EPA’s new policy may result in public disclosure of confidential business information if confidentiality is not properly claimed.

By Julia A. Hatcher, Ann Claassen, and Stijn van Osch

The US Environmental Protection Agency (EPA) announced on July 15, 2019 that, beginning August 15, 2019, EPA would no longer provide notices of deficiency to businesses that submit procedurally flawed confidential business information (CBI) claims under the Toxic Substances Control Act (TSCA). Instead, EPA will only send a notice that the agency does not consider such information confidential, and will make such information available to the public. This policy change, which EPA published in the Federal Register on July 16, means that businesses should take care to provide complete and accurate substantiation for CBI, or risk public disclosure of confidential information.

CBI Requirements Under TSCA

CBI is defined under Section 14 of TSCA (15 U.S.C. § 2613) by reference to the Freedom of Information Act (5 U.S.C. § 552(b)(4)) as “matters that are . . . trade secrets and commercial or financial information obtained from a person and privileged or confidential.” As part of the Frank R. Lautenberg Chemical Safety for the 21st Century Act, Section 14 was significantly amended, changing how EPA must handle CBI and how submitters can claim CBI. Under the newly added TSCA Section 14(c), a company seeking to claim CBI is now required to assert, substantiate, and certify that the information claimed as confidential is in fact confidential. As EPA explains on its website, the best way to substantiate the confidential nature of CBI is by providing answers to a series of “general substantiation questions” that ask for information on, e.g., steps the business has taken to keep the information confidential, the extent of disclosure to others, and the harmful effects of disclosure. For certain specific submissions, such as Premanufacture Notifications (PMNs), EPA provides these questions in a template form that businesses can fill in and provide with the rest of the submission.

EPA’s interpretation issued in January 2017 (effective March 2017) states that substantiation under TSCA must be provided at the time information is claimed as CBI, unless the information is exempted from the substantiation requirement by Section 14(c)(2). (The exemption covers certain types of information relating to, e.g., manufacturing processes, marketing and sales, suppliers, mixture composition, and production or import volumes.) Although TSCA imposes no requirement for EPA to provide notices of deficiency, EPA’s 2017 interpretation stated that in the case of missing or deficient substantiation, the agency would provide businesses with notices of deficiency that would give the business 30 days to remedy the substantiation before EPA would make the information available to the public.[i]

Under the revised policy, as of August 15, 2019, EPA will continue to require substantiation at the time the information is submitted. However, EPA will no longer provide a notice of deficiency if a submission is deficient. Instead, EPA states in the Federal Register that it “will provide written notice to affected business submitters that those CBI claims are invalid, and the underlying information is treated as not subject to a confidentiality claim, and therefore subject to disclosure without further notice.” Such notifications are required by TSCA Section 14(g)(2). Under the statute, information that has been denied protection becomes subject to disclosure 30 days after receipt of the notice of denial.

EPA provides as its rationale for the revised policy that this process will make EPA’s review of CBI claims more efficient. Section 14(g) requires EPA to review all CBI claims for chemical identity and at least 25% of other non-exempt claims. EPA also states that it has been two years since the announcement of its Section 14(c)(3) interpretation, so affected businesses have had ample notice of the requirements to comply with the CBI requirements of TSCA Section 14. EPA notes its outreach, education, and communication activities to inform the business community of the TSCA CBI requirements. EPA has separately published a statistical review of the volume of CBI claims received between June 22, 2016, and June 25, 2019, which provides the regulated community with additional insight on CBI claims.

Takeaways for Businesses

EPA policy change cautions that businesses undertake a heightened review of their TSCA submissions to ensure all necessary information is included to claim CBI. Failure to properly substantiate a CBI claim can result in public release of sensitive information without any further process 30 days after receiving a notice of denial.

TSCA Section 14(g)(2)(D) allows submitters to file an appeal of EPA’s decision to deny CBI protection. An appeal triggers a statutory stay on EPA’s disclosure of the information until the court rules on the appeal. Thus, companies that receive notice of denial of a CBI claim may wish to immediately file such an appeal. In fact, companies may be wise to make a decision ahead of time on whether to appeal any denial of a confidentiality claim, especially if the company has a significant internal approval process.

On appeal, whether a business would have the opportunity to supplement its CBI filing is unclear. The Administrative Procedure Act (APA), 5 U.S.C. § 706, requires EPA decisions to be reviewed only on the record before the agency. However, the TSCA provision allowing appeal of a denied confidentiality claim does not specify that the appeal would be governed by the APA.[ii] With or without an appeal,  a business receiving a notice of denial may want to informally engage with EPA and proffer additional substantiation evidence during the 30-day period after receipt of the notice to advocate for EPA to withdraw its notice of denial. Since, however, EPA’s rationale for the policy revision is to increase efficiency, the agency may be unwilling to consider new information.

Of interest is whether EPA’s policy might receive a constitutional challenge of some form. It may be possible to argue that confidential information for which proper, corrected, or supplemented substantiation is filed is protected by the Fifth Amendment Takings Clause. Although the Takings Clause provides some protection for trade secrets, the courts have not yet explored the extent of such protection under TSCA, and the topic of the Takings Clause and CBI is subject to considerable scholarly debate. Another argument might be that there exists a constitutional Fifth Amendment Due Process requirement to provide a notice of deficiency with opportunity to correct or supplement (as per EPA’s original policy), but courts may consider the TSCA provisions for notification of a denial of protection and appeal of that decision to be sufficient process to satisfy the Fifth Amendment.

EPA provides templates and other information on its TSCA CBI website that businesses can use. Latham & Watkins has significant experience in advising businesses on TSCA compliance and will continue to monitor developments in this area.

This post was prepared with the assistance of Sam Scott in the Washington, D.C. office of Latham & Watkins.

[i] TSCA provides for penalties against EPA employees for unauthorized disclosure; however, TSCA Section 14(h)(2) specifically exempts TSCA from the general federal penalties on disclosure of trade secrets, 18 U.S.C. § 1905, and instead in Section 14(h)(1) imposes its own penalty provision for disclosure of information protected by Section 14. Under EPA’s revised policy, improperly claimed or insufficiently substantiated CBI is not protected by Section 14, and so disclosure of such information would presumably not trigger this penalty provision.

[ii] TSCA Section 19(c) provides that the APA applies to judicial review of other TSCA rules and orders. However, Section 19 only applies to review “under this section” (i.e., Section 19).  Because review of notices of denial takes place under the process separately set forth under Section 14, and not under Section 19, the APA may not apply to such appeals.