Chemical Industry Regulatory Update - November 2019

A Newsletter from The Adhesive and Sealant Council and Thompson Hine LLP

Date: November 10, 2019

The chemical industry is subject to complex and ever-evolving laws and regulations. New standards governing the production and use of chemicals are implemented every year worldwide, and existing laws and regulations are constantly changing to keep pace with new information and scientific advancements. Chemical Industry Regulatory Update provides a monthly digest of recent legislative and regulatory developments and related industry news.

California’s Proposition 65 Effects Changes in Labeling Requirements

Devin A. Barry

While the California Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code §25249.5 et seq.), otherwise known as Proposition 65, has been around for over 30 years, changes in the law’s labeling requirements in August 2018 and new efforts by private parties to enforce the law (and recover attorney fees) are forcing many companies to revisit their compliance strategies.

Among other requirements, Proposition 65 prohibits selling consumer products in California that contain a Proposition 65 listed chemical unless the product is labeled with a “clear and reasonable” warning, or it contains an amount of the chemical that is below the law’s safe harbor levels. In most instances, businesses elect to label their products as a conservative measure, which is why nearly every exposed surface in California contains a warning that the product “may cause cancer or reproductive harm.”

Proposition 65’s most challenging aspect is that it authorizes private parties to “enforce” these requirements and recover penalties and attorney fees. This has led to “bounty hunter” attorneys purchasing products on behalf of interest groups, testing the products for listed chemicals, sending manufacturers, distributors and retailers letters demanding the products be labeled or reformulated, and seeking attorney fees and penalties. In most cases, parties elect to informally settle these demands rather than engaging in expensive litigation on complex exposure issues.

In August 2018, new Proposition 65 regulations became effective that revised the “clear and reasonable” labeling requirements. The revised regulations slightly altered the required warning language, added additional graphic requirements and tailored labeling requirements depending on the product and method of sale. The new regulations have led to confusion among businesses regarding appropriate labels and paved the way for additional bounty hunter actions alleging improper labeling under current regulations.

Recently, bounty hunters have adopted a new strategy of testing consumer product packaging as well as the product itself. In some instances, the products have undergone extensive testing to establish that no labels are required or that they are otherwise labeled appropriately. Bounty hunters maintain that this testing or labeling is not sufficient to address additional exposures that may be created by the packaging itself. In these instances, a business will need to determine whether it is worthwhile to challenge the assertion that the packaging is a consumer product subject to the labeling requirements or should be subject to different exposure assumptions.

In the meantime, the comical situation of a warning label on a warning label on a warning label seems to be a little closer to reality.

ITC Electronic Portal Open for MTB Petitions

David M. Schwartz & Scott E. Diamond*

On October 11, 2019, the U.S. International Trade Commission (ITC) opened its electronic portal for petitions seeking temporary import duty suspensions and reductions in accordance with the American Manufacturing Competitiveness Act of 2016 (AMCA). The ITC will accept these petitions until December 10, 2019. The AMCA permits Miscellaneous Tariff Bill (MTB) petitions to be filed by any member of the public who is a likely beneficiary of the duty suspension or reduction or by a legal representative. A successful MTB petition will cover ”noncontroversial” or “noncompetitive” product criteria, including:

  • No domestic producer objects to the import duty elimination or reduction for the product.
  • The import duty elimination or reduction for the product is determined to be in the interest of U.S. “downstream” producers and consumers.
  • The import duty elimination or reduction for the product must not result in the U.S. Department of the Treasury losing more than $500,000 in annual revenue.

A separate petition must be filed for each product during the petition process period. After the ITC evaluates whether the petitions meet certain statutory requirements, there will be a notice and public comment period to determine if the individual requests threaten domestic producers. The ITC will then submit preliminary and final reports to the House Committee on Ways and Means and the Senate Committee on Finance, which will utilize the findings to develop an omnibus MTB for congressional consideration in early 2020.

According to the ITC, the key considerations are:

  • Petitioners must use the portal to file their petitions; no other filing method will be accepted.
  • Petitioners must file their requests no later than 5:15 p.m. on December 10, 2019; no late filings will be accepted.
  • Before attempting to file a petition, petitioners should review 19 CFR 220, Process for Consideration of Petitions for Duty Suspensions and Reductions, as well as the ITC’s Handbook on MTB Filing Procedures and Before You File.
  • Petitioners should have all required information and documentation readily available before beginning the filing process; the portal system does not allow users to save their work and return to it later.

Petitioners can submit questions about the MTB process to mtbinfo@usitc.gov. David Schwartz and Scott Diamond of Thompson Hine’s International Trade group are also available to offer guidance and assistance with petitions.

*Not licensed to practice law

NSC Issues Position/Policy Statement on Cannabis Use

M. Scott Young

On October 21, 2019, the National Safety Council (NSC) issued a Position/Policy Statement opining that it is unsafe to be under the influence of cannabis while working in a safety sensitive position due to the increased risk of injury or death to the operator and others. According to the NSC, while research clearly shows that cannabis impacts psychomotor skills and cognitive ability, a user’s degree of impairment is not directly correlated to the amount of delta-9-tetrahydrocannabinol (THC), the primary active component in cannabis, found in the body. Therefore, the NSC believes there is no level of cannabis use that is safe or acceptable for employees who work in safety sensitive positions. It also noted a study reported by the National Institute on Drug Abuse, which indicated that employees who tested positive for cannabis had 55% more industrial incidents, 85% more injuries and 75% greater absenteeism than those who tested negative.

Cannabis remains federally illegal under the Controlled Substances Act (CSA) (21 U.S.C. § 811), which does not recognize the difference between medical and recreational use of cannabis. Under the CSA, cannabis is classified as a Schedule 1 drug, meaning that the federal government views it as having no medical value and high abuse potential. Notwithstanding, 33 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands have approved medical marijuana/cannabis programs. Twenty-three states and the District of Columbia have decriminalized marijuana under state or local law, and 10 states and the District of Columbia have legalized marijuana under state or local law, subject to limits, for adult recreational use. Employers should be cautious about indicating any tolerance of marijuana use by any employee who works in a safety sensitive position, or otherwise, in their employee drug use policies.

CMS Releases Drug Coupon Guidance for Group Health Plans

Mark G. Kroboth

The window is closing on the ability of employers who sponsor group health plans to take advantage of a rule requiring them to exclude prescription drug costs covered by a manufacturer’s coupon from a participant’s accumulated deductible. On April 25, 2019, the Centers for Medicate & Medicaid Services (CMS) suggested that for plan years beginning on or after January 1, 2020, group health plans are not required to count coupons used by plan participants to purchase brand-name prescription drugs toward the plan’s annual out-of-pocket maximum when there is no therapeutically equivalent generic drug available.

However, high deductible health plan (HDHP) rules specify that a qualifying HDHP may not pay claims (other than claims for preventive care services) until the HDHP’s annual deductible has been satisfied. Specifically, in 2004, the IRS issued guidance stating that manufacturers’ discounts must be disregarded when calculating whether the minimum annual deductible under an HDHP has been satisfied. A group health plan that counts the value of a brand-name drug coupon toward its out-of-pocket maximum, therefore, potentially runs afoul of this IRS guidance.

As these two pieces of guidance seem contradictory, on August 26, 2019, the Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) issued guidance indicating that no enforcement action will be initiated in 2020 if a group health plan excludes the value of drug manufacturers’ coupons from the annual out-of-pocket maximum, even in situations where there is no therapeutically equivalent generic drug available. Further, the guidance notes that the Departments intend to undertake rulemaking regarding the 2020 NBPP Final Rule and its possible implications for 2021. For more information, see FAQs About Affordable Care Act Implementation Part 40.

STB Issues Demurrage and Storage Charge Proposals

Jason D. Tutrone

Over the past year, railroad practice and rule changes associated with the pickup and delivery of railcars have caused shippers and receivers to incur millions of dollars in fees and raised significant fairness concerns. Shippers and receivers impacted by these changes should have on their radar three measures recently proposed by the Surface Transportation Board (STB), which regulates rail transportation.

First, the STB has proposed a policy that will likely provide shippers and receivers with leverage when addressing demurrage charges (fees for detaining railcars beyond a specified period) and storage charges (fees for occupying railroad track with railcars beyond a specified period). The policy states that demurrage and storage rules and charges are unreasonable when they do not incentivize shippers and receivers to use rail assets efficiently. It also indicates that these rules and charges are likely unreasonable if they do not promote transparency and mutual accountability by both railroads and rail users.

Second, the STB has proposed rules that will require railroads to include in demurrage and storage invoices information necessary to validate the accuracy of the charges, determine how the charges can be avoided in the future, and allocate responsibility between the shipper and receiver. These rules also require a railroad to directly bill the shipper if the shipper and receiver (a warehouse or similar logistics intermediary) agree to the arrangement and notify the railroad.

Third, the STB is clarifying that these policies and rules will apply to certain traffic and commodities that it has broadly exempted from its regulation.

These proposals will likely help deter unreasonable demurrage and storage practices and enable rail users to engage railroads in seeking commercial solutions to demurrage and storage issues.

*****

For more information about this newsletter or its contents, please contact the editor, William J. Hubbard, or any of the authors.

Chemical Industry Regulatory Update is compiled by Thompson Hine lawyers on behalf of The Adhesive and Sealant Council. It should not be construed as legal advice, and the views and opinions expressed herein are those of the authors and do not necessarily reflect those of the ASC or its members.