenters claimed an inability to obtain the information
from foreign sources. In other cases, the commenters indicated
difficulty in obtaining the information because the company from whom
the information should be received would claim it as confidential
business information. In today's action, EPA chose the particular
information requirements listed above because commenters who suggested
them said they would be fairly easy to obtain. Many commenters stated a
willingness to provide the information listed above in order to deter
illegal imports, although they would be subject to the requirements
themselves.
EPA believes the information noted above will provide an
opportunity for independent verification of substances being imported.
Since the goal is to accurately determine whether the imported
substance is in fact ``used,'' EPA considered the practicality of
obtaining the information required and the usefulness of this
information in verifying the nature of the imported material.
EPA received comments from the halon sector requesting an exemption
from the information requirements for imports. These commenters
suggested the halon sector should be exempted because: (1) There are so
few countries still producing halons, (2) the halon sector in the U.S.
is so well organized, and (3) the requirements would be a burden. EPA
believes the information requirements will not pose a great burden for
the halon sector because the information is commonly known by importers
and often incorporated in sales transactions. In addition, U.S.
[[Page 24979]] Customs needs to have import documents that will make a
clear distinction between used halons (including recycled and
reclaimed), and newly produced halons because of the prohibition on
importing newly produced halons. In 1994, halon importers had
difficulty providing documents when EPA requested verification that
shipments were reclaimed material. EPA is also receiving information
that Article 5 producers of halons are exporting newly produced halons
to developed countries, and some of this may be entering U.S. commerce.
EPA hopes that a shipment-by-shipment information requirement will
improve the ability of halon importers to supply documents so that EPA
can monitor and ensure the legitimacy of all imports.
Creation of a Petition Program for Imports of Used Controlled
Substances: With today's action, EPA establishes a process for
petitioning the Agency to import a shipment of used controlled
substance into the United States. A person must submit a petition to
EPA to import each shipment of used controlled substance (recovered,
recycled or reclaimed material) at least 15 working days prior to the
date the ship is to leave the foreign country. The petition submitted
to EPA must include the information listed above in Section B,
``Imports of Used Controlled Substances.'' EPA will review each
petition on a shipment-by-shipment basis and determine whether or not
to object before the date the ship is to leave the foreign country,
within the 15 working days from the time of submission. If EPA objects
to a petition, the person submitting the information will be notified
prior to the time the shipment is to leave the country of export. If
EPA needs additional information, an objection notice will be sent and
the importer may re-submit the petition with the requested information.
The person may proceed with the import if EPA does not object to the
particular import of used controlled substance within the 15 working
days. EPA will send the person a non-objection notice, and notify U.S.
Customs Service and the IRS of the shipment.
With this rule, EPA also creates a petition process for a person
who imports the same used controlled substances from one source many
times during a year. EPA will accept an annual petition, at least 15
working days before the first day of the year, that includes all the
applicable information required in petitions for individual shipments.
In place of exact quantities and particular use systems from which the
material is taken, the annual petition must include an estimate of the
number of shipments and quantity of specific used controlled substances
that will be imported during the year and the likely sources (previous
uses) of the used material. Following the importation of each shipment
during the quarter, the importer must submit to EPA, referencing the
annual petition, the invoice, the bill of lading, and a detailed
description of the use system(s) from which the material(s) was taken.
The annual petition procedure is designed for a company that frequently
imports the same used controlled substances from the same source
(foreign supplier).
Response to Comments--Creation of a Petition Program for the
Importation of Used Controlled Substances: EPA received seven comments
supporting the creation of a permit/petition system for the import of
used controlled substances as proposed (59 FR 56285). Two of the
comments supported an annual permitting system. Four comments supported
some sort of shipment-by-shipment permitting system. Two commenters
suggested an alternative system in which importers petition EPA on a
shipment-by-shipment basis. All the companies supporting a permit or a
petition process agree that it will involve additional paperwork on
their part but they would rather have the process in place to ensure
all imports are legitimate. A petition process was recommended because
it would be less onerous than a permit but accomplish the same goal of
maintaining the integrity of the market-based program that encourages
the transition from class I controlled substances. To reduce the
administrative burden of petitioning for the import of very small
amounts, EPA received comments that suggested adoption of a de minimus
amount for which companies would not need to petition. The commenters
pointed out that laboratories and reclaimers in the U.S. often receive
small samples of used controlled substances for analysis. Due to these
suggestions and common industry practices, EPA exempts imports of 150
pounds or less from the petition requirements. However, all importers,
regardless of quantity, are still required to report quarterly. The
exemption from the petition requirement for 150 pounds or less applies
to individual shipments which cannot be aggregated. EPA believes this
de minimus amount reduces burdens on industry while still deterring the
illegal entry of controlled substances.
EPA believes a process of requiring petitions for imports will
deter the fraudulent importation of mislabeled controlled substances,
and will provide greater control over the entry of used substances into
the United States. The European Union (EU) currently requires permits
of all importers. The EU uses the permits to monitor shipments and
investigate suspected mislabeled ozone-depleting substances. EPA
believes that adoption of a similar system will increase the
effectiveness of enforcement actions against illegal imports. With
today's action, a person can import used controlled substances unless
EPA issues an objection notice to a petition.
EPA will forward the non-objection notices to U.S. Customs and the
IRS to alert them of expected shipments of used class I controlled
substances at U.S. ports. Because EPA will receive the petitions prior
to the date the material is shipped from a foreign port, U.S. Federal
Agencies will have time to investigate the veracity of the claimed
origin of the material, and anticipate its arrival.
Currently, EPA receives a monthly list of importers of controlled
substances from U.S. Customs. A petition system will allow EPA to match
the information from importers' petitions for used class I controlled
substances with the monthly imports on the U.S. Customs list. A person
appearing on the U.S. Customs list of imports, who never submitted a
petition, or who obtained an objection notice in response to a
petition, would be in potential violation of the regulation for that
shipment.
EPA would like to clarify that for ships that are on- or off-
loading controlled substances for on-board use or that was used on-
board, ship owners/operators are exempted from requirements for imports
and exports as in the current regulation. Since these controlled
substances are not being sold, but only used on-board or recovered from
on-board use and sold only for reclamation, these substances cannot be
considered exports or imports. EPA will rely on the records kept by
shipping companies and vessels to verify on-board use of controlled
substances.
Certification by the Country of Export: Many commenters supported
the proposed requirement (59 FR 56285) that all imports of used
substances be accompanied by a certification from the country of
export. EPA proposed this particular requirement in anticipation of a
discussion of illegal trade in controlled substances during the 1995
meeting of the Parties to the Protocol. EPA anticipates that
certification by the country of export will be one of the options
considered by the Parties to confront illegal trade of controlled
substances. At this time, however, EPA [[Page 24980]] cannot
incorporate this procedure into the regulation until the Parties make a
decision to adopt it. Without an international agreement, EPA cannot
compel government agencies of another Party to provide the information.
If the Parties agree to adopt the certification of exports of used
controlled substances during the 1995 Meeting, EPA would be required to
establish a program to certify U.S. exports of used controlled
substances. EPA already has a limited certification program for certain
reclamation facilities. Under this program, reclamation facilities must
be able to ensure that previously used refrigerant will be reclaimed to
a level of purity specified in Sec. 82.152(g). With regard to exports
of used substances, if the Parties adopt a certification procedure,
U.S. exporters would be required to certify that the ``used'' substance
was taken from a use system. The exporter might also be required to
keep records on selected items from the list of information
requirements above, to facilitate future verification.
C. Program Adjustments and Clarifications to Become Effective in the
1995 Control Period
1. Changes in Requirements for Exports to Article 5 Countries
Beginning with the 1995 control period, EPA changes the name of
potential production allowances to Article 5 allowances. In today's
rule, EPA also eliminates the process of converting potential
production allowances to production allowances for all control periods,
beginning with the 1995 control period. EPA assigns Article 5
allowances for the 1995 control period, and subsequent control periods,
to companies that have allocated baseline production allowances for
class I controlled substances, including methyl bromide. A description
of provisions in Article 2 of the Montreal Protocol permitting
additional production for Article 5 countries was included in the
proposed rulemaking published on November 10, 1994 (59 FR 56286).
With this rule, EPA creates a system in which a company notifies
the Agency at the end of each quarter of their exports to Article 5
countries. EPA will deduct Article 5 allowances equal to the amount of
controlled substance exported to Article 5 countries from the company's
balance of Article 5 allowances. With today's action, EPA permits
inter-pollutant and inter-company transfers of Article 5 allowances as
proposed but is not permitting inter-Party trades. The Agency
determined that inter-Party trades of Article 5 allowances would
violate the provision of the Protocol that specifically allows
additional production by each Party for export to Article 5 countries.
Response to Comments: EPA received five comments supporting the up-
front allocation of Article 5 allowances and the change in the system
for deducting Article 5 allowances from a company's balance on a
quarterly basis. EPA received two comments that did not support the
allocation of Article 5 allowances.
A commenter suggested that allocating Article 5 allowances after
January 1, 1996, would be unnecessary because Article 5 countries have
sufficient production capacity to supply their own needs. EPA received
letters from four producers of controlled substances in Article 5
countries (two are subsidiaries of the commenter) asking that EPA not
authorize additional production for export to Article 5 countries.
These Article 5 producers claimed that they could provide material for
all the Article 5 countries in their region, i.e., South America,
Southeast Asia.
The Parties included provisions in the Protocol to assure a
continued supply of controlled substances for Article 5 countries
beyond the phaseout in Article 2 (developed) countries. EPA recognizes
that certain facilities in Article 5 countries have the production
capacity for production of specific, but not all, ozone-depleting
substances. However, the Montreal Protocol limits any increases in
production of controlled substances in Article 5 countries to that
needed to meet their own basic domestic needs.
A commenter did not support the proposed allocation of Article 5
allowances because they believe Article 5 allowances would create
opportunities for controlled substances to be produced for export to
Article 5 countries and illegally be imported back into the U.S. or be
diverted to U.S. commerce and never actually be exported. The current
regulation, in accordance with the Protocol, requires exporters to
obtain a signed certification from an Article 5 importer that the
controlled substances cannot be re-exported, and if re-exported the
importer is in violation and subject to a financial penalty. In
addition, with today's action, EPA prohibits the sale of material in
the U.S. that was produced with Article 5 allowances. This does not
change any legal requirements for Parties under Article 5. EPA believes
that today's requirement addresses the concern about Article 5
allowances and illegal imports.
The Parties to the Protocol adopted provisions allowing additional
production for export to Article 5 countries for sound environmental
reasons as explained in the proposal (59 FR 56287). In today's action,
EPA implements the provisions of the Protocol in accordance with desire
of the Parties to deter the construction of new, or expansion of
existing, manufacturing facilities in Article 5 countries.
CAA Limits on U.S. Post-Phaseout Production: With today's action,
the Agency corrects the date from which, and until which, companies may
produce 15 percent of baseline allowances for export to Article 5
countries. CAA section 604(e)(2)(C) permits production for developing
countries to exceed baseline allowances by up to 15 percent beginning
January 1, 2000, and to continue until January 1, 2010 (2012 in the
case of methyl chloroform). However, the Protocol permits production
for export to Article 5 countries at 15 percent of baseline allowances
beginning with the phaseout date (January 1, 1994, for halons, and
January 1, 1996, for CFCs, methyl chloroform and carbon tetrachloride)
and continuing for ten years after the Protocol phaseout.
With today's action, and subsequent to the U.S. accelerating its
phaseout dates, EPA permits each producer 15 percent of their baseline
production allowances for export to Article 5 countries as under the
Protocol, but in accordance with the restrictions on the U.S.'s overall
production as imposed by the CAA. EPA believes the overall limit the
CAA imposes on U.S. production will never be reached but must
acknowledge this legal upper limit.
Because the CAA only allows 10 percent additional production for
Article 5 countries up until 2000, EPA will count 5 percent of United
States' total production for Article 5 countries against the annual
percent limitations in the phaseout schedule of section 604 of the CAA
as shown in TABLE I, (i.e., 40 percent for CFCs in 1996). The remaining
10 percent of production for Article 5 countries will be added to the
annual percent limitation in the CAA phaseout schedule (i.e., 10
percent + 40 percent = 50 percent for CFCs in 1996). As an example, EPA
will allocate producers 15 percent of their baseline production
allowances in 1996 which is expended when producing for Article 5
countries. Continuing with the example, in EPA's tracking system, EPA
will subtract 5 percent of the 15 percent allocated for export to
Article 5 [[Page 24981]] countries from the CAA annual percentage
limitation of 40 percent for CFCs in 1996, yielding a national
production limit of 35 percent for all other post-phaseout production
exemptions: Essential-uses, transformation credits and destruction
credits. EPA believes it is highly unlikely that U.S. production will
ever approach the pre-accelerated phaseout cap set forth in section
604(a) of the CAA through the combination of the exceptions allowed in
today's rule; however, it is important that EPA explicitly outline how
it intends to ensure that the caps of the CAA are met.
Response to Comments--CAA Limits on U.S. Post-Phaseout Production:
EPA received no comments on the proposed (59 FR 56287) limits on
production imposed by the CAA for the use of Article 5 allowances in
combination with essential use allowances, destruction credits and
transformation credits after January 1, 1996. Therefore, with today's
action, EPA permits production based on limits imposed under section
604(e)(2) and 604(a) of the CAA plus ten percent of the baseline for
export to Article 5 countries. EPA believes this overall limit imposed
by the CAA will never be reached.
2. Administrative Changes to the Consumption Allowance Requirements for
Exports
In the proposal (59 FR 56288), EPA considered various methods of
streamlining the administrative procedures for refunding consumption
allowances when controlled substances are exported to a Party. Based on
comments and further consideration, EPA is maintaining the system in
which producers expend both production and consumption allowances to
produce class I controlled substances for the 1995 control period (and
for methyl bromide until 2001). EPA also maintains the procedure in
which companies request a ``refund'' from EPA of consumption allowances
expended to produce controlled substances exported to a Party during
the 1995 control period.
Response to Comments: EPA received two comments that supported the
proposed system (59 FR 56288) for expediting the refund of consumption
allowances when controlled substances are exported to a Party to the
Protocol. Four comments were received that preferred the proposed
option to eliminate the requirement that producers expend consumption
allowances when producing for export. EPA also received two comments
challenging the proposed system to expedite the refund of consumption
allowances, stating that the double submission of documents would be
unnecessarily burdensome.
With today's action, EPA chooses to maintain the current procedure
for refunding consumption allowances once a company exports a
controlled substance to a Party. EPA maintains the procedure in order
to closely monitor exports in the final year before the phaseout. EPA
wishes to continue receiving documentation of exports as part of the
campaign against illegal imports. Since the proposal was written (59 FR
56275), EPA has become increasingly concerned about illegal imports
entering the U.S. as a result of fraudulent claims that they are
subsequently exported. Many deceptive activities are being taken to
avoid the IRS tax on ozone-depleting substances. The IRS tax code
exempts a percentage of exported controlled substances from the tax.
EPA believes that people are importing controlled substances and
fraudulently claiming their subsequent export to avoid the tax. EPA is
concerned that people are submitting fraudulent documents about either
non-existent exports or about exported shipping containers filled with
some material other than the controlled substances claimed in the
export documents. The receipt of documents is a component of EPA's
compliance and enforcement program against illegal imports. EPA wishes
to maintain the current refund procedure for consumption allowances in
1995 to monitor exports and deter illegal activities.
With today's action, EPA chooses not to expedite the process of
refunding consumption allowances in response to industry comments. EPA
initially proposed the expedited refund of consumption allowances
believing it would assist industry in the final year before the
phaseout. However, industry comments expressed legitimate concern that
the proposed procedure, with the double reporting to expedite the
refund, would actually be an increased burden. Many industry comments
pointed out the complexity of the proposed procedures and the undesired
potential for miscalculations and double-counting. In addition, a
commenter noted the difficulty EPA would face in designing a new
tracking system for only one year to accommodate the double reporting
of contingent consumption allowances followed by a confirmation of the
consumption allowances. EPA now recognizes that the proposed procedures
for expediting refunded allowances would create a significant reporting
and administrative burden for both industry and the Agency. Therefore,
EPA will maintain the existing procedure in which companies submit
documents only once to obtain the refund of consumption allowances.
EPA received a comment challenging the proposed elimination of
consumption allowances from inter-Party trades (59 FR 56288). The
comment points out that eliminating the consumption allowances from an
inter-Party trade would not be a problem, if, as under the December 10,
1993 final rule, Sec. 82.9(b)(1)(vi), the controlled substance produced
in the U.S. were exported to the Party from whom the allowances were
received. If EPA were to eliminate the need for consumption allowances
in inter-Party trades, and the controlled substance returned to the
Party from whom the allowances were received, the global limit on
production of controlled substances would be maintained. The
requirement that material be exported to the country from whom
allowances were traded is a vestige of the original Montreal Protocol
and was eliminated by the London Amendments.
During the 1994 control period, several U.S. companies asked to
rationalize global production through inter-Party trades with a waiver
that material not be required to return to the country from whom the
allowances were received. The U.S. companies wanted to receive trades
from foreign companies and produce the controlled substances for U.S.
customers of those foreign firms. The benefit of these less restricted
inter-Party trades would be more geographically rational production of
controlled substances on a global basis with lower transport costs and
energy use. Unfortunately, the requirement in Sec. 82.9(b)(1)(vi), that
material must be exported to the country from whom the allowances were
received blocked these inter-Party trades in 1994. EPA proposed
eliminating this requirement in the November 10, 1994, notice of
proposed rulemaking (59 FR 56290).
With today's action, EPA creates a dual system for inter-Party
trades in order to allow U.S. companies greater flexibility in meeting
market demand in the U.S. and other countries while maintaining the
global limit on production and consumption of controlled substances.
The dual system for inter-Party trades allows industrial
rationalization, and maintains U.S. obligations under the Protocol. The
two-tier system for inter-Party trades distinguishes between: U.S.
companies wishing to receive production allowances in order to produce
and subsequently export to the country from [[Page 24982]] whom the
allowances were received, and U.S. companies wishing to receive
production allowances and produce for the U.S. domestic market or for
sale to another Party to the Protocol. In order to maintain United
States obligations under the Protocol, EPA would require companies to
expend their consumption allowances as allocated under Sec. 82.6 and
Sec. 82.7 if receiving production allowances from an inter-Party trade
for production of controlled substances to be sold in the U.S., or to
be sold to a third country (Party to the Protocol). To produce for sale
in the U.S. or to another Party, the company would expend production
allowances from the inter-Party trade and expend consumption allowances
that were allocated as part of the Allowance Program in section
Sec. 82.6 and Sec. 82.7. Although counterintuitive, the expenditure of
production allowances received from a Party and the expenditure of
consumption allowances allocated under the Allowance Program would
maintain the global balance of production and consumption of ozone-
depleting substances as restricted by the Montreal Protocol. The
regulatory language under Sec. 82.10(c) that states, ``a request for
production allowances shall also be considered a request for
consumption allowances,'' will not apply to inter-Party trades of
production allowances for the production of controlled substances to be
sold in the U.S. or to be sold to another Party to the Protocol.
The dual-tier system for inter-Party trades of production
allowances applies to methyl bromide beginning in the 1995 control
period and extends until January 1, 2001.
Under the current regulation, a person in the United States may
receive production allowances from a Party to the Protocol in an inter-
Party trade (under the Protocol this is called industrial
rationalization). The request for an increase in production allowances
through an inter-Party trade is considered, under the current
regulation, a request for consumption allowances. The U.S. company that
receives the allowances from the other Party expends the production and
consumption allowances to produce a controlled substance. The
controlled substances produced with the traded allowances are exported
to the Party from whom the allowances were traded. The U.S. company
expends consumption allowances in the production of the controlled
substance for an inter-Party trade and then asks EPA for a ``refund''
of these consumption allowances because the controlled substance was
exported.
3. Administrative Changes to Production Allowance Requirements for
Exports That Are Transformed or Destroyed
With today's action, EPA is creating procedures for the refund of
production allowances when a person expends production allowances in
the manufacture of a controlled substance for export to a Party for
uses that result in transformation or destruction. EPA proposed (59 FR
56289) expediting the ``refund'' of production allowances, but is not
adopting this proposal, because it is too great a reporting and
administrative burden as discussed above for the refund of consumption
allowances.
The refund procedure pertains to the production of class I
controlled substances for only the 1995 control period, except for
methyl bromide. For methyl bromide, the refund of expended production
allowances for quantities exported to Parties that are certified to be
transformed or destroyed would also begin January 1, 1995, but extend
until January 1, 2001. As with the procedures for refunding consumption
allowances, a person in the U.S. producing or purchasing a class I
controlled substance may, upon export to a Party for certified
subsequent transformation or destruction, request from EPA a ``refund''
of production allowances with a certification that the production
allowances were expended in the production of the substance. To ensure
that the controlled substance is in fact transformed or destroyed by
the recipient in a Party country, the Agency requires the U.S. exporter
to obtain a signed IRS certificate of intent to transform or a
destruction verification (as under Sec. 82.13(k)) from the foreign
transformer or destroyer.
Response to Comments: EPA received five comments supporting the
elimination of requirements to expend allowances if the controlled
substance is explicitly produced for export to be transformed or
destroyed. The commenters suggested that all controlled substances that
are transformed, both domestically and overseas, be treated similarly.
A commenter stated that the Protocol does not make a distinction
between transformation (or destruction), whether it occurs domestically
or overseas.
The prior regulation, published in the Federal Register on December
10, 1993, required that allowances be expended for the production of
controlled substances that are exported and transformed or destroyed.
Under this prior regulation, production allowances were expended and
not refunded. With today's action, EPA is refunding the expended
production and consumption allowances if the substance is explicitly
exported for transformation or destruction. EPA considers the refund of
production allowances to be a significant benefit for producers of
class I controlled substances during the final control period before
the phaseout.
EPA received two comments that requested an explicit waiver of
liability for a producer or importer who sells a controlled substance
for transformation or destruction in the event the controlled substance
is not transformed or destroyed. Given EPA's requirements for
transformers or destroyers of controlled substances, the producer or
importer who sells the substance is not liable as long as they receive
an IRS certificate of intent to transform or a destruction
verification.
Additional Actions: With today's action, EPA is standardizing the
reporting requirements for controlled substances that are transformed
or destroyed both domestically and overseas. Each quarterly producer's
or importer's report must be accompanied by the IRS certificates of
intent to transform or destruction verifications (as under
Sec. 82.13(k)) from the transformers or destroyers to whom controlled
substances were sold. EPA is unwilling to further relax requirements
for production during the last control period (1995 calendar year), in
part due to difficulties companies had during 1994 in complying with
the reporting requirements for transformation. The regulation requires
that companies submit IRS certificates of intent to transform with
quarterly production reports. In 1994, few companies submitted the IRS
certification of intent to transform or the destruction verification
with their quarterly reports. By standardizing the reporting
requirement for controlled substances transformed or destroyed both
domestically and overseas, EPA hopes to improve compliance by companies
during the 1995 control period. The procedures for submitting the IRS
certification and the destruction verification change slightly with
today's rule and are described in H., ``Clarification of Reporting and
Recordkeeping Requirements.''
After the January 1, 1996 phaseout, production and consumption
allowances will not be required to produce class I controlled
substances for domestic or foreign transformation or destruction. After
January 1, 1996, EPA will permit production for transformation or
destruction domestically or overseas as long as companies comply with
strict reporting [[Page 24983]] requirements, including the submission
of IRS certificates of intent to transform and destruction
verifications (see H., ``Clarification of Reporting and Recordkeeping
Requirements'').
4. Treatment of Controlled Substances Remaining in Emptied Containers,
i.e.''Heels''
With today's action, EPA exempts heels from the consumption
allowance requirements for imports beginning in the 1995 control period
if certain conditions are met. Heels were described in detail in the
proposed rulemaking and are now defined in the regulation (59 FR
56289). Heels are exempted from the consumption allowance requirements
for imports if the company bringing the heel into the United States
certifies that the residual amount is less than 10 percent of the
volume of the container and will remain in the container and be
included in a future shipment, or recovered for transformation,
destruction or a non-emissive use.
The industry rule-of-thumb is that a heel is up to ten percent of
the volume of the container. Therefore, EPA is requiring that
containers returning to the United States with more than ten percent of
their volume in controlled substance, even if labelled as a heel, be
required to expend consumption allowances to import the substance until
January 1, 1996.
With today's action, EPA requires a person who brings heels back to
the United States to report quarterly the quantity of their returned
heels. In addition, the person must report at the end of the control
period on the final disposition of each shipment of heels. The Agency
will review this information to determine if returned heels are cause
for concern due to the volume and frequency of occurrence.
Response to Comments: Most comments EPA received supported the
proposed requirements for heels (59 FR 56289) as long as the reporting
requirements were stringent enough to prevent illegal import abuses.
Only one company objected to the proposed exemption for heels from the
import requirements, suggesting that it would provide another
opportunity for illegal imports. The commenter claimed that under the
proposal, heels would be under-reported and people would fraudulently
label their imports as heels to avoid the tax.
EPA believes the stringent reporting requirements for heels, the de
minimis provision (no greater than 10 percent of the volume of a
container is considered a heel), and the requirement for non-emissive
disposition of heels eliminates the incentives to fraudulently import
controlled substances as heels.
5. Clarification of the Definition of Transhipment
EPA received comments on the proposed clarification of transhipment
(59 FR 56289) that strongly recommended action to deter the abuse of
transhipment in illegally importing controlled substances. The proposal
only clarified the definition of transhipment and did not address the
abuse of the transhipment provision for illegal imports. In response to
the comments, EPA is issuing a separate, parallel notice of proposed
rulemaking to address the abuse of the current transhipment provision
to illegally divert transhipped material into U.S. commerce.
EPA received a comment suggesting the use of the phrase, U.S.
interstate commerce, in place of the phrase, U.S. jurisdiction. With
today's action, EPA maintains the word jurisdiction in accordance with
the definition of import in the CAA. EPA received no other adverse
comment on the clarification of transhipment.
6. Provision for an Account Reconciliation Period Through Inter-
Pollutant Transfers
With today's action, EPA is creating a 45-day period for
reconciliation of allowances after the last day of the 1995 control
period. During the 45-day reconciliation period, a person may make
inter-pollutant transfers of allowances from the previous control
period for class I controlled substances as defined in Sec. 82.12 of
the current regulation. Inter-pollutant transfers of controlled
substances can only be made between controlled substances in the same
Group as listed in appendices A and F of subpart A. In addition, the
inter-pollutant transfer must be authorized by EPA and will include a
one percent offset.
Response to Comments: EPA received many comments supporting the
creation of a period for reconciliation of allowances after the last
day of a control period. In addition to their support for the proposed
45-day period for inter-pollutant transfers, EPA received five comments
suggesting inter-company transfers be permitted. Two additional
comments suggested inter-Party trades be allowed during the
reconciliation period.
EPA believes that changes in today's action to permit either inter-
company transfers or inter-Party trades in the reconciliation period
would undermine the integrity of the prohibitions in Sec. 82.4 that
require a person to have, at any time, the allowances to produce or
import controlled substances. Allowing inter-company transfers or
inter-Party trades during the reconciliation period would effectively
eliminate the requirement that a company have allowances to produce or
import, thereby eliminating the basis for EPA enforcement of the
regulation. Today's action permits inter-pollutant transfers at the end
of the control period, which are intra-company adjustments to the
balance of allowances for that control period, through paper accounting
rather than an extension of the control period for trades, exports or
transfers between companies.
7. Additional Clarifications
a. Unintended By-Products of Research and Development. EPA adds to
the list of inadvertent or coincidental creations of insignificant
quantities of the listed substances, in the definition of controlled
substance, the production of unintended by-products of research and
development applications.
Response to Comments: EPA received only supportive comments on the
proposal to add the unintended by-products of research and development
applications to the list of inadvertent or coincidental creations of
insignificant quantities so that these unintended by-products be
exempted from the definition of controlled substances. The Agency
continues to reserve the right to require a person to destroy the
unintended by-products of research and development applications if they
are determined to be greater than insignificant quantities.
b. Carbon Tetrachloride Baseline Consumption Allowances. With
today's action, EPA corrects a typographical error made in the proposal
(59 FR 56300). In Sec. 82.6, the apportionment of baseline consumption
allowances shifted the order of consumption allowances allocated to the
various companies. Today's action maintains the baseline consumption
allowances apportioned under the current regulation published on
December 10, 1993 in the Federal Register.
8. Clarification of Reporting and Recordkeeping Requirements
a. Reporting and Recordkeeping for Destruction and Transformation
Credits. With today's action, an eligible person, if they wish to
obtain destruction and transformation credits as defined above in A.1.,
``Post-Phaseout Requirements for Transformation and Destruction of
Controlled Substances,'' must submit to EPA a request for credits when
they have had a quantity of controlled substance taken from a U.S. use
system [[Page 24984]] destroyed or transformed. The request for credits
should include:
The identity and address of the person;
The name, quantity and volume of controlled substance
destroyed or transformed;
A copy of the invoice or receipt documenting the sale or
transfer of the controlled substance to the person;
A certification of the previous use of the controlled
substance;
For destruction credits, a certification that the
controlled substance was destroyed and a certification of the
efficiency of the destruction process; and
For transformation credits, an IRS certificate of
feedstock use or transformation of the controlled substance.
EPA will review the information submitted in a request for
destruction and transformation credits and determine whether or not to
issue credits equal to the calculated level of material destroyed or
transformed minus the 15 percent offset. EPA received no comments on
the reporting requirements for granting destruction and transformation
credits.
b. Reporting and Recordkeeping for Importers. With today's action,
EPA requires that importers of used, recycled or reclaimed controlled
substances maintain records on the items included in Section B,
``Imports of Used Controlled Substances,'' of this preamble. In
addition, EPA continues to require that all importers submit quarterly
reports. EPA requires that all importers differentiate, in their
quarterly reports, between quantities of imported controlled substances
that are newly produced, and quantities of imported controlled
substances that are used, recycled or reclaimed in accordance with the
reporting requirements of the prior regulation published in the Federal
Register on December 10, 1993.
Under the current rule, EPA requires that importers be prepared to
verify that the company has consumption allowances when entering a
newly produced class I controlled substance into the United States. EPA
also requires importers be prepared to provide the documentation as
listed in Section B of this preamble, to verify the previous owner and
the previous use when entering a controlled substance claimed to be
used, recycled or reclaimed into the United States. After January 1,
1995, an importer must provide to EPA, as part of the petition to
import used, recycled or reclaimed controlled substances, the following
information as listed in section B., ``Imports of Used Controlled
Substances:
The name and quantity of the used controlled substance to
be imported (including material that has been recycled or reclaimed),
The name and address of the importer, the importer I.D.
number, the contact person, and the phone and fax numbers,
Name and address of the source(s) of the used controlled
substance, including a description of the previous use(s), when
possible;
Name and address of the exporter and/or foreign owner of
the material,
The U.S. port of entry for the import, the expected date
of shipment and the vessel transporting the chemical, where available,
The intended future use of the used controlled substance,
The name, address and contact person of the U.S.
reclamation facility, where applicable,
A certification that the purchaser of the used controlled
substance being imported is liable for payment of the tax.
A petition to import a class I controlled substance that was
reclaimed overseas must also include the name and address of the
foreign reclamation facility, as well as the contact person at the
facility and their phone and fax number. The name of the foreign
reclamation facility should be included with the information listed
above accompanying the import through U.S. Customs.
If the imported used controlled substance is intended to be sold as
a refrigerant, EPA also requires that the importer identify the name
and address of the reclaimer to whom the refrigerant will be sent to
comply with the standard required in Sec. 82.152(g). EPA regulation
published in the Federal Register on Friday August 19, 1994, (59 FR
42949) states that, ``no person may sell or offer for sale for use as a
refrigerant any class I or class II controlled substance consisting
wholly or in part of used refrigerant unless * * * it has been
reclaimed as defined in Sec. 82.152(g).''
Response to Comments: EPA received many comments on the proposed
actions to address illegal imports of controlled substances. The
commenters stated a willingness to accept new reporting requirements in
order to stem the flow of illegally imported controlled substances.
One commenter stated that chemical testing of imported materials
would not provide EPA with reliable evidence that the controlled
substance had been taken from a use system. A lab test would not be
able to distinguish between a contaminated newly produced controlled
substance, a contaminated ``off-spec'' newly produced substance, or a
substance taken from a use system. Therefore, the commenters stated
that this reporting requirement would be an unnecessary expense and
burden. EPA agrees with these arguments and has not included lab
testing of imported used controlled substance in today's action.
Another commenter claimed it would be difficult to obtain the
proposed information requirement on the type of machine utilized to
recover the controlled substance. EPA recognizes the difficulty in
identifying and describing recovery machinery and has not included it
in the reporting requirement for used imported controlled substances.
c. Reporting and Recordkeeping for Article 5 Exports. Today's
Action: EPA requires companies to submit with their producer's
quarterly report the amount of controlled substance produced with
expended Article 5 allowances and exported to Article 5 countries
during the quarter. Today's change of name from potential production
allowances to Article 5 allowances does not change the quarterly
reporting requirements. However, today's action does eliminate the need
to convert allowances.
Today's amendment to the recordkeeping and reporting requirement
anticipates the phaseout of class I controlled substances (except
methyl bromide) in January 1, 1996. In 1995, all class I controlled
substances produced for export to Article 5 countries will be reported
in the producer's quarterly report. Beginning January 1, 1996, EPA will
simplify the quarterly reporting, so that producers indicate which of
the production exceptions apply (i.e., essential-use allowances,
Article 5 allowances, destruction and transformation credits,
transformation or destruction) for a given quantity of controlled
substance, with relevant information to explain the justification for
the exception.
Response to Comments: EPA received five comments supporting the
changes in the reporting requirements for Article 5 allowances that
eliminate the need to convert potential production allowances to
production allowances. The commenters also indicated a need to clarify
in the regulatory language how Article 5 allowances will be used in the
production of controlled substances. The commenters pointed out that
the regulatory language should be consistent with the preamble. With
today's action EPA makes the changes to the regulatory language to
ensure correspondence with today's preamble. [[Page 24985]]
d. Reporting and Recordkeeping for the Production Allowance
Requirements for Exports that are Transformed or Destroyed. Today's
Action: EPA requires the submission of an IRS certificate of intent to
transform or a destruction verification (as outlined in Sec. 82.13(k)),
during the 1995 control period, if a person is requesting the refund of
production allowances for material exported to be transformed or
destroyed. If requesting a refund of production allowances, the
producer must submit the IRS certificate or destruction verification
for each shipment.
Starting in the 1995 control period, EPA requires all producers and
importers to submit with quarterly reports an IRS certificate of intent
to transform or a destruction verification (as in Sec. 82.13(k)) from
transformers or destroyers, both domestic and of a foreign Party, who
purchase controlled substances.
Response to Comments: EPA received comments that claimed the
reporting requirements for submission of IRS certificates to transform
and destruction verifications were burdensome. In response to the
comments, EPA is permitting a one-time-per-year submission of an IRS
certificate of intent to transform or a one-time-per-year submission of
a destruction verification from each individual transformer or
destroyer that purchases the same controlled substances throughout the
year that will be transformed or destroyed during that year. After the
first submission of an IRS certificate for a particular transformer, or
the first submission of a destruction verification for a particular
destroyer, whether the transformer or destroyer is domestic or foreign,
the U.S. producer or importer may list the quantities of subsequent
shipments sold to the transformer or destroyer, referencing the
original certificate or verification.
e. Reporting and Recordkeeping for Heels. Today's Action: With
today's action, EPA requires a person who brings heels back to the
United States to report quarterly a list of the quantity of their
returned heels, shipment-by-shipment. The quarterly submission must
list the quantity of the heel in each shipment and the volume of the
container in which the heel returned to the United States. The
submission of the list of heels must also include a certificate that
the residual amount will remain in the container and be included in a
future shipment, or be recovered for transformation, destruction or a
non-emissive use. Due to concerns about illegal imports of controlled
substances, the Agency determined that quarterly reporting on heels is
necessary to closely monitor for possible abuses of today's provision.
EPA requires all companies that brought heels into the United
States to report, at the end of the control period, on the final
disposition of each shipment of heels. The Agency will review this
information to determine if returned heels are cause for concern due to
the volume and frequency of occurrence and potential abuse.
f. Reporting Requirements for Class II Controlled Substances
(HCFCs). With today's action, EPA includes class II controlled
substances that are transformed or destroyed in the reporting
requirement of Sec. 82.13(n). In the proposal, EPA inadvertently
excluded class II material that is transformed or destroyed from the
reporting requirement.
III. Summary of Supporting Analysis
A. Executive Order 12866
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether this regulatory action is ``significant''
and therefore subject to OMB review and the requirements of the
Executive Order. The Order defines ``significant'' regulatory action as
one that is likely to lead to a rule that may:
(1) Have an annual effect on the economy of $100 million or more,
or adversely and materially affect a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlement, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
It has been determined by OMB and EPA that this amendment to the
final rule is not a ``significant regulatory action'' under the terms
of Executive Order 12866 and is therefore not subject to OMB review
under the Executive Order.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-602, requires that
Federal agencies examine the impacts of their regulations on small
entities. Under 5 U.S.C. 604(a), whenever an agency is required to
publish a general notice of proposed rulemaking, it must prepare and
make available for public comment an initial regulatory flexibility
analysis (RFA). Such an analysis is not required if the head of an
agency certifies that a rule will not have a significant economic
impact on a substantial number of small entities, pursuant to 5 U.S.C.
605(b).
The Agency originally published an RFA to accompany the August 12,
1998 final rule (53 FR 30566) that placed the initial limits on the
production and consumption of CFCs and halons. That RFA was also
updated as appendix G of the Regulatory Impact Analysis for the
regulations implementing the phaseout schedule of section 604 of the
Clean Air Act Amendments of 1990. The Addendum to the Regulatory Impact
Analysis was further updated in 1993 to examine the impact of the
acceleration of the phaseout and the phaseout of HCFCs on small
businesses. The analysis in the Addendum indicated that the actions
were not expected to have a substantial impact on small entities.
EPA believes that any impact that today's amendment will have on
the regulated community will serve only to provide relief from
otherwise applicable regulations, and will therefore limit the negative
economic impact associated with the regulations previously promulgated
under Sections 604 and 606. Although almost all business participants
in the phaseout program for ozone-depleting substances are large
businesses, today's amendment reduces reporting or recordkeeping
burdens that might possibly impact small businesses. Therefore, the
amendment is expected to have minimal if any impact on small entities.
Under section 605 of the Regulatory Flexibility Act, 5 U.S.C. 605,
I certify that the regulation promulgated in this notice will not have
any additional negative economic impacts on any small entities.
C. Paperwork Reduction Act
The information collection requirements in this final rule were
approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act, 44 U.S.C. 3501 et. seq. and assigned control
number, OMB No. 2060-0170. An Information Collection Request document
has been prepared by EPA (ICR No. 1432.15) and a copy may be obtained
from Sandy Farmer, Information Policy Branch, U.S. EPA, 401 M St., SW.,
(2136), Washington, DC 20460 or by calling (202) 260-2740.
The information collection requirements for this final rule has an
estimated reporting burden averaging 23.3 hours per response. This
estimate includes time for reviewing [[Page 24986]] instructions,
searching existing data sources, gathering and maintaining the data
needed and completing the collection of information.
Send comments regarding the burden estimate of any other aspect of
this collection of information, including suggestions for reducing this
burden to Chief, Information Policy Branch, U.S. EPA, 401 M St., SW.,
(2136), Washington, DC 20460; and to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Washington, DC
20503, marked ``Attention: Desk Officer for EPA.'' The final rule will
respond to any OMB or public comments on the information collection
requirements contained in this proposal.
D. Enhancing the Intergovernmental Partnership Under Executive Order
12875
In compliance with Executive Order 12875 we have involved state,
local, and tribal governments in the development of this rule to the
extent they are affected by these requirements. EPA is conducting an
outreach program to facilitate the transition for state, local and
tribal governments to ozone-friendly alternatives.
E. Unfunded Mandate Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
EPA to prepare a budgetary impact statement before promulgating a rule
that includes a Federal mandate that may result in expenditure by
state, local and tribal governments, in aggregate, or by the private
sector, of $100 million or more in any one year. Section 203 requires
the Agency to establish a plan for obtaining input from and informing
any small governments that may be significantly or uniquely affected by
the rule. Section 205 requires that regulatory alternatives be
considered before promulgating a rule for which a budgetary impact
statement is prepared. The Agency must select the least costly, most
cost-effective, or least burdensome alternative that achieves the
rule's objectives, unless there is an explanation why this alternative
is not selected or this alternative is inconsistent with law.
This rule amends the accelerated phaseout rule with the net effect
of reducing the regulatory burden for regulated entities. Because this
amendment to the rule is estimated to result in the expenditure of less
than $100 million in any one year by state, local, and tribal
governments, or the private sector, the Agency has neither prepared a
budgetary impact statement nor addressed the selection of the least
costly, most cost-effective, or least burdensome alternative. Because
small governments will not be significantly or uniquely affected by
this rule, the Agency is not required to develop a plan with regard to
small governments.
List of Subjects in 40 CFR Part 82
Environmental protection, Administrative practice and procedure,
Air pollution control, Chemicals, Chlorofluorocarbons, Exports,
Hydrochlorofluorocarbons, Imports, Ozone layer, Reporting and
recordkeeping requirements, Stratospheric ozone layer.
Dated: April 19, 1995.
Carol Browner,
Administrator.
40 CFR part 82 is amended as follows:
PART 82--PROTECTION OF STRATOSPHERIC OZONE
1. The authority citation for part 82 continues to read as follows:
Authority: 42 U.S.C. 7414, 7671-7671q.
2. Subpart A is revised to read as follows:
Subpart A--Production and Consumption Controls
Sec.
82.1 Purpose and scope.
82.2 Effective date.
82.3 Definitions.
82.4 Prohibitions.
82.5 Apportionment of baseline production allowances.
82.6 Apportionment of baseline consumption allowances.
82.7 Grant and phased reduction of baseline production and
consumption allowances for class I controlled substances.
82.8 Grant and phased reduction of baseline production and
consumption allowances for class II controlled substances.
[Reserved]
82.9 Availability of production allowances in addition to baseline
production allowances.
82.10 Availability of consumption allowances in addition to
baseline consumption allowances.
82.11 Exports to Article 5 Parties.
82.12 Transfers.
82.13 Recordkeeping and reporting requirements.
Appendix A to Subpart A--Class I Controlled Substances
Appendix B to Subpart A--Class II Controlled Substances
Appendix C to Subpart A--Parties to the Montreal Protocol
Appendix D to Subpart A--Harmonized Tariff Schedule
Description of Products That May Contain Controlled Substances
in Appendix A, Class I, Groups I and II.
Appendix E to Subpart A--Article 5 Parties
Appendix F to Subpart A--Listing of Ozone-Depleting Chemicals
Appendix G to Subpart A--UNEP Recommendations for Conditions
Applied to Exemption for Laboratory and Analytical Uses.
Appendix H to Subpart A--Clean Air Act Amendments of 1990
Phaseout Schedule for Production of Ozone-Depleting Substances.
Subpart A--Production and Consumption Controls
Sec. 82.1 Purpose and scope.
(a) The purpose of the regulations in this subpart is to implement
the Montreal Protocol on Substances that Deplete the Ozone Layer and
sections 603, 604, 605, 606, 607 and 616 of the Clean Air Act
Amendments of 1990, Public Law 101-549. The Protocol and section 604
impose limits on the production and consumption (defined as production
plus imports minus exports, excluding transhipments and used controlled
substances) of certain ozone-depleting substances, according to
specified schedules. The Protocol also requires each nation that
becomes a Party to the agreement to impose certain restrictions on
trade in ozone-depleting substances with non-Parties.
(b) This subpart applies to any person that produces, transforms,
destroys, imports or exports a controlled substance or imports a
controlled product.
Sec. 82.2 Effective date.
(a) The regulations under this subpart take effect May 10, 1995.
Amendments to the requirements specifically addressing 1995 apply to
the entire control period.
(b) The regulations under this subpart that were effective prior to
May 10, 1995, continue to apply for purposes of enforcing the
provisions that were applicable prior to January 1, 1995.
Sec. 82.3 Definitions.
As used in this subpart, the term:
Administrator means the Administrator of the Environmental
Protection Agency or his authorized representative.
Article 5 allowances means the allowances apportioned under
Sec. 82.9(a).
Baseline consumption allowances means the consumption allowances
apportioned under Sec. 82.6.
Baseline production allowances means the production allowances
apportioned under Sec. 82.5.
Calculated level means the weighted amount of a controlled
substance [[Page 24987]] determined by multiplying the amount (in
kilograms) of the controlled substance by that substance's ozone
depletion potential (ODP) weight listed in appendix A or appendix B to
this subpart.
Class I refers to the controlled substances listed in appendix A to
this subpart.
Class II refers to the controlled substances listed in appendix B
to this subpart.
Completely destroy means to cause the expiration of a controlled
substance at a destruction efficiency of 98 percent or greater, using
one of the destruction technologies approved by the Parties.
Complying with the Protocol, when referring to a foreign state not
Party to the 1987 Montreal Protocol, the London Amendments, or the
Copenhagen Amendments, means that the non-Party has been determined as
complying with the Protocol, as indicated in appendix C to this
subpart, by a meeting of the Parties as noted in the records of the
directorate of the United Nations Secretariat.
Consumption means the production plus imports minus exports of a
controlled substance (other than transhipments, or used controlled
substances).
Consumption allowances means the privileges granted by this subpart
to produce and import class I controlled substances; however,
consumption allowances may be used to produce class I controlled
substances only in conjunction with production allowances. A person's
consumption allowances are the total of the allowances obtained under
Secs. 82.6 and Sec. 82.7 and 82.10, as may be modified under Sec. 82.12
(transfer of allowances).
Control period means the period from January 1, 1992 through
December 31, 1992, and each twelve-month period from January 1 through
December 31, thereafter.
Controlled product means a product that contains a controlled
substance listed as a Class I, Group I or II substance in appendix A to
this subpart. Controlled products include, but are not limited to,
those products listed in appendix D to this subpart.
Controlled products belong to one or more of the following six
categories of products:
(1) Automobile and truck air conditioning units (whether
incorporated in vehicles or not);
(2) Domestic and commercial refrigeration and air-conditioning/heat
pump equipment (whether containing controlled substances as a
refrigerant and/or in insulating material of the product), e.g.
Refrigerators, Freezers, Dehumidifiers, Water coolers, Ice machines,
Air-conditioning and heat pump units;
(3) Aerosol products, except medical aerosols;
(4) Portable fire extinguishers;
(5) Insulation boards, panels and pipe covers;
(6) Pre-polymers.
Controlled substance means any substance listed in appendix A or
appendix B to this subpart, whether existing alone or in a mixture, but
excluding any such substance or mixture that is in a manufactured
product other than a container used for the transportation or storage
of the substance or mixture. Thus, any amount of a listed substance in
appendix A or appendix B to this subpart that is not part of a use
system containing the substance is a controlled substance. If a listed
substance or mixture must first be transferred from a bulk container to
another container, vessel, or piece of equipment in order to realize
its intended use, the listed substance or mixture is a ``controlled
substance.'' The inadvertent or coincidental creation of insignificant
quantities of a listed substance in appendix A or appendix B to this
subpart; during a chemical manufacturing process, resulting from
unreacted feedstock, from the listed substance's use as a process agent
present as a trace quantity in the chemical substance being
manufactured, or as an unintended byproduct of research and development
applications, is not deemed a controlled substance. Controlled
substances are divided into two classes, Class I in appendix A to this
subpart, and Class II listed in appendix B to this subpart. Class I
substances are further divided into seven groups, Group I, Group II,
Group III, Group IV, Group V, Group VI, and Group VII, as set forth in
appendix A to this subpart.
Copenhagen Amendments means the Montreal Protocol on Substances
That Deplete the Ozone Layer, as amended at the Fourth Meeting of the
Parties to the Montreal Protocol in Copenhagen in 1992.
Destruction means the expiration of a controlled substance to the
destruction efficiency actually achieved, unless considered completely
destroyed as defined in this section. Such destruction does not result
in a commercially useful end product and uses one of the following
controlled processes approved by the Parties to the Protocol:
(1) Liquid injection incineration;
(2) Reactor cracking;
(3) Gaseous/fume oxidation;
(4) Rotary kiln incineration; or
(5) Cement kiln.
Destruction Credits means those privileges that may be obtained
under Sec. 82.9 to produce controlled substances.
Essential-Uses means those uses of controlled substances designated
by the Parties to the Protocol to be necessary for the health and
safety of, or critical for the functioning of, society; and for which
there are no available technically and economically feasible
alternatives or substitutes that are acceptable from the standpoint of
environment and health. Beginning January 1, 2000 (January 1, 2002 for
methyl chloroform) the essential use designations for class I
substances must be made in accordance with the provisions of the Clean
Air Act Amendments of 1990.
Essential-Use Allowances means the privileges granted by
Sec. 82.4(r) to produce class I substances, effective January 1, 1996
until January 1, 2000, as determined by allocation decisions made by
the Parties to the Montreal Protocol and in accordance with the
restrictions delineated in the Clean Air Act Amendments of 1990.
Export means the transport of virgin or used controlled substances
from inside the United States or its territories to persons outside the
United States or its territories, excluding United States military
bases and ships for on-board use.
Exporter means the person who contracts to sell controlled
substances for export or transfers controlled substances to his
affiliate in another country.
Facility means any process equipment (e.g., reactor, distillation
column) used to convert raw materials or feedstock chemicals into
controlled substances or consume controlled substances in the
production of other chemicals.
Foreign state means an entity which is recognized as a sovereign
nation or country other than the United States of America.\1\
\1\Taiwan is not considered a foreign state.
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Foreign state not Party to or Non-Party means a foreign state that
has not deposited instruments of ratification, acceptance, or other
form of approval with the Directorate of the United Nations
Secretariat, evidencing the foreign state's ratification of the
provisions of the 1987 Montreal Protocol, the London Amendments, or of
the Copenhagen Amendments, as specified.
Heel means the amount of a controlled substance that remains in a
container after it is discharged or off-loaded (that is no more than
ten percent of the volume of the container) and that the person owning
or operating the container certifies the residual amount
[[Page 24988]] will remain in the container and be included in a future
shipment, or be recovered for transformation, destruction or a non-
emissive purpose.
Import means to land on, bring into, or introduce into, or attempt
to land on, bring into, or introduce into any place subject to the
jurisdiction of the United States whether or not such landing,
bringing, or introduction constitutes an importation within the meaning
of the customs laws of the United States, with the following
exemptions:
(1) Off-loading used or excess controlled substances or controlled
products from a ship during servicing,
(2) Bringing controlled substances into the U.S. from Mexico where
the controlled substance had been admitted into Mexico in bond and was
of U.S. origin, and
(3) Bringing a controlled product into the U.S. when transported in
a consignment of personal or household effects or in a similar non-
commercial situation normally exempted from U.S. Customs attention.
Importer means any person who imports a controlled substance or a
controlled product into the United States. ``Importer'' includes the
person primarily liable for the payment of any duties on the
merchandise or an authorized agent acting on his or her behalf. The
term also includes, as appropriate:
(1) The consignee;
(2) The importer of record;
(3) The actual owner; or
(4) The transferee, if the right to draw merchandise in a bonded
warehouse has been transferred.
London Amendments means the Montreal Protocol, as amended at the
Second Meeting of the Parties to the Montreal Protocol in London in
1990.
Montreal Protocol means the Montreal Protocol on Substances that
Deplete the Ozone Layer, a protocol to the Vienna Convention for the
Protection of the Ozone Layer, including adjustments adopted by the
Parties thereto and amendments that have entered into force.
1987 Montreal Protocol means the Montreal Protocol, as originally
adopted by the Parties in 1987.
Nations complying with, but not joining, the Protocol means any
nation listed in appendix C, annex 2, to this subpart.
Party means any foreign state that is listed in appendix C to this
subpart (pursuant to instruments of ratification, acceptance, or
approval deposited with the Depositary of the United Nations
Secretariat), as having ratified the specified control measure in
effect under the Montreal Protocol. Thus, for purposes of the trade
bans specified in Sec. 82.4(k)(2) pursuant to the London Amendments,
only those foreign states that are listed in appendix C to this subpart
as having ratified both the 1987 Montreal Protocol and the London
Amendments shall be deemed to be Parties.
Person means any individual or legal entity, including an
individual, corporation, partnership, association, state, municipality,
political subdivision of a state, Indian tribe; any agency, department,
or instrumentality of the United States; and any officer, agent, or
employee thereof.
Plant means one or more facilities at the same location owned by or
under common control of the same person.
Production means the manufacture of a controlled substance from any
raw material or feedstock chemical, but does not include:
(1) The manufacture of a controlled substance that is subsequently
transformed;
(2) The reuse or recycling of a controlled substance;
(3) Amounts that are destroyed by the approved technologies; or
(4) Amounts that are spilled or vented unintentionally.
Production allowances means the privileges granted by this subpart
to produce controlled substances; however, production allowances may be
used to produce controlled substances only in conjunction with
consumption allowances. A person's production allowances are the total
of the allowances obtained under Secs. 82.7, 82.5 and 82.9, and as may
be modified under Sec. 82.12 (transfer of allowances).
Transform means to use and entirely consume (except for trace
quantities) a controlled substance in the manufacture of other
chemicals for commercial purposes.
Transformation Credits means those privileges that may be obtained
under Sec. 82.9 to produce controlled substances.
Transhipment means the continuous shipment of a controlled
substance from a foreign state of origin through the United States, its
territories, to a second foreign state of final destination, as long as
the shipment does not enter into United States jurisdiction.
Unexpended Article 5 allowances means Article 5 allowances that
have not been used. At any time in any control period a person's
unexpended Article 5 allowances are the total of the level of Article 5
allowances the person has authorization under this subpart to hold at
that time for that control period, minus the level of controlled
substances that the person has produced in that control period until
that time.
Unexpended consumption allowances means consumption allowances that
have not been used. At any time in any control period a person's
unexpended consumption allowances are the total of the level of
consumption allowances the person has authorization under this subpart
to hold at that time for that control period, minus the level of
controlled substances that the person has produced or imported (not
including transhipments and used controlled substances) in that control
period until that time.
Unexpended destruction and transformation credits means destruction
and transformation credits that have not been used. At any time in any
control period a person's unexpended destruction and transformation
credits are the total of the level of destruction and transformation
credits the person has authorization under this subpart to hold at that
time for that control period, minus the level of controlled substances
that the person has produced or imported (not including transhipments
and used controlled substances) in that control period until that time.
Unexpended essential-use allowances means essential-use allowances
that have not been used. At any time in any control period a person's
unexpended essential-use allowances are the total of the level of
essential-use allowances the person has authorization under this
subpart to hold at that time for that control period, minus the level
of controlled substances that the person has produced or imported (not
including transhipments and used controlled substances) in that control
period until that time.
Unexpended production allowances means production allowances that
have not been used. At any time in any control period a person's
unexpended production allowances are the total of the level of
production allowances he has authorization under this subpart to hold
at that time for that control period, minus the level of controlled
substances that the person has produced in that control period until
that time.
Used controlled substances means controlled substances that have
been recovered from their intended use systems (may include controlled
substances that have been, or may be subsequently, recycled or
reclaimed).
Sec. 82.4 Prohibitions.
(a) Prior to January 1, 1996, for all Groups of class I controlled
substances, and prior to January 1, 2001, for class I, Group VI
controlled substances, no person may produce, at any time in any
control period, (except that are [[Page 24989]] transformed or
destroyed domestically or by a person of another Party) in excess of
the amount of unexpended production allowances or unexpended Article 5
allowances for that substance held by that person under the authority
of this subpart at that time for that control period. Every kilogram of
excess production constitutes a separate violation of this subpart.
(b) Effective January 1, 1996, for any class I, Group I, Group II,
Group III, Group IV, Group V, or Group VII controlled substances, no
person may produce, at any time in any control period, (except that are
transformed or destroyed domestically or by a person of another Party)
in excess of the amount of conferred unexpended essential-use
allowances or exemptions under this section, the amount of unexpended
Article 5 allowances as allocated under Sec. 82.9, or the amount of
conferred unexpended destruction and transformation credits as obtained
under Sec. 82.9 for that substance held by that person under the
authority of this subpart at that time for that control period. Every
kilogram of excess production constitutes a separate violation of this
subpart.
(c) Prior to January 1, 1996, for all Groups of class I controlled
substances, and prior to January 1, 2001, for class I, Group VI
controlled substances, no person may produce or (except for
transhipments, heels, or used controlled substances) import, at any
time in any control period, (except for controlled substances that are
transformed or destroyed) in excess of the amount of unexpended
consumption allowances held by that person under the authority of this
subpart at that time for that control period. Every kilogram of excess
production or importation (other than transhipments, heels or used
controlled substances) constitutes a separate violation of this
subpart.
(d) Effective January 1, 1996, for any class I, Group I, Group II,
Group III, Group IV, Group V, or Group VII controlled substances, no
person may import (except for transhipments, heels, or used controlled
substances), at any time in any control period, (except for controlled
substances that are transformed or destroyed) in excess of the amount
of unexpended essential-use allowances or exemption as allocated under
this section held by that person under the authority of this subpart at
that time for that control period. Every kilogram of excess importation
(other than transhipments, heels or used controlled substances)
constitutes a separate violation of this subpart.
(e) Effective January 1, 1996, no person may place an order for the
production or importation of the class I controlled substance, at any
time in any control period, in excess of the amount of unexpended
essential-use allowances, or unexpended destruction and transformation
credits, held by that person under the authority of this subpart at
that time for that control period. No person may place an order for the
production or importation of a class I controlled substance with
essential-use allowances or destruction and transformation credits, at
any time in any control period, other than for the class I controlled
substance(s) for which they received essential-use allowances as under
paragraph (r) of this section, or for which they were nominated for
that control period by the U.S. Government to the Protocol for an
essential-use exemption. Every kilogram of excess production or
importation ordered constitutes a separate violation of this subpart.
(f) Effective January 1, 1996, the U.S. total production and
importation of a class I controlled substance (except Group VI) as
allocated under this section for essential-use allowances and
exemptions, and as obtained under Sec. 82.9 for destruction and
transformation credits, may not, at any time, in any control period
until January 1, 2000, exceed the percent limitation of baseline
production in Appendix H of this subpart, as set forth in the Clean Air
Act Amendments of 1990. No person shall cause or contribute to the U.S.
exceedance of the national limit for that control period.
(g) In addition to total production permitted under paragraph (f)
of this section, effective January 1, 1996, for class I, Group I, Group
III, Group IV and Group V controlled substances, and effective January
1, 1995, for class I, Group II, a person may, at any time, in any
control period until January 1, 2000, produce 10 percent of baseline
production as apportioned under Sec. 82.5 for export to Article 5
countries. No person may, at any time, in any control period until
January 1, 2000, produce class I, Group I, Group II, Group III, Group
IV, and Group V controlled substances for export to Article 5 countries
in excess of the Article 5 allowances allocated under Sec. 82.9(a). No
person may sell in the U.S. any class I controlled substance produced
explicitly for export to an Article 5 country.
(h) Effective January 1, 1995, no person may import, at any time in
any control period, a heel of any class I controlled substance that is
greater than 10 percent of the volume of the container in excess of the
amount of unexpended consumption allowances, or unexpended destruction
and transformation credits held by that person under the authority of
this subpart at that time for that control period. Every kilogram of
excess importation constitutes a separate violation of this subpart.
(i) Effective January 1, 1995, no person may import, at any time in
any control period, a used class I controlled substance, without
complying with the petition procedures as under Sec. 82.13(g) (2) and
(3).
(j) Prior to January 1, 1996, for all Groups of class I controlled
substances, and prior to January 1, 2001, for class I, Group VI
controlled substances, a person may not use production allowances to
produce a quantity of a class I controlled substance unless that person
holds under the authority of this subpart at the same time consumption
allowances sufficient to cover that quantity of class I controlled
substances nor may a person use consumption allowances to produce a
quantity of class I controlled substances unless the person holds under
authority of this subpart at the same time production allowances
sufficient to cover that quantity of class I controlled substances.
However, prior to January 1, 1996, for all class I controlled
substances, and prior to January 1, 2001, for class I, Group VI
controlled substances, only consumption allowances are required to
import, with the exception of transhipments, heels and used controlled
substances. Effective January 1, 1996, for all Groups of class I
controlled substances, except Group VI, only essential-use allowances
or exemptions are required to import class I controlled substances,
with the exception of transhipments, heels and used controlled
substances.
(k) Every kilogram of a controlled substance, and every controlled
product, imported or exported in contravention of this subpart
constitutes a separate violation of this subpart, thus no person may:
(l) Import or export any quantity of a controlled substance listed
in Class I, Group I or Group II, in Appendix A to this subpart from or
to any foreign state not listed as a Party to the 1987 Montreal
Protocol unless that foreign state is complying with the 1987 Montreal
Protocol (See Appendix C, Annex 2 of this subpart);
(2) Import or export any quantity of a controlled substance listed
in Class I, Group III, Group IV or Group V, in Appendix A to this
subpart, from or to any foreign state not Party to the London
Amendments (as noted in appendix C, Annex l, to this subpart), unless
that foreign state is complying [[Page 24990]] with the London
Amendments (as noted in appendix C, Annex 2, to this subpart); or
(3) Import a controlled product, as noted in appendix D, Annex 1 to
this subpart, from any foreign state not Party to the 1987 Montreal
Protocol (as noted in appendix C, Annex 1, to this subpart), unless
that foreign state is complying with the Protocol (as noted in appendix
C, Annex 2, to this subpart).
(l) Effective January 1, 2003, no person may produce HCFC-141b
except in a process resulting in its transformation, use in a process
resulting in destruction, or for exceptions stated in paragraph (s) of
this section.
(m) Effective January 1, 2003, no person may import HCFC-141b
except for use in a process resulting in its transformation, use in a
process resulting in destruction, or for exceptions stated in paragraph
(s) of this section.
(n) Effective January 1, 2010, no person may produce or consume (as
defined under Sec. 82.3 HCFC-22 or HCFC-142b for any purpose other than
for use in a process resulting in their transformation, use in a
process resulting in their destruction, for use in equipment
manufactured prior to January 1, 2010, or for exceptions stated in
paragraph (s) of this section in excess of baseline allowances
allocated in Sec. 82.5(h) and Sec. 82.6(h).
(o) Effective January 1, 2020, no person may produce or consume (as
defined under Sec. 82.3 of this subpart) HCFC-22 or HCFC-142b for any
purpose other than for use in a process resulting in their
transformation, use in a process resulting in their destruction or for
exceptions stated in paragraph (s) of this section.
(p) Effective January 1, 2015, no person may produce or consume (as
under defined under Sec. 82.3) class II substances not previously
controlled, for any purpose other than for use in a process resulting
in its transformation, use in a process resulting in their destruction,
as a refrigerant in equipment manufactured before January 1, 2020, or
for exceptions stated in paragraph (s) of this section, in excess of
baseline production and consumption levels defined in Secs. 82.5(h) and
82.6(h).
(q) Effective January 1, 2030, no person may produce or consume
class II substances, for any purpose other than for use in a process
resulting in their transformation, use in a process resulting in their
destruction, or for exceptions stated in paragraph (s) of this section.
(r) Effective January 1, 1996, essential-use allowances are
apportioned to a person for the exempted production or importation of
specified class I (except class I, Group VI) controlled substances.
(1) Essential-uses for the production or importation of controlled
substances as agreed to by the Parties to the Protocol and subject to
the periodic revision of the Parties are:
(i) Metered Dose Inhalers--aerosols.
(ii) Space Shuttle--solvents.
(iii) Laboratory and Analytical Applications (see Appendix G of
this subpart).
(2) Persons in the following list are allocated essential-use
allowances or exemptions for quantities of a specific class I
controlled substance for a specific essential-use (the Administrator
reserves the right to revise the allocations based on future decisions
of the Parties).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Company Year Chemical Quantity (metric tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Metered Dose Inhalers--Aerosols
--------------------------------------------------------------------------------------------------------------------------------------------------------
Members of the International Pharmaceutical & Aerosol 1996 CFC-11..................................... 749.8.
Consortium (IPAC)1.
Abbot Laboratories..................................... ........... CFC-12 .................................... 2353.2.
Armstrong.............................................. ........... CFC-114.................................... 314.1.
Boehringer Ingelheim................................... 1997 CFC-11 .................................... 658.3.
Glaxo.................................................. ........... CFC-12 .................................... 2166.5.
3M..................................................... ........... CFC-114.................................... 311.4.
Rhone Poulenc Rorer
Schering Corporation
Miles Inc.................................................. 1996 CFC-12 .................................... 5.1.
CFC-114.................................... 10.2.
1997 CFC-12..................................... 5.2.
CFC-114.................................... 10.5.
Sankofi Winthrop, Inc...................................... 1996 CFC-12..................................... 5.0.
CFC-114.................................... 19.4.
1997 CFC-12..................................... 5.3.
CFC-114.................................... 21.2.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(ii) Space Shuttle--Solvent
--------------------------------------------------------------------------------------------------------------------------------------------------------
NASA/Thiokol............................................... 1996 Methyl Chloroform.......................... 56.8.
1997 Methyl Chloroform.......................... 56.8.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(iii) Laboratory and Analytical Applications
--------------------------------------------------------------------------------------------------------------------------------------------------------
Global Exemption........................................... 1996 Class I (except Group IV).................. No quantity specified.
1997 ......do................................... Do.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\IPAC consolidated requests for an essential use exemption to be nominated to the Protocol as an agent of its member companies for administrative
convenience. By means of a confidential letter to each of the companies listed above, EPA will allocate essential-use allowances separately to each
company in the amount requested by it for the nomination.
(s) The following exemptions apply to the production and
consumption restrictions under paragraphs (l), (m), (n), (o), (p) and
(q) of this section:
(1) Medical Devices [Reserved]
(2) Exports to developing countries [Reserved] [[Page 24991]]
Sec. 82.5 Apportionment of baseline production allowances.
Persons who produced controlled substances in Group I or Group II
in 1986 are apportioned baseline production allowances as set forth in
paragraphs (a) and (b) of this section. Persons who produced controlled
substances in Group III, IV, or V in 1989 are apportioned baseline
production allowances as set forth in paragraphs (c), (d), and (e) of
this section. Persons who produced controlled substances in Group VI
and VII in 1991 are apportioned baseline allowances as set forth in
paragraphs (f) and (g) of this section.
Allowances
Controlled substance Person (kg)
(a) For Group I controlled substances:
CFC-11................... Allied-Signal, Inc........... 23,082,358
E.I. DuPont de Nemours & Co.. 33,830,000
Elf Atochem, N.A............. 21,821,500
CFC-12................... Laroche Chemicals............ 12,856,364
Allied-Signal, Inc........... 35,699,776
E.I. DuPont de Nemours & Co.. 64,849,000
Elf Atochem, N.A............. 31,089,807
CFC-113.................. Laroche Chemicals............ 15,330,909
Allied-Signal, Inc........... 21,788,896
CFC-114.................. E.I. DuPont de Nemours & Co.. 58,553,000
Allied-Signal, Inc........... 1,488,569
CFC-115.................. E.I. DuPont de Nemours & Co.. 4,194,000
E.I. DuPont de Nemours & Co.. 4,176,000
(b) For Group II controlled substances:
Halon-1211............... Great Lakes Chemical Corp.... 826,487
ICI Americas, Inc............ 2,135,484
Halon-1301............... E.I. DuPont de Nemours & Co.. 3,220,000
Great Lakes Chemical Corp.... 1,766,850
Halon-2402
(c) For Group III controlled substances:
CFC-13................... Allied-Signal, Inc........... 127,125
E.I. DuPont de Nemours & Co.. 187,831
Elf Atochem, N.A............. 3,992
Great Lakes Chemical Corp.... 56,381
Laroche Chemicals............ 29,025
CFC-111
CFC-112
CFC-211 E.I. DuPont de Nemours & Co.. 11
CFC-212.................. E.I. DuPont de Nemours & Co.. 11
CFC-213.................. E.I. DuPont de Nemours & Co.. 11
CFC-214.................. E.I. DuPont de Nemours & Co.. 11
CFC-215.................. E.I. DuPont de Nemours & Co.. 511
Halocarbon Products Corp..... 1,270
CFC-216.................. E.I. DuPont de Nemours & Co.. 170,574
CFC-217.................. E.I. DuPont de Nemours & Co.. 511
(d) For Group IV controlled substances:
CCl4..................... Akzo Chemicals, Inc.......... 7,873,615
Degussa Corporation.......... 26,546
Dow Chemical Company, USA.... 18,987,747
E.I. DuPont de Nemours & Co.. 9,099
Hanlin Chemicals-WV, Inc..... 219,616
ICI Americas, Inc............ 853,714
Occidental Chemical Corp..... 1,059,358
Vulcan Chemicals............. 21,931,987
(e) For Group V controlled substances:
Methyl Chloroform........ Dow Chemical Company, USA.... 168,030,117
E.I. DuPont de Nemours & Co.. 2
PPG Industries, Inc.......... 57,450,719
Vulcan Chemicals............. 89,689,064
(f) For Group VI controlled substances:
Methyl Bromide........... Great Lakes Chemical 19,945,788
Corporation.
Ethyl Corporation............ 8,233,894
(g) For Group VII controlled substances:
HBFC 22B1-1.............. Great Lakes Chemical 46,211
Corporation.
(h) For class II controlled substances: [Reserved]
[[Page 24992]]
Sec. 82.6 Apportionment of baseline consumption allowances.
Persons who produced, imported, or produced and imported controlled
substances in Group I or Group II in 1986 are apportioned chemical-
specific baseline consumption allowances as set forth in paragraphs (a)
and (b) of this section. Persons who produced, imported, or produced
an
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