Chemical Industry Regulatory Update – October 2019

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

Date: October 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.

Shippers to Obtain More Accessible Process for Rail Rate Disputes

Jason D. Tutrone

Chemical companies who use rail transportation are on the verge of gaining additional access to relief from unreasonable rail freight rates. Many chemical companies who use rail transportation have long complained of unreasonably high rates. Although they have the right under federal law to challenge these rates before the Surface Transportation Board, bringing a rate challenge has become too costly and time-consuming to be a practical option for many of them, especially if they do not have large traffic volumes. To address this issue, the Board is proposing significant reforms to its rate review process and is seeking public input on its proposals.

On September 12, 2019, the Board issued two proposed rules that would reform its current rail freight rate review process to make it more streamlined and accessible. It also announced a hearing to explore policy changes that would make certain rate-related remedies available to shippers where a railroad earns adequate revenues.

Final-Offer Rate Review

The Board proposed a rule establishing a final-offer process for challenging the reasonableness of railroad rates in smaller cases. Under this process, the complainant and defendant each would submit a final offer of a reasonable rate under an expedited procedural schedule and the Board would decide a case by selecting the best offer, without making any modifications. The Board would make its selection based upon which offer it considers best reflects national rail transportation policies, statutory requirements and basic economic principles.

The Board has invited interested parties to submit comments on the proposed final-offer rule by November 12, 2019, and reply comments by January 10, 2020.

Market Dominance Streamlined Approach

The Board also proposed a rule that would streamline the market dominance component of rate cases. To challenge a rate, a shipper must show that the railroad has market dominance (i.e., a lack of effective competition) over the traffic to which the rates apply. Over time, market dominance presentations have grown costly and time-consuming, resulting in a significant burden to rate case litigants. The proposed rule allows a complainant to establish a rebuttable presumption of market dominance by demonstrating certain factors. It also limits the size of market dominance submissions.

The Board has invited interested parties to submit comments on the proposed market dominance rule by November 12, 2019, and reply comments by January 10, 2020.

Revenue Adequacy

The Board has announced a December 12, 2019 hearing to receive input on policy changes related to the determination that a carrier earns adequate revenues and the rate-related remedies available when a carrier is revenue adequate. The Board has long held that a railroad’s revenue adequacy operates as a constraint on its rates.

Persons wishing to speak at the hearing should file a notice of intent to participate no later than October 31, 2019. Written testimony and written submissions must be filed by November 26, 2019.

FMC Proposes Guidance About Unreasonable Ocean Demurrage and Detention Practices

Jason D. Tutrone

In recent years, importers and exporters have complained that ocean transportation providers have been unfairly assessing millions in fees when the providers or port congestion prevent the timely pick up or return of cargo containers at U.S. ports. Recent proposed guidance from the Federal Maritime Commission may help importers and exports avoid being unfairly assessed these fees.

On September 13, 2019, the Federal Maritime Commission proposed an interpretive rule clarifying that demurrage and detention rules and practices are less likely to be reasonable the less they incentivize the movement of freight. Demurrage and detention refers to the practice of assessing charges when a freight container occupies space at a port or terminal beyond a certain period or has not been returned to a port or terminal within a certain period, respectively. Historically, the purpose of these charges has been to incentivize cargo movement and the productive use of freight containers and port or terminal property. The Commission seeks comments on the proposed rule, which are due by October 31, 2019.

Based on the guidance in the proposed rule, demurrage and detention charges that apply when a container is not actually available for pickup during free time, an empty container cannot be timely returned because the marine terminal refuses it or the return location is changed without sufficient notice, or a cargo interest has not been given adequate notice of cargo availability are likely unreasonable. Additionally, demurrage and detention practices would likely be unreasonable under the rule if the policies implementing them are inaccessible, do not clearly convey dispute resolution procedures, or do not use transparent terminology.

The proposed rule is the result of a nationwide investigation the Commission initiated in response to a petition by the Coalition for Fair Port Practices, a group of trade associations representing importers and exporters, draymen, freight forwarders, and customs brokers. In the petition, the Coalition identified concerns about a lack of clear demurrage and detention policies, the assessment of charges when delays in picking up and returning containers are beyond the shipper’s or drayman’s control, poor communication regarding container availability, and inadequate processes for disputing charges.

DOD Publishes Draft Cybersecurity Maturity Model Certification Model Framework

Joseph R. Berger

Chemical industry companies are frequently part of the Department of Defense supply chain, where new cybersecurity requirements will apply next year. The DOD recently released new information on its Cybersecurity Maturity Model Certification (CMMC) program, publishing a draft CMMC model framework for public comment and releasing the latest CMMC overview briefing. The CMMC enforcement mechanism will build upon, and significantly add to, the current DOD cybersecurity requirements, which include DFARS 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, and the incorporated requirements developed by the National Institute of Standards and Technology. CMMC will become a requirement in DOD contracts next year and will apply throughout the DOD supply chain.

The Chemical Sector, like the Defense Industrial Base Sector, is one of 16 critical infrastructure sectors whose “assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof.” Moreover, the chemical industry, like the defense industry, is a potential target of sophisticated cyberattacks, and is therefore a top cybersecurity priority for the U.S. government. As stated by the Department of Homeland Security, “Securing our Nation’s chemical sector infrastructure is crucial to our economic prosperity, national security, and public health and safety.” See also DHS’s Chemical Security page.

Guidance and information specific to the Chemical Sector is available on the website of the DHS Cybersecurity and Infrastructure Agency (CISA). DHS, as the Chemical Sector’s designated Sector-Specific Agency, has worked with the Chemical Sector Council Partners, the Chemical Sector Coordinating Council and Government Coordinating Council, to develop the Chemical Sector Cybersecurity Framework Implementation Guidance specifically for Chemical Sector owners and operators. For additional resources, see DHS’s Chemical Sector Publications.

For more about DOD’s draft CMMC model framework, including detailed new cybersecurity requirements, please see our recent Government Contracts Update, "DOD’s Cybersecurity Maturity Model Certification and Draft CMMC Model Framework."

DOL Overtime Rule: New Minimum Salary Level for Exempt Employees

Heather M. Muzumdar

Employers, are you ready for the new overtime rule? The minimum salary for exempt employees under the Fair Labor Standards Act is increasing to $35,568 effective January 1, 2020, pursuant to the new rule issued by the Department of Labor (DOL) on September 24, 2019. Organizations that have employees classified as exempt from overtime who are not currently making at least $35,568 in salary per year should begin planning for the changes necessary to maintain exempt status or be prepared to start paying those newly non-exempt employees overtime beginning on the effective date. The DOL anticipates that approximately 1.3 million workers will be eligible for overtime pay as a result of the higher minimum salary requirement. For more information, including recommended action steps to prepare for this new rule, see our Labor & Employment @lert, "Department of Labor Issues Final Overtime Rule."

Ohio Governor Orders Analysis of PFAS in Drinking Water

Joel D. Eagle

On September 27, 2019, Ohio Governor Mike DeWine provided an initial roadmap for the state of Ohio’s response to the growing national health concerns related to per- and polyfluoroalkyl substances (PFAS) in drinking water. Both before and since U.S. EPA issued its PFAS Action Plan on February 14, 2019, many states have been taking their own regulatory and legislative action to address PFAS, including establishing non-binding health advisory levels, binding drinking water maximum contaminant levels and remediation cleanup level guidance, as well as listing certain PFAS compounds as hazardous substances.

DeWine has directed Ohio EPA and the Ohio Department of Health to develop an action plan by December 1, 2019, to sample public and private water systems that are near known PFAS contaminated sites, which are commonly associated with historical manufacturing facilities and public and private firefighting training facilities that used aqueous film-forming foam (AFFF) containing PFAS. PFAS have been detected in drinking water supplies and human health samples throughout the country, and although toxicity evaluations of most of the thousands of PFAS compounds are not fully developed, many states and the federal government are taking preemptive action to address these “forever chemicals.” For more information, see the governor’s press release or our Environmental Update, "Governor DeWine Orders State Agencies to Develop PFAS Action Plan for Drinking Water Sampling in Ohio."

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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.