EPA Issues Penalty Associated with Violation of R&D Exemption
In September 2018, the U.S. Environmental Protection Agency (EPA) issued a consent agreement with Chevron USA, Inc. (Chevron) related to an alleged violation of the Toxic Substances Control Act (TSCA).
EPA’s issuance of a consent agreement for the alleged TSCA violation is not especially newsworthy. Neither is the agreed upon penalty for the violation, which could be considered minor based on the penalty provisions allowed under TSCA. What is newsworthy here is that the alleged violation, technically three as the violation occurred on three separate days, was related to the research and development (R&D) exemption. Specifically, EPA alleged that Chevron did not appropriately label chemicals that it had distributed to other companies for R&D purposes. In our experience, the R&D exemption under TSCA is seldom the subject of enforcement scrutiny. This may be changing.
The R&D exemption is a critical aspect of TSCA and it offers many companies significant flexibility to research new chemical innovations. The exemption is self-implementing and thus does not require pre-approval by or submissions to EPA. Nonetheless, there are specific restrictions and recordkeeping requirements associated with reliance on that exemption. The consent agreement at issue here confirms that EPA will hold companies accountable to these requirements. The enforcement action is an important reminder to all entities relying upon the R&D exemption to ensure that they comply strictly with each element of the exemption requirements as identified under TSCA Section 5(h)(3).
Companies relying on the R&D exemption for new chemical development may wish to review internal files and processes to ensure compliance, as EPA has shown its intent to pursue violations and associated penalties for non-compliance instances.