Category: Regulatory

EPA Proposes Updates Intended to Strengthen the Safer Choice Standard

The U.S. Environmental Protection Agency (EPA) announced proposed updates to the Safer Choice Standard on November 13, 2023. According to the November 14, 2023, notice, the proposed changes include a name change to the Safer Choice and Design for the Environment (DfE) Standard (Standard), an update to the packaging criteria, the addition of a Safer Choice certification for cleaning service providers, a provision allowing for preterm partnership termination under exceptional circumstances, and the addition of several product and functional use class requirements. 88 Fed. Reg. 78017. EPA notes that Safer Choice helps consumers, businesses, and purchasers find products that perform and contain ingredients that are safer for human health and the environment and states that DfE is a similar program currently used by EPA to help consumers and commercial buyers identify antimicrobial products that meet the health and safety standards of the typical pesticide registration process required by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), as well as other EPA DfE criteria. EPA will hold a webinar on December 19, 2023, on its proposed plans for updating the Standard. After EPA’s presentation, there will be time for a question and answer period. EPA asks that comments be submitted in writing after the webinar. Comments on the proposed changes are due January 16, 2024. EPA has posted on its website the proposed changes to the Standard, as well as a “preamble” explaining the proposed changes.

According to the preamble, when EPA adopts the revisions, it expects to make them effective “upon the finalization and public notification.” EPA states that candidate partners would need to comply with the updated Standard prior to becoming program partners and that existing program partners would be expected to comply with the revisions within the year following their next partnership renewal.

EPA notes that many of its proposed revisions are in the nature of technical amendments. EPA states that in some instances, it also deleted text from the Standard to avoid redundancy with program criteria expressed elsewhere. EPA proposes to introduce the following topics to highlight their importance and specifically requests comments on them:

Entering or Exiting a Product Class (Section 3.4)

EPA has added detail to the Standard on its process for entering and exiting product classes (i.e., a category of products that have similar functions). EPA states that it may solicit public input before entering or exiting a product class. According to EPA, for entering a new product class, it will consider various factors (e.g., product type, functionalities, and improvements to health and the environment) and determine whether entering the new product class will advance the goals of the Safer Choice and DfE programs.

EPA notes that on “rare occasions,” newly available information may indicate that a class of products poses unanticipated serious adverse health or environmental effects. In such circumstances, EPA may find it necessary to end any partnerships and discontinue certification of products in the class, at least until EPA can understand the cause of the adverse effects and, if possible, develop criteria to address them. EPA proposes to add provisions to address these situations in Section 3.4.2.1 Exceptional circumstances affecting health or the environment. The preamble states that “[i]n general, if EPA decides to exit a product class, EPA will allow a period of time for partners to cease use of the product label or logo.”

On-Site Audit (Section 3.6.2)

EPA currently requires audits on a yearly basis throughout the partnership, including one on-site audit in the first or second year of the partnership cycle. To ensure that partners are formulating certified products in compliance with Safer Choice criteria, EPA proposes, in Section 3.6.2 On-site audit, that the first audit for a new partner must be an on-site audit.

Information to Help Reduce Carbon-Based Energy Consumption (Section 4.2.3.1)

EPA proposes to update the Standard to encourage and recognize product manufacturers’ efforts to incorporate energy-saving technologies and approaches. This optional provision in Section 4.2.3.1 Information to help reduce carbon-based energy consumption lists actions manufacturers may implement. Partners may be recognized for demonstrating outstanding leadership and innovation in sustainable energy use.

Primary Packaging (Section 4.2.5)

To respond to increased demand for more sustainable practices, EPA proposes to update its packaging criteria to ensure that certified products also use safer, more sustainable packaging. According to the preamble, the revised requirements are informed by common themes across existing third-party packaging sustainability schemes. EPA notes that the proposed specific recycled content levels “do not necessarily come from existing schemes but, based on research, are understood to be leadership but achievable levels.”

EPA proposes to add requirements to Section 4.2.5 Primary packaging on recyclability and recycled content, label compatibility, and primary packaging ingredients. Specifically, EPA proposes to require that primary packaging either be recyclable and contain a minimum level of post-consumer recycled content or be designed to be reused. Additionally, EPA proposes to require that product labels associated with primary packaging not affect recyclability and that proper recycling method(s) be clearly indicated on the packaging.

EPA also proposes to add per- and polyfluoroalkyl substances (PFAS) and all bisphenol-based chemicals to its list of ingredients that may not be intentionally introduced into primary packaging material. EPA states that it will explicitly list the four heavy metals (cadmium, lead, mercury, and hexavalent chromium) currently covered by the Standard as ingredients that may not be intentionally introduced into primary packaging material.

EPA seeks stakeholder comment on all aspects of the primary packaging requirements, including, but not limited to:

  • Are the proposed minimum post-consumer recycled content levels feasible for primary packaging made of plastic, glass, metal, fiber (e.g., paper or cardboard), or other sustainable materials? If not, what levels would be feasible? How should EPA consider multi-material packaging?
  • Is it reasonable for EPA to require that the entire product primary packaging be recyclable? If not, what is an appropriate minimum percent of recyclable material?
  • Is it reasonable for EPA to require both a minimum recycled content and package recyclability? What are the challenges to achieving both simultaneously?
  • In developing its final criteria, should EPA consider concerns for contaminants that may be intentionally added and/or unintentionally introduced into recycled materials? At what point should testing occur?

Yellow Triangle Content Limit (Section 4.2.8)

To enhance transparency, EPA is updating the Standard to reflect the ongoing practice of allowing the use of yellow-triangle designated chemicals from the Safer Chemical Ingredients List (SCIL) when they do not cumulatively exceed ten percent in the product as sold.

Ingredient Combinations Causing Adverse Effects (Section 4.5)

According to EPA, certain ingredients, while independently meeting Safer Choice ingredient criteria, may cause adverse effects when combined. EPA states that it does not allow ingredient combinations known to cause negative synergistic effects and is updating the Standard to reflect this ongoing practice in Section 4.5 Ingredient Combinations Causing Adverse Effects.

Products in Solid or Particulate-Generating Form (Section 4.6)

EPA proposes to add Section 4.6 Products in Solid or Particulate-Generating Form to require certain information from manufacturers. EPA proposes to require that, upon request, manufacturers of products in particulate-generating or solid form provide information to determine that the product does not contain or generate a substantial portion of particles that are respirable (ten microns or less).

Special Product Classes (Section 4.7)

EPA states that over the years, to extend the reach of the program into product categories where manufacturers sought to lead the market with safer ingredients, it has developed policy criteria and guidance as a supplement to the broader Standard. According to EPA, these policies have been distributed widely and posted on the Safer Choice website. EPA now proposes to add links to the Safer Choice website, where criteria can be found for the following product classes: Section 4.7.1 Ice-melt products, Section 4.7.2 Inorganic- and mineral-based products, Section 4.7.3 Microorganism-based products, and Section 4.7.6 Marine lubricants. EPA proposes to provide a brief description of each product class in the Standard and to refer readers to the Safer Choice website for the full criteria.

Products Intended for Use on Pets (Section 4.7.5)

EPA is adding a product class for non-pesticidal and non-drug pet care products in Section 4.7.5 Products intended for use on pets. EPA states that it will evaluate chemicals used in products intended for use on pets for human and pet health, in addition to environmental toxicity and fate. EPA will not allow ingredients in pet care products that are severely irritating or corrosive to skin or eyes unless whole product testing demonstrates low concern for irritation. EPA will also not allow Globally Harmonized System of Classification and Labeling of Chemicals (GHS) listed sensitizers in certified pet care products (unless the manufacturer provides whole product testing demonstrating low concern for sensitization or a rationale based on functional necessity that also addresses sensitization) and will require that ingredients meet direct release criteria, with the exception of fragrance materials.

EPA requests comment on the feasibility of the requirements for direct release, irritation, and sensitization for pet care products.

Direct Release Products (Section 4.8.1)

According to EPA, a number of stakeholders have approached Safer Choice to request the addition of a label that would distinguish products that meet Safer Choice direct release criteria. The preamble includes the following questions for comment:

  • Would it be helpful to have a version of the Safer Choice label with text that distinguishes products that meet direct release criteria (similar to the Fragrance-Free Safer Choice label)?
  • Would text such as “approved for outdoor use” better communicate the meaning of direct release to consumers and purchasers?
  • Are there alternative phrases to “approved for outdoor use” that EPA should consider?

General Requirements (Section 5.2): Use of New Approach Methodologies (NAM)

EPA states that it continues to advance the use of NAMs to replace laboratory animal studies, and the program will continue to adopt NAMs as they are developed. The proposed revisions to the Standard include changes in the following sections to formalize the ongoing Safer Choice use of NAMs: Section 5.2 General Requirements and Section 4.2.2 pH.

Component-Specific Requirements (Sections 5.3, 5.11, and 5.17)

EPA states that it proposes several revisions and additions to Section 5 Component-Specific Requirements.

Surfactants (Section 5.3)

Under Section 5.3 Surfactants, EPA is proposing to require aquatic toxicity data for at least one trophic level for surfactants (or a close analog). EPA notes its ongoing practice that where data for human health are available, EPA will evaluate chemicals based on the thresholds in the Master Criteria.

Disposable Wipes (Section 5.11)

EPA notes that the Standard currently limits the composition of wipe materials to those that are readily compostable and cites cotton and bamboo as examples. To reinforce current industry practice, EPA proposes to require that all wipe-based products indicate they are not flushable to carry the Safer Choice label or DfE logo. EPA proposes to modify Section 5.11 Disposable Wipes to indicate that wipes made from both natural fibers and synthetic fibers from renewable sources are acceptable, provided they have similar biodegradability profiles (as demonstrated by one of the following or similar methods: EN13432, ASTM 6400, ASTM 5338, or ISO 14855). Wipes-based products must also include a “do not flush” logo and language on product labels to qualify for certification. Since fibers are often treated with processing chemicals to create the nonwoven substrates, EPA states that it is also adding clarifying language on additive components (such as binders or coatings) in nonwoven substrates and how they must also meet program criteria.

EPA requests comment on the functionality and consumer acceptance of wipes that are composed of natural fibers and synthetic fibers from renewable sources, and the preamble includes the following question:

  • Should EPA only allow natural fibers in disposable wipes or also allow compostable synthetic fibers from renewable sources?

Odor Elimination Chemicals (Section 5.17)

EPA proposes to add Section 5.17 Odor Elimination Chemicals to formalize the evaluation criteria already used for odor elimination chemicals, which function to reduce or eliminate odorous chemicals. According to EPA, it would continue to evaluate odor elimination chemicals based on general requirements in Section 5.2 and based on requirements provided on the Safer Choice website.

SCIL (Section 5.18)

EPA states that it believes that additional language further describing the relationship between the SCIL, the Standard, and Safer Choice- and DfE-certified products would provide additional transparency. Specifically, EPA proposes to describe the evaluation process for single Chemical Abstracts Service Registry Numbers® (CAS RN®) that cover broad ranges of chemical structures.

Use of the Safer Choice Label by Raw Material Suppliers (Section 6.3)

EPA states that it is aware that raw material suppliers may wish to communicate that they supply ingredients that meet Safer Choice criteria and proposes to add language to the Standard that explains how the Safer Choice label should be used by material suppliers. EPA proposes to add Section 6.3 Use of the Safer Choice Label by Raw Material Suppliers to document the ongoing practice under which raw material suppliers may use the Safer Choice label to indicate that certain raw materials meet Safer Choice criteria or that a specific supplier can formulate to meet Safer Choice criteria. EPA notes that it currently allows this practice for raw material suppliers with chemical ingredients listed on CleanGredients (https://cleangredients.org/). EPA proposes to continue to work with interested raw material suppliers on a case-by-case basis.

Safer Choice Cleaning Service Certification (Section 7)

EPA requests comment on whether it should establish a Safer Choice Cleaning Service Certification for cleaning service providers that use Safer Choice-certified products for cleaning and DfE-certified products for disinfecting. EPA states that residential and commercial cleaning service providers, as well as facility owners, managers, and government entities that provide in-house cleaning would be eligible for this certification. Entities that could be certified must be organizations and businesses that use cleaners, detergents, disinfectants, and related products as part of their primary operations. According to EPA, program certification would require organizations and businesses to use exclusively Safer Choice-certified products for cleaning and DfE-certified products for disinfecting, in product categories with Safer Choice- and DfE-certified products, to the maximum extent practicable. EPA may grant exceptions at its discretion on a case-by-case basis. Certified cleaning service providers would be permitted to display the Safer Choice Service Certification logo (outlined in Section 7.6), and their name and contact information would be listed on the Safer Choice website.

EPA states that candidates for Safer Choice Cleaning Service Certification must use a Safer Choice-qualified third-party profiler to prepare and submit applications, document exceptions, and conduct annual virtual audits. There is a cost associated with obtaining these services. The proposal for the Safer Choice Cleaning Service Certification is in Section 7 of the Standard, with a template partnership agreement in Annex D. EPA requests comment on the following questions:

  • Other than the exceptions outlined in Section 7.3.1.1, should other exceptions be included? Are these exceptions overly broad? Is granting the exceptions under this certification appropriate?
  • Do you have a preference between the Safer Choice Service Certification logos in Section 7.6? Comments on the logo elements (e.g., tagline, color, and shape) would be especially valuable. Which do you think would best communicate the meaning of the certification?
  • Should any of the locations for use of the Safer Choice Service Certification logo listed in Section 7.6.2 be removed or should additional locations be added?

Private Label, Licensee, and Toll Manufacture Products (Sections A.13 and B.13): Private Label Company Dilution

To document the ongoing practice under which EPA explicitly allows for dilution of a concentrated form of a product by a private label company at its facility, EPA proposes to add language to the Safer Choice Partnership Agreement template in Section A.13 Private Label, Licensee, and Toll Manufacture Products and in the equivalent section (B.13) in the DfE Partnership Agreement template to allow dilution of a certified concentrate conducted by a private label company. EPA states that it allows such “Ready To Use” private label products to be certified on a case-by-case basis. The partner must communicate that the concentrate is being diluted and the corresponding dilution rates to EPA.

Commentary

We commend EPA for seeking to expand the utility of its Safer Choice/DfE recognition. Such recognition provides consumers and end users a robust system from which to select “greener” products. Many have argued that the Safer Choice/DfE program should be managed by a non-governmental organization (like other green standards), but our view is that Safer Choice provides benefits to the marketplace because it carries EPA’s imprimatur and it provides EPA greater visibility in an area EPA is committed to promote.

The packaging criteria are important but present many challenges to Safer Choice partners. Most packaging is considered an article under TSCA, and there is limited supply chain visibility into the content of packaging. Participants in Safer Choice and their suppliers need to provide EPA with a practicable standard. Supply chain agreements can provide insight into what is intentionally added and may include limits on impurities, but will have to avoid “free of” standards because suppliers may be reluctant to provide certification that any particular contaminant is not present at all at any level. The spate of PFAS consumer product litigation has made that reality abundantly clear. This is especially true for recycled content, such as recycled plastic. If the Safer Choice standard is such that it can only be met by virgin plastic resin, the standard that is meant to drive circularity will instead effectively force products out of Safer Choice when participants cannot meet an impossibly difficult packaging standard.

EPA’s proposed consideration of synergistic effects could benefit from clarity on how EPA will consider and evaluate synergistic effects. Will EPA require testing for synergistic effects, or will EPA consider such effects only in cases in which EPA has had some indication of synergistic effects? In those cases, will the standard prohibit one or both of the ingredients, or only prohibit the combination?

EPA’s proposed category for non-pesticidal and non-drug pet care products is a sensible expansion for Safer Choice. It may be surprising to readers that while a shampoo intended for humans is regulated as a cosmetic in the United States by the U.S. Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act (FFDCA), an identical formulation for a shampoo intended for pets is regulated by EPA under TSCA. EPA’s criteria for household care products should provide a foundation upon which EPA can develop criteria for pet care.

A key expansion that EPA proposes is recognition for service providers. The idea is that a cleaning service provider that uses Safer Choice/DfE products to the extent practicable can receive recognition and advertise that recognition to potential customers. This expansion of Safer Choice has the potential to increase substantially the quantity of Safer Choice-recognized products by encouraging service providers to maximize their use of such products.

There are great opportunities for the expansion of Safer Choice. It is important for suppliers and formulators to engage with EPA to ensure that the criteria are robust and practicable.

©2023 Bergeson & Campbell, P.C.
For more news on EPA’s Safer Choice Standard, visit the NLR Environmental, Energy & Resources section.

What Are the Top 3 Labor Law Developments of 2023 (So Far)?

It’s hard to believe the end of 2023 is upon us. This year is one for the history books on the labor law and labor relations fronts. In a year packed with significant legal landscape changes and high-profile labor disputes, it’s worth a quick recap of what are – in my view – the top 3 developments.

1. NLRB Revamps the Union Organizing Process

At the top of my list are changes the National Labor Relations Board (NLRB) made to the union organizing process. The board did several things in this regard. First, the NLRB reinstated the Obama-era “ambush” election rules that accelerate the union election timetable. Specifically, these rules truncate the amount of time between an election petition being filed and a vote being held (i.e., shorten the amount of time a company has to campaign).

Second, the agency issued arguably one of its most groundbreaking decisions in decades in Cemex. In that case, the NLRB altered the framework for how unions can and will be recognized and significantly loosened the standard for Draconian bargaining orders in some cases. Bottom line: The legal landscape, relatively speaking, makes it exponentially easier for workers to vote in unions now.

2. UAW Strikes at the Big 3

Labor relations issues haven’t been top headlines in recent decades. That changed this year. The ongoing nationwide union push at Starbucks over the last two years has garnered much attention, along with some other high-profile union pushes and disputes. But the United Auto Workers’ (UAW) coordinated strike efforts at Detroit’s “Big Three” automakers truly was remarkable in terms of the national attention it garnered. For the first time, the UAW struck General Motors, Ford, and Stellantis (aka Chrysler) at once.

The UAW took a creative approach: it targeted specific plants for work stoppages while leaving others operational. This approach had two primary benefits to the union: 1) it allowed it to slow the cash burn on their strike pay bank (estimated to be north of $800 million at one point) and 2) it allowed the union to keep the companies guessing as to which plants the UAW may bring offline next – creating operational inefficiencies and uncertainty. Ultimately, this strategy resulted in deals with each of the Big 3, and most view the UAW as having come out on top in these negotiations.

3. NLRB Starts to Scrutinize Non-competes

On May 30, the NLRB’s top lawyer, Jennifer Abruzzo, turned heads when she issued a memo signaling that her office was taking the view that non-compete agreements, in some circumstances, violate the National Labor Relations Act (NLRA). This development was somewhat surprising to some given that the NLRA was passed nearly 100 years ago and was not cited previously as a basis to invalidate standard restrictive covenants found in countless employment agreements around the country.

Abruzzo further announced the NLRB will be coordinating enforcement and a potential crackdown on non-competes with the other agencies, including the Federal Trade Commission – which this year also signaled an emphasis on these agreements – and the Department of Justice.

Given there’s a month left to go before the end of 2023, there may be other significant developments to come, but, for now, these are my top three. Happy Holidays!

© 2023 BARNES & THORNBURG LLP
For more news on 2023 Labor Law Updates, visit the NLR Labor & Employment section.

October PFAS Regulatory Update

In October 2023, the United States Environmental Protection Agency (EPA) finalized two separate but analogous rulemakings – one under the Toxic Substances Control Act (TSCA), and one under the Emergency Planning and Community Right to Know Act (EPCRA). Both rulemakings pertain to per- and polyfluoroalkyl substances (“PFAS”), commonly referred to as ​“forever chemicals.” PFAS are manmade chemicals ​that have been widely used in industry and consumer products since their inception in the late 1930s. PFAS are most known for their resistance to tricky substances such as grease, water, and oil and have been commonly used in a variety of products like cleaning products, water and stain resistant fabrics, nonstick cookware, medical devices, firefighting foam, beauty products, and even things like microwave popcorn bags and pizza boxes.

These rulemakings are significant because they place broad recordkeeping and reporting requirements on facilities that may not have previous experience with either environmental statute. Under the new TSCA rule, any entity that manufactures or has manufactured (including import or previously ​imported) PFAS or PFAS-containing articles in any year since January 1, 2011, must now report certain information to EPA. Additionally, under the new EPCRA rule, facilities that use more than 100 pounds of PFAS annually must comply with Toxics Release Inventory (“TRI”) reporting obligations and provide downstream businesses with notifications that products may contain PFAS.

Broad PFAS Reporting under TSCA

Considered one of the most significant rulemakings of the year, on October 11, 2023, EPA finalized a rule under TSCA Section 8(a)(7) requiring any person that manufactures (including import) or has manufactured (including imported) PFAS or PFAS-containing articles in any year since January 1, 2011, to electronically report information regarding “PFAS uses, production volumes, byproducts, disposal, exposures, and existing information on environmental or health effects” through EPA’s agency-wide Chemical Data Exchange (“CDX”) portal. The new rule, effective November 13, 2023, triggers specific reporting dates and deadlines depending on the entity’s size and previous and/or current usage of PFAS.

The first of the reporting dates under the new rule applies to any entity, including small entities, that have manufactured and/or currently manufacture (including imported or currently import) PFAS in any year since January 1, 2011. These entities will have 18 months from the effective date of the rule to report PFAS data to the EPA. The second reporting date applies to “small manufacturers” as defined under 40 CFR 704.3 whose reporting obligations are exclusively from article imports. Entities meeting this definition will have 24 months from the effective date of the rule to report PFAS data to EPA. These dates are estimated to fall in May 2025 and November 2025, respectively.

This rule is likely most applicable to those in the electronics, food packaging, and automotive industries, but will also likely ripple to many other types of industries, including those that manufacture and/or import items such as textiles, circuit boards, wires, cables, and pharmaceuticals.

If you believe you may be impacted ​by this new rule, we recommend developing a strategy immediately to determine whether your company has manufactured or imported PFAS since January 1, 2011. Additionally, if your company has acquired another company since January 1, 2011, we also recommend ​reviewing that company’s documentation to determine whether there may be any additional reporting requirements triggered.

PFAS Reporting to the Toxics Release Inventory under EPCRA

On October 20, 2023, just a week after the TSCA PFAS rulemaking was finalized, EPA finalized a second PFAS rulemaking under EPCRA. This rule revised the TRI program to impose two new sets of reporting obligations related to 189 specified PFAS. Scheduled to go into effect on November 30, 2023 (and for annual reporting purposes ​beginning January 1, 2024), the new rule now requires:

  1. An annual reporting obligation to EPA for facilities that use more than 100 pounds of PFAS annually, and
  2. A requirement for business-to-business downstream notifications of the presence of PFAS in certain products

These new requirements are significant because the previously applicable de minimis exception that exempted products containing less than 1% of PFAS (or 0.1% for PFAS qualifying as carcinogens, such as PFOA) from ​being considered for either reporting or notification purposes, is now removed. Now, under this new rule, any quantity of the 189 specified PFAS counts towards the 100-pound threshold and triggers the downstream notification obligation. While the new rule only applies to 189 specified PFAS, EPA retains the authority to add additional PFAS in the future.

This rule is ​significant as it could result in ​numerous products being newly identified as containing PFAS throughout the supply chain. Companies that manufacture, process, or otherwise use PFAS in their operations should immediately develop a strategy to better understand this new rulemaking and determine whether the TRI reporting requirements may be triggered. Additionally, companies that supply PFAS-containing products to downstream business purchasers should evaluate whether additional notifications of the presence of PFAS in the products they supply may be required.

Conclusion

These rulemakings are complex and will have significant impacts on those in the industrial and manufacturing industries. These rules are also likely just the beginning of the PFAS regulatory iceberg.

© Polsinelli PC, Polsinelli LLP in California
For more news on EPA PFAS Rules, visit the NLR Environmental, Energy & Resources section.

Permitting Reform Package Passes as Part of Debt Ceiling Deal

The past year’s long wrangling between Republicans, Democrats, and the White House on permitting reform finally made progress this month when Congress enacted significant reforms to the National Environmental Policy Act (“NEPA”) as part of the legislation to increase the debt ceiling. Prior to this legislation, the core statutory framework of NEPA had remained relatively unchanged for 50 years. Building from Rep. Garrett Graves’ (R-LA., 6th Dist.) “Building United States Infrastructure through Limited Delays and Efficient Reviews” (“BUILDER”) Act of 2023, the permitting reform title of the Fiscal Responsibility Act of 2023 (“FRA” or “legislation”) tackles four key areas:

(1) reforming NEPA to make the federal environmental review process simpler and quicker;

(2) directing a study of the existing capacity of our transmission grid to reliably transfer electric energy between distinct regions and subsequent recommendations to improve interregional transfer capabilities within the grid;

(3) streamlining permitting for energy storage projects; and

(4) congressional ratification of the Mountain Valley Pipeline.

Several of the reforms to NEPA codify changes to the Council on Environmental Quality (“CEQ”) NEPA implementing regulations made during the Trump Administration.

While these provisions are intended to yield significant benefits for projects requiring federal approvals or funding, the actual impact will depend substantially on how the reforms are implemented, and there remains considerable interest in other aspects of permitting and siting reform making further legislative action likely.

Key NEPA Reforms

The FRA includes numerous changes to NEPA. We have highlighted several key changes here.

Narrowing the Scope of “Major Federal Action”

The term “major Federal action” is the trigger for requiring environmental review under NEPA – federal actions that qualify as a “major Federal action” must be considered under NEPA. The new legislation narrows the definition of what constitutes a “major Federal action” by limiting the term to actions that the lead agency deems are “subject to substantial Federal control and responsibility.” The legislation does not define this phrase, leaving substantial room for agency interpretation. Building on this general concept, the amendments codify the regulatory definition of a “major Federal action,” with modifications. As now defined, certain federal actions will be excluded from the scope of a major federal action, including:

  • non-federal actions (i.e., private or state actions) “with no or minimal Federal funding”;
  • non-federal actions (i.e., private or state actions) “with no or minimal Federal involvement where a Federal agency cannot control the outcome of the project”;
  • funding assistance consisting exclusively of general revenue sharing funds, where the federal agency does not have “compliance or enforcement responsibility” over the use of those funds;
  • “loans, loan guarantees, or other forms of financial assistance where a Federal agency does not exercise sufficient control and responsibility over the subsequent use of such financial assistance or the effect of the action”;
  • Small Business Act business loan guarantees under section 7(a) or (b) of the Small Business Act or title V of the Small Business Investment Act of 1958;
  • federal agency activities or decisions with effects located entirely outside of the jurisdiction of the United States; and
  • non-discretionary activities or decisions that are made in accordance with the agency’s statutory authority.

The meaning and application of these exclusions to specific actions will be subject to interpretation and likely litigation going forward. For example, what constitutes minimal funding—a threshold dollar amount or a percentage of the federal funding contribution in relation to overall project cost—is not clearly identified under the revisions. Resolution of this question will be critical to determining what actions are subject to NEPA review going forward. Given the recent dramatic increase in federal funding opportunities from the Inflation Reduction Act and Infrastructure Investment and Jobs Act, determining what actions are subject to NEPA review based on the level of federal funds involved is likely to become a more frequent and important question.

Scope of Review

When an agency action constitutes a “major Federal action,” the FRA also focuses and limits the scope of the NEPA review in two key ways.

First, the legislation modifies the statute’s existing, broad language requiring that “major Federal actions” significantly affecting the quality of the human environment include a detailed statement on the “environmental impact of the proposed action.” The revised language statutorily limits environmental review of environmental effects to those that are “reasonably foreseeable.” This change follows from a provision of the Trump Administration’s 2020 NEPA rule—later removed by the Biden Administration—which sought to eliminate long-used concepts of direct, indirect, and cumulative effects and instead focus on effects that are reasonably foreseeable and that have “a reasonably close causal relationship to” the proposed action or alternatives. Although the new statutory language does not go as far as the Trump Administration’s rule, which required a “close causal relationship,” it does follow the trend in case law to only require evaluation of reasonably foreseeable impacts. What project-specific impacts are “reasonably foreseeable” is still likely to be the subject of litigation.

Second, the FRA also makes changes regarding the alternatives analysis, often considered the heart of NEPA review. The legislation clarifies that agencies are to consider a “reasonable range” of alternatives to the proposed agency action, and that such alternatives must both be “technically and economically feasible” and “meet the purpose and need of the proposal.” This seems to codify long-standing guidance from CEQ contained in its 40 Most Asked Questions Concerning CEQ’s NEPA Regulations. In addition, it directs that, in assessing the no action alternative, agencies must include an analysis of any negative environmental impacts of not implementing the proposed action. Whether an agency has met its obligations under NEPA to consider “alternatives to the proposed action” is a frequent source of controversy and litigation, particularly for the authorization of large infrastructure and energy projects.

These changes should both help focus environmental reviews and reduce costs and delays associated with challenges to agencies’ alternative analyses and emphasize the importance of properly defining the “purpose and need” of a proposed action.

Data Standards and Requirements

The FRA includes several provisions related to data. First, it clarifies that in making a determination on the appropriate level of review (Environmental Impact Statement (“EIS”), Environmental Assessment (“EA”), or categorical exclusion), the lead agency can make use of any reliable data source—and that “new scientific or technical research [is not required] unless the new scientific or technical research is essential to a reasoned choice among alternatives, and the overall costs and time frame of obtaining it are not unreasonable.” It is unclear whether this will be applied beyond the determination of what level of review is required. This change has the potential to limit delays due to agencies undertaking or requesting additional studies from project proponents. What is deemed “essential” and what costs and timeframe are “not unreasonable,” however, remain undefined.

Second, the legislation requires that the action agency “ensure the professional integrity, including scientific integrity, of the discussion and analysis in an environmental document.” The practical implications and scope of this scientific integrity mandate are unclear—and is likely to be a subject of agency guidance and, potentially, future litigation.

Efficiency Measures

The FRA further codifies several less controversial changes from the Trump Administration 2020 NEPA rule, which the recent Biden rulemaking had left in place. These changes include expressly recognizing and establishing regulations for EAs. Additionally, these changes include setting page limits for EISs—150 pages generally and 300 pages for agency actions “of extraordinary complexity”—and EAs—75 pages—excluding citations and appendices. Additionally, the changes codify the regulatory presumptive deadlines for completion of NEPA reviews—two years for EISs and one year for EAs. The legislation goes beyond existing regulations by creating the right to judicial review when an agency fails to meet a deadline. Under the new legislation, if an agency misses the deadline, the delayed project’s sponsor may seek a court order requiring the agency to act as soon as practicable, which is not to exceed 90 days from the date on which the order was issued unless the court determines that additional time is needed to comply with applicable law.

Further, the legislation clarifies the role of the NEPA lead agency, specifying that the lead agency must develop a schedule, in cooperation with each cooperating agency, the applicant, and other appropriate entities, for the completion of the environmental review and any permit or authorization required to carry out the proposed agency action. This mirrors provisions previously adopted as part of Title 41 of the Fixing America’s Surface Transportation Act (“FAST-41”) in 2015, which has demonstrated success in requiring coordination and improving the permitting and authorization processes for certain large infrastructure projects. Although the FRA expressly contemplates extensions to the schedule, just having a schedule in place can be a helpful tool in the timely completion of NEPA reviews.

In addition, the legislation authorizes project applicants to hire independent consultants to prepare EISs and EAs, subject to the independent review of the lead agency. This provision can provide project applicants with a path to minimize delays caused by a lack of staff and resources at federal agencies.

Programmatic Reviews and Categorical Exclusions

The FRA also codifies the current agency practice of preparing and relying on programmatic environmental documents to streamline the review process for subsequent actions that implement the evaluated program. The legislation provides that programmatic review can be relied on for five years without additional review, and after five years if the agency reevaluates the analysis. Although this change promotes further use of programmatic reviews, the five-year period presumption and reevaluation process could present challenges in certain cases given the extensive resources and time required to undertake a programmatic review and tiered reviews.

The FRA also seeks to facilitate the use of categorical exclusions in the NEPA process by authorizing agencies to adopt a categorical exclusion established by another agency. The legislation lays out a process for consulting with the agency that established the exclusion to determine whether adoption is appropriate, notifying the public of the plan to use the categorical exclusion, and documenting adoption of the categorical exclusion. Though dependent upon agencies taking advantage of this new flexibility, this could have the effect of enabling some types of projects to forgo detailed environmental review.

Other Provisions

In addition to the NEPA reforms, the FRA includes several other important permitting provisions. The legislation seeks to streamline and accelerate permitting for “energy storage” projects by adding energy storage to the list of “covered projects” under FAST-41.

Additionally, the legislation provides a clear path for the completion of the much-delayed Mountain Valley Pipeline project. The legislation finds the timely completion of the project is in the national interest, and congressionally approves and ratifies the various federal authorizations required for the project. Further, the legislation bars judicial review of federal agency actions with respect to the project.

Finally, the legislation requires the North American Electric Reliability Corporation (“NERC,” the entity responsible for setting reliability standards for the nation’s electric grid) to undertake a study within a year and a half on whether more transfer capacity is needed between existing transmission planning regions—including recommendations on measures to increase the amount of energy that can be reliably moved between the studied regions. The Federal Energy Regulatory Commission will thereafter have a year to seek and consider public comments on the study and file a report with Congress detailing any recommendations for statutory changes. This study provision was in lieu of a larger set of transmission-related actions that are of key interest to Democratic lawmakers that will be the subject of future legislative efforts.

Implications

Although the provisions in FRA are not a silver bullet to solve every NEPA woe experienced by project applicants, it is a significant step in the right direction. The codification of key concepts within the NEPA statute itself (rather than regulation, guidance, or case law) will have a durable, long-lasting impact on implementation of environmental reviews because it limits the regulation issuance/withdrawal cycle that we have witnessed with the recent administration changes.

Looking forward, we can expect a rulemaking by CEQ to align the existing regulations with the revised statutory language, as well as additional rulemakings by other agencies to harmonize their NEPA implementing regulations with the revised law. For the last year, we have awaited the Phase 2 NEPA rulemaking from CEQ, as explained in our previous alert. With this new legislation, it seems likely that CEQ will pause and further revise its proposed regulations to capture these new reforms before issuing additional regulations. We can also expect future guidance—and eventual litigation—on several ambiguous provisions in the new legislation as agencies begin to implement them.

While the intention behind the legislation is to speed and ease what has become a very lengthy, expensive, and perilous environmental review process—far exceeding the original intent of NEPA—whether these goals are achieved will depend on whether federal agencies embrace them or look for ways to interpret the reforms to continue “business as usual.”

For example, to meet the new timelines, it is possible that federal agencies will require applicants to provide all documentation needed for the environmental review before starting the clock. This approach would have the effect of undermining the statutory timeframes as well as the efficacy of the public engagement process. Similarly, while the legislation seeks to curtail the extent of the analysis through page limits, it is foreseeable that relatively short EISs and EAs could be weighed down with thousands of pages of analysis contained in the appendices.

It also remains to be seen how courts will interpret these reforms. The “hard look” standard developed by courts to evaluate the adequacy of environmental review documents may have the effect of ballooning the analyses again despite Congress’ intent to streamline the process.

Finally, while these reforms are substantial, Congress continues to discuss and debate additional reforms to address unresolved federal siting and permitting concerns—particularly with respect to energy infrastructure projects. Notably absent from the legislation was transmission permitting reform language of interest to Democratic lawmakers as well as provisions to support oil and gas leasing on federal lands and to facilitate the siting and permitting of mining projects to boost domestic supplies of critical minerals essential for existing and developing clean energy technologies.

© 2023 Van Ness Feldman LLP

For more environmental legal news, click here to visit the National Law Review. 

NLRB Issues Complaint for Athlete Misclassification against NCAA, Pac-12, and USC

On May 18, 2023, the National Labor Relations Board’s (the Board) regional director in Region 31 issued a complaint against the National Collegiate Athletic Association (NCAA), the Pac-12 Conference, and the University of Southern California (USC), alleging they violated the National Labor Relations Act (the Act) by misclassifying college football and basketball players as “non-employee student-athletes.” The original charge was issued back in February 2022 and alleged all three entities were in violation of the Act as “joint employers” of these athletes.

While this issue is not necessarily new to higher education, the Board’s decision to issue a complaint—and issue that complaint against all three entities—is new ground, as it departs from a 2015 precedent and paves the way for student-athletes to unionize at potentially both private and now public institutions. Under the Act, the Board has authority over private-sector workers, while state labor boards have jurisdiction over employees at state institutions. However, because the students at issue in Thursday’s complaint would be considered employees of the private NCAA and Pac-12 as well as USC, all three entities would be subject to potential liability as “joint employers.” What this means for public institutions is that there is a real and likely potential that the “joint employer” doctrine will allow for an end run around the Act’s coverage exemption for public-sector entities. As such, all student-athletes could potentially seek to collectively bargain at the NCAA level.

Finding merit to the charge and issuing this complaint is a logical result of General Counsel (GC) Memorandum GC 21-08 issued by the Board’s GC Jennifer Abruzzo in late September 2021. At that time, we issued an alert detailing the GC’s desire to expand the definition of “employee” in order to bring scholarship collegiate athletes under the Act. In February 2022, we issued another alert detailing how USC was likely to be the test case for that endeavor.

Alleging the violation of Section 7 of the Act, Thursday’s complaint arises from charges filed by the National College Players Association, a nonprofit advocacy association founded by former UCLA football player Ramogi Huma. The charge and complaint asserted that USC, the Pac-12, and NCAA misclassified student-athletes in order to deny them their rights under the Act, including the right to speak about compensation and working conditions. In addition to the alleged misclassification issue, the complaint alleges that USC illegally obstructed athletes’ organizing by “maintaining unlawful rules and policies in its handbook, including restricting communications with third parties, in the media, etc.”

Colleges and universities may be tempted to minimize this issue by thinking that the shift to seeing student-athletes as employees would affect them only in the event their athletes attempt to form a union. That is not the case. While a Board determination that student-athletes are employees could lead to a renewed effort by college athletes to organize, the GC has already cautioned (and made good on that warning) that the Board will seek to issue unfair labor practice charges against colleges and universities that misclassify student-athletes as “non-employees” or engage in other violations of the Act. For example, the GC has previously made clear that protections afforded by the Act apply to concerted activity such as expressions of support for social justice issues and other advocacy. As such, higher education institutions would be wise to tread lightly into these waters when they arise, because where employee status exists, concerted efforts of those employees to speak their minds or speak out on certain issues will be viewed as protected under the Act.

The hearing on the Board’s complaint is set for November 7, 2023.

© Steptoe & Johnson PLLC. All Rights Reserved.

For more Labor and Employment Legal News, click here to visit the National Law Review.

How to Succeed in Environmental Marketing Claims

Environmental marketing claims often present something of a Catch-22—companies that are doing actual good for the environment deserve to reap the benefits of their efforts, and consumers deserve to know, while at the same time, heightened scrutiny from the Federal Trade Commission (FTC), the National Advertising Division (NAD), state regulators and the plaintiffs’ bar have made such claims increasingly risky.

In 2012, the FTC issued the Green Guides for the use of environmental marketing claims to protect consumers and to help advertisers avoid deceptive environmental marketing. Compliance with the Green Guides may provide a safe harbor from FTC enforcement, and from liability under state laws, such as California’s Environmental Marketing Claims Act, that incorporate the Green Guides. The FTC has started a process to revise the Green Guides, including a request for comments about the meaning of “sustainable.” In the meantime, any business considering touting the environmental attributes of its products should consider the following essential takeaways from the Green Guides in their current form:

    • Substantiation: Substantiation is key! Advertisers should have a reasonable basis for their environmental claims. Substantiation is the support for a claim, which helps ensure that the claim is truthful and not misleading or deceptive. Among other things, substantiation requires documentation sufficient to verify environmental claims.
    • General benefit claims: Advertisers should avoid making unqualified claims of general benefit because substantiation is required for each reasonable interpretation of the claim. The more narrowly tailored the claim, the easier it is to substantiate.
    • Comparative claims: Advertisers should be careful and specific when making comparative claims. For example, a claim that states “20% more recycled content” begs the question: “compared to what?” A prior version of the same product? A competing product? Without further detail, the advertiser would be responsible for the reasonable interpretation that the product has 20% more recycled content than other brands, as well as the interpretation that the product has 20% more recycled content than the advertiser’s older products.
    • General greenwashing terms: Advertisers should be very cautious when using general environmental benefit terms such as “eco-friendly,” “sustainable,” “green,” and “planet-friendly.” Those kinds of claims feature prominently in many complaints alleging greenwashing, and they should only be used where the advertiser knows and explains what the term means, and can substantiate every reasonable interpretation of the claim.

Putting it into Practice: Given the scrutiny that environmental claims tend to attract, advertisers should exercise care when making environmental benefit claims about their products and services. They should narrowly tailor their claims to the specific environmental attributes they want to promote, and perhaps most important, they should ensure they have adequate backup to substantiate their claims. While the FTC Green Guides are due for a refresh (which we will surely report on), for the time being, they will continue to serve as important guidance for advertisers seeking to inform consumers without exposing their business to FTC scrutiny or class action litigation.

G7 Sanctions Enforcement Coordination Mechanism and Centralized EU Sanctions Watchdog Proposed

On Feb. 20, 2023, Dutch Minister of Foreign Affairs Wopke Hoekstra gave a speech titled “Building a secure European future” at the College of Europe in Bruges, Belgium where he made a plea to “(…) sail to the next horizon where sanctions are concerned.” The Dutch Foreign Minister said European Union (EU) “(…) sanctions are hurting the Russians like hell (…)” but at the same time the measures “(…) are being evaded on a massive scale.” Hoekstra believes this is in part because the EU has too little capacity to analyze, coordinate, and promote the sanctions. However, arguably, there is also a lack of capacity at the EU Member-State level to enforce sanctions.

Against this background the Dutch Foreign Minister proposed to set up a sanctions headquarters in Brussels, Belgium, i.e., a novel watchdog or body to tackle the circumvention of EU sanctions. Such a body might represent the nearest EU equivalent to the U.S. Office of Foreign Assets Control (OFAC). OFAC both implements and enforces U.S. economic sanctions (issuing regulations, licenses, and directives, as well as enforcing through issuing administrative subpoenas, civil and administrative monetary penalties, and making criminal referrals to the U.S. Department of Justice). In Hoekstra’s words:

“A place where [EU] Member States can pool information and resources on effectiveness and evasion. Where we do much more to fight circumvention by third countries. This new HQ would establish a watch list of sectors and trade flows with a high circumvention risk. Companies will be obliged to include end-use clauses in their contracts, so that their products don’t end up in the Russian war machine. And the EU should bring down the full force of its collective economic strength and criminal justice systems on those who assist in sanctions evasion. By naming, shaming, sanctioning, and prosecuting them.”

The Dutch Foreign Minister’s proposal – which is also set out in a separate non-paper – apparently is backed and supported by some 10 or so EU Member States, including Germany, France, Italy, and Spain.

Additionally, on Feb. 23, 2023, the press reported the international Group of Seven (G7) is set to create a new tool to coordinate their enforcement of existing sanctions against the Russian Federation (Russia). The aim of the tool, tentatively called the Enforcement Coordination Mechanism, would be to bolster information-sharing and other enforcement actions.

Background

Like other Members of the G7, the EU has adopted throughout 2022 many economic and other sanctions to target Russia’s economy and thwart its ability to continue with its aggression against Ukraine. Nevertheless, currently EU Member States have different definitions of what constitutes a breach of EU sanctions, and what penalties must be applied in case of a breach. This could lead to different degrees of enforcement and risk circumvention of EU sanctions.

As we have reported previously, on Nov. 28, 2022, the Council of the EU adopted a decision to add the violation of restrictive measures to the list of so-called “EU crimes” set out in the Treaty on the Functioning of the EU, which would uniformly criminalize sanctions violations across EU Member States. This proposal still needs the backing of EU Member States, which have traditionally been cautious about reforms that require amendments to their national criminal laws.

Next steps

The decision on when and how to enforce EU sanctions currently lies with individual EU Member States, who also decide on the introduction of the EU’s restrictive measures by unanimity. As such, the Dutch Foreign Minister’s proposal requires the backing and support of more EU Member States. If adopted, the new proposed body could send cases directly to the European Public Prosecutor’s Office (EPPO), assuming the separate “EU crimes” legislative piece was also adopted.

Notably, the Dutch Foreign Minister’s proposal appears to suggest a stronger targeting of third countries, which are not aligned with the EU’s sanctions against Russia or help in their circumvention (e.g., Turkey, China, etc.).

Whether or not an EU sanctions oversight body is established, the Dutch proposal signals the current appetite for enhanced multilateral coordination on economic sanctions implementation and tougher, more consistent enforcement of economic sanctions violations. The G7’s proposed Enforcement Coordination Mechanism points in the same direction.

©2023 Greenberg Traurig, LLP. All rights reserved.

USDA Finalizes the Strengthening Organic Enforcement Rule

  • USDA’s Agricultural Marketing Service (AMS) administers the National Organic Program (NOP) as authorized by the Organic Foods Production Act of 1990 (OFPA).  The USDA organic regulations, which were published on December 21, 2000, and became effective on October 21, 2002, govern the production, handling, labeling, and sale of organically produced agricultural products.  On August 5, 2020, in response to mandates in the Agriculture Improvement Act of 2018, as well as pressure from the industry and recommendations from the National Organic Standards Board (NOSB), USDA published a proposed rule called Strengthening Organic Enforcement (SOE) that is aimed at preventing loss of organic integrity—through unintentional mishandling of organic products and intentional fraud meant to deceive—and strengthening trust in the USDA organic label.
  • On January 19, 2023, USDA published the SOE final rule.  The final rule includes clarifications and additional examples in response to comments received on the SOE proposed rule.  Key updates include:
    • Requiring certification of more businesses, like brokers and traders, at critical links in organic supply chains;
    • Requiring NOP Import Certificates for all organic imports;
    • Requiring organic identification on nonretail containers;
    • Increasing authority for more rigorous on-site inspections of certified operations;
    • Requiring uniform qualification and training standards for organic inspectors and certifying agent personnel;
    • Requiring standardized certificates of organic operation;
    • Requiring additional and more frequent reporting of data on certified operations;
    • Creating authority for more robust recordkeeping, traceability practices, and fraud prevention procedures; and
    • Specifying certification requirements for producer groups.
  • The compliance date for the SOE final rule is March 19, 2024, or 12 months after the effective date of March 19, 2023.

Article By Food and Drug Law Practice Group at Keller and Heckman

For more biotech, food, and drug legal news, click here to visit the National Law Review.

© 2023 Keller and Heckman LLP

Federal PFAS Drinking Water Standards: 2023 Is the Year

On Friday, October 7, 2022, the EPA formally sent its proposed federal PFAS drinking water standards to the White House Office of Management and Budget (OMB) for consideration and approval or rejection. The proposed rule cleared OMB review on November 30, 2022; however, the EPA has not yet released the proposed rule. While the details of the rule under consideration are not yet known, what is evident from the title of the document logged on the OMB website is that the drinking water standards will address PFOA and PFOS. At least from the document title, it does not appear that any other PFAS will be subject to Safe Drinking Water Act (SDWA) regulation at the moment.

The delay in releasing the proposed drinking water standards for over a month now, though, could suggest that the proposed rule may seek to regulate more than just PFOA and PFOS, and the EPA may be looking to shore up language and support language in the proposed rule for such a proposal in light of comments from the OMB. Similarly, many wonder whether the EPA proposed a limit so low that the OMB had concerns as to whether the limits were detectable. With the EPA keeping its proposed language a closely guarded secret for the time being, much of the discussions rest on speculation. What we do know is that he EPA is statutorily required to put forth a proposed standard before the first half of 2023, and it has publicly pledged repeatedly to act more quickly than that statutory requirements.

Thus, 2023 will see federal PFAS drinking water standards for at least two PFAS from the EPA and we predict that it is only a matter of days before the country sees the EPA’s proposal, which will kick off what promises to be an extremely contentious public comment period.

Now more than ever, the EPA is clearly on a path to regulate PFAS contamination in the country’s water, land and air. These regulations will require states to act, as well (and some states may still enact stronger regulations than the EPA). Both the federal and the state level regulations will impact businesses and industries of many kinds, even if their contribution to drinking water contamination issues may seem on the surface to be de minimus. In states that already have PFAS drinking water standards enacted, businesses and property owners have already seen local environmental agencies scrutinize possible sources of PFAS pollution much more closely than ever before, which has resulted in unexpected costs. Beyond drinking water, though, the EPA PFAS Roadmap from 2021 shows the EPA’s desire to take regulatory action well beyond just drinking water, and companies absolutely must begin preparing now for regulatory actions that will have significant financial impacts down the road.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2023 CMBG3 Law, LLC. All rights reserved.

New Cosmetic Regulatory Requirements: What Cosmetic Manufacturers Need to Know

On December 29, 2022, President Biden signed into law the “Modernization of Cosmetic Regulation Act of 2022,”1 which requires increased Food and Drug Administration (FDA) oversight of cosmetics and the ingredients in them. This GT Alert outlines the law’s key provisions, including timelines for FDA actions and enforcement. The law creates new requirements that may generate increased consumer litigation. This GT Alert summarizes the Act’s provisions and does not constitute legal advice. Many provisions are subject to regulatory implementation by a date provided for in the Act.

The new law also includes amendments modifying other FDA requirements. In particular, the law modifies the law as to issues such as improvements and innovations in drug manufacturing, reauthorization of key FDA programs such as the Humanitarian Device Exemption Incentive, the Best Pharmaceuticals for Children Program, and Reauthorization of Orphan Drug Grants. There are also modifications to biologics and drugs, as well as modifications of the Save Medical Device amendments. For information on the potential litigation impacts of the new law, please see this GT Alert published by the Pharmaceutical, Medical Device & Health Care Litigation Practice.

Modernization of Cosmetic Regulation Act of 2022 (MoCRA)

MoCRA, the new cosmetic regulation law, establishes a process, similar to those for other FDA-regulated products, that ensures the cosmetic manufacturers provide assurances that the cosmetic products are safe. This GT Alert provides general information on these new requirements, with effective dates for certain regulatory and other requirements. The law establishes obligations on the “responsible person” that is, the manufacturer, packer, or distributor of a cosmetic and those whose name appears on the products label.

MoCRA is only applicable to importers and entities that manufacture or process cosmetic products. It does not apply to the following entities if they do not import, manufacturer, or process cosmetics: beauty salons; cosmetic product retailers; distribution facilities; pharmacies; hospitals; physicians offices; health care clinics; public health agencies and other nonprofit entities; entities that provide complimentary cosmetic products; trade shows and others giving free samples; entities that are only doing research; and entities that prepare labels, relabel, package, repackage, hold, and/or distribute cosmetic products.

Key Terms

Good Manufacturing Practices: The secretary of the Department of Health and Human Services (HHS) (through the FDA) will propose and finalize regulations to establish good manufacturing practices. The key is to ensure that products are not adulterated and will allow FDA to inspect records to ensure compliance. The proposed rulemaking shall be no later than two years after date of enactment (December 29, 2022) with final regulations no later than three years after date of enactment (December 29, 2022).

Adverse Events: Any health-related event associated with the use of a cosmetic product.

Serious Adverse Event: Any event that is a result of death, life-threatening experience; inpatient hospitalization; persistent or significant disability or incapacity; a congenital anomaly or birth defect; and infection or significant disfigurement OR requires, based on reasonable medical judgment, a medical or surgical intervention to prevent an outcome described in the first definition of serious adverse event.

Process for Reporting Adverse Events: In compliance with the HHS secretary’s regulations, the responsible person shall file a report within 15 days and may supplement the report within one year. A serious adverse event report is similar to other safety reports and can include a statement released to the public (without any personal health information). The HHS secretary may exempt certain reports that do not involve a significant public health issue. Records must be kept by the responsible person for six years; three years for small businesses. There is a Rule of Construction that the submission of any report shall not be construed as an admission that the cosmetic product involved, caused, or contributed to the relevant adverse event.

  • Fragrance and Flavor Ingredients: If an ingredient(s) has caused or contributed to a serious adverse event, the HHS secretary may request a list of such ingredients, and such list must be provided within 30 days of the request.

  • Safety Substantiation: Records must be maintained that demonstrates adequate substantiation of the safety of the cosmetic product. Adequate substantiation means tests, studies, or other evidence to support a reasonable certainty that the product is safe.

Inspection: The responsible person shall permit an officer or HHS employee (with credentials) to have access to inspect records, manufacturing and other issues.

Registration and Product Listing: Cosmetic manufacturers must submit a registration no later than ONE YEAR AFTER ENACTMENT (December 29, 2022). New facilities must register within 60 days (or 60 days after deadline). Renewal is every two years. Updates or changes must be submitted within 60 days of the change. The content of the information required for registration is outlined in the law. The registering company must also list all cosmetic products it imports, manufactures, or processes and include product category or categories, list of ingredients (fragrances, flavors, or colors), and product listing number (if previously assigned). Flexibility is given to the listing of multiple products with identical formulations or those that differ only to colors, fragrances, flavors, or quantity. Annual updates are to be submitted. FDA will withhold confidential information included in a listing when a request for information is filed.

The HHS secretary may suspend a cosmetic entity’s registration if there is a reasonable probability that a product is causing serious adverse health or deaths, and the secretary has reasonable belief that other products made or processes may also be affected and for which health concerns are raised about the products manufactured. Notice of suspension is to be provided and an opportunity within five days to provide corrective action; or a hearing may be held. The secretary may conclude (a) the suspension remains necessary or (b) the registrant must submit a corrective action plan to demonstrate remediation of the problem conditions. The plan will be reviewed not later than 14 business days or such other time agreed upon by the parties. If the secretary vacates the suspension, FDA will then reinstate the registration. If the facility is suspended, no person shall introduce or deliver in the United States cosmetic products from such facility. The secretary can only delegate this authority to the FDA Commissioner.

Labeling: Each cosmetic product shall have a label that includes a domestic address, domestic phone number, or electronic contact information. In addition, the following applies to labeling.

  • Fragrance Allergens: The responsible person shall identify on the label each fragrance allergen included. The secretary shall propose a rule on June 29, 2024 (18 months after date of enactment) and final rule 180 days after the public comment period closes. The secretary shall consider international, state, and local requirements for allergen disclosure and threshold amount levels.

  • Cosmetic Products for Professional Use: A professional is an individual licensed by a state authority to practice in the field of cosmetology, nail care, barbering, or esthetics.

  • Professional Use Labeling: A cosmetic product introduced into interstate commerce and intended to be used only by a professional shall bear a label that contains a clear and prominent statement that the product shall be administered for use only by a licensed professional; and is in conformity with the requirements for cosmetics labeling.

Records: Records are to be available to authorized personnel to examine products if there is reason to believe a cosmetic product is adulterated or an ingredient could cause harm or run afoul of other standards. The authorized personnel must provide written notice to have access to records at a reasonable time to determine whether the product poses a threat. The records to be reviewed do not include recipes or formulas for cosmetics, financial data, pricing data, personnel data (except qualifications) research data (other than safety substantiation) or sales data (other than shipment data regarding sales).

  • Rule of Construction: Nothing in this section shall be construed to limit the secretary’s ability to inspect records or require establishment and maintenance of records under any other provision of the law.

Mandatory Recall Authority: If the secretary determines there is a reasonable probability that a cosmetic is adulterated or misbranded and the use or exposure will cause serious adverse health consequences or death, the secretary shall provide the cosmetic manufacturer an opportunity to voluntarily cease distribution and recall such article. If the entity refuses or does not recall the cosmetic within the time and manner prescribed, the secretary may order that the product not be distributed.

  • Hearing: A hearing may be held, no later than 10 days after the date of issuance. A process for resolution is provided by the law to either recall the product and cease distribution based on evidence provided or permit the product to continue distribution. Notice to affected individuals may be required.

  • Public Notification: If a recall is required, a press release is to be published, and alerts and public notices are to be issued, as appropriate. The materials must include the name of the cosmetic; a description of the risk; to the extent practicable, information for consumers about similar cosmetics that are not affected by the recall and ensure publication on the FDA website of the image of the cosmetic. The secretary can only delegate this authority to the Commissioner of the FDA.

  • Rule of Construction: Nothing in this section shall affect the authority of the secretary to request or participate in a voluntary recall or to issue an order to cease distribution or to recall under any other provision of this chapter.

Small Businesses: Responsible persons and owners and operators of facilities whose gross annual sales in the United States of cosmetic products for the previous three-year period is less than $1,000,000 shall be considered small business and not subject to Good Manufacturing Practices, registration, and listing requirements.

  • Exemptions: The small business exceptions do NOT apply to (1) cosmetic products that contact the mucus membrane of the eye under conditions of use that are customary or usual; (2) products that are injected; (3) products that are intended for internal use; or (4) products that are intended to alter appearance for more than 24 hours under conditions of use that are customary or usual, and removal by the consumer is not a part of such conditions of use that are customary or usual.

Preemption. No state or political subdivision of a state may establish any law, regulation, order, or other requirement for cosmetics that is different for registration and product listing, good manufacturing practice, records, recalls, adverse event reporting or safety substantiation. Nothing prevents any state from prohibiting the use of an ingredient in a cosmetic product, or continuing requirement of any state in effect at time of enactment.

  • Savings Clause: Nothing in the amendments shall be construed to modify, preempt, or displace any action for damages or the liability of any person under the law of any state, whether statutory or based in common law.

Talc-containing cosmetics: The HHS secretary shall propose regulations one year after December 29, 2022 and finalize the rules 180 days after the comment period to establish testing for detecting asbestos in talc products.

(1) Not later than one year after date of enactment of this act, the secretary shall promulgate proposed regulations to establish and require standardized testing methods for detecting and identifying asbestos in talc-containing cometic products and

(2) Not later than 180 days after the date on which the public comment period on the proposed regulations closes, the secretary shall issue such final regulations.

PFAS in Cosmetic. The HHS secretary shall assess the use of perfluoroalkyl and polyfluoroalkyl substances (PFAS) in cosmetic products and the scientific evidence regarding the safety in cosmetic products, including risks. The secretary may consult with the National Center for Toxicological Research. Report must be issued not later than three years after enactment summarizing the results of the assessment conducted.

Sense of the Congress on animal testing: It is the sense of the Congress that animal testing should not be used for the purposes of safety testing on cosmetic products and should be phased out except for appropriate allowances.

Funding: $14,200,000 for 2023, 25,960,000 for 2024, and $41,890,000 for 2025-2027 have been identified for these activities. The new law provides no industry user fees.

FOOTNOTES

1 This legislation was included in H.R. 2617, the “Consolidated Appropriations Act, 2023,” as part of a year-end bill.

Article By Nancy E. Taylor and Eleanor (Miki) A. Kolton of Greenberg Traurig, LLP

For more biotech, food, and drug legal news, click here to visit the National Law Review.

©2022 Greenberg Traurig, LLP. All rights reserved.