Chemical manufacturers and traders are only now starting to feel the full impact of the changes in American legislation on the chemical industry following the signing into law of the Lautenberg Chemical Safety Act in June 2016. It is an act that is seen by legislators, including one of its authors Tom Udall as, “Landmark chemical safety reform [that] will finally protect our kids from dangerous chemicals.” While the Society of Chemical Manufacturers and Affiliates said that the bill’s signing, “…begins the process of regaining the public’s confidence in everyday products made possible by our industry.”
Certainly the law will increase protection for the public, as it will also allow for greater scrutiny of chemical products. As the Washington Post writes, “[It is a] law that places stronger regulations on chemicals present in nearly every product Americans use, including detergents, clothing, paint thinners, cleansers and automobiles”.
But in adding extra oversight, someone has to become an overseer, and this role has fallen to the Environmental Protection Agency (EPA). A government body that must now decide where to draw the line between what is best for chemical companies, and what is best for consumers. As the Washington Post states, “the new law allows the EPA to stop a potentially dangerous chemical from going to market. A consideration of high risk populations, such as pregnant women and children, will factor into decisions on whether to approve chemicals.” Adding that, “Chemicals with high priority concerns will get faster reviews.”
However, the Post also includes the key fact that, “… companies can no longer hide behind ‘trade secret’ claims to shield the identity of chemicals they use so officials can’t investigate them.”
And it is this conflict between a chemical company protecting its business advantage, and the public’s ‘right to know’ that is causing much concern and confusion in the industry.
In a recent report, Bloomberg BNA, the legal news wing of the Bloomberg business news, tried to clarify much of the misunderstandings of the new legislation. In the report, Washington based reporter Pat Rizzuto writes how in the past, “The agency reflexively granted Confidential Business Information [CBI or trade secret] claims without asking for detailed rationales which shielded information from the public arena.” And explains how today, chemical companies should expect more frequent reviews of their right to CBI, as well as a ‘raising of the bar’ on what chemical information should remain confidential.
The report also includes input from, Judah Prero, an attorney with Sidley Austin LLPc, who explained how chemical companies must prove that they have tried to protect their trade secrets and that public knowledge of those secrets would damage their business.
In the interview he states that, “One of the main new requirements discussed in EPA’s guidance is the need for companies to certify that the information for which they seek CBI protection meets the criteria provided in the law. For example, companies must certify that they have taken measures to protect the confidentiality of the information they ask the agency to protect and have a reasonable basis to conclude disclosure of the information is likely to cause substantial harm to their competitive position.”
What’s in a Chemical Product’s name?
Furthermore, the new legislation also outlines the names that new chemicals can be given, stating that they must have a name that describes the chemical structure of the product. This means that if ‘glyphosate’ were to come to the market today, it would need to be called, at least as a secondary name, something such as ‘phosphonomethylglycine’, or maybe even ‘C3H8NO5P’.
This is a point raised by Martha Marrapese, a partner at the law firm of Keller and Heckman LLP, who said, “When a manufacturer claims the identity of its chemical to be confidential, the amended law requires the company to provide a ‘structurally descriptive generic name’. While some companies already give their chemicals generic names based on the molecular structure of the substance, others base the name on how the chemical will be used. ” Adding that, “The selection of a structurally descriptive name will be new for these latter companies and something they’ll need to craft in concert with the agency [EPA]”.
This is a point that Bloomberg BNA confirmed when writing that, “The requirement to use a structurally descriptive name when identifying a chemical generically will apply to all chemical manufacturers when the agency updates the TSCA inventory, as it is required to do under Lautenberg.”
What Will Keep a Company’s Trade Secrets Secret?
But while this idea of the public’s right to know of a chemical product’s make-up is clear, there is still uncertainty over other legal requirements. This is in large part because the law has yet to be fully enacted, however, as Marrapese makes clear, “By June 2017, the EPA is required to issue a final rule describing the process chemical manufacturers will use to have their chemicals listed on one of two TSCA inventories: the active inventory or the inactive inventory. Chemicals on the active inventory are in commerce or have been within the last 10 years.”
Once this process has been concluded, the debate on what is a chemical company trade secret and what isn’t will fully begin. This is because, “EPA’s guidance describes various times the agency may review and re-review a company’s need for CBI protection. These include when someone has submitted a Freedom of Information Act request seeking documents that contain CBI information, when the agency designates a chemical to be a high priority for risk evaluation, when the agency updates the TSCA inventory and when the agency determines disclosure would be important to implement chemical restrictions or bans authorized under Section 6 of TSCA.”
To help with the change, the EPA recently issued advice on what chemical manufacturers can do to keep trade secrets secret. However, the guidance is far from clear, and includes generalisations, such as, “Currently, EPA is using existing authorities to obtain CBI substantiations. This includes substantiation of CBI claims in submissions for which Agency rules currently require it, such as certain CBI claims under the Chemical Data Reporting (CDR) rule, and requests for comment (substantiation) on CBI claims under EPA general confidentiality regulations at 40 CFR § 2.204(e). These regulations allow EPA to request additional information, including substantiation, when making a CBI determination. EPA will use the substantiation provided to inform the confidentiality determinations for chemical identity and other CBI claims. The Agency may revise CBI substantiation requirements for specific types of information submissions by subsequent rulemaking.”
As Prero said, he often hears clients asking, “What types of evidence does the EPA want a company to provide to substantiate its need for CBI protection and how much evidence is sufficient?”
In general, what will keep a chemical company‘s trade secrets secret?
While the EPA is hard at work trying to carry the fine print of the law into working practice, many chemical companies are being left in limbo over how to proceed with their business. Not knowing what information will be made public and what can remain a secret effects future contracts being signed, causes uncertainty over competitive advantage and limits the investment for product development. Must chemical manufacturers and traders wait until June 2017 to know where they stand?