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Citation: 57 Fed. Reg. 33753 1992

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ThursdayJuly 30, 1992

Part II

EnvironmentalProtection Agency40 CFR Part 82Protection of Stratospheric Ozone; FinalRule

I II III II I III IIII III I III I IIIII III I

33754 Federal Register / Vol. 57, No. 147 / Thursday, July 30, 1992 / Rules and Regulations

ENVIRONMENTAL PROTECTIONAGENCY

40 CFR Part 82

[FRL-4158-21

Protection of Stratospheric Ozone

AGENCY: Environmental ProtectionAgency (EPA).ACTION: Final rule.

SUMMARY: With this action, EPApromulgates stratospheric ozoneprotection regulations (40 CFR part 82)required under title VI of the Clean AirAct Amendments of 1990, Public Law101-549. Today's action promulgatesregulations implementing the 1992 andlater requirements of section 604, as wellas ,the related provisions of sections 603,607 and 616, in a manner consistent withthe United States' continuing obligationsunder the Montreal Protocol onSubstances that Deplete the OzoneLayer as revised.

Through this action, EPA (1)Apportions baseline allowances toproduce or import ozone depletingsubstances to companies that producedor imported certain ozone depletingsubstances in the baseline years; (2)allocates decreasing amounts of thoseallowances to the companies accordingto the phaseout schedule prescribed bysection 604; (3) applies an 18-month capfrom July 1, 1991, to December 31, 1992,on production and consumption asrequired under the Protocol; (4) permitstransfers of allowances provided thetransferor's remaining allowances arereduced by the amount it transferredplus one percent of the amounttransferred; (5) permits production inexcess of the amount authorized by theoriginal allocation of allowances inorder to supply developing countriesthat are operating under Article 5 of theProtocol, so long as producers provideadequate assurances that the productionsupplied to the developing country willnot be reexported; (6) permits transfersof allowable production with otherProtocol Parties under certainconditions; (7) changes procedures tofacilitate the transformation of carbontetrachloride without requiringextensive trading of allowances; (8)imposes minimal reporting andrecordkeeping requirements, includingthose needed to include several newlyregulated chemicals in the phaseoutprograms, as well as recordkeeping andreporting requirements by companiesthat transform carbon tetrachloride; and(9) requires that companies thatproduced controlled substances as by-products and did not destroy them withmaximum available control technology

(MACT) in 1989 but did not report theirproduction in response to the section 114information request in the November 26,1990 Federal Register supply EPA withthis information within 45 days of thepublication of this document.

EFFECTIVE DATE: January 1, 1992.

ADDRESSES: Materials relevant to thisrulemaking are contained in Air DocketNo. A-91-50. The docket is located atU.S. Environmental Protection Agency(LE-131), 401 M Street, SW.,Washington, DC 20460 in room M-1500,First Floor Waterside Mall and is openfrom 8:30 a.m. until noon and from 1:30p.m. until 3:30 p.m. Monday throughFriday. A reasonable fee may becharged by EPA for copying docketmaterials. s

FOR FURTHER INFORMATION CONTACT.Martha Dye, Stratospheric OzoneProtection Branch, Global ChangeDivision, Office of Atmospheric andIndoor Air Programs, Office of Air andRadiation, 6202J, 401 M Street, SW.,Washington, DC 20460, (202) 233-9093.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. BackgroundA. Overview of the Ozone Depletion ProblemB. Scientific Evidence of Ozone DepletionC. Past Efforts to Control Ozone Depleting

Substances1. Vienna Convention and 1987 Montreal

Protocol2.1988 Final Rulea. Overviewb. Baseline Allowancesc. Interrelationship of Consumption and

Production Allowancesd. Additional Allowancese. Reporting Requirements3. 1990 Revision of Montreal Protocol4. The Clean Air Act Amendments of 19905. Temporary Final Rule

II. Statutory AuthorityIII. September 30,1991 ProposalIV. Summary of Changes to Proposed RuleA. Definitions

1. Importer2. Productiona. Exemption for Immediately-Destroyed

By-Products that are ControlledSubstances

b. Used and Entirely Consumed (Except forTrace Quantities)

3. Transformation-Distinction BetweenTransformation and Destruction

B. Baseline Allowances1. Class II Baseline2. Selection of Baseline Year and Baseline

Allowances for Chemicals Added Later3. Method of Calculation of Baseline

AllowancesC. Implementation of Exemptions to the

Phaseout1. Exemption for Immediately-Destroyed

By-Products that are ControlledSubstances

a..The Exemption

b. First Come, First Served Policy andInterplay with the Montreal Protocol

c. Definition of Maximum AvailableControl Technology

d. Criteria for Determining if ControlledSubstances are Unavoidable,Coincidental By-Products

e. Interpretation of "ImmediatelyContained and Destroyed by theProducer"

(i) Immediately Contained and Destroyed(ii) Destruction By the Producer: On-Site

versus Off-Sitef. Extension of the Exemption2. Exemption for De Minimis By-Product

Production of Controlled Substances inGroups I-III

3. Other Exemptionsa. Halonsb. Methyl Chloroformc. Analytical and Research Purposes

D. Basic Prohibitions1. Compliance2. Consumption Limits

E. General Stringency of Regulations andPhaseout Schedule

F. Recordkeeping and ReportingRequirements

1. Daily Production Records2. Class II Reporting

G. Exchanges1. Domestic Trading-Environmental Offseta. Offset Amountb. Intra-Company Tradingc. Transformer Trading2. International Tradesa. The Proposalb. Trades from the U.S. to other Montreal

Protocol Partiesc. Trades to the U.S. from other Montreal

Protocol PartiesH. Obtaining Additional Allowances-

Transformation1. Carbon Tetrachloride Transformationa. Summary of today's Final Ruleb. The Proposalc. Proposed System versus 1991 Systemd. Allowances for the Production of

Feedstockse. Written Contracts and Commitments to

Transformf. Year-End Problemg. Liability if Production for Feedstock

Exceeds Transformationh. Provision for the Export of Carbon

Tetrachloridei. Recordkeeping and Reporting for the

Carbon Tetrachloride TransformationSystem

2. Transformation of Other ControlledSubstances

3. Provision for the Import of FeedstockCarbon Tetrachloride

4. Transformation in Foreign CountriesI. Obtaining Additional Allowances-Exports

1. Proof that Exports to Article 5 Countriesare net Reexported

2. Exports to Non-Party Complying NationsJ. Comments on the Impact of the ActionV. Section-by-Section DescriptionA. Authority CitationB. Section 82.1-Purpose and ScopeC. Section 82.2-Effective DateD. Section 82.3---DefinitionsE. Section 82.4-Prohibitions

Federal Register / Vol. 57, No. 147 / Thursday; July 30, 1992 / Rules and Regulations

F. Sections 82.5 and 82.6--Apportionment ofBaseline Production. and ConsumptionAllowances

G. Section 82.7-Granting and PhasedReduction of Allowances for Class IControlled Substances

H. Section 82.--Grant and Phased Reductionof Allowances for Class II ControlledSubstances

I. Section 82.9--Availability of AdditionalProduction Allowances

1. Section 82.10 Availability of AdditionalConsumption Allowances

K. Section 82.11 Exports to Article 5 PartiesL Section 82.12 ExchangesM. Section 82.13 Recordkeepin8 and

Reporting1. Producersa. Daily Recordkeepingb. Production Reports2. Importersa. Daily Recordkeepifigb. Import Reports3. Exporters4. Transformers5. Class II Controlled Substances

VI. Impact of ActionVII. Additional InformationA. Executive Order 12291B. Regulatory Flexibility ActC. Paperwork Reduction Act

I. Background

A. Overview of the Ozone DepletionProblem

Stratospheric ozone shields the earth'ssurface from dangerous ultraviolet (UV-B) radiation. In response to growingscientific evidence, a national andinternational consensus has developedthat certain human-made halocarbonsdeplete stratospheric ozone. To theextent depletion occurs, it is believedthat penetration of UV-B radiation willincrease, resulting in potential healthand environmental harm includingincreased incidence of certain skincancers and cataracts, suppression ofthe immune system, damage to cropsand aquatic organisms, increasedformation of ground-level ozone, andincreased weathering of outdoorplastics.

Different chlorine- and bromine-containing substances vary in theirpotential to deplete stratospheric ozone.The fully halogenatedchlorofluorocarbons (CFCs), halons 'andcarbon tetrachloride, for example, aresuch stable molecules that they reachthe stratosphere largely intact and onlythere are degraded by high energy solarradiation. The chlorine or bromine fromthese chemicals is then released informs (or chemical precursors of forms)which are extremely effective indepleting ozone. In contrast, methylchloroform has a substantially shorteratmospheric lifetime but is used in suchlarge quantities that it too contributessignificantly to total atmospheric

chlorine levels.Hydrochlorofluorocarbons (HCFCs) alsohave relatively short atmosphericlifetimes and are only beginning to beintroduced as substitutes for fullyhalogenated CFCs. Future use of HCFCsmust be carefully evaluated on the basisof both their potential volumes and theiratmospheric lifetimes. The relativeability of a substance to contribute toozone depletion is its "ozone depletionpotential."

B. Scientific Evidence of OzoneDepletion

The initial hypothesis linking CFCsand depletion of the stratospheric ozonelayer was published in 1974. A paper byresearch scientists Molina and Rowlandsuggested that industrial halocarbonscould react in the stratosphere anddestroy stratospheric ozone.

Between 1974 and 1987, the scientificcommunity made remarkable advancesin understanding atmospheric processesaffecting stratospheric ozone. Inresponse to this growing threat, theinternational community negotiated theMontreal Protocol, which limited theproduction and consumption of anarrow set of ozone depletingsubstances.

Significant ozone loss was firstreported over Antarctica in 1985. In1987, an international team of scientistscollected and analyzed evidence linkingthe Antarctic ozone hole to ozonedepleting chemicals. This report alsosuggested that some depletion of globalozone levels had already occurred(Ozone Trends Panel Report: ExecutiveSummary, 1988). In response, the Partiesto the Protocol agreed to accelerate theassessment process required underArticle 6 of the Protocol. The results ofthe initial Protocol assessment wereissued in 1989 and further heightenedconcern that chlorine- and bromine-containing substances had already ledto a greater depletion of stratosphericozone than had been expected.

This scientific assessment resulted ina call to strengthen national andinternational controls on ozonedepleting chemicals. Adjustmentsadopted by the Parties to the Protocol inJune of 1990 and Amendments to theClean Air Act signed into law inNovember 1990 require a full phaseoutof the most significant ozone depletingchemicals by the turn of the century.

The process of scientific review hascontinued since the 1989 Protocolassessments. In April 1991 the ExecutiveSummary of the second assessmentreport was issued. This report statedthat ozone depletion has occurred in thesummertime over northern mid-latitudes. This new information will be

examined in the context of possiblefurther amendments to the Protocol in1992 and in reference to a petition for afaster phaseout of controlled shbstancesthat EPA received under section 606 ofthe Clean Air Act on December 3, 1991from the Natural Resources DefenseCouncil, Friends of the Earth and theEnvironmental Defense Fund.

C. Post Efforts to Control OzoneDepleting Substances

1. Vienna Convention and 1987 MontrealProtocol

Recognizing the global nature of thisissue, EPA participated in negotiationsorganized by the United NationsEnvironment Programme (UNEP) todevelop an international agreement toprotect the ozone layer. Thesenegotiations successfully concludedwith the signing of the ViennaConvention in 1985 and the signing ofthe original Montreal Protocol in 1987.Currently, 81 nations representing over90 percent of the world's consumption ofCFCs and halons are Parties to theProtocol (see appendix C to subpart A of40 CFR part 82).

The 1987 Protocol required nationswho join to restrict their production andconsumption (defined as production plusimports minus exports of bulkchemicals) of CFC-11, CFC-12, CFC-113,CFC-114, and CFC-115 and halons 1211,1301 and 2402. It did not regulatespecific 'uses or emissions of these"controlled substances," but limitedtheir production and importationinstead. It also did not place limits oneach of the substances, but insteadgrouped the substances (i.e., the CFCslisted above were placed in Group I andthe halons were placed in Group II), andplaced separate limits on the total ozonedepletion potential (ODP) of each group.The Protocol thus allowed a nation tochange the mix of controlled substanceswithin each group that it produced andconsumed, so long as the total ODP ofthe mix did not exceed the specifiedlimits, The phrase "calculated level"was used to refer to this weighting ofcontrolled substances based on theirrelative ODP.

As originally drafted, the Protocolcalled for annual production andconsumption of the five most ozonedepleting CFCs (i.e., Group I substances)and halons (i.e., Group I substances) tobe frozen at 1986 levels beginning July 1,1989 and January 1, 1992, respectively,and for CFCs to be reduced to 50percent of 1988 levels by 1998. It alsoallowed for limited increases inproduction beyond the caps describedabove for the purposes of supplying

33755


developing country Parties that areoperating under Article 5 of the Protocolor trading allowable levels of production("industrial rationalization") betweenParties. In addition, the Protocolprovided that after January 1, 1993 onlyexports to Parties would be subtractedfrom a Party's consumption, and itbanned imports of controlled substancesfrom nations which neither join norcomply with the Protocol.

2. 1988 Final Rule

a. Overview. EPA promulgatedregulations implementing therequirements of the 1987 Protocolthrough a system of tradeableallowances. The Agency ensuredcompliance with the Protocol bycreating production and consumptionallowances equal to the quantity ofproduction and consumption allowedunder the Protocol. The Protocol'sseparate treatment of Group I andGroup II controlled substances wasreflected in separate allowances foreach group of substances. Similarly, theProtocol's application of limits to theODP of the groups of controlledsubstances ("calculated level") wascarried over into the definition ofallowances. Thus, allowances werespecified in terms of a calculated levelof a particular group of controlledsubstances, so that holders ofallowances could select any mix of'controlled substances within eachgroup, provided that the total calculatedlevel of the mix did not exceed thecalculated levels of the allowances held.

b. Baseline allowances. EPAapportioned allowances to producersand importers of controlled substancesbased on their 1986 levels of productionand imports. It then allocatedpercentages of the allowances accordingto the reduction schedule specified inthe Protocol. For example, for thecontrol periods during which CFCproduction and consumption were to befrozen at 1986 levels, EPA allocated 100percent of baseline allowances.

c. Interrelationship of Consumptionand Production Allowances. To reflectthe interrelationship of the productionand consumption limits, the Agencyprovided that a producer needed bothproduction and consumption allowancesto produce these chemicals (sinceproduction counted against bothproduction and consumption limits),while importers needed onlyconsumption allowances to import(since imports counted only againstconsumption).

To illustrate, a company that intendedto manufacture a controlled substancehad to have sufficient productionallowances for the group of controlled

substances to which the particularsubstance belongs in order to cover itslevel of production. Furthermore, sinceproduction is also included in thecalculation of consumption, thatcompany must also have had at least thesame number of consumptionallowances in order to produce the samecontrolled substances. For example,prior to producing one kilogram of CFC-12, a company must have had both aone-kilogram production allowance forGroup I substances and a one-kilogramconsumption allowance for the samegroup of substances. In producing thatone kilogram, the company expendedboth the production allowance andconsumption allowance.

A company could import controlledsubstances with consumptionallowances alone, since imports wereincluded in the definition ofconsumption but not of production. Likethe producer, however, the importer hadto hold prior to importing sufficientconsumption allowances specific to thegroup of controlled substances to whichthe substance being imported belongs.Once the import occurred, theconsumption allowances needed tocover the import were expended.

Exporters of controlled substanceswere not required to obtain allowancesin order to export. Through the export ofa controlled substance, a companydecreased the volume of controlledsubstance available for consumption inthe United States. Consequently, ifcertain conditions were met, an exportercould obtain additional consumptionallowances from EPA after thecontrolled substances had beenexported to a Party to the MontrealProtocol (see Additional Allowances).To obtain additional allowances, thecompany had to verify to the EPA thatthe export had occurred. EPA thengranted additional allowances equal tothe calculated level of the export.

The following specific examplesfurther illustrate the interrelationshipsbetween these allowances:

1. A producer had 20 kilograms ofGroup I (CFCs) production allowancesand 15 kilograms of Group Iconsumption allowances. Since bothproduction allowances and consumptionallowances were needed to produce, aproducer could make only 15 kilogramsof Group I substances, expending the 15of its 20 production allowances and allof its 15 consumption allowances in theprocess. However, if the producer thenexported 5 kilograms of Group Isubstances to a Party nation, it couldreceive 5 additional Group Iconsumption allowances from EPA uponproof of export. With the additional 5Group I consumption allowances, the

company could produce .5 morekilograms of Group I substances,expending its remaining 5 Group Iproduction allowances and the 5additional consumption allowances.

2. An importer had Group Iconsumption allowances equal to 20kilograms. The importer imported 20kilograms of Group I substances usingthe 20 kilograms of consumptionallowances, and then repackaged 10kilograms for re-export. Once these 10kilograms had been exported, theimporter could report the export to EPAand request additional allowances.Upon proof of export the companywould receive 10 additional Group Iconsumption allowances.

Under EPA's 1988 rule, once anyallowance was used to produce orimport a controlled substance, thatallowance was "expended" and couldnot be used again. In addition,allowances were only valid for thecontrol period for which they wereissued. Consistent with the twelve-month control requirements contained inthe Protocol, allowances could never becarried over to the next control period.

d. Additional allowances. EPA's finalrule also provided for grantingadditional allowances under certaincircumstances. Exporters could receiveadditional consumption allowances forcontrolled substances exported to anynation before January 1, 1993 or to anyother Protocol Party beginning January1, 1993. Producers could receiveadditional production allowances forexporting controlled substances todeveloping country Parties to theProtocol or upon the transfer ofproduction rights from another Party tothe Protocol. In accordance with theregulations, allowances could also beobtained through trading.

e. Reporting requirements. To monitorindustry's compliance with theproduction and consumption limits, EPAalso required that producers andimporters maintain records of theiractivities and report their productionand import levels every quarter.

Since the original rule waspromulgated in 1988, minor revisionshave been issued on February 9, 1989 (54FR 6376), April 3, 1989 (54 FR 13502), July5, 1989 (54 FR 28062), July 12, 1989 (54 FR29337), February 13, 1990 (55 FR 5005),June 15,1990 (55 FR 24490) and June 22,1990 (55 FR 25812).3. 1990 Revision of Montreal Protocol

As noted earlier, the Protocol's 1989scientific assessment confirmed thatstratospheric ozone was being depletedmore quickly than originally believed. Inresponse to the 6ssessment, the Parties

Federal Register / Vol. 57, No. 147 /, Thursday. July so; 1992 _/ Rules and.'Regulations

decided at their June 1990 meeting inLondon to completely phaseout byJanuary 1, 2000, the CFCs and halonsalready subject to the Protocol's controlrequirements and carbon tetrachlorideand the "other" fully halogenated CFCsnot originally regulated by the Protocol.They also agreed to phaseout methylchloroform by 2005. In addition, theParties decided to shift from July-through-June control periods tocalendar-year control periods, beginningwith the 1993 control period. Theyprovided for an 18-month transitionalcontrol period from July 1, 1991, toDecember 31, 1992, during which Partieswould be obligated to limit theirproduction and consumption of thealready regulated CFCs and halons to150 percent of baseline levels.

The changes in reductionrequirements applicable to the alreadyregulated CFCs and halons were madeas "adjustments" to the Protocol and sobecame binding on the Parties sixmonths after the receipt of formalnotification under the terms of theProtocol. The 1990 adjustmentsaccordingly took effect on March 7, 1991.The addition of carbon tetrachloride,methyl chloroform and the other CFCswas adopted as an "amendment" to theProtocol, which will take effect 90 daysafter 20 Protocol Parties ratify theAmendments. Under the Protocol,amendments bind only the Parties thatratify them. The U.S. has ratified theamendments. As a result, a nation thatis a Party for purposes of the originallyregulated CFCs and halons would not bea Party for purposes of carbontetrachloride. methyl chloroform and theother CFCs until it has ratified theAmendments.

To encourage all nations to ratify or atleast comply with the Protocol and theLondon Amendments, the Parties alsoadopted additional trade sanctionsagainst nations that fail to join orcomply with all or part of the Protocol.Article 4 originally required that Partiesban imports of controlled substancesfrom non-Parties. Amendments toArticle 4 require that Parties also banexports of controlled substances to non-Parties and defines non-Parties forpurposes of Article 4 as including, withrespect to a particular controlledsubstance, a nation that has not agreedto be bound by the control measures ineffect for that substance. Underamended Article 4, a nation that is aParty only for the original controlledsubstances will not be able to import thenewly regulated controlled substancesfrom other Parties or export the newlyregulated controlled substances to otherParties beginning January 1. 1993.

The issue of what Parties areoperating under Article 5 of the Protocolwas addressed by the Parties, as well.Article 5 permits any developing countrywhose consumption of the originalcontrolled substances is less than 0.3kilograms per capita when it joins theProtocol to delay its compliance withthe Protocol's control measures by tenyears. The Parties originally delayeddesignating Article 5 nations on thebasis that many countries had notsubmitted data showing that they wereunder the 0.3 kilogram cap. At theirmeeting in Nairobi in June, 1991,however, the Parties agreed on a list ofArticle 5 countries.

4. The Clean Air Act Amendments of1990

Shortly after the Protocol Parties'London meeting, the United StatesCongress passed the Clean Air ActAmendments of 1990. The restrictions onproduction and consumption of ozonedepleting substances found in title VI ofthe Clean Air Act are similar to those Inthe London Amendments, althoughinterim targets are more stringent andthe phaseout of methyl chloroformoccurs earlier.

The Amendments to the Act alsorequire EPA to promulgate regulations toensure the "lowest achievable levels" ofemissions in all use sectors, to bannonessential products, to approve theuse of safe substitutes only. and tomandate warning labels. Today's noticepromulgates limits on production andconsumption and is one of severalregulations that will implement theAmendments' title VI provisions.

5. Temporary Final RuleOn March 6, 1991 (56 FR 9518), EPA

published temporary regulations toimplement the 1991 limits on theproduction and consumption of ozonedepleting chemicals required by section604 of the Act. The regulations tookeffect on January 1, 1991, and were toremain in effect only during 1991.Today's regulations pertain to all controlperiods beginning with the 1992calendar year.

The temporary final rule revisedEPA's regulations implementing theMontreal Protocol as needed toimplement the 1991 production andconsumption limits under section 604 ina manner consistent with the UnitedStates' obligations under the Protocol.

II. Statutory AuthorityTitle VI of the Clean Air Act as

amended in 1990 provides for thephaseout of ozone depleting substancesthrough provisions contained in severalsections. Section 602 directs EPA to

issue within 60 days after enactment ofthe 1990 Amendments two lists.of ozonedepleting chemicals. One list is toinclude the chemicals already regulatedunder the Protocol and EPA'sregulations (i.e., the five CFCs and threehalons), as well as the chemicals to beregulated under the revised Protocol(i.e., all other fully halogenated CFCs,carbon tetrachloride and methylchloroform) and their isomers (except1,1,2-trichloroethane, an isomer ofmethyl chloroform). The chemicals onthat list are collectively called "class I"substances. The second list is. to includeallthe HCFCs and their isomers; thesechemicals are referred to as "class 11"substances. For each of the chemicalslisted, EPA must also assign an ozonedepletion potential, a chlorine orbromine loading potential, anatmospheric lifetime and, within oneyear after enactment, a global warmingpotential (the relative ability of acontrolled substance to contribute toglobal warming). EPA published therequired initial listing notice, includingODPs, on January 22, 1991 (56 FR 2420).

Section 603 directs EPA to amend itsregulations to implement newrequirements regarding monitoring andreporting of class I and class I1substances. Included in this section arerequirements for industry reports onproduction, import, and export levels ofclass I and class I substances andperiodic EPA reports to Congress onspecified industry activities,atmospheric conditions, and the statusof substitute technology.

Section 604(a) makes it unlawful forany person to produce any class Isubstance in an annual quantity greaterthan the specified percentages of thequantity of the substance produced bythat person in the baseline year.(Section 601(2) defines baseline year as1986 for the already regulated chemicalsand 1989 for the newly regulatedchemicals.) The provision is selfeffectuating. The first control period inthe reduction schedule began on January1, 1991, and ran through the end of 1991.Section 604(a) requires in the firstcontrol period a freeze on carbontetrachloride and methyl chloroform at1989 production levels and a 15 percentreduction for all remaining class Isubstances.

Section 604(c) calls for EPA topromulgate within ten months afterenactment regulations to implement theproduction controls described aboveand to "insure" that United Statesconsumption of the class I chemicals isreduced on the same schedule asproduction. Section 601(b) definesconsumption as production plus imports

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minus exports to nations which areParties to the Montreal Protocol.

Section 607 requires EPA topromulgate within ten months afterenactment rules "providing for issuanceof allowances" for production andconsumption of class I and II substancesand governing the transfer of suchallowances. The transfer rules are torequire that each trade result in lessoverall production or consumption thanwould have occurred absent the trade.

Section 604(e) authorizes EPA topermit, after notice and opportunity forcomment, production in excess of thelimits for export to, and use in,developing countries that are operatingunder Article 5 of the Protocol. Like theProtocol, section 604(e) provides thatsuch excess production must be solelyfor the purpose of supplying the basicdomestic needs of suchocountries.

Section 616 requires EPA topromulgate, within two years afterenactment, regulations authorizingtrades of allowable production withother Parties to the Protocol. Theregulations are to require, among otherthings, that trades do not result in moreproduction than would have otherwise.occurred.

Finally, section 614(b) addresses therelationship between the statute and theProtocol, stating that "in the case ofconflict between any provision of thistitle and any provision of the MontrealProtocol, the more stringent provisionshall govern." It also provides that thetitle "shall not be construed, interpreted,or applied to abrogate theresponsibilities or obligations of theUnited States to implement fully theprovisions of the Montreal Protocol."

III. September 30,1991 ProposalIn a Federal Register notice published

on September 30, 1991, the Agencypublished proposed regulations for theimplementation of the phaseout of ozonedepleting substances as required by titleVI of the Clean Air Act for 1992 andlater. The notice included the proposedimplementation of the requirements ofsection 604 of the Act as well as of therelated provisions of sections 603, 607,and 616 in a manner consistent with theUnited States' continuing obligationsunder the Montreal Protocol. A detaileddescription of those provisions, theissues they raise, and EPA's proposedimplementation of them may be found inthe NPRM at 45 FR 49548.

Among the more significant issuesaddressed in the proposal was thereduction schedule for production andconsumption of ozone depletingsubstances. The Act sets forth aphaseout schedule for the regulatedchemicals. For 1992. production and

consumption of CFCs and halons arelimited to 80 percent of baseline levels,methyl chloroform is frozen at baselinelevels and carbon tetrachloride isreduced to 90 percent of baseline levels.The limits on the production andconsumption of ozone depletingchemicals are gradually reduced until2000 (2002 for methyl chloroform), whenthe chemicals are to be phased out.

An additional cap on production andconsumption to ensure compliance withthe Protocol's somewhat differentrequirements was also proposed. Asexplained above, the temporary finalrule shifted the control period tocoincide with the calendar year, asrequired by the 1990 Amendments to theClean Air Act. EPA proposed tosafeguard against non-compliance withthe Protocol's 150 percent cap for July1991 through December 1992 byprohibiting any company fromexceeding more than 150 percent of itsbaseline production and consumption ofGroup I (CFCs) substances from July 1,1991 through December 31, 1992, exceptto the extent the company has receivedallowances authorizing additionalproduction or consumption throughintercompany trading, exports to Parties,and transfers of allowable productionfrom other Parties. This prohibition is inaddition to the prohibition against anyperson exceeding the allowancesallocated to that person for thecalendar-year control period establishedpursuant to section 604(a) of the CleanAir Act.

In the NPRM, EPA also proposedrevisions to the trading provisions of thestratospheric ozone protectionregulations as required under title VI.Section 607 of the Act requires that anytrade between chemicals or companiesresult in less overall production orconsumption than would have occurredabsent the trade. In the notice theAgency proposed to permit transfers ofallowances provided the transferor'sremaining allowances are reduced bythe amount it transferred plus onepercent of the amount transferred. Aone-percent offset was proposed as anamount large enough to provide a netenvironmental benefit withoutdiscouraging trading necessary to meetmarket demands.

Exports to Article 5 Parties were alsoaddressed by the proposed regulations.Section 604 of the Act permitsproduction in excess of the amountotherwise allowed in order to supply thebasic domestic needs of developingcountries that are operating underArticle 5 of the Protocol. In the NPRM,the Agency proposed to implement thisprovision by requiring that producersprovide adequate assurances that the

production supplied to a developingcountry will not be re-exported.

The Agency also proposed to permitincreases or decreases in productionthrough transfers of allowableproduction with other Protocol Partiesunder certain conditions. Section 616authorizes EPA to issue regulationsproviding for trades of allowableproduction with other Protocol Parties. IfEPA approves a trade to another Party,it must revise the "production limits forthe United States" such that the revisedlimits are the lesser of (a) the maximumproduction that the country is allowedunder the Protocol minus the amounttransferred, (b) the maximum productionthat is allowed under the country'sapplicable domestic law minus theamount transferred or (c) the average ofthe country's actual national productionlevel for the three years prior to thetransfer minus the productionallowances transferred. In the case of atransfer to the United States, it wasproposed that the principal diplomaticrepresentative in the transferringcountry's embassy attest that thetransferring country has revised itsproduction limits in a similar manner.

In the NPRM, a change to theapproach to granting additionalallowances for transforming ozonedepleting substances was proposed forcarbon tetrachloride. Since over 81percent of the carbon tetrachlorideproduced in this country is used toproduce CFCs, the original system ofapproving additional allowances onlyafter a chemical has been transformed isless workable for carbon tetrachloride.The proposed scheme providedallowances "up-front" prior totransformation, thus avoiding anunnecessarily burdensome stop-startproduction cycle.IV. Summary of Changes to ProposedRule

A. Definitions

1. Importer

The Agency proposed the followingdefinition of "importer." "the importer ofrecord listed on U.S. Customs ServiceForm 7501 or 7512 for importedcontrolled substances." This definitionis identical to that used in the past in 40CFR part 82 (53 FR 30566), with theaddition of the words "or 7512."

Comments received on the definitionof importer stated that the importer ofrecord should not be the party requiredto possess consumption allowances.These commenters were concerned thatshipping agents and customs brokerswho routinely put up Customs bonds forother companies are often listed as the

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importer of record, and therefore wouldbe held responsible for the import ofcontrolled substances in which theyhave no economic interest. Thecommenters maintained that the existingregulations are in this way unfair andvirtually impossible for brokers tocomply with. As a result, they suggestedthat the definition of importer forpurposes of compliance during thecontrol period be the same as that usedfor purposes of granting baselineallowances, or "the first United Statesowner who is a supplier to or a memberof the domestic industry that uses thecontrolled substances."

The Agency previously consideredusing this definition for enforcementpurposes and rejected it (see 53 FR188Q3 and 53 FR 30583). The Agencyagrees that limiting the definition ofimporter to the importer of record couldcause brokers to be held liable forimports of controlled substancesalthough they were not granted baselineconsumption allowances. However, asdiscussed in previous rulemakings (e.g.,53 FR 18803 and 53 FR 30583), theAgency must choose a definition thatwill make compliance monitoringadministratively feasible. In general,requiring the importer of record to be theparty that holds the consumptionallowances has proved to be effectivefor compliance-monitoring purposes, asit allows the Agency to rely on datagathered from Customs entry summaryforms to verify importer quarterlyreports and to identify imports for whichconsumption allowances were notexpended. EPA also does not believethat its definition of import putsCustoms brokers or shipping agents inan impossible position. As severalcompanies have demonstrated, one wayto deal with the definition is forcompanies that have an economicinterest in imported controlledsubstances and thus were grantedbaseline consumption allowances toensure that they are designated as theimporter of record on the entry summaryform. Customs brokers and shippingagents can similarly require that theholder of allowances be designated theimporter of record or that the neededallowances be transferred to them bythe time the import occurs. In spite ofthe large volume of trade that brokersmay handle, they remain responsible forthe content of material that crosses theborder into the United States under theirbond. Clearly, many regulations ban theimport of certain products or materialsand brokers must be sure that thematerial they are importing is notprohibited. In the same way, they areresponsible for ensuring that controlled

substances under this subpart are notimported without the properauthorization.

One of the commenters also notedthat the definition of importer isinconsistent with the definition of thatterm in a recent regulation promulgatedby the Internal Revenue Service (IRS).The Agency, however, need not defineimporter in a manner consistent withIRS regulations, if, as is the case here, adifferent definition is more suitable toEPA's regulatory purposes.

Upon examining the definition ofimporter and its relation to Customspractices, the Agency determined thatseveral different forms may be usedwhen importing material into the UnitedStates. For example, Customs Form 3401may be used for low value shipments inplace of Form 7501. In order toguarantee that any person bringingcontrolled substances into the UnitedStates is subject to the importrestrictions, which is and has been theobjective of these restrictions, theAgency has determined that thedefinition of importer should read "theimporter of record listed on U.S.Customs Sdrvice forms for importedcontrolled substances."

2. Productiona. Exemption for immediately-

destroyed by-products that arecontrolled substances. The Agencyproposed that carbon tetrachloride thatis produced as a coincidental,unavoidable by-product (CUBP} of amanufacturing process and thenimmediately contained and destroyedbe exempted from regulation under thissubpart. This proposal was based onlanguage in the Joint ExplanatoryStatement of the Committee ofConference that accompanied the CleanAir Act Amendments. The Agencyrequested comment on several issuesrelating to the definition of a (CUBP),immediate containment and destruction,and maximum available controltechnologies.

One commenter believed that thisexemption should take the form of analteration in the definition of productionunder the regulations. This companymaintained that by restructuring theregulations in this manner, theinadvertent manufacture of a controlledsubstance immediately contained anddestroyed is exempt from the definitionof production rather than from thecontrol of production.

The Agency, however, does notbelieve that it is appropriate to exemptCUBP production of Groups IV and Vcontrolled substances from thedefinition of production. The Agencybelieves that it is more appropriate to

include this exemption in § 82.4,Prohibitions, than under § 82.3,Definitions, because the exemption isnot permanent and categorical, butrather is subject to case-by-case annualreview by the Agency. CUBP productionof controlled substances in Groups IVand V is therefore exemfpted from theproduction restrictions in today'sregulations. This exemption is discussedin more detail below as part of thediscussion of exemptions to thephaseout.

Another commenter argued thatcarbon tetrachloride that is used forexplosion prevention in the manufactureof chlorine and subsequently destroyedshould be exempted from the definitionof production because it is essential forhuman safety.

The Agency does not believe that thisuse of carbon tetrachloride falls withinthe parameters of the CUBP exemptiondescribed in the Joint ExplanatoryStatement of the Committee ofConference on the 1990 Clean Air ActAmendments, because it does notinvolve the inadvertent manufacture of acontrolled substance. Although theProtocol allows for controlledsubstances to be excluded fromproduction if they are destroyed usingdestruction methods approved by theParties, the Clean Air Act does notcontain such an exclusion and the JointExplanatory Statement specificallystates that the Protocol's exclusion doesnot apply under domestic law exceptwhere the destroyed material is CUBP.

b. Used and entirely consumed(Except for Trace Quantities). Thedefinition of production in the statuteand in the proposed regulationsexcludes from production "themanufacture of a substance that is usedand entirely consumed (except for tracequantities) in the manufacture of otherchemicals." In the NPRM, the Agencysuggested that although theparenthetical phrase "except for tracequantities" does not appear in theMontreal Protocol definition, it isimplicit because it is a law of chemistrythat no chemical can ever be entirelyconsumed in the manufacture of anotherchemical. Thus, EPA found that theaddition of the phrase in the regulationsis warranted and not incongruous withthe Protocol.

The only comment the Agencyreceived on this point agreed that theexception for trace amounts is implicitin the Montreal Protocol's exclusionfrom "production" for amounts "entirelyused as a feedstock in the manufactureof other chemicals."

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3. Transformation-Distinction BetweenTransformation and Destruction

In the NPRM, the Agency discussedthe difference between transformationand destruction. Essentially, theproposed definition of transformationwas the use and entire consumption of achemical in a process that producesanother commercially useful chemical.The proposed definition of destructionwas any process that results in the"expiration" of the chemical withoutany commercially useful end productbeing produced.

One company commented thatdefining "transformation" as a processthat produces a commercial product thatis sold, or an intermediate substancethat is used in further manufacture limitstransforriation to only those processeswhere a commercial product is thedirect product of the transformationreaction. This company stated that sucha limitation would unnecessarily restrictcommercial manufacturing use ofcontrolled substances since, in manycommercial processes, a controlledsubstance is used and entirelyconsumed but is not transformed into acommercial product (e.g., use ofcontrolled substances as reactioninhibitors, solvents, or inert directcoolants. The same company arguedthat the proposed definition would forcesome processes where controlledsubstance use is essential to shut down.It contended that even where substitutechemicals are available, large sums ofmoney would be spent on processretrofits without environmental benefit.

The commenter gave as an example ofa process which it believed would notmeet the proposed definition oftransformation a process in which (1)The reattion process results in acommercial product or intermediatesubstance that could not otherwise beproduced without the presence of theozone depleting chemical; (2) the ozonedepleting chemical is entirely consumedin the production process via acombustion reaction that transforms thecontrolled substance to a non-controlledsubstance; (3) the combustion device isa necessary and integral part of thecommercial process where the ozonedepleting chemical is used; (4) there isno storage of the ozone depletingsubstance between the use in theproduction of the commercial productand the controlled substancecombustion because they are both partsof the same production process; (5) theseoperations cannot be characterized as aResource Conservation and RecoveryAct (RCRA) waste destructionoperation; and (6) the ozone depletingchemical is generally burned as part of a

process to vent steam and is not a solidwaste as defined by RCRA. Thecommenter noted that although theprocess described above did not resultin the transformation of the ozonedepleting substance into a commercialproduct, it does meet the strictrequirement that the substance be usedand entirely consumed. Furthermore, thecommenter stated, there is no practicaldifference between processes where thecontrolled substance is transformeddirectly to a commercial product andthose where the ozone depletingchemical is used to produce acommercial product and is thentransformed to a noncommercialchemical.

The Agency's definition oftransformation would not necessarilyexclude the process described above.EPA is aware of several transformationsituations in which the manufacturingprocess requires that the controlledsubstance be broken down orchemically changed, without the ozonedepleting substance actually formingpart of the intended commercial product.One example is the use of carbontetrachloride as a chlorine source forrejuvenating the catalyst in certainrefinery or isomerization processes. Inthese cases, although the gasoline or iso-butane being produced does not containthe reaction products of carbontetrachloride, the carbon tetrachloridewas transformed to produce chlorineatoms which were commercially usefulwhen they rejuvenated the catalyst.Thus, EPA's proposed definition oftransformation does not require that thereaction products become part of asaleable product.

In order for a process in which thereaction products do not become part ofa saleable product to satisfy thedefinition of transformation, thefollowing must be true. It must beessential for the manufacturing processthat the controlled substance be brokendown, and it must be physicallyimpossible to recover the ozonedepleting chemical after its use and stillhave it serve its purpose in the process.If it is not essential for themanufacturing process that thecontrolled substance be broken down,the "expiration" of the controlledsubstance is incidental and would mostlikely be as the result of destruction. Thecontrolled substance is clearly not beingincorporated into a commercially usefulchemical. If it is physically possible torecover the ozone depleting chemicalafter it has served its purpose in theprocess, then it is not being transformedin the process and is only expiring in aseparate, destruction step. If it is

essential that the material be brokendown, and as a result it is notrecoverable, the process probablyqualifies as transformation, as long asthe actual reaction that is taking placeclearly results in a commercially usefulintermediary as one step in themanufacturing process. If it is notessential for the manufacturing processthat the controlled substance be brokendown, i.e., it is recoverable afterperforming its function in the process, itis probably not being transformed. Thiswould be true if the material served as asolvent in the process, even if it werefed directly into an incinerator aftercompleting its function.

The Agency cannot allow thedefinition of transformation to includemanufacturing processes wherecontrolled substances are used and thenmoved directly into an incinerator afteruse. Clearly, the purpose of theincinerator is simply to destroy thematerial. This is true even if theincinerator is attached to a vent in orderto capture and destroy volatileemissions. If the Agency were to includethese processes in the definition oftransformation, a company using anozone-depletor as a solvent could simplysend the waste solvent directly to anincinerator and claim it astransformation. The Protocol, however,distinguishes between transformation ofcontrolled substances in the productionof another commercial chemical anddestruction. As explained above, theAgency believes the key questions fordetermining whether a substance hasbeen transformed is whether thesubstance has undergone a change inchemical composition in order tobecome a commercial product orintermediary as a necessary step in aproduction process. The Agency isproviding exemptions in this rulemakingfor production of controlled substancesthat are by-products of manufacturingprocesses, and is participating in aworking group established by the Partiesthat is exploring issues relatedspecifically to destruction.

One company supported the definitionadopted by the Agency fortransformation. Two other commenters,however, maintained that the definitionof "transform" refers to manufacture ofother chemicals "for commercialpurposes", and that the regulationsshould clarify that commercial purposesmeans for sale by producers or for useby producers that would otherwise haveto purchase it.

As a general rule, the phrase"commercial purposes" would have themeaning the commenters suggest.However, in the catalyst-rejuvenation

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case discussed above, the chlorineatoms that activate the catalyst couldnot necessarily be sold or purchased inthat form, and so although the product ofthe transformation is commerciallyuseful, it could not otherwise have beensold or purchased. Thus EPA hasdecided not to restrict "commercialpurposes" (as suggested by thecommenters) to sale or use in place ofpurchased material.

One commenter asserted that thedefinition of transformation should beclarified because there are situationswhere both transformation anddestruction occur in the same process(i.e., transformation where thecontrolled substance "expires" in themanufacture of another commercialchemical, anddestruction where the"expiration" of the controlled substanceresults in the creation of anotherchemical which is a waste product).They maintained that this situationmeets the exclusion from the definitionof "production" since the controlledsubstance is essential to the reaction (invery small amounts relative to thecommercial chemical), but is not itselfincorporated into the molecules of thecommercial chemical. In assisting thereaction, the controlled substance isbroken into simpler compounds that arewaste products. According to thiscompany, the chemical is thus used andentirely consumed (except for tracequantities) in the manufacture of otherchemicals, and meets the definition oftransformation even if the actual atomsof the controlled substance end up aswaste products after assisting thereaction. This commenter suggested thatEPA either clarify the definition oftransformation to include this type ofprocess or expand the definition oftransformation itself.

The Agency believes that the processdescribed by this commenter wouldqualify as transformation. The key pointin the above description is that "inassisting the reaction, the controlledsubstance is broken into simplercompounds." If it is necessary for theozond depleting chemical to be brokendown in order to serve its purpose in thereactor, it is being transformed. Thisagain differs from the situation wherethe ozone depleting substance serves itspurpose, remains intact, and only as aseparate step is destroyed.

One commenter was generally inagreement with EPA's proposeddistinction between transformation anddestruction, and believed that specificprocesses including thermal oxidizersand halogen acid furnaces should beidentified as transformation.

In applying the "commercialpurposes" test to these processes, the

Agency concludes that halogen acidfurnaces would qualify astransformation because the resultinghalogen acid Is used or sold and notdisposed of as a waste. Thermaloxidizers, however, would not qualifybecause the product of the controlledsubstance being broken down Is notanother chemical, but simply energy. Inno way is the controlled substance beingchemically changed to become acommercially useful chemical- thesubstance is destroyed in order toproduce heat.

In summary, a controlled substance istransformed if it is used and entirelyconsumed (except for trace quantities)in the manufacture of other chemicals.The "other chemicals" manufacturedmust be commercially useful. Thisincludes uses in manufacturingprocesses and is not limited tocommercial sale. Processes where theatoms that make up the controlledsubstance are rearranged to form only awaste product are destructionprocesses, not transformation.

B. Baseline Allowances

1. Class II BaselineThe Agency proposed to reserve the

baselines for class II chemicals, becauseunder § 605 the phaseout of thosechemicals does not begin until 2015, andit will take some time for the market todetermine what representativeproduction levels for these substanceswould be. This proposal was supportedby commenters.

2. Selection of Baseline Year andBaseline Allowances for ChemicalsAdded Later

In the NPRM, the Agency requestedsuggestions regarding the appropriatemethod for determining the baselineyear and allowances for new chemicalsto be added to the class I list of ozonedepleting substances. The allocation ofsuch allowances is subject to theprovisions of sections 604 and 607 of theClean Air Act.

One company responded with asuggestion on how to calculate thebaseline allowances for CHF2Br (Halon1201. or bromodifluoromethane), achemical that EPA intends to add to thelist of ozone depleting substances and apotential substitute for Halons 1211 and1301. The suggested approach for thisparticular substance will be discussed inthe proposal to list Halon 1201 as a classI chemical and allocate baselineproduction and consumption levels forthis chemical.

Since no other comments werereceived on the method for determiningthe baseline year and allowances, the

Agency will continue to evaluate eachsubstance on a case-by-case basis inorder to determine a representativebaseline year.

3. Method of Calculation of BaselineAllowances

EPA proposed baseline allowances forthe Class I substances based on eachcompany's production and consumptionof each of the substances in the baselineyear. Information on baseline-yearactivities was gathered under twoinformation requests. The first request,dated December 14, 1987 (52 FR 47468),collected information on the amount ofGroup I and H controlled substancesthat firms had produced, imported orexported in 1988. More recently, thesame information was requested forGroups Ill through V (other CFCs,carbon tetrachloride, and methylchloroform) on November 26, 1990 (55FR 49116). The Agency calculated acompany's baseline production of acontrolled substance by subtractingfrom the amount manufactured theamount of that company's product thatwas transformed or used as a feedstockin the baseline year. Consumption wascalculated in a similar fashion, addingimports to the calculated production andsubtracting baseline-year exportsattributed to the company. A correctionfactor was applied to all baselinecalculations to account for exported andtransformed material that could not beattributed to a particular producer orimporter.

Two companies commented that afterthe regulations are adopted. companiesshould be given an opportunity tochallenge the baseline allowances andverify correct computation. In addition,these corporations believed thatproblems were created by the 1991temporary final regulations becauseEPA collected information beforedefining key terms. These companiesmaintained that EPA-should consider re-examining data in light of newdefinitions and reviewingdata in casesin which definitions have changed.Another commenter also maintainedthat EPA may need to examine theprocess used to set baseline allowancesfor carbon tetrachloride, especially if itchanges the method of applyingproduction and consumption limits forthat chemical.

The Agency has already given anopportunity for companies to challengethe baseline allowances by includingthem in the NPRM. and a lengthydescription of the calculation methodwas provided to all involved. Althoughissues such as destruction versustransformation have required

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clarification in this rulemaking, theAgency has recalculated the allowancesto account for the changes In thedefinitions. The Agency received theadditional information that was neededto make the changes since thepublication of the proposal. The onlyissue concerning which the Agency mayneed additional information is that ofcontrolled substances produced as by-products. As discussed below, theAgency is requesting the necessaryinformation.

Comments from two companiesmentioned that baseline allowancesshould reflect the percentage of acompany's baseline-year productionthat will not be exported or transformed.These companies asserted that with theproposed EPA system, inventories canmake baseline numbers artificially lowor high. One company offered analternative approisch that would rely onemissive uses to set baseline allowancesfor heavily transformed substances.

EPA recognizes that the effect ofsubtracting 1989 exports andtransformations from 1989 productionand imports is not the same ascalculating the actual amount of 1989production and imports that were notand will not be exported or transformed.The Agency submits that it would beimpossible to trace each molecule of1989 controlled substances to ascertainits ultimate use or destination whenthere had been no requirement at thattime to track the fate of the compound.In addition, it is possible that someamounts of controlled substancesproduced in 1989 will yet be transformedor exported at some future date. Again,it is not possible for EPA to determinethe fate of all 1989 production. As aresult, 1989 transformation and exportswere used as a reasonableapproximation.

The emissive uses approach wouldnecessitate a supplementary survey ofusers that would cause a significantdelay in the implementation of theprovisions of the Act. Furthermore, thesuggested method would depart from theClean Air Act requirements by changingits most basic definitions, whereas thecurrent method's assumptions areconsistent with those definitions whilemaking certain mathematicalapproximations in order to render itsrequirements achievable. EPA notes,moreover, that the Agency hascalculated allowances in this mannerbeginning with the original phaseoutregulations in 1988, and has reportedU.S. baseline-year levels to the ProtocolSecretariat using these calculations.

One company maintained thatbecause of business cycles andeconomic factors, the same amount of

carbon tetrachloride is not producedand used every year. As a result, theassumption that current-yeartransformations equal the amount ofcurrent-year production eventuallytransformed does not hold true. Thiscompany presented an example of twocompanies that produced the sameamount of carbon tetrachloride in thebaseline year, with the same amounteventually exported and transformedbut a different amount sold to emissiveuses. The example showed thatinventories distort the numbers to createidentical baselines for the twocompanies.

Another example mentioned by thesame company shows how a producerthat did not sell to emissive users in1989 could receive baseline allowances,unlike another producer that did sell toemissive users. This situation couldoccur if the first company's sales fornon-emissive uses were not transformeduntil 1990, and the second company hada high level of inventory at the end of1988 that was sold or exported in 1989.The commenter stated that the results,as shown by these examples, are unfairand inconsistent with the goal of theClean Air Act to eliminate emissive usesof ozone depleting substances.

These examples show that inventorycan indeed affect the calculation of thebaseline. However, as discussed above,it would be administrativelyburdensome and in many casesimpossible to actually trace the fate of1989 production. The new method oftracking carbon tetrachloridetransformation as discussed belowshould remove any compliancedifficulties that producers of thiscontrolled substance for feedstockexperienced during calendar year 1991arising from idiosyncrasies of thecarbon tetrachloride market in 1989.

One company commented that theClean Air Act does not require EPA touse the proposed baseline calculationmethod, and that this method isinconsistent with the Act's definition ofproduction. The company pointed outthat the definition excludes only theamount transformed from the amountproduced, as opposed to excluding thetransformation of controlled substancesthat may have been produced in theprevious year.

As noted earlier, the Agency hasconcluded that only the amount of eachchemical transformed in the baselineyear can be accurately ascertained andthat calculating baseline allowances onthis basis is consistent with thedefinition of production. As statedabove, it would not be possible to tracelater transformation of 1989-producedcontrolled substances. A simplifying

assumption was necessarily made thatthe amount of previous-year productiontransformed in 1989 would be similar tothe amount of 1989 productiontransformed in 1990. Although theAgency recognizes that business mayfluctuate from year to year, the proposedapproach is readily calculated andconsistent with the relevant definitions.

One company remarked that EPA haschanged allowance allocations from1991 without stating so in the preamble,or explaining why the change was made.This company believed that theregulations should clarify that theallocations do not apply to 1991.

In the preamble to the NPRMv, EPAdiscussed the calculations that caused achange in the baseline allowancesbetween March 6, 1991 and thisrulemaking. Some changes were madebecause of new information oncompanies' activities in the baselineyear. Another change resulted from thedistribution of two companies' negativeGroup IV consumption allowances overthe rest of the companies receivingconsumption allowances for carbontetrachloride. These companies'baseline-year consumption was negativebecause the amount of carbontetrachloride produced by them that wasexported and transformed during 1989was greater than the amount of carbontetrachloride that they produced andimported during 1989. The resultingchanges of the baseline allowances arenot effective for 1991, as stated in thesection of today's rule on Effective Date.

Another commenter maintained thatre-allocation of the negativeconsumption is not needed in order tosatisfy the Clean Air Act, which thecommenter asserted sets limits on a per-person basis depending on the person'sbaseline-year production andconsumption. Therefore, the companyasserted that the allocation of thenegative amounts should be deferreduntil Montreal Protocol provisions forcarbon tetrachloride go into effect in1995.

In response, the Agency notes thatsection 604(c) requires EPA "topromulgate regulations to insure that theconsumption of class I substances in theUnited States is phased out" on thesame schedule as is applicable to theproduction of class I substances(emphasis added). While section 604(a)defines production limits in terms of apercentage of a company's baseline-yearproduction, section 604(c) requires EPAto define consumption limits that willinsure that United States' consumptionas a whole is subject to the samepercentage reduction. Section 607provides that allowances be granted in a

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manner consistent with the applicablereductions prescribed by section 004.Thus, consumption allowances must beallocated in such a way that the totalnumber of allowances granted equalstotal allowable U.S. consumption. Forthe aggregate number of consumptionallowances to reflect U.S. consumptionin the baseline year, the "negative"consumption accrued by somecompanies in the baseline year must betaken into account in this rulemaking.

Another comment explained onesituation where a customer soughtallowances for transformations, andEPA ruled the customer's process to bedestruction. If this company weretreated as a transformer in computingthe 1989 baseline allowances, othercompanies' allocations would be toolow. This commenter maintained thatthere is no check on EPA since theinformation upon which the allowancesare based is not made available to thepublic.

The Agency is familiar with the caseto which the commenter refers, andresponds that in any case for which acompany's designation may havechanged, the baseline allowances havebeen adjusted accordingly. Many of thecompanies submitting baselineinformation filed claims ofconfidentiality, and, as such, the Agencycannot at this time make the informationavailable to the public. EPA believes,however, that producers of controlledsubstances that wish to check theinformation submitted by theircustomers could do so by contactingthose companies. EPA has providedcompanies with detailed spreadsheetsdescribing exactly how their allowanceallocations were affected by second-party reports.

One suggestion was made that EPAshould resurvey customers after it issuesfinal regulations in order to rectifypotential problems. This companybelieved that a resurvey would not be amajor impediment because it needs tobe done in any event to make sure thefeedstock numbers are correct.

EPA has examined the informationcollected on transformation andbelieves that the data set is consistentwith the definitions set forth in thisrulemaking. In addition, the commentperiod allowed companies theopportunity to submit additional datafor EPA to revise their baseline numbersif they found them to be inaccurate inthe proposed rule. Since the additionalinformation resulting from refineddefinitions was submitted after theproposed rule was published, baselinenumbers have changed slightly fromthose published in the proposed rule.The Agency does not anticipate that

these changes will cause affected firmsany difficulty in complying with 'today'sregulations.

C. Implementation of Exemptions to thePhaseout

1. Exemption for Immediately-DestroyedBy-Products That Are ControlledSubstances

a. The exemption. EPA proposed thatcarbon tetrachloride that is acoincidental, unavoidable by-product(CUBP) of a manufacturing process thatis immediately contained and destroyedby the producer using maximumavailable control technology beexempted from the limits on productionof controlled substances. Thisexemption was based on statementsmade in the Joint Explanatory Statementof the Committee of Conference of the1990 Clean Air Act Amendments,indicating that EPA should grant suchexemptions on a case-by-case basis. Theproposal stated that requests for such anexemption would be considered on acase-by-case basis, and if the exemptionwere not granted, the Agency wouldgrant the requesting company baselineallowances (subject to the phaseout)based on the company's production ofthe chemical as a by-product in 1989.

One company supported EPA'sobservation in the NPRM that it wouldbe unworkable to control oompaniesthat coincidentally produce and thendestroy carbon tetrachloride through theproposed allowance system. Anothercompany commented that EPA shouldexempt destroyed coincidentally-produced carbon tetrachloride and notprovide allowances to its producerssince the allowance system would notwork in the long term because all of thisproduction would theft have to bephased out. This company contendedthat providing allowances could lead tothe shutdown of facilities producingnon-controlled substances.

In response to this comment, theAgency clarifies that it would only allotbaseline allowances to by-productproducers in situations where it couldnot grant an exemption. This wouldoccur in cases where the chemical wasproduced intentionally, where as a by-product it was not destroyed with anappropriate destruction technique, or ifthe Protocol restrictions on carbontetrachloride took effect beforeapproved destruction techniques weredefined. EPA notes that in such cases,having baseline allowances that arebeing phased down would stimulate theproducer to arrange for thetransformation of the chemical, or seek

'out an approved method of destroyingthe chemical, thus preventing damage to

the ozone layer caused by its release. Toensure that all destruction technologiesare considered by the Parties forapproval, the Agency is activelyparticipating in a UNEP working groupon destruction technologies,

If companies eligible for thisexemption have previously reportedcarbon tetrachloride by-productgeneration as production for thedetermination of their baseline, theyshould include that information withtheir request for the exemption. If theexemption is granted, their baseline willbe reduced accordingly.

Another company suggested anamendment to the recordkeepingrequirements in § 82.13(1)-as follows: (1)If the Administrator's designatedrepresentative finds, based on thesubmitted information, that the carbontetrachloride for which the exemptionfrom the definition of "produced" issought is an unavoidable, coincidentalby-product of the production of anotherchemical and that MACT will be used todestroy it, he or she will exempt thismanufacture from the definition of"produced."

The Agency does not agree that theexemption should take the form of anexclusion from the definition ofproduction, because such a categoricalexclusion from production would beinconsistent with the joint ExplanatoryStatement of the Committee ofConference which is the basis forproviding the exemption. The Agencybelieves that in light of the JointExplanatory Statement it is moreappropriate to exempt companies fromthe production limits on a case-by-casebasis.

b. First come, first served policy andinterplay with the Montreal Protocol.The proposal included the provision thatexemptions for carbon tetrachloride thatis CUBP be granted only up to the levelof the U.S. production limit for carbontetrachloride under the MontrealProtocol. The definition of productionunder the Montreal Protocol includes anexemption for material that has beendestroyed by technologies approved bythe Parties, but as of this writing notechnologies have been so approved. Asa result, there is a cap on the totalamount of exemptions that could begiven, set by the difference between theProtocol limits and total U.S. productionand consumption. EPA proposed thatthe exemptions be granted on a firstcome, first served basis.

A number of companies pointed outthat control of carbon tetrachlorideunder the Montreal Protocol does notbegin until 1995,and thus there is noProtocol cap on the amount of

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exemptions that can be granted until1995. The Agency agrees and will grantunlimited exemptions until 1995. In 1995,if destruction techniques are not yetapproved by the Parties, EPA will beunable to grant any further exemptions.

Another commenter stated that EPAshould allow for the exclusionsubsequent to 1995 since the MontrealProtocol includes an exclusion fordestroyed controlled substances and theClean Air Act conference report allowsfor such exclusion. Moreover, thiscompany maintained that exclusion isappropriate because destroyed ozonedepleting substances do not damage theozone layer.

EPA cannot grant exemptions fromProtocol limits, and thus from Clean AirAct limits, that are not sanctioned bythe Montreal Protocol. The Clean AirAct Amendments specifically state thatin situations where the Act and theProtocol are in conflict, the morestringent of the two should govern.Although the Montreal Protocol doesallow for exemptions for destroyedcontrolled substances, it only allowsthem to the extent that the destructiontechnology has been approved by theParties. To date, no technologies havebeen approved. Again, the Agency isworking to assist the Parties indetermining acceptable destructiontechnologies. The Agency notes that theexclusion for destroyed CUBPsdiscussed in the Joint ExplanatoryStatement of the Committee ofConference is more limited than thepotential exclusion for destructionallowed under the Protocol. Therefore,even for control period prior to 1995, theAgency is permitting only a narrowexemption for destroyed CUBPs.

One company believed that EPAshould re-open the matter for publiccomment well in advance of 1995because exclusions will not be permittedstarting in 1995, possibly forcingexpensive alterations of productionprocesses and costs not factored intothe Regulatory Impact Analysis (RIA)before that date. Another commentermaintained that if an exemption fordestruction is not allowed, companiesthat coincidentally produce and thendestroy carbon tetrachloride would beforced eventually to alter theirproduction processes at great cost andwithout measurable benefit to theenvironment.

EPA agrees that this could be anundesirable outcome if the Parties doagree on approved destructiontechnologies before 1995. The Agencyanticipates that these technologies willbe defined by that date.

One commenter stated that Congressand EPA did not mean to restructure the

* chemical industry (i.e., preclude themanufacture of non-controlledsubstances that create carbontetrachloride as a coincidental by-product) when they approved thephaseout. The Agency recognizes theimportance of the exclusion provisionand intends to grant exemptions forinadvertent production to the greatestextent allowed by the statute and theinternational treaty.

The Agency is educating the Partieson this subject and will explore whetherthe Montreal Protocol should beamended to deal with this issue.

c. Definition of maximum availablecontrol technology. The Agencyrequested comment in the NPRM onhow to define "maximum availablecontrol technology" (MACT), as used inthe Clean Air Act Conference Report todescribe the appropriate destructiontechnique for the purposes of granting aCUBP exemption. EPA suggested thatfor carbon tetrachloride, current RCRArequirements for the incineration ofcarbon tetrachloride as a hazardouswaste would be an appropriatedefinition of MACT. Regulations underRCRA require in most cases that carbontetrachloride be treated as a hazardouswaste. The typical treatment methodwould be combustion in an incinerator,boiler or industrial furnace that has a99.99 percent destruction or removalefficiency rating (40 CFR 264.343(a). 40CFR 266.104).

One commenter stated that definingMACT on the basis of RCRArequirements is appropriate, but thatEPA should consider expanding thedefinition to allow the use of a ventincinerator with 98 percent efficiency forseveral years, because it is the besttechnology reasonably available incertain process operations.

Although the use of a vent incineratorwith 98 percent destruction efficiencymay be allowable under other EPAregulations when carbon tetrachloride isnot classified as a hazardous waste, theAgency believes that it is not sufficientfor obtaining a CUBP exemption underthe stratospheric ozone protectionprogram. Congress in its JointExplanatory Statement specified thatmaximum available control technologybe used to destroy CUBP, and RCRA-permitted combustion devices with 99.99percent efficiency are available.Requiring the maximum, as opposed tothe reasonably, available controltechnologies also fits with the goal ofthe EPA stratospheric ozone protectionregulations and title VI, which is tominimize emissions of ozone depletingsubstances that lead to atmosphericharm.

One company asserted that the MACTdefinition should be made to includeany destruction technologies approvedby the Parties of the Montreal Protocol.Another company stated that thedefinition of MACT should be consistentwith the standards that will beestablished pursuant to section 112 ofthe Act, but that the definition shouldfocus on specific compounds rather thanon categories of sources. Thiscommenter also stated that althoughRCRA standards for incineration ofcarbon tetrachloride would probablyprevail, the Agency should allow for theconsideration of other techniques thatare equally or more efficient and costeffective.

The Agency agrees that destructiontechniques that are as efficient as theRCRA combustion requirements forcarbon tetrachloride should also qualifyfor the exemption. To the extent thatany emissions standards under section112 of the Clean Air Act require the useof technologies that have a destructionefficiency equal to or greater than 99.99percent, EPA will consider them to besufficient for the granting of theexemption for carbon tetrachlorideproduced as a by-product. When theParties to the Protocol complete theiranalysis of destruction techniques, EPAwill evaluate these to determine If theyreflect MACT. As noted previously, theClean Air Act exemption for destroyedcontrolled substances is narrower thanthe Protocol's potential exemption, andthus it does not necessarily follow thatdestruction techniques approved by theParties will meet the MACT criterion forthe destruction exemption under theAct.

Another company agrees thatincineration with an efficiency of 99.99percent should qualify as MACT for thedestruction of carbon tetrachloride, butthat a more inclusive definitionincluding alternative technologiesshould be considered. This commenterstated that EPA should establishprocedures to allow for thedemonstration of treatment anddestruction techniques with removalefficiencies that are equivalent to anincinerator permitted under RCRA.

EPA will consider each exemptionrequest on a case-by-case basis,allowing for the possibility of otherefficient destruction procedures with99.99 percent efficiency in addition tocombustion. For alternative destructiontechnologies, however, the requestermust provide adequate documentationfor the Agency to be able to make adetermination that the destructionefficiency of the technique is at least99.99 percent.

Federal -Register'/ Vol. 57, No, 147/ Thursday, July 30. 1992 / Rules a*d'R~egulat.ione 3375.. d. Criteria for determining if,

controlled substances are unavoidable,coincidental by-,products. Twocommenters suggested definitions of acoincidental, unavoidable by-product(CUBP), stating that a product is a CUBP:if it is unintentionally manufactured inthe course of manufacturing anotherproduct. One example provided wasthat carbon tetrachloride would be aCUBP of a production process if theamount of carbon tetrachlorideproduced could not be variedindependently of the intended product(i.e., the quantity of a CUBPmanufactured varies proportionatelywith the production of the intendedproduct, and ceases when the intendedproduct's production is stopped).Similarly, these companies asserted thatif carbon tetrachloride is notmanufactured for commercial purposes(i.e., sale or use in place of carbontetrachloride that otherwise would bepurchased), then it is a CUBP.

The Agency believes that requiringboth the commercial test and thedependent-variable test is appropriatefor determining if a substance is acoincidental, unavoidable by-product.

One company observed thatidentifying individual chemicalprocesses that result in the CUBP ofcarbon tetrachloride would not bepractical. Another company stated thata number of chlorination processescould result in the coincidentalgeneration of small amounts of carbontetrachloride that, under the proposedregulatory scheme, would be prohibited.As an example, this company noted thatthe chlorination of a municipality'sdrinking water supply could result in theformation of many organic chemicalssuch as carbon tetrachloride or othercontrolled substances.

The Agency does not have sufficientinformation to identify at this time allthe chemical processes that result in theproduction of controlled substances asby-products. To the extent they arenumerous, the Agency is concernedabout their contribution to ozonedepletion and believes that until more isknown, this type of production shouldbe subject to phaseout requirementsunless the CUBP substances aredestroyed by appropriate destructiontechniques, in which case an exemptioncould be granted. In any case,companies that produced controlledsubstances as by-products and did notdestroy them with MACT in 1989 shouldhave reported their production inresponse to the section 114 informationrequest in the November 26, 1990Federal Register. Those companies thatdid not must supply EPA with this

information within 45 days of-thepublication of this notice. Baselineproduction and consumption allowanceswill then be calculated for them by EPA.As producers of controlled substances,companies in this situation are subjectto the phaseout provisions until suchtime as they begin providing for thedestruction or transformation of theircarbon tetrachloride production inaccordance with the regulationspromulgated today.

The Agency recognizes that verysmall quantities of carbon tetrachloridemay be formed in water treatmentplants if a municipality has chlorinatedits water, but it does not believe thatcarbon tetrachloride so formed iscovered by the definition of production.Chlorination does not involve"production" of a controlled substanceeven as a coincidental unavoidable by-product of a manufacturing process,since chlorination is not typicallyconsidered manufacturing. A specificexemption from the regulations is thusnot necessary for the chlorination ofwater.

One commenter acknowledged thatEPA correctly recognized that carbontetrachloride can be a CUBP in theproduction of methylene chloride andmethyl chloroform. In addition, thiscompany wrote that carbontetrachloride can be a CUBP in the hightemperature, catalytic trimerization ofcyanogen chloride to cyanuric chloride,which is a feedstock for numerousvaluable chemicals.

Although the Agency has notdeveloped an exhaustive list of chemicalprocesses that create controlledsubstances as by-products, all of theabove-mentioned processes wouldqualify for the exemption if they meetthe commercial test and the dependent-variable test laid out in the definition ofa CUBP.

e. Interpretation of "immediatelycontained and destroyed by theproducer"--i) Immediately containedand destroyed. EPA proposed that thephrase "immediately contained anddestroyed" as used in the JointExplanatory Statement be defined toallow for a 90-day storage period beforedestruction is required. This requirementwould be similar to RCRA restrictionson the storage of hazardous waste priorto destruction.

Two commenters mentioned that the90-day period is reasonable, but statedthat where there is a shortage ofincineration capacity a longer periodshould be allowed if the material isstored in RCRA-permitted tanks. Thesecompanies maintained that thisexception may be necessary to make

best use of MACT without-over-buildingincinerators. This Is particularly-true of,the period from 1995 to 1997 when- IMACT, for eliminating CUBP carbontetrachloride may not yet be widelyavailable, but-production allowancesare reduced to 15 percent of thebaseline. Moreover, one company.asserted that the 90-day period shouldrefer to the time that the carbontetrachloride may remain at theproducer's site before it must be shippedoff-site for destruction (assuming that itis not destroyed on-site); and'that, at thedestruction site it may be stored as long,as necessary in accordance with RCRA.This company maintained that the,90-day period should refer to the timeallowed until destruction or shipment toa destruction facility, and that theproducer should not be held responsiblefor delays in off-site incineratordestruction.

Another opiany discussed anexample of CUBP carbon tetrachloridethat was not listed as halardous wasteand thus would not be subject to RCRArequirements for storage/destruction.The commenter stated that the Agencyshould allow at least 15 months for thematerial's eventual destruction and notlimit the storage period to 90 days.

The Agency Is concerned primarilythat the controlled substance not bereleased to the atmosphere. This

concerh is largely alleviated if the CUBPis contained immediately after it wasproduced or left the reactor. As long asthe material is contained, the actualtime of destruction is less crucial.Indeed, the Joint Explanatory Statementarguably reflects such an approach, as"immediately" clearly modifies"contained" but does not necessarilymodify "destroyed."

The Agency will thus grant a CUBPexemption if a company can show that itcan adequately contain the chemicaland that it has made definite provisionsfor its destruction. Although under theseregulations there is no specific timeperiod during which the destructionmust take place companies will ofcourse still be subject to the RCRAlimits to the extent that the material is ahazardous waste te.g., 90 days for a non-RCRA-permitted generator or 180 daysfor a small quantity generator) and mustprovide documentation that they are incompliance with the relevant statute(s)(RCRA, Clean Air Act, Clean WaterAct) when applying for the exemption,by providing EPA with copies ofpermits, manifests, exemptions, or otherofficial documents.

One company stated that the term"immediately contained" should refer tothe capture and containment of carbon

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tetrachloride after it is removed from theprocess in which it is inadvertentlygenerated. This company maintainedthat although in general the 90-dayperiod would be appropriate, forcontinuous, closed-loop processes, thiscriterion is meaningless. The companysuggested that in these instances, thecontinuous purge of the closed-loopprocess should also be consideredimmediately contained and destroyed.

The Agency agrees that such aprocess would be eligible for a CUBPexemption if the material is completelycontained at all times, and thedestruction device removes the chemicalwith at least 99.99 percent efficiency.This treatment of closed-loop processesis consistent with the definition of solidwaste under RCRA (40 CFR part 261),which exempts materials reprocessed inclosed-loop systems.

One company maintained that anadequate time must be allotted for thestorage and destruction of thecoincidentally produced by-product.This company stated that If a 90-daytime limit were imposed, it should notbegin to elapse until a reasonablequantity (e.g., 1,000 lbs) had beencollected and packaged for safetransport to the destruction facility. Thesmall quantity of carbon tetrachlorideproduced daily may not be enough foreconomical destruction. This companysuggested that the time limit wouldcommence after 1,000 pounds had beencollected.

Again, insofar as the company isoperating in compliance with applicablestatutes (e.g., CAA, RCRA, CWA),containment is complete, and anappropriate destruction strategy isplanned, these regulations allow thestorage of approved CUBP material untilan adequate quantity has beenaccumulated for destruction. Companiesshould include in their request forexemption a description of theirhandling of the CUBP an estimation ofthe amount accumulated and the periodof time for which it is stored.

(ii) Destruction by the producer On-site versus off-site. In the proposal, theAgency also discussed the meaning of"immediately contained and destroyedby the producer" from the standpoint ofwhere the destruction must occur. EPAsuggested that small generators ofcarbon tetrachloride might currentlyship their waste off-site and requestedcomment on whether the phrase couldbe interpreted to permit both off-site andon-site destruction.

Several commenters maintained thatEPA should permit off-site destructionor contracting with another firm fordestruction because in some casesadequate incineration capacity is not

available on-site, and it would be unfairto require that each producer have anincinerator. These comments also statedthat if transport and destruction ofcarbon tetrachloride are conducted in amanner consistent with RCRA, it shouldbe sufficient for title VI as well, and thatEPA should clarify that "destroyed bythe producer" is not being interpretedrestrictively. One company noted thatthere may be many small generatorswho require incineration off-site.Another company agreed that off-siteincineration should be allowed in lightof the difficulty of burning orincinerating halogenated hydrocarbonsand the difficulty of constructing newIncinerators. This company maintainedthat as long as the release of carbontetrachloride is controlled and thematerial is destroyed by a technologymeeting the level of destructionefficiency identified in the applicableRCRA regulation, it should not matterwhether such destruction occurs on-siteor off-site.

The Agency has determined that therewould be no measurable environmentalbenefit to restricting the exemption toon-site destruction by the produceritself. Furthermore, the JointExplanatory Statement does notnecessarily require that the producerdestroy the chemical itself, but only thatit be responsible for its destruction.Since carbon tetrachloride emissionsand treatment are already tracked underRCRA, allowing the material to bedestroyed off-site does not entail a lossof accountability. EPA. has determinedthat if the manufacturer can show that ithas made provisions for sufficientlyefficient destruction of the carbontetrachloride (off-site, on-site, or througha contractor) it will be eligible for theexemption.

One commenter stated that since thecarbon tetrachloride is produced as aresult of a chemical manufacturingoperation, EPA should require that it bedestroyed on-site and under strictlycontrolled conditions. This companycontended that to send the carbontetrachloride off-site, considering that ithas no commercial value, wouldconstitute an unnecessary exposure tothe general public of its harmfulproperties

EPA currently regulates carbontetrachloridewaste generation,transport, and treatment under RCRA.The regulations under this statute givestandards for each handler of the carbontetrachloride and require thatsafeguards be taken in order to avoidunnecessary exposure to the generalpublic. In the absence of any claims thatthese precautions are inadequate toprotect the public welfare, the Agency

finds that it would be inappropriate tomake any further restrictions in thisrulemaking. Thus by-product carbontetrachloride produced and destroyedon-site or off-site is eligible forconsideration for an exemption.

f. Extension of the exemption. In theNPRM, the Agency requested commenton what other controlled substancesshould be considered for exemptions inaddition to carbon tetrachloride.

One company suggested that thedestroyed-CUBP exemption be allowedfor methyl chloroform as well. It wasestimated that three percent of the 1987methyl chloroform production wasdestroyed by incineration, and that asthe availability of control equipmentincreases, methyl chloroformincineration will also increase.

Since methyl chloroform is currentlyproduced as a CUBP in severalproduction processes and Is frequentlydestroyed, the Agency is allowing anexemption for coincidentally produced,incinerated methyl chloroform as well.The same destruction techniques areavailable for methyl chloroform andcarbon tetrachloride, neither of whichcontain fluorine or bromine that canattack the refractive materials inincinerators, and RCRA standards fordestruction of methyl chloroform that isa hazardous waste are the same asthose for destruction of carbontetrachoride. All the standardsdiscussed above for determiningwhether or not a particular casequalifies for an exemption will apply formethyl chloroform, as well as carbontetrachloride.

The Agency recognizes that MontrealProtocol controls take effect for methylchloroform in 1993, and that Clean AirAct requirements are more stringentthan the Protocol controls until 1905.The Agency is not promulgating asystem for distributing exemptionsduring these control periods at this time.If no more methyl chloroform isdestroyed during the 1993 and 1994control period than is the case now(about three percent), the gap betweenthe Montreal Protocol limit (100 percentof the baseline) and the Clean Air Actlimit (90 percent of the baseline) shouldbe more than enough to allow allcompanies with qualifying processes tobe exempted. If, in 1992, requests forexemptions greatly exceed expectationsand total more than ten percent ofproduction in the baseline year, EPAwill propose a method for distribution ofexemptions for destroyed-CUBP methylchloroform in a separate notice. As for1995 and beyond, the Agency believesthat appropriate destruction techniqueswill have been defined by 1995, when

Fedeal Register J Vol. 57, No. 147 / Thursday, July 30, 1992 1 Rules and Regulations

Montreal Protocol controls and CleaAir Act comrol coincide. If the Partiesdo not define appropriate destructiontechniques by 1996, however, theAgency will no loger grant exemptionsat that time.

Several commenters also suggestedthat other controlled substancesproduced as by-products be exempted.Another comunter asserted that anylisted compound that meets theexemption criteria should be providedthe exemption. Another company wrotethat the definition of coincidentally-produced material should include othercompounds in addition to carbontetrachloride because during themanufacture of halona and otherhalocarbons, for instance, certain CFCsmay be produced in small quantities asby-products.

Since CFC and halon production iscurrently restricted under the MontrealProtocol. and these substances can bedestroyed only with difficulty and underspecial circumstances, the Agency willnot at this time grant exemptions forthem. Although destruction techniqueshave been identified, destructionfacilities are not widely available forthese substances, due to their tendencyto corrode incinerator walls, and theAgency does not believe that it isappropriate to approve exemptions fortheir destruction prior to the ProtocolParties' designation of approveddestruction techniques. When theParties to the Protocol complete theiranalysis of destruction techniques, EPAwill again examine the issue of grantingthe exemption for all controlledsubstances that are incidentallyproduced and destroyed by thetechniques approved by the Parties.

2. Exemptions for De Minimis By-Product Production of ControlledSubstances in Groups -1II

One company commented that theAgency has insufficient informationrelating to the incidental generation ofcontrolled substances and is focusingonly on the companies producing thesematerials as mainstream products in itsproposal to exempt incidental.destroyed carbon tetrachloride. Thecommenter noted that a number ofchlorination processes could result inthe coincidental generation of smallamounts of carbon tetrachloride. Theseprocesses would be prohibited by EPA'sproposed regulations (e.g. a municipalitychlorinating its drinking water supply).This company maintained that this isnot a reasonable position for CUBPegenerated as part of manufacturing orchlorination processes and stated thatthe Agency should obtain iniormationconcerning the environmental impacts of

halogen chemistry in orde to fashion arational program to exclude from theregulations such de unimis generationuntil it is shown to pos anenvironmental problem. The suggestionwas made in this comment that theAgency should investigate theunintended impacts of its regulationsbeyond the ozone depleting compoundproducing industry.

The Agency agrees that an exemptionfor de minimis by-product productionwhether or not it is destroyed couldpotentially be warranted in order toefficiently implement the phaseout.However, EPA has Insufficientinformation on the subject at this timeand thus will be requesting informationfrom the regulated commanity in anupcoming Federal Register notice. TheAgency has determined that additionalstudy will be necessary to determinewhether de minimis generation shouldbe exempt from the phaseout. Personsthat produce controlled substances inGroup I, II or III as by-products ofmanufacturing processes will berequired to provide information on theprocesses and the quantities of by-products being produced. In addition,companies that have fugitive emissionsof any of the class I substances will beasked to report the annual amount thatis emitted from each of their plants. Forthose companies that have this type ofmanufacturing process but that did notreport it as production under theNovember 26 1990 Information requestand thus have no allowances to covertheir production, the Agency requeststhat this data be submitted as soon aspossible so that allowances may beallotted or the issue may be otherwiseresolved.

A suggestion was made by onecompany that the Agency should allowsome de minims generation of CFCsduring the production of H Cs andHFCs. such as a one-percent de minimislevel in the production stream forexclusion from the scope of theregulations. Another companycommented that a by-product that is notdestroyed after production, or sold asfeedstock and transformed, should besubject to the production phaseout.

The Agency s considering such anexemption from the phaseout forcontrolled substances in Groups L II,and M that are produced ascoincidental. unavoidable by-productsof a manufacturing process. However,the Agency must investigate appropriatetechnologies and appropriate de minimislevels and the environmental impact ofde minimis production for these groupsof chemicals before a final decision canbe reached. Persons that possess

relevant inmnatioan on tis subject wilbe asked to submit it in an upcomingFederal Register notice.

3. Other Exemptions

In the NPRM, EPA requested commenton how some of the exemptionsprovided for in the Clean Air Act, butnot in the Montreal Protocol, could beimplemented in the future. The Agencynoted, however, that under theexemption provisions themselves aswell as section 614(t), it could notimplement these exemptions unless anduntil it could do so in a way that wasconsistent with the Protocol. Since theProtocol does not yet permit theseexemptions from its requirements, theAgency ihay not implement them, exceptto the extent that the Clean Air Act'slimits are more stringent than theProtocors. In such cases, the Clean AirAct creates a margin in whichexemptions could be granted withoutrunning afoul of the Protocol. Evenwithin this "compliance margin,".theAgency is not making provisions forgranting the exemptions because theyare not warranted at this time. given thelikely availability of the controlledsubstances under the Clean Air Actlimits in at least the near term. TheAgency is particularly hesitant to grantexemptions that are not currently vitalsince the Parties to the Protocol havenot yet made provision for suchexemptions. Furthermore, The Agencybelieves that these exemptions will forthe most part not be needed until thetime that the U.S. approaches thephaseout date. A summary and analysisof the comments received on the needfor and implementation of theexemptions follows.

a. Halons. Section 604(g)(1) allows theAdministrator to grant limitedexemptions from the percentagereduction requirements for certainhalons for prpoes ol fire suppressionor explosion prevention where no safeand effective substitute has beendeveloped. Paragraph (3) of abetsubsection also allows a limitedexemption from the phaseout for hatonsneeded for the same purposes inassociation with energy production onthe North Slope of Alaska.

On the issue of implementing theexemptions to the extent thatdifferences in the stringency betweenthe Clean Air Act and the Protocolallow, one company commented thatthere is no guarantee that halon demandand production will continue to remainbelow allowable levels. It stated that.because there is no national helenrecycling or banking Infrastructure andno known substitute for Halos 1301 in

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situations requiring the inertion of anoccupied enclosed space for explosionprevention, demand could require newhalon production in amounts greaterthan those allowed by the interimreduction requirements.

The Agency has monitored halonproduction, and to date, production iswell below the allowed amount. Inaddition, halon demand is expected todecrease over the next few years ascompanies adopt alternative fireprotection methods or chemicalsubstitutes and as a bank for the storageand recycling of halons is established.'

Another company commented that itis inappropriate to prohibit halonproduction exemptions in associationwith domestic crude oil or natural gasproduction on the North Slope of Alaskabecause the Parties have yet to agree toany such exemptions after the phaseoutyear. Two companies suggested thatEPA should convene a STOPAC(Stratospheric Ozone ProtectionAdvisory Committee) subcommittee ofusers and manufacturers to advise EPAon how exemptions should beimplemented and maintained that EPAshould acknowledge that theexemptions contained in the Clean AirAct may be applicable if at some futuredate the Parties amend the Protocol suc,that both it and the Clean Air Act areconsistent.

In response, the Agency notes that itis not in any way eliminating thepossibility of future exemptions, but atpresent does not believe that they arewarranted, given the likely continuedavailability of controlled substancesunder Clean Air Act limits. For thisreason, EPA believes that it would bepremature to convene a STOPACmeeting on exemption implementationat this time.

b. Methyl chloroform. Section604(d)(1) provides for another exemptiorspecifically for essential uses of methylchloroform, for which no safe andeffective substitute is available.

One commenter asserted that methylchloroform is an important transitionalsubstance because of its low ODP andbelieved that when it is used as areplacement for CFCs it should beconsidered for exemption from thephaseout.

The Agency is required to phaseoutmethyl chloroform according to aspecified schedule under the Clean AirAct and the Montreal Protocol, andsubstitution for CFCs could not beconstrued to be an "essential use" perse. EPA concurs with anothercommenter's view that exemptionsshould be left open until the availabilityof methyl chloroform is far moreconstrained and until the Parties have

agreed on whether they are appropriateand if so in what applications.

c. Analytical and research purposes.One commenter requested an exemptionfor the use of carbon tetrachloride andCFCs for analytical and researchpurposes. This company maintained thatthey are unable to purchase carbontetrachloride due to the currentproduction and consumption limits. Thiscompany distributes carbontetrachloride in small packages tolaboratories for chemical analyticalpurposes and research, uses that areconsidered emissive. The commentprovided the following example: Carbontetrachloride and other CFCs arenecessary as standards in testing fortrace levels of contamination in drinkingwater, and no alternative products canbe used to prepare standard solutionsfor this application. This commentproposes an exemption of the continuedmanufacture and use of these chemicalsfor use as analytical reagents in smallquantities.

The Agency believes that suchexemptions are not currently necessary.given the continued availability ofproduction and consumption allowancesfor the ozone depleting chemicals. Sincethese research and analytical usesrequire only small quantities of thechemical, exemptions from the phaseoutshould not be needed to satisfylaboratory needs at this time. Sinceproduction and consumption of carbontetrachloride is currently limited, buthas yet to be completely phased out,EPA does not believe that companiesshould experience difficulties in locatingsuppliers of small quantities of thematerial.

D. Basic Prohibitions

1. Compliance

The September 30, 1991 proposalincluded a section on basic prohibitions(§ 82.4), which stipulated that no personmay produce controlled substances atany time during any control period inexcess of the amount of unexpendedproduction allowances held by thatperson at that time, and that no personmay produce or import controlledsubstances at any time during anycontrol period in excess of the amountof unexpended consumption allowancesheld by that person at that time. For allthe controlled substances except carbontetrachloride, these requirements areidentical to those that were originallypromulgated in the August 12, 1988 rulelimiting the production and consumptionof CFCs and halons.

Two companies commented that thefinal regulations should applyproduction and consumption limits

annually, rather than daily. Thesecompanies maintained that the CleanAir Act Amendments and the MontrealProtocol both provide for annual limits.and, therefore, that EPA has nostatutory authority to require thatcompanies have allowances before theyproduce or import instead of havingsufficient allowances at the end of thecontrol period to cover their totalproduction and imports for the period.

'The Agency does not agree that itlacks authority to require persons topossess allowances before they mayproduce or import ozone-depletingsubstances. While § 604's limits may beenforced on an end-of-year basis only asthe commenters suggest, the statuteitself does not require that they be soenforced. Section 604(b) calls on EPA toissue regulations implementing thephaseout in accordance with that andother applicable sections of the statute.Section 607(a) provides for issuance ofallowances, as the Agency had done inits original phaseout regulations. andsection 614(b) provides that Title VIprovisions are to be construed in amanner that does not abrogate the U.S.obligations under the Protocol. In itsoriginal rule, the Agency requiredpersons- to hold allowances before theyproduced or imported to minimize thepotential for exceedances that couldcause .the U.S. to exceed its Protocollimits. While the Protocol's limits were(and. remain) annual, EPA judged thatrequiring allowances to be held at thetime a person produced or imported wasa worthwhile precaution against U.S.noncompliance with the Protocol.Nothing in title VI or its legislativehistory suggests that Congress disagreedwith or intended to change the Agency'sapproach to implementing reductions inozone-depleting substances. Indeed,Congress' adoption of EPA's allowancesystem suggests its satisfaction withEPA's approach to implementing theProtocol. If Congress had meant toprohibit EPA from requiring allowancesto be held "up-front," surely it wouldhave specified such a change to EPA'sprogram.

Two companies asserted that theproposed rule, even if within theAgency's authority, representsoverregulation and reflects anunfounded distrust of controlledsubstance producers. They commentedthat a daily test constitutes excessiveinterference in business practices andplaces an enormous accounting burdenon producers without benefit to EPA orthe environment. One companymaintained that daily accounting createsproblems for ozone depleting chemicalproducers that sell their products for

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export or transformation and expect toreceive production and consumptionallowances in the future as the result ofsuch uses.

The Agency disagrees with thesecomments. As stated above, requiringcompliance by requiring the holding ofallowances prior to production andconsumption is appropriate in view ofthe U.S. obligations under the MontrealProtocol. Moreover, neither EPA norproducers of the original controlledsubstances have had difficulties withthis system in the past.

This compliance mechanism is alsonecessary for EPA to track allowancesthroughout the control period in order toascertain whether trades can be carriedout without endangering compliance.Since companies can trade allowancesat any time during a control period, theAgency must be aware of theircompliance status in order to ensurethat the trade will not result in acompany's expending more allowancesthan it holds.

In general, the commenters on thissubject appeared to be concerned withrecouping allowances expended in theproduction of controlled substances forexport or transformation. To the extentthat the system for the tracking ofcarbon tetrachloride will no longerrequire this cycling of allowances, asdescribed later, EPA believes thatcompanies should have little difficultyremaining in compliance with theregulations.

One company stated that EPA wouldbe able to assess compliance or stopdrastic non-compliance withoutimposing a daily test. This companysuggested that the Agency use quarterlyreports to assess compliance and, if acompany exceeds its allowances duringa given quarter, require the company tosubmit evidence (such as its customers'IRS Certifications) that it would be ableto retrieve enough allowances by theyear's end.

EPA believes that the requirement forquarterly reports as well as therequirement for companies to haveallowances before they produce orimport are both necessary to ensurecompliance with the production andconsumption limits. In addition, thesuggested control system would make itimpossible for the Agency to monitortrading of allowances during the courseof each quarter. Consequently, theAgency is continuing to follow thesystem established in the 1988regulations and isr requiring thatcompanies keep records on a daily basisand report quarterly and that companieshold adequate unexpended allowancesto cover their activities.

2. Consumption Limits

The proposed regulations requiredthat companies that import controlledsubstances must hold consumptionallowances, and may not importcontrolled substances in amounts thatexceed their level of unexpendedconsumption allowances at any time. Acontrolled substance is imported at suchtime that it enters U.S. territory, with theexception of Maquiladora transactionswhere controlled substances of U.S.origin are imported into Mexico in-bondand then re-imported into the U.S. Theregulations apply to any bulk quantity ofthe listed chemicals, including recycledmaterial or that intended for recycling.

One company commented that, from apolicy perspective, it is inappropriate torequire a party to use consumptionallowances for:the import of usedcontrolled substances that will berecycled. According to the company, itshould be apparent that any quantity ofused controlled substance that isrecycled will be used in place of newproduction, thereby reducing controlledsubstance production. The samecompany maintained that the siting ofrecycling facilities should not beartificially affected by the need to useconsumption allowances for imports.This company stated that this issue willbe important in later phases of thephaseout when it is likely that thequantity of consumption allowances willnot be sufficient to allow for bothproduction of virgin material and forimport of used controlled substances forreclamation. An alternative approachsuggested by this company would be toallow used controlled substances to betransported across national boundariesfor the purposes of reclamation withoutcounting them towards the recipientcountry's consumption limit.

The Agency first notes that there is noassurance that recycled controlledsubstances will be used in place of newproduction. Indeed, the Agency expectsthat as the phaseout progresses,recycled substances will be used as asupplement to new production. In anyevent, the Protocol requires that importsof used controlled substances beincluded in the calculation ofconsumption, because of the practicaldifficulty of distinguishing between usedand new substances. Exempting importsof controlled substances from applicableconsumption limits would create astrong incentive to mislabel newcontrolled substances as used.Moreover, EPA does not believe that theexpenditure of consumption allowancesfor imports of used controlledsubstances for recycling constitutes adisincentive or an obstacle to recycling.

The domestic use and recycling ofcontrolled substances is not restrictedunder these regulations andconsumption allowances are notrequired to recycle controlledsubstances. Only used or recycledmaterial crossing international bordersis affected by the availability ofconsumption allowances. However, ifthis material is then re-exported,-consumption allowances expended forthe imports may be recovered uponexport of the material through a requestfor additional consumption allowances.Thus, there may be no net loss inconsumption allowances. Even underthe phaseout, controlled substancescould still be imported as long as atleast an equal amount is exported(annual consumption must equal zero).To the extent that the suggestion is thatmaterial would leave the country, berecycled, and returned (or vice versa)this should not be a problem.

E. General Stringency of Regulationsand Phaseout Schedule

The Agency proposed the phaseoutschedule Congress set forth in the Act.In the NPRM, EPA noted that recentscientific evidence suggested a need toaccelerate the phaseout schedule. TheAgency explained, however, that thetight statutory deadline to which thisrulemaking is subject did not permit theAgency to consider such an accelerationwithin the scope of the rulemaking.

One commenter stated that the rulesshould be formulated to be as stringentas possible in eliminating the productionof controlled substances and preventingtheir emission to the atmosphere, andthat there are too many provisions in theproposal for companies to increase theirproduction allowances and not enoughincentives for companies to reduce theworld market of ozone depletingchemicals. The commenter urgentlyrecommended revisions to the rule toaccelerate the phaseout and to broadenthe list of ozone depleting chemicals.

For the reasons cited above, today'sregulations implem.ent the phaseoutschedule specified by the Clean Air Act.The Agency notes, though, that theproduction of ozone depleting chemicalsis being further decreased due to theeffects of the excise tax implemented bythe IRS. Currently no companies areincreasing their production of ozone-depletor$ and significant efforts areunderway to find substitutes. However.as new scientific and technologydevelopments occur, and in response topetitions received under the Clean AirAct Section 806, EPA will reassess theschedules contained in this rule. Asmentioned previously, the Agency is

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currently evaluating one such petition,received on December 3, 1991.

F. Recordkeeping and ReportingRequirements

1. Daily Production RecordsThe proposed regulations require

producers to keep dated productionrecords. One commenter claimed thatdaily mass balancing is unworkablebecause although daily productionrecords exist, they contain only roughmeasurements. This companymaintained that monthly rather thandaily documentation should be used formass balancing. This is because it takesseveral days for material to becompletely processed and only then canit be measured for the purpose of a massbalance. In addition, this companyasserted that improving the dailyaccounting would cost hundreds ofthousands of dollars per plant, and stillwould not be as accurate as monthlydocumentation.

This comment is similar to commentsreceived in response to the NPRMimplementing the Montreal Protocol in1987. At that time EPA determined thatdaily recordkeeping is important andthat it is common business practice tokeep daily records. Based on its reviewof data submitted by producers, EPAbelieves that current methods of dailyrecordkeeping will be sufficient tosatisfy the requirements. Daily massbalancing is not required. The Agencyrecognizes that daily records mayconsist of rough measurements and assuch are generally used by inspectors,not for a direct mass balance, butprimarily as a check when discrepanciesin other records are found.

2. Class II ReportingThe Agency proposed that, as

required by the Clean Air Act,producers, importers, and exporters ofClass II chemicals report their activitiesto the Agency on an annual basis.

One company's comments expressedsupport for quarterly Class I reports andannual Class II reports. Moreover, thecompany believed that the Agencyshould maintain all reports of HCFCactivity in confidence until such time asit has established baseline levels foreach of the producers.

The Agency follows the proceduresoutlined in 40 CFR subpart 2 whencompanies submit information with aconfidentiality claim. Unless a specificfinding is made that the information isnot entitled to confidential treatment,the Agency will maintain it as such untildisclosure is needed to carry out a CleanAir Act provision, including section 607which requires the establishment of

baselines. Aggregate production andconsumption information on the HCFCswill be submitted to the Protocolsecretariat at UNEP in fulfillment ofEPA's reporting requirements to thatbody under the Montreal Protocol oncethe amendments enter into force.

G. Exchanges

1. Domestic Trading-EnvironmentalOffset

a. Offset amount. Section 607 of theClean Air Act provides for trading ofallowances between chemicals in thesame group. It requires, however, thatany trade must "result in greater totalreductions in production in each year ofclass I and class II substances thanwould occur in that year in the absenceof such transactions." In the NPRM, theAgency proposed an implementationstrategy for this environmental offset.EPA argued that it could not predictwhat would have occurred in theabsence of the trade, and proposed thatthe assumption be made that allallowances available would be used inthe absence of the trade. Based on thisassumption, the required offset could becalculated every time a trade occurred.by subtracting a certain percentage ofthe amount of the trade from thetransferor's unexpended allowances.EPA proposed that this percentage bebased on the level of measurement errorthat companies would likely buildl intotheir compliance margin and upon thelevel of environmental benefit resultingfrom the offset, and arrived at a one-percent offset, although comment wasrequested on offset amounts of 0.1percent and on two percent.

A number of commenters maintainedthat EPA had taken a satisfactoryapproach to the offset requirement bypresuming reasonably that companieswould have used allowances beingtransferred if a trade did not occur. Anindustry group noted that the evaluationof whether allowances would have beenused in the absence of trades wouldhave been highly subjective, even in thecase of plant-closings, because acompany may have kept its plant open ifit had known that it could not trade itsallowances.

One company commented that EPAshould review the impact of the one-percent offset on the ability of theproducing companies to supply both theneeds of the U.S. and those of its tradingpartners. According to this company, asthe phaseout schedules take effect andless virgin material is available toservice the needs of the U.S., the Agencymay need to revisit its decision.

The Agency believes that a one-percent offset will not cause any

shortages or difficulties in supplying thecountry's needs for ozone depletingchemicals. If at some future date theoffset becomes a significant problem,the Agency can revisit the issue.

The same industry group commentedthat the analysis on the margin of errorin the NPRM was not relevant to thecalculation of an appropriateenvironmental offset. The Agency hadstated that the offset amount should berelated to the measurement errorpresent in companies' productionestimations. The commenter stated thatthe margin of error moves rather thandisappears when allowances aretransferred, and thus the level of theoffset does not need to be related to thelevel of measurement error.

EPA's concern was that if thepercentage selected for theenvironmental offset were smaller thancompanies' actual productionmeasurement error, there could be noguarantee that the trades would result inlower overall production. The Agencyagrees that to a large extent, the marginof error would move with a transfer ofallowances, since a cushion formeasurement error would have to bemaintained and production would bereduced accordingly. For example, if acompany had 200 production allowances(authorizing 200 kg of production), andhad a production measurement error ofone percent, the company wouldprobably not plan to produce more than198±1.98 kg of controlled substances. Ifthe company traded away 100allowances with a one-percent offset, itwould only have 99 allowances left, andwould likely only produce 98±0.98 kg.The receiving company would similarlyproduce only 99±0.99 kg, so the totalproduction would only reach 197.±:1.97kg; the environmental offset would haveeffectively reduced total production byone kilogram. At the same time. theAgency notes that permittingallowances to be traded increases thevalue of any compliance cushion thatcompanies build in and thus creates anincentive to share it. Overall, however,the Agency believes that regardless ofparticular companies' measurementerrors, a one-percent offset will besufficient to ensure an overallproduction reduction as a result ofallowance transfers.

The group accepted EPA's conclusionthat the offset should be at least 0.1percent in order to satisfy the statutoryrequirement. Another commenter alsoagreed that 0.1 percent is quantifiableand enforceable and commented thatone percent is excessive andunnecessary. The industry group statedthat a one-percent offset is more than

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sufficient to satisfy statutoryrequirements, but that the greater thepercentage, the more trading will bediscouraged.

None of the commenters presentedcompelling evidence that a one-percentoffset would be damagin? to industry orto trading, however. Therefore, theAgency does not believe that areduction of the proposed one-percentoffset is warranted. EPA analysis showsthat one percent is an appropriatenumber to ensure a measurableenvironmental benefit while not harmingousiness unnecessarily.

Several commenters endorsed theproposed one-percent offset factor, andbelieved that higher offset penalties willonly discourage and hinder tradingbetween chemicals, thereby resulting inless efficient utilization of productionfacilities and in increased costs to theeconomy.

The Agency agrees that an offsetlarger than one percent would be likelyto discourage trading and could beharmful to small businesses. For thisreason, it is adopting the proposed offsetfactor of one percent.

Two companies stated that althoughEPA explained in the preamble to theproposed regulations that a single tradebetween parties and chemicals shouldonly be subject to one offset, theproposed regulations were unclear onthis point. This company suggested thatthe language in § 82.12 be clarified toremove any doubt.

The Agency has added language to§ 82.12 clarifying this point. It has alsoadded language to specify that onlytrades of consumption and productionallowances are subject to the offset. Asdiscussed in the NPRM, trades of"authorizations to convert" or "potentialproduction allowances" are not subjectto the offset.

b. Intra-company trading. Onecomment stated that EPA should make itclear that the offset does not apply tointra-company transfers, citing section607(c) of the Clean Air Act, which refersto trades between "2 or more persons."

The Agency notes that section 607(a)requires that the Agency promulgaterules for trading that "shall insure thatthe transactions under the authority ofthis section will result in greater totalreductions in the production in eachyear of class I and class II substancesthan would occur in that year in theabsence of such transactions." Amongthe transactions authorized under thissection are interpollutant transfers(section 607(b)) which permitallowatices for one type of controlledsubstance to be exchanged for anothertype within the same group. These arethe types of trades that would occur

within a company as well as betweencompanies. Although section 607(a)'sgeneral statement could be interpretedto allow other methods of calculatingthe offset than set forth in section 607(c),using two different offset systems fortrades between different companies andtrades within the same company wouldbe unnecessarily complex. Since bothtypes of trades must be subject to anoffset, the Agency finds that it is mostlogical to use the same offset for both.

Another company commented thatwhere a trade occurs within the samecorporate organization, domestically orinternationally, it should not benecessary for a company to obtainadvance authorization of the trade. Thiscompany asserted that theadministration of this requirementwould be burdensome on EPA andindustry. Moreover, since the samecompany is on both sides of the trade, itis fully responsible for compliance andthus there is no need for EPA to pre-approve a company's productionschedule. The company maintained thatquarterly reports should be adequate.

The Agency does not agree thatrequiring EPA notification of intra-company trades is administrativelyburdensome. The number of such tradeswill be small. For the NPRM, the Agencyanalyzed of the trades of chemical-specific allowances that would havebeen necessary in the first controlperiod, and found that fewer than fivetrades would have been needed for alarge ozone depleting substanceproducer. In addition, the Agency's pastexperience with the ozone depletingchemical industry indicates thatproduction plans do not change fromday to day. Thus, the number of tradesduring the year is not expected to belarge. The Agency notes that onlytowards the end of the control period,when allowances are being used up,would intra-company trading activity belikely to pick up. Even then, EPAbelieves its experience with tradet andits commitment to communicateobjections to trades within three days ofreceipt will ensure that trades late in thecontrol period will be processed quickly.

The same commenter stated thatrequiring Agency pre-approval of eachshift in the mix of chemicals producedby a single company is wasteful ofresources and does little to accomplishimproved compliance with the Clean AirAct and the Montreal Protocol.

If U.S. treaty obligations were not atstake, EPA non-objection might not beregarded by EPA as worthwhile. As aleader in the phaseout of ozone-depleting substances and with theexistence of an international agreement,however, EPA believes it must take

extra care that compliance is ashieved.In this context, the Agency disagreesthat the requirement to notify EPA priorto intra-company trades does little toimprove prospects for compliance withthe Clean Air Act and the MontrealProtocol. Since companies may tradeallowances at any time during thecontrol period, the Agency must beaware at all times of the number ofallowances held by each company. Forexample, if a company internally tradedall its allowances from CFC-114 to CFC-115 and then proposed to trade CFC-115allowances to another company, EPAwould not know that the company hasCFC-115 allowances to trade and wouldobject to the trade. Likewise, if thecompanly did not have any CFC-114allowances left, yet proposed to tradethem, the Agency would not object tothe trade and the second company couldproduce CFC-114 without there beingany actual allowances to cover theproduction. In this way, compliance withthe Montreal Protocol and the Clean AirAct would be endangered. The Agencyalso notes that EPA has only threebusiness days in which to object to atrade, and thus companies would not behindered by a paperwork bottleneckthat could hinder the implementation ofproduction plans.

c. Transformer trading. Onecommenter maintained that theproposed rule subjecting feedstockpurchasers to the "offset" requirementwhen allowances necessary for thepurchase of feedstocks are traded isunlawful and serves no legitimatepurpose. This company also stated thatthe non-manufacturing feedstock userswould be forced to compete in themarket for increasingly scarceallowances. This company noted thateach time a feedstock purchaserattempted to exchange his regeneratedallowances with a manufacturer in orderto facilitate the purchase of additionalfeedstocks it would be subject to a one-percent reduction. After 20 such cyclesin one control period, the purchaser'sallowances would be reduced by 17percent. If product use expands, whichmay occur, the effect of repetitivelyapplied offsets combined withdiminishing allowances would create ashortage of allowances and feedstock.One of the most disturbing effects,according to this c6mpany, is that newfeedstock uses, such as for CFCsubstitutes, would never be launched.Furthermore, this company commentedthat feedstock purchasers wouldgradually suffocate from lack of supply,while feedstock manufacturers would beawash with excess feedstock material.

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The Agency agrees that placing anoffset on trades, the purpose of which isto replenish allowances expended infeedstock production, is not mandatedby the Act. Section 607 requires thatallowance trades result in lowerproduction than otherwise would haveoccurred. Under current marketconditions, transformers receiveallowances and trade them back tofeedstock producers on the basis thatthe chemical originally produced -wasused as a feedstock. and, therefore, doesnot count as production. In that way,allowances expended to producesubstances later transformed are onlytemporarily expended. As such, the"trade" of these allowances is simply anallowance reimbursement.

The same commenter asserted thatthe offset applied to transformers isclassically anti-competitive in that itrequires feedstock users to compete fordiminishing supplies, thus driving themarket price up unnecessarily andbestowing further advantage on thosewho manufacture their own feedstocks.This anti-competitive and economicallydamaging spiral of prices is not intendedor sanctioned by the legislation and issufficient reason, standing alone, toadopt an alternative regulatory scheme,according to this company. Thecommenter stated that the languageemployed in section 607 shows that thedrafters did not envision that offsetswould be required for trades by non-producers. This commenter argued thatsince all allowances expire at the end ofthe control period, this language canlogically only apply to those with whoare allocated baseline allowances, andnot purchasers who only haveallowances they have acquired.

Although EPA doubts that thepotentially catastrophic consequencespredicted by this commenter wouldactually take place in the event that anoffset were placed on allowancetransfers from transformers toproducers, it concedes that this wouldnot be a desired result of the Act. Asexplained earlier, the Agency believes itappropriate not to apply the offset totransfers of production and consumptionallowances from transformers toproducers. The Agency however doesnot agree that all trades by non-producers should be exempt from theoffset. Although section 607(c) statesspecifically that "the transferor of suchallowances will be subject, under suchrules, to an enforceable and quantifiablereduction in annual production,"subsection (d) states that "the rulesunder this section shall also provide forthe issuance of consumption allowancesin accordance with the requirements of

this title and for the trading of suchallowances in the same manner as isapplicable under this section to thetrading of production allowances"(emphasis added). EPA interprets thislanguage to mean that transferors ofconsuinption allowances should besubject to a reduction in annualconsumption. For this reason, theAgency is only exempting traders ofallowances from the offset in caseswhere it is clear that the purpose of thetrade is to reimburse a producing orimporting company for allowancesexpended in the production or import offeedstock material or material that islater exported. All other trades ofproduction and consumption allowancesare subject to a one-percent offset.

2. International Tradesa. The proposal. Section 616 of the

Clean Air Act provides that trades ofproduction between Parties to theProtocol also be subject to specificconditions. "Consistent with the,Montreal Protocol. the United Statesmay engage in transfers with otherParties to the Protocol under thefollowing conditions:

(1) The United States may transferproduction allowances to another Partyif, at the time of such transfer, theAdministrator establishes revisedproduction limits for the United Statessuch that the aggregate national UnitedStates production permitted under therevised production limits equals thelesser of (A) The maximum productionlevel permitted for the substance orsubstances concerned in the transferyear under the Protocol minus theproduction allowances transferred, (B)the maximum production level permittedfor the substance or substancesconcerned in the transfer year underapplicable domestic law minus theproduction allowances transferred, or(C) the average of the actual nationalproduction level of the substance orsubstances concerned for the threeyears prior to the transfer minus theproduction allowances transferred.

(2) The United States may acquireproduction allowances from anotherParty if, at the time of such transfer, theAdministrator finds that the other Partyhas revised its domestic productionlimits in the same manner as providedwith respect to transfers by the UnitedStates in subsection (a]."

Under section 616. then, trades ofallowable production between the U.S.and a Protocol Party cannot result in anincrease in production over what wouldhave occurred in the absence of thetrade. In the case of a trade to a U.S.company, the trading Party must agreeto reduce its production to the extent

prescribed by section 616. In the case ofa U.S. company trading production toother Parties, the U.S. must likewisereduce its production.

The Agency considered variousmethods of reducing overall U.S.production as called for in trades fromU.S. companies to companies "-broad,but proposed that the only fair way ofdistributing the offset would be todecrease the transferor's balance ofproduction allowances by the amountrequired under section 616. Thus, theformula for calculating the transferor'srevised production limit would be "thelesser of. (i) The unexpended productionallowances held by the person * * *minus the amount transferred; or (ii) theunexpended production allowances heldby the person * * * minus the amountby which the U.S. average annualproduction for the three pearm prior tothe transfer is less than the UnitedStates' production allowable under thisPart minus the amount tranderred."

b. Trades from the U. 9 to otherMontreal Protocol parties. Onecommenter stated that although theproposal for intra-companyinternational trades would appear to beworkable under today's marketconditions, as the phaseout movesforward and substitutes are developed,the formula will become unworkable.This is because the three-year averagewould be very low due to the rapidadoption of substitutes in some end usesand to the recent economic slowdownwhich has led to reduced demand forozone depleting chemicals. Thecommenting company provided anexample of how applying the offsetcould lead to severely diminishedsupplies of controlled substances in theU.S. If the U.S. were producing andconsuming controlled substances atabout 50 percent of its allowable levels,and that allowable level was 80 percentof baseline levels, the commenterclaimed that a company transferring tenpercent of its production rights toanother country would severely restrictfuture production (i.e., only 80 percentminus 50 percent minus ten percent ofthe company's limits).

The Agency acknowledges that theU.S. production of some of thecontrolled substances has been wellbelow allowable levels and agrees thatimplementation of section 616 couldresult in a severe curtailment of futureproduction if a company were totransfer away its baseline productionrights under the kind of scenariodescribed above. The Agency notes,however, that under its proposedapproach to implementing section 616, atrade could only take place if the U.S.

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transferor had enough allowances topermit the reduction in actual U.S.production to be reflected in thetransferor's adjusted allowance balance.In short, using the example given above,the transferor would have to haveallowances equal to at least 30 percentof U.S. baseline production for it totrade its allowances abroad. In this way,any resulting curtailment in productionwould be for the transferor to absorband would not directly affect othercompanies' ability to produce. EPA alsopoints out that if the U.S. were alreadyoperating well below its allowableproduction in a future control period, itwould not need the full amount ofallowable production during that controlperiod and trades of allowances wouldnot necessarily result in such severecutbacks at least for that period. In anyevent, regardless of the effect on futureproduction, the Act clearly requiresthese adjustments to the U.S. productionlimit and the need to make suchadjustments should be considered bythose contemplating trades.

The same commenter stated thatunder the Agency's proposal, nocompany other than itself may be ableto transfer production rights because thepotential shortfall in national productioncould easily exceed the total productionallowances held by any other producer.The company suggested as trades willbecome increasingly necessary underthe phaseout, and that it would beuneconomical and bad policy for theU.S. to undertake a program that wouldeffectively prohibit international trades.

One company also maintained thatthe first company requesting a transferto another Party would bedisproportionately penalized by havingto absorb the entire national differencebetween the allowable productionquantity and the three-year average ofactual annual production.

The Agency agrees that its proposalcould have the effect of unfairly limitingthe availability of trading and that sucha result should be avoided. The Agencyhas thus changed its requirement so thatif more than one company tradesproduction of a controlled substance toanother Party or Parties, they willequitably share the burden of absorbingany shortfall in national production.Thus, the allowance balance of thecompany to trade first would be reducedby the full amount of its trade plus thedifference between the allowableproduction and the three-year nationalaverage. If another company were thento trade away its production allowancesfor the same controlled substance, thefirst company would recoup part ofwhat it lost and the second company's

allowance balance would be reduced.The exact percentage of the requiredreduction levied on each companywould be proportional to the amount ofeach company's trade. Since allowancesare calculated in kilograms, the offsetwould also be determined in kilograms.

According to several commenters, theimplementation of this requirement ofthe Clean Air Act as proposed would actas a severe disincentive to earlycutbacks beyond those required by theMontreal Protocol, and would have a"chilling effect" on the free market'sdistribution of production, of controlledsubstances throughout the world. Theyalso contended that EPA's proposalregarding transfers to other ProtocolParties could be onerous andunworkable as it would seriouslydiscourage any company from enteringinto a transfer with another Party.

The Agency believes that thecommenters' problem is with the termsof section 616 itself, not with theAgency's manner of implementing it.That section clearly calls for U.S.production to be reduced not only by theamount being transferred but by anyshortfall between U.S. actual andallowable production. Congress calledfor the required reduction to becalculated this way in order to ensurethat the production being transferredwas not production that would haveotherwise gone unused, thereby sparingthe ozone layer that amount of potentialdepletion. The Agency, required toimplement the Clean Air Actrequirements, has simply codified themost equitable method of distributingthe effect of this requirement.

The same commenters suggested thatEPA take under advisement and furtherconsider its proposed approach tosection 616, and not finalize it with therest of the rule. The Agency notes,however, that until it implements section616. no trades of production withProtocol Parties could be undertaken.The regulations that were effective in1991 expired at the end of that year.Section 616 sets forth the basis on whichEPA may allow international trades. Inthe absence of regulations implementingthat provision, there could be no trades.As noted above, while section 616 maymake international trades lessattractive, EPA has no choice but toimplement its requirements.

The Agency has altered its approachto section 616 in this final regulation inresponse to comments to make it moreequitable and less burdensome on anyindividual firm. As the Act is veryspecific on this point, EPA does notbelieve that postponing this section's

implementation would lead to a moresatisfactory solution.

c. Trades to the U.S. from otherMontreal Protocol parties. Section 616also allows for transfers of productionfrom other countries to the UnitedStates. If the Party nation agrees toreduce its production limit according tothe provisions set forth in the Act, theU.S. may increase its production by theamount transferred.

One commenter asserted thattransfers of methyl chloroform andcarbon tetrachloride production fromParties do not make sense because othercountries do not have limits yet. Thiscompany commented that EPA shouldclarify this point, and declare that astatementto UNEP proving a country'sreduction in production would besufficient to satisfy the Clean Air Act.

While section 616 appears to presumethe existence of Protocol limits on thecontrolled substances being transferred,EPA does not believe that Protocollimits need exist for it to apply and beapplied. The purpose of section 616 is topermit the U.S. to transfer production toor from other Parties so long as the totalactual production of the U.S. and theParty engaged in the transfer does notincrease. Before Protocol limits apply,the same purpose can still be served solong as the Party engaged in the transferhas placed or will place limits on thecontrolled substances being transferredand revises or sets those limits to reflectthe adjustment required by section 616.

Section 616(a) provides that thetransferring Party adjust its productionlevel based on its allowable productionunder the Protocol, its allowableproduction under domestic law or itsaverage annual production for the threeyears prior to the transfer. BeforeProtocol limits take effect, then,adjustments can be calculated based ondomestic limits or average productionlevels. What is essential, though, is thatthe adjustment be binding on thetransferring Party. If it has domesticlimits, it must reduce them by theamount transferred. If it has no limits, itmust establish limits equal to theaverage of its actual production in thelast three years less the amounttransferred.

For EPA to approve transfers ofcontrolled substances, including thosethat are not yet subject to Protocollimits, the transferee must submit to theAgency a signed document from theprincipal diplomatic representative inthe transferring nation's, embassy in theUnited States stating that theappropriate authority within the nationhas revised or established productionlimits as described. The Agency submits

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that in cases where the compoundsinvolved in the trade are not yetregulated under the Montreal Protocol,no purpose is served by sending astatement to UNEP that the country hasreduced its production.

An industry group commented that itis unrealistic to expect other countries torevise their production limits as requiredby section 616 if the resulting limitswere more stringent than the applicableProtocol limits. It argued that theAgency should not place the burden ofnegotiating lower national productionlimits on the U.S. company seeking thetransfer and maintained that if theAgency did not act on a government-to-government basis to negotiateproduction reductions, no allowancetrades from other countries could becarried out. Unless the Agency took partin negotiations, the group stated,allowances would flow only away fromthe U.S., resulting in lower U.S.employment and balance of tradewithout environmental gain.

The Agency does not believe that it isthe U.S. government's place to negotiatewith foreign governments on behalf ofU.S. companies that wish to receiveproduction rights from other nations.The Act is clear in requiring that thegovernment of a Party restrict itsproduction if a U.S. company is toreceive production from that Party. If aforeign company wishes to transferproduction rights, it must work with itsgovernment to achieve nationalreductions in production. Although theU.S. will continue to act on aninternational level to encourage nationsto join the Protocol and phaseout ozonedepleting substances, the Agency willact as an agent for U.S. firms wishing tocarry out allowance transfers.

In addition, the Agency does not agreethat this provision of the regulations willresult in a one-way transfer ofallowances away from the U.S. withnegative economic consequences. Underthe regulations, before trades ofproduction from the U.S. can occur, EPAmay evaluate the economicramifications and. in cases wherenegative consequences are anticipated,disapprove the transfer.

I. Obtaining Additional Allowances--Transformation

1. Carbon Tetrachloride Transformationa. Summary of today's final rule. EPA

decided to change the provisions for thetracking of carbon tetrachlorideproduction and transformation fromthose proposed in the September 30,1991 notice in light of the commentsreceived during the rulemakingproceeding. Under today's regulations,

any company that produces carbontetrachloride to be used as feedstockmay do so without expendingproduction and consumption allowancesunder certain conditions. In order for thecompany to avoid the prohibitionagainst producing without allowances,however, the same amount of material itreports to EPA as "production forfeedstock use" in a control period mustbe transformed by the end of the firstquarter of the next control period. No"transformation allowances" or up-frontcommitments will be necessary forcompanies to produce carbontetrachloride for feedstock. Instead,recordkeeping and reportingrequirements needed to make this addedflexibility for producers of carbontetrachloride and feedstock userspossibly have been promulgated.

b. The proposal. The Agencyproposed a new system of"transformation" allowances for theproduction of carbon tetrachloride to beused as a feedstock. Under the system ineffect in 1991, producers of carbontetrachloride, like the producers of theother controlled substances, were notallowed to produce the chemical unlessthey had adequate production andconsumption allowances to cover theirproduction. After the chemical wastransformed, the transforming companywould be eligible to receive additionalproduction and consumption allowancesthat could then be used to furtherproduce or import additional carbontetrachloride. Since a large percentageof the carbon tetrachloride produced istransformed, however, and two of theproducing companies received nobaseline consumption allowances, the1991 system proved cumbersome andgenerated a large amount of paperworkwhile creating a stop-start production acycle.

The proposed system would providefor the allocation of allowances beforethe actual transformation occurred,upon the producer's proving to theAgency's satisfaction that it had salescommitments with companies thatpromised to transform the carbontetrachloride received. Producers coulduse these transformation allowances toproduce carbon tetrachloride forfeedstock use within the same controlperiod. Transformers would report theiractivities quarterly. Any amount ofcarbon tetrachloride produced pursuantto transformation allowances and nottransformed by year-end would beconsidered a violation of the regulations.

c. Proposed system versus 1991system. The Agency requested commenton the proposed system as well as the1991 system. Two commenterscommended EPA for developing a new

approach, but said that the proposedsystem would not solve some problemsof the 1991 system and wouldexacerbate other problems. Anothercommenter remarked that the proposedsystem would be an improvement fromthe current system in that would solvethe problems of stop-start productionand of requiring producers to haveallowances before producing carbontetrachloride for exempt uses (in 2000).However, according to this company,the proposed scheme still had severalflaws, which are discussed in moredetail below.

In preparing the final regulations, theAgency has taken these comments intoaccount, and altered the proposedtransformation allowance system so thatit will work more smoothly whilemaintaining an effective compliancemonitoring mechanism.

d. Allowances for the production offeedstocks. Two companies assertedthat since the manufacture of controlledsubstances used for feedstock is notdeemed production under EPA'sregulations, no allowances of any kindshould be required to manufacturecarbon tetrachloride for that purpose.One company commented that the word"production" found in the Protocol andthe Act does not include themanufacture of controlled substancesthat are wholly used and consumed inthe manufacture of other substances,and thus that EPA's proposedregulations unjustifiably and withoutauthority would prohibit the sale ofcontrolled substances for feedstockpurposes except to the extent permittedby existing production and consumptionallowances. One commenter alsocontended that EPA's interpretation ofproduction denies the plain andordinary meaning of the wordscontained in the statute, cannot bereconciled with other parts of thestatute, and is neither required norsuggested by the Montreal Protocol.According to this company, since theeffect of EPA's interpretation is to placea restriction on trade in these chemicalsthat is not authorized or required by the-Statue or the Protocol, the Agency'sposition is unlawful. One commentindicated that it would be lessdisruptive of business to interpret thefeedstock exclusion as covering thecurrent year's production that has beenor will be used as feedstock. requiringonly a certification that the material willbe transformed eventually.

The Agency continues to believe thatthe Clean Air Act and Protocoldefinitions of production may be read toinclude any amount of feedstockchemical manufactured until it actualy


is trandormed. The Clean Air Act, afterall, excludes from production thosecontrolled substances that are "usedand entirely consumed" in themanufacture of other chemicals(emphasis added). At the same time,EPA concedes that the use of the pasttense does not necessarily connote thatthe substance must have been used andconsumed before it may be excludedfrom production. There are strong policyreasons for interpreting production asthe Agency has in the past, to ensurethat controlled substances are notproduced in amounts greater than theProtocol and Clean Air Act allow andthen not transformed.

In the case of controlled substanceslargely used as feedstocks, however,EPA's past interpretation can beunwieldy to implemenL To address thisconcern, the Agency believes that it ispermissible to interpret the definition ofproduction in such a way that anychemical transformed at any point intime is never deemed "produced" withinthe context of the Protocol and Act. Forreasons discussed in the followingsections, EPA has determined that theallocation of transformation allowancesfor the production of carbontetrachloride as feedstock (a systempremised on the first interpretation)would not provide significantcompliance monitoring advantages,while it would increase industry's andEPA's administrative burden.Consequently, this rulemaking providesthat companies may produce carbontetrachloride for feedstock use withoutexpending allowances.

One commenter stated that within thesame company, EPA excludes thetransformed chemical from production.and there is no compelling reason fortreating transformation by othercompanies differently.

The Agency's response Is that prior totoday's rule, all production, includingfeedstock production required theexpenditure of consmption andproduction allowances and was notexcluded directly from production. Thecommenter is most likely referring to theAgency's suggested format for theproducer's quarterly report, which issimplified by netting out the amounttransformed during that quarter from theamount produced during that quarter(the regulations promulgated today donot change this reporting system forinternal transformation). It has beenunder past rulemakings and continues tobe prohibited, however, to producecontrolled substances for feedstock usewithout expending production andconsumption allowances to cover thatproduction, so in-house transformation

is treated the same as second-partytransformation. This rulemaking altersthat system for carbon tetrachlorideonly.

One commenter also remarked thatwith few producers and transformersinvolved, enforcement would be just aseasy for second party transformation asfor producer transformation. Therefore,according to the commenter, the twosystems should be treated in the samemanner, as Congress intended.

To date, however, the Agency hasidentified at least 30 companies thattransform carbon tetrachloride, inaddition to six companies that produceit as well. The tracking of second partytransformation thus is not as simple astracking internal producer feedstockuse. Therefore, the Agency is placingspecific controls on producing andtransforming companies to ensurecompliance, which are outlined below.

e. Written contracts and commitmentsto transform. One company and anindustry group commented that theproposed requirement for written fixed-amount contracts before transformationallowances could be granted would altercurrent business practices. In addition,they stated that sending each newpurchase order to EPA would involveconsiderable paperwork withoutcorresponding benefits. Thesecommenters were also concerned thatthe production limits would still beexceeded if customers do not take theamount of carbon tetrachloride orderedor do not transform it by the year-end.

These commenters maintained thatelements of EPA's proposedrequirements do not take account ofeveryday business practices, ascontracts are often only for estimatedamounts. These three companies statedthat the proposed system would preventproduction without advance orders,which would make the productionprocess slow to respond to Immediate oremergency needs.

Responding to these concerns, theAgency has removed the requirementthat a producer obtain up-frontcommitments from purchasers totransform carbon tetrachloride. SinceEPA is not estabbiobing a system basedupon the provision of "up-front"allowances for carbon tetrachloride,EPA does not believe it is necessary torequire producers to obtain the up-frontcommitments, the purpose of which (asexplained in the NPRMJ would be todetermine the precise amount of carbontetrachloride intended fortransformation so that the appropriateamount of allowances could be granted.Instead, a producer must report everyquarter its sales of carbon tetrachloride

to each feedatock-user and provide theIRS certificates of thcustomersinvolved. The certificate shows thecustomer's intent to transform and.substantiates the producer's claim thatits feedstock production in excess of itsproduction allowances will betransformed. Thus, industry will havemore flexibility in responding toemergency orders, while EPA will stillhave adequate assurance that thecarbon tetrachloride will betransformed.

f. Year-end problem. Severalcommenters expressed concern aboutthe provision in the proposed rule thatall of the carbon tetrachloride producedpursuant to transformation allowancesfor one control period must betransformed within the same controlperiod or be counted as production. Thisprovision stemmed from the Agency'sinterpretation of production asexcluding the quantity manufacturedand already used as a feedstock, butincluding any quantity manufacturedand not yet used as a feedstock. even ifthat is its intended use. This means thatat year-end, any inventory of thechemical remaining (even if intended fortransformation) would be counted asproduction. The proposed system wouldbe advantageous for compLiancemonitoring because it would assure thattransformation occurs before additionalallowances are granted. However, inlight of these comments and itsexperience implementing carbontetrachloride controls in 1991, EPAbelieves that the disruptive effects ofthis approach outweigh the compliancemonitoring advantages in the case ofcarbon tetrachloride. The broaderinterpretation of production discussedearlier, allowing the amount of chemicaltransformed after the control period inwhich it was produced [not just withinthe same year) to be excluded fromproduction, avoids the problem of year-end shutdown. In order to avoid plantshut-downs at year end, the Agency hasdecided that carbon tetrachioridetransformed by the end of the firstquarter in the control period followingthe control period in which it wasproduced may be excluded from theprevious control period's production.Producers will be required to reportproduction separately from production-for-trnsformation, for which noallowances will be expended. The effectof these rules will be the same asdividing the carbon tetrachloridemanufactured Into "produced" and"transformed" quantities.

The final regulations allow for twotypes of carryovers. First, a three-monthgrace period for transformation after the

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end of the control period in which it wasproduced is established. Second, theproducing company must show only thatan amount equivalent to the amount itproduced during the control periodwithout the expenditure of productionand consumption allowances for thatcontrol period was transformed. Thismeans that production from one controlperiod that is transformed at thebeginning of the following control periodcould count towards the amount thatmust be transformed during the currentperiod. For those companies that do nothave baseline consumption allowances.this second type of carryover couldprovide them with a needed cushion. Forall companies, the carryover period willprovide flexibility needed to deal withthe unpredictable instances ofuntransformed inventory.

One company maintained that by 1996it will have the capability to transformcarbon tetrachloride produced as by-product with a superior,environmentally sound technology. Thiscompany proposes that EPA allowcoincidentally produced carbontetrachloride to be stored in 1995 and1996. The commenter noted that thiswould not violate the Clean Air Act andMontreal Protocol because productionfor feedstock is not production.

If the Agency were to allow indefinitestorage of production-for-feedstock, itwould not be able to effectively monitorcompanies' compliance. Even if acompany's production far exceeded itsinternal or its customers'transformation, it could always claimthat the material was intended for futuretransformation. The Agency hasdetermined that there'must be sometransformation cutoff date in order toensure compliance with the Act andProtocol.

The Agency considered all of thecarryover time periods suggested bycommenters, ranging from 30 days to.one year, and selected three months, orone quarter, as the most workable.Although some commenters indicatedthat any carryover from one year'sproduction could be completelytransformed by the end of the following.January, a carryover period equal to onequarter reduces the reporting burden oncompanies by allowing them to provideinformation on the transformation in thefirst quarterly report. Six-month andone-year grace periods were rejected asbeing unnecessarily long, sinceprevious-year compliance could not bedetermined until much later, in the caseof the one-year grace period, up to 14months after the end of the relevantcontrol period.

Under the one-quarter carryoversystem, every transformer of carbon

tetrachloride must report each quarterthe amounts of carbon tetrachloride ithas transformed. Each quarter, everyproducer will report its productionintended for transformation and its non-feedstock production, and provide salesdata and IRS certificates for eachcustomer to which feedstock productionwas sold. After the end of the firstquarter of the following control period,EPA will compute a mass balance.Compliance would be monitored for1992 as follows: Amount Transformed in'92 + Amount Transformed in firstquarter of '93 must be > AmountProduced-for-Transformation in '92.

The next year, the mass balance willbe calculated as follows: AmountTransformed in '93 - AmountTransformed in first quarter '93 that wasattributed to '92 produced + AmountTransformed in first quarter of '94 mustbe > the Amount Produced forTransformation in '93.

Under this system, companies mayallot a certain amount of first quartertransformation to justify previous-yearproduction for-feedstock uses. Anyamount of first quarter transformationthat exceeds what is needed to coverprevious-year production will counttowards transformation of feedstockproduction in the same year. All second,third and fourth quarter transformationwill be attributed to production in thesame year, along with as much of thenext year's first quarter transformationas is necessary. Companies will be outof compliance if their first quartertransformation is not large enough toaccount for the previous year'sremaining production-for-transformation.

An industry group inquired whatwould happen if a transformer starts acontrol period with inventory and endsthe year with an untransformedinventory. For example, would a portionof any transformation that took place beallocated to the preexisting inventoryand thus not be counted toward thecurrent year's production? Thiscommenter also asked what wouldhappen if a transformation occurredearly in the contrul period before carbontetrachloride was actually purchasedduring that control period.

Under the feedstock tracking system,no transformation will be allotted tospecific sources. A transformer-beginning a year with inventory andending the year with inventory does notpresent a problem because the amounttransformed in that year could still beprecisely calculated and matchedagainst the producers' feedstockproduction. As a result, it does notmatter if transformation of past-yearpurchases occurs, as this type of

carryover is allowable if the totalamount transformed in one controlperiod plus the following carryoverperiod minus the previous year'scarryover is equal to or less than theamount produced in that year forfeedstock.

One commenter maintained thattransformation documentation should bebased upon changes in bulk inventory.and not be tied to carbon tetrachloridein a specific shipment. This companystated that material received in bulk(e.g., by tank truck or rail car) would notbe stored by discrete shipment, but"would be combined in a single storagetank or battery of tanks.

The tracking system promulgated inthis regulation allows for treatment oftransformation reporting in a mannersimilar to the reporting of production,based on inventories, shipments andother pertinent information. The systemthus avoids the problems of tracking thefate of individual shipments in acontinuous manufacturing process.

g. Liability if production for feedstockexceeds transformation. Under theproposed rule, a carbon tetrachlorideproducer that produced no more than itstransformation allowances permittedwould still be liable if the carbontetrachloride produced pursuant to thetransformation allowances was nottransformed in the same control periodas it was produced, Several commentersobjected that producers should not beheld liable for the failure of purchaserswho agreed to transform the productionto do so. They maintained that as longas a carbon tetrachloride producer doesnot exceed its production allowances.the Agency should consider it incompliance.

In the final rule, the Agency hasmaintained the basic tenet of this aspectof its proposal-that producers remainultimately liable for production nottransformed. Under this rule, a companythat produces without allowances agiven quantity of carbon tetrachloridefor feedstock use during a control periodmust ensure that at least that amounthas been transformed by the end of thefirst quarter of the next control period.Any amount that is not transformed willbe counted as production andproduction and consumption allowanceswill be deemed to have been expended.To the extent that a company's totalproduction, including that nottransformed, does not exceed itsproduction and consumptionallowances, it will be in compliance.with the regulations. To the extent thatits total production does exceed itsallowances, it will be in violation.

Federal Register / VoL 57. No. 1-47 1 Thursday, July 30, 190Z i Rules and Regulations

The Agency has placed liability on theproducer because the Act restrictsproduction, not transformation. Thespecter of potential liability givesproducers an incentive to ensure thattheir customers' claims that the carbontetrachloride will be transformed arefulfilled. Since it is the producer whotakes the first step in deciding whetheror not to produce the chemical, andassures the Agency that this productionwill be transformed, it is clearly theproducer's responsibility to see that thetransformation is in fact carried out.Such liability is not only required by thestatute, but also assures the protectionof the environment At the same time,producers may enter into contracts withtransforming companies that coitainclauses providing that the transformingcompanies will compensate theproducer for any financial consequencesof liability.

Several commenters maintained thatEPA has the authority to hold customersliable because of its authority to limitproduction and transformation. Onecompany contended that if thecustomer's action causes the carbontetrachloride to be classified asproduction, then the customer becomesthe de facto producer and as such isliable. Another commenter stated that ifthe Agency does not believe it has thisauthority, it could still place liability ontransformers by granting transformationallowances only to companies that havesigned a liability statement.

The Agency believes at this time thateven if it has the legal authority to placeliability on transformers," this would notbe an effective way of ensuringcompliance. As noted earlier, thenumber of transformers far exceeds thenumber of producers, and the monitoringof transformers thus presents greaterdifficulties than does the monitoring ofproducers.

One commenter remarked that forcases of failure to transform due to"Acts of God," there should be aprovision allowing EPA to issue anenforceable consent order requiring thecustomer to transform or destroy thecarbon tetrachioride within 180 days. Ifa customer does not comply, EPA shouldfine the customer and arrange for thedestruction at the customer's expense.

The Agency is providing a 90-daygrace period in which a producer andtransformer can arrange fortransformation of untransformedinventory, whether it is due to "Acts ofGod" or any other cause. If the materialis not transformed within the firstquarter after yearen d the Agency willtake enforcement action and collectfines from the phoducer of the chemical.'Producers may pass fines and costs onto

their customers as they see fit throughcontract provisions.

Another company commented that theproposed liability system ensures thattransformation will take place. Thiscompany suggested that compliance willbe effected through normal contractprocedures since the EPA is clearlyplacing the burden on the producers.Therefore. producers will establishadequate contract and other controlmechanisms to assure that thetransformation occurs because theywould be exposed to substantialnoncompliance penalties.

By contrast another companyresponded to the Agency's suggestion inthe NPRM that producers could useprovisions for liquidated damages incontracts in order to avoid the costs offines for transformers' failure totransform. They stated that liquidateddamages provisions are inadequate fortwo reasons: (1) a customer would notsign the contract, and (2) damages mightbe uncollectible (Le- in the case ofbankruptcy, the security interest wouldnot cover the fines, and other creditorswould be harmed). A supplementarycomment added that it is notcommercially realistic to believe that acompany would agree to manufacturecarbon tetrachloride even though itwould be held liable if the purchaser didnot transform the chemical. Thiscompany commented that there is noreason why the onus of the prohibitionscannot focus on the buyer.

The Agency believes that if acustomer were already certifying on IRScertificates that it would transform thematerial and it could not obtain carbontetrachloride without signing a contractcontaining the provisions discussedabove, then it would not be difficult toreach an agreement on liquidateddamages in cases of failure to transform.The Agency also submits that the riskthat a customer will declare bankruptcy'or otherwise default, is a risk normallyencountered and that if a producerperceives the risk to be too high, itwould not be prudent to continue sellingfeedstock to that customer. Producingcompanies, in addition to makingresponsible decisions about to whom tosell the material, could make provisionsfor transforming the remaining materialat another company's or one of theirown plants. Thus, liquidated damagesprovisions should prove to be aneffective method by which producerscan ensure that their customers arefinancially accountable for failure totransform.

In sum, the Agency continues tobelieve its proposed liability system willbe the most effective in ensuringcompliance. Although the Agency is not

requiring fixed contracts betweenproducers and transformers, It is likelythat producers will arrange for thesetypes of agreements in order to guardagainst being penalized foruntransformed material.

One commenter asked which producerwould be penalized if a customer of twoproducers failed to transform within thecontrol period. Under the scheme forcarbon tetrachloride transformationpromulgated in this rulemaking,transformers are required to reportexactly how much carbon tetrachloridefrom each producer was transformed ineach quarter. In cases where productfrom several producers is mixed intanks, the governing assumption forwhose carbon tetrachloride wastransformed first would be "first in, firstout" (FIFO), unless the transformerindicates that it plans to use analternate method. This method iswidely-used in industry and has in thepast been the basis of some companies'distinction between imported anddomestically-produced material that ismixed before sale to transformers. Thusif a transformer received a shipmentfrom one producer on the first of themonth, and a shipment from anotherproducer on the fifteenth of the month,the assumption would be that the firstproducer's material was transformedfirst. In this way, it could be determinedto whom any untransformed materialshould be attributed. If a transformerdoes not wish to use the FIFO method.the company should submit adescription of the alternate calculationmethod and a justification as to whyFIFO is not satisfactory prior tosubmitting its first quarter report. TheAgency will either approve ordisapprove the request for the use of analternate method, based on whether itcan be reconciled with othertransformers' calculation methods andFIFO.

Although today's rule makes theproducer liable in cases where feedstockproduction exceeds transformedamounts during the five-quarter period,EPA will continue to monitor theeffectiveness of relying solely on thiscompliance mechanism. If the Agencydetermines in the future thattransforming companies are acting inbad faith by failing to transform, it willconsider proposing regulations makingtransformers also liable pursuant to itsstatutory authority under section 615 ofthe Act. That section grants EPA broadauthority to regulate practices oractivities (such as failing to transform)that may reasonably be anticipated tocontribute to ozone depletion andendanger public health or welfare.

I

IIII II II

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h. Provision for the export of carbontetrochloride. Two commentersremarked that elements of the proposedrule could eliminate their ability toproduce for export because they cannotproduce without consumptionallowances. The commenters stated thattwo producers, including one of thecommenters, have zero consumptionallowances. That company commentedthat if the proposed system is adopted, itshould be expanded to provide specialexport allowances under rulesanalogous to the rules for obtainingtransformation allowances.

For exports, the Agency will use aprocess similar to that set up in 1991 forcompanies that needed up-frontallowances in order to produce fortransformation. Production of carbontetrachloride for export does not presentthe same problems as production fortransformation, as only a smallpercentage of the carbon tetrachloridemanufactured in the U.S. is exported.Nevertheless, EPA recognizes the needfor a mechanism for companies that didnot receive baseline consumptionallowances to enable them to produceand then export. These companies willbe granted consumption allowanceseach year, equal to their productionallowances for that year in order toproduce for export. Companies musthold at least this number ofconsumption allowances at the end ofthe control period; they will receiveconsumption allowances equal to thenumber they expended to produce uponexporting their production. The Agencywill allow companies to continue toprocess paperwork demonstrating thatexports took place in the proper controlperiod for up to 45 days after the end ofthe control period.

i. Recordkeeping and r.porting for thecarbon tetrachloride transformationsystem. Recordkeeping and reportingrequirements have been changed fromthe proposal to be consistent with thecarbon tetrachloride transformationsystem adopted here. Producers will berequired to keep on-site records of:

- The type of information requiredunder the 1991 rules; and

* Sales of material (invoices] totransformers.

Producers will also have to filequarterly reports registering:

- The same type of informationrequired under the 1991 rules, with"production" including only carbontetrachloride manufactured and notintended for transformation;

* The amount of "feedstockproduction" (carbon tetrachloridemanufactured and intended fortransformation);

e The amount of feedstock productionsold to each transforming company; and* IRS certificates for eachtransformer.

Transformers will be required to keepon-site records of:

• The same type of informationrequired under the 1991 rules forcompanies that request additionalallowances for the use of a controlledsubstance as feedstock;

* All purchases of carbontetrachloride for feedstock;

e Shipments received and the dateand quantity of material received;

- The source of all purchases andshipments; and

* Quarter-start inventories of carbontetrachloride.

Transformers will also have to filequarterly reports including:

* A list of producers or importersfrom whom material was purchased;and

• The amount of each producer's orimporter's material that wastransformed during that quarter. Ifmaterial from several producers orimporters was mixed, the transformershould use the first in, first out (FIFO)method for determining whoseproduction was transformed, unless theAgency has approved an alternatemethod for that company.

2. Transformation of Other ControlledSubstances

One company commented thatproducers of methyl chloroform shouldalso be allowed to exclude methylchloroform that is transformed fromproduction because in the future the useof methyl chloroform as a feedstock willincrease. It presented the example of theproduction of HCFCs, which in 1995 mayrun into the same problems of allowancerecycling delays and year-end problemsas are experienced currently for carbontetrachloride.

EPA recognizes that as the phaseoutprogresses, it may be appropriate toexpand the carbon tetrachloridetransformation system to otherchemicals and to exports. To date,however, the burden of allowancecycling for chemicals other than carbontetrachloride has not been large enoughto warrant expanding thetransformation system, which providesless assurance that production forfeedstock purposes is actuallytransformed.

Another company remarked that itand a number of other companies usecontrolled substances as manufacturingfeedstocks, including for HFCs beingdeveloped as CFC substitutes, and thattheir need for such feedstocks isexpected to increase in the future.

According to this commenter, thesecompanies would be placed at anunnecessary and unauthorizedcompetitive disadvantage simplybecause they buy, instead of make, theirfeedstock chemicals. It asserted that theproposed rules would place a "choke-hold" on companies that must purchasecontrolled substance feedstocks andproducts made with them, giving anenormous advantage to manufacturerswho produce their own feedstocks. Thecommenter maintained that this aspectof the proposal was unnecessary toprotect the ozone layer, and was notauthorized or required by the Clean AirAct. Moreover, this company arguedthat the differential treatment of second-party transformers significantly injurethe U.S. and individual companies. Itadded that at the conclusion of thephaseout period it would no longer bepossible to purchase controlledsubstance feedstocks (except for carbontetrachloride) because there would beno more allowances. Moreover, thiscompany maintained that in the interim.supplies would be scarce and priceswould be unnecessarily high, withoutenvironmental benefit.

The Agency has been monitoringallowance cycling for second-partyfeedstock use of CFC feedstocks sinceJuly of 1989 and has yet to encounterany situation where companies haddifficulties purchasing feedstockchemicals because of a "choke-hold" onallowances. Indeed, to date there hasbeen a surplus of allowances at the endof each control period. Again, as thephaseout begins to take effect, thissituation could change. The Agencyprefers, however, to continue with thecurrent system, which has been effectiveand has not presented problems forchemicals other than carbontetrachloride, until it is determined thatthe carbon tetrachloride transformationsystem as promulgated in theseregulations is effective and canreasonably ensure compliance withinternational production andconsumption limits. At that time, theAgency will reconsider switching othercontrolled substances over to thiscontrol system. It is not the Agency'sintention to disadvantage second-partytransformers or to stifle the productionof CFC substitutes. The commenter haspresented no compelling evidence thatthis is currently taking place.

3. Provision for the Import of FeedstockCarbon Tetrachloride

One company asserted that under the1991 and proposed rules, importation ofcontrolled substances for feedstock usecan on!y be accomplished by expending

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consumption allowances, which willbecome unavailable in 2000. In theinterim, this company maintained thattransfers of allowable productionbetween Parties (to permit greaterdomestic production of controlledsubstances for feedstock use) would besubject to an even greater offset thanthat applied in the case of domestictransfers. As certain feedstock materialsneeded for industry are in short supply(e.g., Halon 2402), the company inquiredas to why American industry should bedenied the opportunity to import thesefeedstocks.

This comment raises several issues.The first is how the import of feedstocksubstances should be treated. TheAgency has provided that companiesthat wish to import carbon tetrachloridefor feedstock use do not need to expendconsumption allowances. In this way theimport of carbon tetrachloridefeedstocks is treated in the samemanner as the production of the same.The offset for inter-Party trading ofallowable production should not directlyaffect importation of controlledsubstances. Second, other controlledsubstances (such as Halon 2402) are notbeing considered for this type oftreatment currently for the reasonsdiscussed above. However, if at a laterdate the Agency were to establish asimilar system for the other controlledsubstances as well, provision wouldalso be made for imported feedstocksand of these substances.

4. Transformation in Foreign Countries

One commenter maintained that aftera Party transfers to the U.S. someamount of its allowable production, U.S.companies should be able to getproduction and consumption (ortransformation) allowances forexporting the actual production thatresults when the exports are used asfeedstocks in other countries uponsubmitting proof of export,transformation, and the importer'sintended use.

EPA at this time cannot grantadditional allowances for, or exemptfrom production limits, controlledsubstances that are manufactured fortransformation abroad. The Parties tothe Protocol have specifically addressedthis issue and decided that the countryin which the transformation takes placeshould be able to exclude from its limitsthe amount transformed. (See 55 FR24491 June 15,1990.) Moreover, theAgency could not inspect transformationfacilities in other countries, and,therefore, would not be able to enforceproduction limits adequately.

I. Obtaining Additional Allowances-Exports

I. Proof That Exports to Article 5Countries are Not Reexported. The Clean Air Act allows producing

companies to increase their productionby up to ten percent of their baseline forthe purpose of supplying the basicdomestic needs of developing countriesoperating under Article 5 of theMontreal Protocol. The Agency'sproposed method of tracking thisproduction is to create potentialproduction allowances equal to tenpercent of each company's baseline thatcan be converted into actual productionallowances if companies can prove thatthey have exported to Article 5countries for the purposes of supplyingtheir basic domestic needs. The Agencyproposed to define "basic domestic.needs" as the parties have thus fardefined it. This definition presumes thatcontrolled substances supplied todeveloping countries are used for basicdomestic needs to the extent that theyare not re-exported in bulk form. TheAgency proposed that companies thatwish to convert potential productionallowances to production allowancessubmit to EPA documentation verifyingthat the export has occurred, as well asproof that the material will not be re-exported. As proposed, thedocumentation could be in the form of acontract providing for liquidateddamages equal to the resale price of thechemical in the event the provision notto re-export is breached or could reflectother means to guarantee that the goodswould not be re-exported. The Agencyrequested comments on other forms thisproof could take.

One company asserted that re-exportshould be allowed if it can bedemonstrated that re-export is to servethe basic domestic needs of anotherArticle 5 country and also that one testof basic domestic needs could be thefact that there is greater economic valuein re-exportation than in internal use.This company stated that to dictateotherwise would disrupt free marketforces.

The Agency responds that under theProtocol and section 614 of the Act itdoes not have the authority to broadenthe definition of basic domestic needs assuggested. The Parties clearly indicatedin the discussions accompanying theLondon Amendments that basicdomestic needs are not defined toinclude bulk re-export of any kind.

The same commenter also suggestedan alternative scheme for determiningbasic domestic needs under which EPAwould determine the percentage ofimports by each Article 5 country that

typically is re-exported, and apply thisfactor to the U.S. exports in order todetermine how many authorizations toconvert should be given.

EPA does not believe that basingauthorizations to convert on past re-exportation statistics would guaranteethat countries would not re-exportcontrolled substances in the future. Inaddition, the Agency finds thatdetermining the re-export rates of all 43Article 5 countries would beadministratively and financiallyburdensome. This is particularlyapparent in light of the fact that theProtocol's Secretariat, which hasalready requested these data, has notbeen able to fully determine past exportrates for the developing countries.

The Agency is thus finalizing itsproposed system, which allowscompanies to request only additionalconsumption allowances for exports toParties that are not operating underArticle 5, but allows companies thatexport to Article 5 countries that havesubmitted appropriate documentation toreceive both consumption allowancesand authorizations to convert potentialproduction allowances.

2. Exports to Non-Party ComplyingNations

The same company commented thatthe Agency should allow exports tonations that are not Parties to theProtocol but are complying with itsterms to be subtracted fromconsumption.

Under the Protocol, the Agency maygrant additional allowances for exportsto non-Party complying nations if theyhave been identified as such by theProtocol Parties. To date, no non-Partycountries have been identified ascomplying. As countries identified, theAgency will begin granting additionalallowances for exports to thesecountries.

I. Comments on the Impact of the Action

The Agency prepared a RegulatoryImpact Analysis (RIA) for thisregulation. It discusses the costs andbenefits of the action, including benefitsresulting from a decrease in ozonedepletion. The RIA also contains ananalysis of companies' average burdenfor fulfilling the recordkeeping andreporting requirements.

Two commenters wrote that the RIAwas flawed, particularly the sectionslinking ozone depletion to adversehuman health effects. They suggestedthat the RIA be submitted to the ScienceAdvisory Board for review andcomment.

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In 1988, the Agency prepared anextensive risk assessment which servedas the basis for its original regulationsimplementing the provisions of theMontreal Protocol. This documentincluded detailed information about theadverse human health effects associatedwith excess UV-B radiation and ozonedepletion. This information wasreviewed by the Science Advisory Boardand forms much of the basis for thecurrent RIA.

One company also stated that theindustry burden estimated for therecordkeeping and reportingrequirements was too small. The Agencybelieves, however, that although theestimate may be too low or too high forany one company, it accuratelyrepresents the average number of hoursthat would be spent by an affectedindustry entity to fulfill the requirementsof this regulation.

V. Section-by-Section Description

A. Authority Citation

The statutory sections Implementedby the regulations are sections 603, 604,605, 607 and 616 of the Clean Air Act asamended by the Clean Air ActAmendments of 1990 (42 U.S.C. 7671 etseq.).

B. Section 82.1-Purpose and Scope

This section states that the purpose ofthe regulations is to implement theMontreal Protocol and sections 603, 604,605, 607 and 618 of the Clean Air Act.

C. Section 82.2-Effective Date

As proposed. January 1.1992 is theeffective date of these regulations. EPAhas determined that it is necessary tomaintain the January 1, 1992 effectivedate even though that will result in theseregulations having a retroactiveeffective date because that effectivedate is necessary to avoid a period inwhich there are no regulationscontaining production and consumptionrestrictions in force. The temporary finalrule promulgated by EPA was effectiveJanuary 1, 1961 and establishedrequirements only for the 1991 controlperiod, which ended December 31, 1991.Thus, unless the regulationspromulgated with this notice go intoeffect on January 1, 1992, there wouldhave been a period running fromDecember 31, 1991 until their effectivedate during which no regulations wouldhave been effective. This would presenta serious danger of being out ofcompliance with the Montreal Protocol,as no consumption limits would be inplace during that period. Furthermore, itwould mean that the Clean Air Act'sproduction limits for 1992, which are

self-effectuating, would have been inplace without any implementingregulations, a situation that wouldcreate uncertainties with respect toproducers' compliance with theproduction limits. (EPA determined that.it was necessary to promulgate thetemporary final rule concerning the 1991control period with retroactive effect forsimilar reasons. See 56 FR 9518 (March6,1991).)

EPA does not believe that in theweeks between January 1, and today,any company has produced or importedin excess of the limits established bytoday's rule. All affected companieswere notified of the upcomingregulations, were able to review theproposal and in general were madeaware of the production andconsumption restrictions through therequirements of the temporary final rulein 1991. The Agency contacted thesecompanies by mail and sent each one acopy of the temporary final regulations,the subsequent NPRM, and the directfinal amendment to the temporary finalrule, published on December 30, 1991.The changes that have been made hereto the proposal do not include anyrequirements that are more stringentthan those in the proposed rule.Accordingly. the retroactive nature ofthe regulations should not pose aproblem for the regulated community.For the reasons given in the temporaryfinal rule regarding its retroactiveeffective date, including the fact that itis highly unlikely that any companywould have exceeded its allocation ofallowances for the whole year in theshort period since January, EPA doesnot believe that any member of theregulated community will be placed outof compliance with the regulations as aresult of their retroactive effect.

A savings clause has been included inthe regulations so that enforcementaction can continue to be taken forviolations of the requirements of thetemporary final rule.

D. Section 82.3-DefinitionsSeveral definitions are revised to

conform to the definitions set forth insection 601 of the Clean Air Act. Inparticular, the terms "import" and"production" are changed to conform totheir section 601 .counterparts, and"control period" is redefined to includethe calendar-year period specified inthis section. Several other refinementsof definitions are included as well.

"Production" includes spills that mayoccur, as discussed in a previousrulemaking on spills promulgated by theAgency (55 FR 24490).

The proposed regulatory languageconcerning the exemption from the

definition of import for Maquiladoratransactions has been modified toreflect more accurately the nature ofMaquiladora arrangements.Consequently, instead of providing anexemption for imports "from Mexico bycompanies operating under theMaquiladora Accord." the newregulatory language provides anexemption for "[bjringing controlledsubstances into the U.S. from Mexicowhere the controlled substance hadbeen admitted into Mexico in-bond andwas of U.S. origin." The new languagebetter reflects the reality of thearrangement, whichis that controlledsubstances crossing the border from theU.S. into Mexico "inbond" (i.e., under abond insuring that the controlledsubstances will remain in Mexico onlyon a temporary basis) will be returnedto the U.S. For the purposes of thisregulation, therefore, the Agency willnot require those persons importingcontrolled substances from a facility inMexico operating under a Maquiladoraarrangement to expend consumptionallowances nor will the Agency grantallowances for an export to such afacility. The Agency believes thatbecause allowances are expended whensuch controlled substances are initiallyproduced in the United States,compliance with the Montreal Protocolwill not be adversely affected by thisexemption.

Section 801(7) does not define"importer." For the purposes of theseregulations the Agency defines animporter as the person listed as theimporter of record on U.S. CustomsService forms for the import of acontrolled substance into the UnitedStates.

The Amendments also do not define"export" or "exporter." EPA is retainingits current regulatory definitions of theseterms.

EPA is also retaining its definition of"controlled substance." This definition,which is based on its Protocolcounterpart and includes elaborationadopted by the Parties, distinguishesbetween bulk chemicals, which areregulated, and products, which are notregulated under sectiQn 604. "Controlledsubstance" means any substance listedin appendix A to this part, whetherexisting alone or in a mixture, butexcluding any such substance or mixturethat is in a manufactured product otherthan a container used for thetransportation or storage of thesubstance or mixture. Any amount of alisted substance that is not part of a usesystem containing the substance is acontrolled substance. If a listedsubstance or mixture must first be


transferred from a bulk container toanother container, vessel, or piece ofequipment in order to realize itsintended use, the listed substance ormixture is a controlled substance.

All of the above revisions to thedefinitions are being adopted asproposed, with the exception of thedefinition of importer. Severalalterations have been made to theproposed definitions of calculated level,production and transformation forclarification purposes. Since thetransformation allowance system is notbeing adopted, the definition oftransformation allowances has beendropped. Definitions of CUBP andMACT have been added. The CUBPdefinition incorporates the commercialtest and the dependent-variable testdiscussed above, and the MACTdefinitipn includes a requirement for99.99 percent destruction efficiency.

E. Section 82.4-ProhibitionsIn this section, EPA prohibits persons

from producing or importing controlledsubstances in excess of the productionallowances and consumptionallowances they hold, with theexception of the production of carbontetrachloride for feedstock and CUBPcarbon tetrachloride and methylchloroform. In addition, this sectionprohibits persons from producing orimporting more than 150 percent of theirbaseline levels of Group I chemicalsbetween July 1, 1991, and December 31,1992, except to the extent they haveobtained additional allowances byexporting to Parties in general or Article5 countries in particular, bytransforming Group I substances, or byobtaining allowable production fromanother Protocol Party during the sameperiod. This added restriction on GroupI chemicals ensures that the UnitedStates continues to meet its obligationsunder the Montreal Protocol. Companiesare also prohibited from importingcontrolled substances in Groups I and IIfrom non-Party countries.

Exemptions from the production andconsumption restrictions have beenadded here as discussed above. Theseinclude the exemption for the productionof carbon tetrachloride for feedstockthat is transformed by the end of thefirst quarter of the next control periodand the exemption for immediatelycontained and destroyed CUBPproduction of controlled substances inGroups IV and V.

Companies that wish to qualify for theexemption for immediately containedand destroyed CUBP production ofcarbon tetrachloride and methylchloroform must submit the followinginformation to EPA within 45 days after

the beginning of the control period(except in 1992, when the informationshould be submitted 45, days after thepublication of this notice):-The name and address of the plant at

which the CUBP production takesplace, and the name and telephonenumber of a contact person;

-A description of the process of whichthe chemical is a by-product;

-The name of the primary chemicalproduced in the process;

-A description of the destructiontechnology to b.e used, includingdocumentation showing that it has adestruction efficiency of at least 99.99percent;

-An estimate of the annual productionand subsequent destruction of thecontrolled substance;

-Documentation describing thehandling of the material and showingthat all procedures are consistent withregulations under RCRA or otherapplicable rules; and

-A statement of whether the processand destruction method was beingused in 1989 and whether the amountsmanufactured were included as"production" in reports submitted foruse in EPA's baseline calculation.This information is similar to that

appearing in the proposed rule, with theaddition of that relating to the 99.99percent requirement, other regulations,and how the process was treated inbaseline-year reports, In addition, thesecompanies are required to keep on-sitedated records of the quantity of theCUBP carbon tetrachloride and methylchloroform produced at the facility, aswell as dated records of the quantity ofthe CUBP controlled substancedestroyed at the facility or shipped fromthere to an off-site destruction facility.

This section also specifies theequation that the Agency will use tocalculate each company's compliance inthe production of carbon tetrachloridefor feedstock.

F. Sections 82.5 and 82.6-Apportionment of Baseline Productionand Consumption Allowances

In these sections, EPA is promulgatingeach company's baseline production andconsumption allowances for eachchemical within the five groups of classI substances. The Agency is reservingthe apportionment of allowances forclass II substances as proposed.

EPA's method for baseline calculationremains unaltered from the proposal. Asnoted in the NPRM, to establish baselineallowances for the groups of newlyregulated chemicals, EPA obtainedinformation on and documentation ofcompanies' 1989 production, import, and

export of these chemicals through arequest issued under section 114 of the.Act. Because section 601(11) excludesfrom the definition of production theamount of a chemical used and entirelyconsumed (except for trace quantities)in the production of another chemical,the Agency also requested companiesthat had consumed or transformed theregulated chemicals as feedstock in themanufacture of another chemical tosupply information documenting thetransformation. Based on thisinformation, the Agency calculatedcompanies' baseline production andconsumption allowances for the groupsof newly regulated chemicals specifiedby section 602 (i.e., Group Ill-the newlyregulated CFCs; Group IV-carbontetrachloride; and Group V-methylchloroform).

Baseline production allowances werecalculated by excluding from theamount of the newly regulatedchemicals produced in 1989 the amountof those chemicals transformed in thesame year. The Agency attempted totrace every discrete amount of achemical that had been transformed tothe producer of that discrete amount ofchemical and exclude that amount fromthe producer's baseline allowances. Insome cases, however, EPA was unableto track the chemical transformed to itsoriginal producer. To account for theseunassignable amounts of transformedchemicals, EPA applied a correctionfactor to distribute these amountsamong producers of the relevantchemicals based on their respectivemarket shares.

The Agency believes that this is a fairway of allocating transformationamounts to the producers of thesechemicals, with the larger producers.receiving the larger share of thedocumented, but inassignable,transformation amounts. This approachis also consistent with that taken by theAgency in a previous rulemakingapportioning baseline allowances. Inthat rulemaking, EPA decided thatdocumented, but unassignable, exportsof the regulated CFCs and halons shouldbe allocated to producers based on theirrelative market share. As a result, largerproducers had their consumptionallowances decreased more thansmaller producers.

EPA determined each company'sconsumption allowances by performingthe consumption equation for eachcompany based on that company'sdocumented production, imports, andexports. For the chemicals for which theAgency is establishing baselineallowances in this rule, EPA was able, inmost cases, to track all exports back to

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the exported chemicals' producers.However, it was also necessary toallocate unassignable exports toproducers in a manner similar to themethod used to allocate unassignabletransformation amounts to producers.As discussed above, consumptionamounts that were negative for twocompanies were also distributed acrosscompanies receiving consumptionallowances through use of a correctionfactor. In addition, since the Protocol asconstrued by the Parties and EPA's ruledo not count imports transformed in themanufacture of other substances againstapplicable consumption limits, theAgency has not counted baseline-yearimports transformed in the manufactureof other substances in calculatingbaseline consumption allowances. (See55 FR 24491; June 15, 1990.)

In developing chemical-specificallowances for Groups I and IIcontrolled substances for today'srulemaking, the Agency reviewed theoriginal data submitted in compliancewith the section 114 information requestpromulgated in 1987. In today's rule,producers are receiving chemical-specific production allowances based onwhat they had reported as production in1986, excluding any production that wasused and consumed as a feedstock foranother chemical. Producers andimporters of these chemicals arereceiving chemical-specific consumptionallowances based on their reportedproduction, imports, and exports ofthese chemicals. The Agency is furtheradjusting individual consumptionallowances within these two groups totake account of the unattributed exports.Chemical-specific, unattributed exportswere apportioned to each consumptionallowance holder based on thepercentage share of the market thatproducer and/or importer held for thatchemical.

Since allowances are no longerallotted on a group basis, they arepromulgated here in units of unweightedkilograms, instead of by calculatedlevel, as was used in the past. Althoughthe ODP weights of the controlledsubstances are still relevant forallowance transfers, actual productionand consumption limits now applyseparately to each chemical and thusthe concept of calculated level is nolonger necessary for the purpose ofallotting baseline allowances.

Although the baseline calculationmethod has remained unchanged fromthat proposed in the September 30, 1991notice, actual numbers for Groups III, IVand V have changed slightly. Thesedifferences are due to the Agency'sallowing companies to continue to

submit baseline information through thecomment period as well as refining thedefinitions of transformation anddestruction. The changes result inbaselines that more accurately reflectactual production and consumption in1989.

G. Section 82.7-Granting and PhasedReduction of Allowances for Class IControlled Substances

This section allocates percentages ofbaseline allowances for Group I, GroupII, Group III, Group IV, and Group Vcontrolled substances for all controlperiods until the year 2000 and beyondaccording to the schedule presented insection 604. Baseline production andconsumption allowances are chemical-specific. This section is beingpromulgated as proposed.

H. Section 82.8-Grant and PhasedReduction of Allowances for Class IIControlled Substances

This section is reserved in thisrulemaking.

I. Section 82.9-Availability ofAdditional Production Allowances

This section provides that personswith baseline production allowances forany controlled substance be grantedpotential production allowances equalto ten percent of their baselineallowances for that chemical for eachyear from 1992 through 1999, and 15percent for each year from 2000 through2010 (with adjustments for methylchloroformn Potential productionallowances may be converted toproduction allowances with proof ofexport to a developing country that isoperating under Article 5 of the Protocol,as specified under § 82.11. Thisparagraph is-being adopted unchangedfrom the proposal.

A company can also increase ordecrease its production allowances bytrading with another Party to theProtocol under the provisions of section618. The Agency has adopted proposedregulations under § 82.9(b)(2) as final.

For trades to another Party, thesubmission must include the identityand address of the person seekingapproval of the trade, the identity of theParty, the names and telephone numbersof contact persons for the person and forthe Party, and the chemical and level ofproduction being transferred. Thetrading company's production limit willbe reduced according to the formula asproposed, except that if more than onecompany trades production to a Party inthe same control period, the total offsetamount will be recalculated and dividedbetween the companies based on theratio of the amount of their trades. Thus,

the first company to trade will see anincrease in its balance of allowances if asecond company trades within the samecontrol period.

For trades to the United States,similar information is required with theaddition that the transferring Party mustsubmit a document from that nation'sembassy in the United States statingthat it has revised its production limitsaccording to the conditions stated insection 616.

EPA will review trades from and toother Montreal Protocol Parties on a onecontrol period, one time trade basis, aswell as permanent trades betweenParties for the remaining controlperiods.

When a Party to the Protocol tradesproduction for the remaining controlperiods to a company within the UnitedStates, the Agency will modify the U.S.company's production allowances toreflect the additional allowancesreceived in trade. For the remainingcontrol periods, the Agency will reducethat companies allowances by therequired Clean Air Act schedules,adjusting the traded allowances by aratio that accounts for the percentagereduction required by that control periodrelative to the percentage reductionrequired in the control period in whichthe trade was received. This is requiredto ensure that companies reduce theirproduction according to the percentagereductions required under the Clean AirAct, and that total production is phasedout by the turn of the century.

In addition, should a U.S. companytrade all of its production for theremaining control periods to a Party ofthe Protocol. that company's zeroproduction for the remaining years willnot enter into any calculation of the pastthree year average if additional tradesby other companies occur at a laterdate. EPA believes that other companieswhich may eventually trade should notbe disadvantaged by the permanenttrade of all trades of another company.

However, the Agency will include inthe three year average calculation, anyproduction of controlled substances by acompany that had traded on a one timebasis some production rights during thatcontrol period.

Finally, companies may receiveadditional production allowances fortransforming Group 1.I, IIII or Vchemicals. To obtain additionalproduction allowances for thetransformation of these chemicals, aperson must submit a request forproduction allowances that includes theidentity and address of the person; thename and quantity of the controlledsubstance used and entirely consumed

Federal Register I Vol. 57, No. 147 / Thursday, July 30, 1992 / Rules and Regulations

in the manufacture of another chemical;a copy of the invoice or receiptdocumenting the sale from the producerof the chemical to the person; and thename, quantity, and verification of thecommercial use of the resultingchemical. The Agency uses thisinformation to confirm that the chemicalwas indeed transformed, and thatproduction allowances were expendedin the production of the chemical. If thetransformed chemical was imported, thecompany cannot receive additionalproduction allowances, since onlydomestic consumption allowances wereexpended in bringing the chemical intothe country.I. Section 82.10 Availability ofAdditional Consumption Allowances

Companies can receive additionalconsumption allowances for exports toParties. Companies requestingadditional consumption allowancesmust submit the following information:The identities and the addresses of theexporter and the recipient of the export;the Exporter's Identification Number(FIN) listed on the United States CensusExport Declaration form; the names andtelephone numbers of contact personsfor the exporter and the recipient; thequantity and type of controlledsubstance; the source of the controlledsubstance and the date purchased; thedate on which and the port from whichthe controlled substance was exportedfrom the United States or its territories;the country to which the controlledsubstances were exported: the bill oflading and the invoice indicating the netquantity of controlled substance anddate shipped and documenting the saleof the controlled substance to thepurchaser; and the harmonized tariffnumber (or "commodity code") of thegoods exported.

This information will be used by EPAto verify that the export actuallyoccurred and to prepare end-of-yearreports required by the MontrealProtocoL The Agency will review theinformation expeditiously and issue anotice granting additional consumptionallowances to the exporter if all thesubmitted information indicates that theexport actually occurred.

In this rule, the Agency has added aprovision for producing companies thatdo not have baseline consumptionallowances for Group IV that wish toproduce for export. A limited number ofconsumption allowances will be grantedto the producing company up front,equal to the level of their baselineproduction allowances for that year. Atthe'end of the control period, theproducer must have obtained at leastthat same quantity of consumption

allowances and hold them unexpendedin order to be in compliance.

Companies can also receiveadditional consumption allowances forthe transformation of a controlledsubstance (other than carbontetrachloride). Any application foFadditional production allowances for thetransformation of a controlled substancewill be treated as an application foradditional consumption allowances.This section is being adopted asproposed.K. Section 82.11 Exports to Article 5Parties

Companies may obtain authorizationto convert potential productionallowances to production allowances byexporting controlled substances todeveloping countries that are operatingunder Article 5 of the Montreal Protocol.

The proof required by EPA in order togrant authorization to convert potentialproduction allowances for exports toArticle 5 countries is the same as thatrequired for a request for additionalconsumption allowances for exports toParties. However, the exporter must alsoadequately demonstrate that the exporthas not been and will not be re-exportedin bulk form by submitting a copy of acontract specifying that the material,cannot be re-exported and requiringpayment of damages if it is re-exported.

This information will be used by EPAto verify that the export did indeedoccur and to prepare end-of-year reportsrequired by the Montreal Protocol. TheAgency will review the informationexpeditiously and issue a noticegranting authorization to convertpotential production allowances to theexporter if all the submitted informationindicates that the export did indeedoccur and the material will not be re-exported. This section is also beingadopted without alteration from theproposal.

L. Section 82.12 ExchangesCompanies must submit requests for

inter-pollutant and inter-companyallowance trades to EPA that includethe identities and addresses of thetransferor and the transferee; the namesand telephone numbers of contactpersons for the transferor and for thetransferee; the type and amount ofallowances being transferred; theamount of the one-percent offset appliedto the unweighted amount traded thatwill be deducted from the transferor'sallowance balance (except for trades ofpotential production allowances,authorizations to convert, or trades fromtransformers to producers or importersfor the purpose of allowancereimbursement); and the amount of

unexpended allowances orauthorizations for that chemical that thetransferor holds as of the date the claimis submitted to EPA. The Agency usesthis information to verify that sufficientallowances exist for the trade. TheAgency will issue a "No ObjectionNotice" within three working days ifEPA does not object to the trade. If EPAdoes deny the trade, the transferee willhave ten working days to appeal thedecision.

This section has been slightly alteredfrom the proposal. Specifically, languagehas been added stating that the offsetdoes not apply for trades of productionand consumption allowances fromtransformers to producers for purposesof allowance reimbursement. Trades ofpotential production allowances andauthorizations to convert are also notsubject to the offset requirement. Inaddition, language has been addedclarifying that in the case of an inter-pollutant/inter-company trade, theoffset only applies once.M Section 82.13 Recordkeeping andReporting

1. Producers

a. Daily recordkeeping. Producers arerequired to maintain dated records ofthe quantity of the class I controlledsubstances produced at each facility,including the dated records of thequantity of any carbon tetrachlorideproduced for feedstock use, the quantityof controlled substances used asfeedstocks in the manufacture ofcontrolled substances and in themanufacture of non-controlledsubstances, and the quantity of anyvirgin, used or recycled controlledsubstances introduced into theproduction process of new controlledsubstances. They are also required tokeep records of the feedstock materialsconsumed in producing the regulatedchemicals at each facility and recordsdocumenting the sale of carbontetrachloride for feedstock use (invoices,bills of lading, etc.). EPA requiresrecords of feedstocks consumed so thatthe Agency can approximate thequantity of controlled substancesproduced by monitoring the materialsconsumed. Records of shipments ofcontrolled substances from each facilitymust be maintained as well. EPAbelieves that this requirement will aidthe Agency in verifying production.Finally, EPA requires that all spills orreleases of 100 pounds or more berecorded, including the date ofoocurrence and the estimated quantityof the contr6led substance released.

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These amounts should be included inproduction totals for reporting purposes.

EPA believes that current methods ofrecordkeeping will generally besufficient to satisfy the recordkeepingrequirements. EPA is aware that someproducers may not make dailyproduction estimates over weekends,and that production may not bemeasured directly, but may bedetermined from records ofconsumption, shipments, andinventories. For the purpose of verifyingthat these accounting procedures areacceptable, EPA is requiring thatproducers who have not previously doneso submit within 120 days of publicationof this final rule a report detailing howproduction is measured on a regularbasis and how its methods are to beused to determine quarterly productionfigures in kilograms.

b. Production reports. EPA alsorequires that producers report on aquarterly basis, within 45 days after theend of the quarter. The Clean Air Actspecifies that cuntrols be on a calendar-year basis and thus EPA cannot allowcompliance to be determined based on acompany's fiscal period to the extentthat it is different from the specifiedcontrol period. However, if the first andlast quarterly reports are adjusted tocoincide with the beginning and end ofthe control period, the interim quarterlyreports may be based on a fiscalquarter, provided EPA determines that acompany's fiscal quarters follow thecalendar quarters closely enough so asnot to complicate its review of records.

Since one purpose of these reports isto provide EPA with information toverify production, EPA requires thatproducers submit the following,information: summaries of quarterlyproduction of the controlled substances(for carbon tetrachloride separating outproduction and manufacture-for-feedstock), specifying the quantity usedand consumed as feedstock forcontrolled and non-controlledsubstances; summaries of total quarterlyand control period to date productionlevels each class I controlled substance;and the producer's total expended andunexpended consumption allowances,expended and unexpended productionallowances, potential productionallowances, and authorization toconvert potential production allowancesto production allowances, as of the endof the quarter. In addition, firms mustreport the total shipments of eachcontrolled substance from that plant inthe quarter. For companies that producecarbon tetrachloride for feedstock use,the proposal has been altered to add arequired reporting of amounts sold to

each transforming company during thequarter, and the provision of IRScertificates showing that the purchaserintends to transform the material.

2. Importersa. Daily recordkeeping. EPA is

requiring the same import records aswere contained in its previousregulations (56 FR 9518) and in theproposal, with the addition ofrequirements for importers of carbontetrachloride to be used as feedstock.The rule requires that importersmaintain daily records of the following:The quantity of virgin, used, andrecycled controlled substances broughtinto the United States; the date and portof entry into the United States or itsterritories; the country from which theimported controlled substances wereexported; and the port of exit. Inaddition, importers must record thecommodity code and the importernumber for each shipment and keep thefollowing documentation to verifyimports: The bill of lading and theinvoice and United States CustomsEntry Summary Form. This informationwill allow EPA to verify shipmentsagainst United States Census reportsduring compliance checks andinvestigations of potential violations.Retention of the bill of lading and theinvoice is necessary to provide EPAwith an independent check on quantitiesimported, separate from Census andCustoms data.

Companies importing carbontetrachloride for feedstock use mustkeep records documenting the sale ofthe material to transforming companies.

b. Import reports. EPA requires thatimporters, like producers, file quarterlyreports within 45 days of the end of thequarter. Importers may receiveshipments at several ports throughoutthe country and thus may need 45 daysto collect and summarize informationand report accurate quantities. Alsosince several importers are alsoproducers, it is helpful for the reportingperiod for importers to be consistentwith the 45-day reporting period forproducers. Again, EPA cannot allowcompliance to be determined based on acompany's fiscal period to the extentthat it is different from the specifiedcontrol period. However, if the first andlast quarterly reports are adjusted tocoincide with the beginning and end ofthe control period, the interim quarterlyreports may be based on a fiscalquarter, provided EPA determines that acompany's fiscal quarters follow thecalendar quarters closely enough so asnot to complicate record review.

These reports must include thefollowing: The quantity of controlled

substances that are imported in thatquarter, the level of each controlledsubstance imported for the quarter andthe total for the control period, and thetotal quantity of expended andunexpended consumption allowancesthe importer holds at the end of thequarter. The importer must also providea summary of the import activities thatshall include the quantity of each importas recorded on the Entry Summary Formto the United States Customs Service,the date and port of entry into theUnited States or its territories, thecountry from which the importedcontrolled substances were imported,the port of exit, and the name andaddress from whom additionalinformation can be obtained. Inaddition, the commodity code and theimporter number must be provided toassist with comparison and verificationof importer records with United StatesCensus and Customs records. Finally,the Agency requires that importers,when reporting controlled substancescontained in mixtures, state whatpercentage of the mixture consists ofcontrolled substances. Theserequirements have been adopted asproposed.

The Agency, in implementing theprevious rules, determined thatexporters must report the residualamounts (heels) of controlled substancesthat remain in isotanks or canisters orother shipping containers that arereturned to the United States as imports.Companies are entitled to receive, anddo so when they request them,additional allowances for the full weightof their export. Therefore, as a matter ofconsistency the Agency must requirecompanies to report the controlledsubstances that return in the form ofheels as imports. These companies musthave and expend consumptionallowances in the import process. Thus,exporters who intend to return heelsmust possess allowances before theheels are returned and report heelimports quarterly.

Reporting requirements have beenadded for companies that import carbontetrachloride for feedstock use. Thesecompanies must report the amount ofcarbon tetrachloride imported forfeedstock use and the amounts soldduring that quarter to transformingcompanies. IRS certificates for thosecompanies must accompany thequarterly report.

3. Exporters

EPA is requiring the same reportingand recordkeeping requirements forexporters as were contained in itsprevious regulations (56 FR 9518] and


the proposal. Exports for whichadditional consumption allowanceswere not requested or for-which therequest was denied must be reportedwithin 45 days after the end of the year.EPA requires this information to complywith the Montreal Protocol only and,therefore, does not believe that morefrequent reporting is necessary. Sinceconsumption allowances are not beinggranted for these exports, periodicmonitoring and independent verificationis not needed. Consequently, theseexporters need only report at the end ofthe control period.

For these exports EPA requires thatthe following be submitted: Name andaddress of the exporter and recipient ofthe exports, the exporter's EmployerIdentification Number (EIN), the typeand quantity of controlled substancesexported and the percentage that isrecycled or used, and the date and portfrom which the exports were shipped.The commodity code is also requiredbecause it allows EPA to verify theseshipments. A final reporting requirementincludes the date and source from whomthe exported controlled substances werepurchased.

4. Transformers, Companies that use any of the class I

controlled substances in Groups 1, 11,111or V as feedstock and request additionalallowances under I § 82.9 and 82.10 ofEPA's regulations and companies thattransform carbon tetrachloride mustmaintain the following records on site:Dated records of the quantity ofcontrolled substance used and entirelyconsumed in the manufacture of anotherchemical; copies of the invoices orreceipts documenting the sale from theproducer or importer of the controlledsubstance to the person; dated recordsof the names, commercial use, andquantities of the resulting chemicals;and dated records of shipments to thepurchasers of the resulting chemicals.These requirements are being adoptedas proposed.

Recordkeeping requirements havebeen added for carbon tetrachloridetransformers, including dated records ofall shipments received end records ofamounts of carbon tetrachloride ininventory at the beginning of eachquarter.

Companies that transform carbontetrachloride must report their activitiesquarterly, within 45 days after the end ofthe quarter. Such companies mustprovide the amount of carbontetrachloride purchased from eachproducer and transformed during thatquarter. The report should include thename and address of the producing andtransforming company and the name

and telephone number of the contactperson at each company. Also providedshould be the address of the facility atwhich the transformation took place, thename of the chemical produced as aresult of the transformation, and theverification of its commercial use. Thisrequirement is being altered slightlyfrom the proposal to match therequirements under § 82.9 for requestsfor additional allowances for the use ofcontrolled substances as feedstock.

5. Class H Controlled SubstancesFor class II controlled substances,

companies who produced, imported, orexported a. class II substance must filean annual report within 45 days after theend of the calendar year, stating theamount of each substance that suchperson produced, imported, andexported during that year. Each suchreport shall be signed and attested by aresponsible officer of the company. Thisrequirement is being adopted asproposed.

VL Impact of ActionThe Agency has prepared a

Regulatory Impact Analysis thatevaluates the costs and benefits ofphasing out class I chemicals.

The costs and benefits of the phaseoutwere estimated by comparing thepercentage of ozone depletion thatwould occur in the future if the phaseoutwere implemented to various scenarios,including a projected baseline thatwould occur in the absence of anyregulation, the ozone depletion thatwould occur with the original 1987Montreal Protocol limits, and the ozonedepletion that would occur under thelimits outlined in the LondonAmendments to the Montreal Protocoland in the amended Clean Air Act.

The RIA used two projections toestimate ozone depletion. The primarymethod is a parameterization based on aone dimensional model, which has beenused in previous EPA analyses of thestratosphere, and is taken from Connell(1986). This model translates emissionsof the class I and II chemicals intochlorine loadings, and transforms theseloadings into estimates of depletionrelative to ozone concentrations in 1970.This first projection does not take intoaccount any depletion that may haveoccurred prior to 1988.

To account for the observed depletionprior to 1988, the Agency developed asecond projection using an adjustedversion of the one dimensionalparameterized model. In this model, anadjustment factor was applied so thathistorical emission data, when enteredinto the model predicted the observedestimated level of ozone depletion prior

to 1988. For this adjustment, the Agencyassumed that the average ozone trendover the latitudes 30" N-64° N wasrepresentative of the global change incolumn ozone, and that the trend is dueto decreases in stratospheric chlorine.The model was further adjusted toaccount for the seasonal level of UV-Bexpected when ozone depletion occurs.The RIA provides results based on bothmodel projections.

The major health benefits of theseregulations are attributable to avoidedeffects of exposure to ultravioletradiation. The major environmentaleffects are based on studies that founddecreased crop and fish harvestsassociated with increased ultravioletradiation. Decreased stratosphericozone is also expected to lead toincreased tropospheric ozone, which canalso reduce crop yields, and lead torapid deterioration of polymers. Thereare uncertainties related to the linksbetween increased use of the substancesand ozone depletion, as well as betweendecreases in stratospheric ozone andincreases in UV-B radiation and theireffects on human health and theenvironment.

A phaseout significantly reduces therate of depletion of stratospheric ozone.Indeed, the atmospheric models indicatethat ozone concentrations will return tohistoric levels in the middle of the nextcentury under certain scenarios.However, it should be noted that thesemodels have been shown tounderpredict the level of ozonedepletion in the past, and the twoprojections do not account for the mostrecent observation that ozoneconcentrations have decreased by threeto five percent over the last decade inthe northern mid-latitudes.

The health effects due to ozonedepletion are generated from estimateddose-response relationships. Thesedose-response relationships have largeuncertainties related to the type ofpopulation affected, and variability inthe studies providing the data. A secondhuman health benefit of ozone depletingcompound regulation is reducedincidence of cataracts. The estimatedincrease in cataracts is roughly 0.5percent for each percent increase in UV-B.

The quantifiable environmentalbenefits in the United States due to CFC,halon, methyl chloroform, and carbontetrachloride regulation, although smallwhen compared to the value of theavoided cancer benefits, are alsosubstantial. Increases in ultra-violetradiation have been shown to affectcrop yield and crop quality adversely.Again, the Agency emphasizes that

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these benefit estimates are based onlimited data containing manyassumptions. However, they do providean order of magnitude estimate of thelikely benefits to preserving the ozonelayer.

Social costs of reducing CFC, halon,and methyl chloroform use throughregulation were estimated by examiningthe costs of alternative technologies andmaterials for producing CFC, halon, andmethyl chloroform based products.Social costs are the additional amountof resources required to produce anequivalent amount of goods and servicesfor consumers. Regulation also transfersincome from consumers of class I basedproducts to other sectors of society. Theeconomic model calculated the coststhat society would incur to meet theproduction targets of the Clean Air Act,based on available or future controltechnologies. The economic modelgenerally selected those control optionsthat were either already being used byindustry, or were the least costly optionsavailable, thus minimizing the cost tosociety. Once selected, the modeltotalled the social costs and transferpayments needed each year to meet thereduction targets of the Clean Air Act.

The costs of these regulations areexpected to depend on the speed atwhich specific user industries and theeconomy as a whole adopts techniquesto reduce the use of ozone depletingcompounds, and on the potential forthese technologies to achieve thereductions required. Transfer paymentsgenerated by ozone depleting substanceregulation are significant, particularly inthe initial years of regulation. Costestimates are also subject toconsiderable uncertainty because theyare sensitive to technical innovation,and future energy and chemical costs.

To estimate costs and benefitsdistributed over time, the Agencyapplied several discount rates to variousphaseout scenarios. The Agency applieddiscount rates of two, four, and tenpercent to gauge their impact on socialcosts and benefits. The two and fourpercent discount rates representpossible estimates of the "consumptionrate of interest," where two percent hasbeen used and accepted by the Agencyin previous analyses on the impact ofregulations restricting the productionand consumption of ozone-depletingsubstances. The ten percent discountrate represents the "real pre-tax rate ofreturn on private investments" and isrequired by the Office of Managementand Budget's 1972 circular A-94. TheRIA discusses further the choice of thevarious discount rates and thecircumstances under which each could

most appropriately be used. The Agencybelieves that the two and ten percentdiscount rates may currently representthe outerbound estimates of theappropriate rate.

The following table summarizes thenet incremental benefits in billions of1985 dollars (between the LondonAmendments and the Clean Air ActPhaseout Scenarios) of the regulation atthe three different discount rates usingthe two different modelling projections.The London Amendments provide thefollowing net incremental benefits overthe 1997 Montreal Protocol: For theunadjusted model--$226 billion to $887.6billion at a two percent discount rate,$35.8 billion to $145.3 billion at a fourpercent discount rate, and $-0.6 to $2.2billion at ten percent; for the adjustedmodel--$352.7 billion to $1,362 billion attwo percent, $57.3 billion to $222.4billion at four percent, and $0.1 billion to$4.2 billion at ten percent.

Model Discount Nete s incremen-rate (%) tal benefits

Unadjusted ............................ 2 1.0-6.54 (0.2)-1.3

10 (0.3)-(0.2)Adjusted (assuming a 2 1.6-8.5

weighted average ozonedepletion of approxi-mately one percent).

4 0.0-2.110 (0.3)-(0.1)

The Agency is also developing a thirdprojection of ozone depletion thatincludes the most recent ozone depletioncalculations determined by NASA, usingan initial depletion amount of 3.38percent in 1989. The value of benefits topeople born before 2075 exceed thecontrol costs through 2075 using Idiscount rates of two, four, and tenpercent when the most current ozonedepletion measurements are accountedfor. Using the two percent discount rate,the net incremental benefits using there-adjusted model are expected to rangebetween 13.0 and 50.2 billions of 1985dollars, with the results at the fourpercent rate ranging between 3.6 and 4.1billion and the calculation at ten percentshowing net incremental benefits from0.1 to 1.2 billions of 1985 dollars.

VH. Additional Information

A. Executive Order 12291

Executive Order (E.O.) 12291 requirespreparation of a Regulatory ImpactAnalysis for major rules, defined by theorder as those likely to result in:

(1) An annual effect on the economyof $100 million or more;

(2) A major increase in costs or pricesfor consumers, individual industries,

Federal, State or local governmentagencies, or geographic industries; or

(3) Significant adverse effects oncompetition, employment, investment,productivity, innovation, or on theability of United States-based industryto compete with foreign basedenterprises in domestic or exportmarkets.

EPA has determined that theseregulations meet the criteria of a majorrule. The Agency estimates that annualindustry costs will exceed $100 million.A regulatory impact analysis has beenprepared to analyze these costs and hasbeen submitted to the Office ofManagement and Budget for review.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5U.S.C. 601 et seq., requires that federalagencies examine the impacts ofregulations on small entities. Under 5U.S.C. 601(a), whenever an agency isrequired to publish a general notice ofrulemaking, it must prepare and makeavailable a regulatory flexibilityanalysis (RFA).

The Agency originally published anRFA to accompany the August 12, 1988final rule (53 FR 30566) that placed theinitial limits on the production andconsumption of CFCs and halons. TheRFA concluded that of the industriesaffected by regulation of CFCs andhalons only some segments of the foamblowing industry were potentially atrisk. In contrast to almost all the otherusers of these chemicals, CFCs are alarge percentage of the final costs for thefoam industry.

Different sectors of the foam industryare likely to be affected differently.Indeed, the August 12 rule discussedhow several foam sectors were alreadymoving away from CFCs. Foam foodpackagers have shifted out of CFCs toHCFC-22 or other alternatives.Similarly, the industry sector that makesflexible molded foam has moved out ofCFCs with minimal disruption, while theextruded polystyrene board-stockindustry intends to eliminate the use ofCFC-12 in the near future.

In updating this analysis to examinethe other foam sectors, as well as thosesectors using carbon tetrachloride andmethyl chloroform, the Agency did re-examine the effect of increased price onseveral foam segments--polyurethane-sprayed and molded foam and foaminsulation and board-stock. Theinsulating foam industry is investigatingthe use of HCFC-141b or a blend ofHCFC-141b and HCFC-123. To theextent that these substitutes aredetermined to be technically andeconomically viable, the longer term

Federal Register./ Vol. 57, No. 147 / Thursday, July 30, 1992 / Rules and Regulations

impact on these firms will be minimized.The industry is actively pursuing theseoptions and is currently waiting for theresults of toxicity studies required for itsuse of these chemicals.

Based on the analysis contained in theRFA, EPA does not believe that anyfoam industry segment will besubstantially harmed over the long term,and that recent development ofalternative blowing agents for use inthese sectors indicate thecompetitiveness of this industry. Sectorsusing carbon tetrachloride and methylchloroform are unaffected. In theapplications where they are mostcommonly used, the value of the end

product Is not significantly related to theprice of the chemicals, since they areused only in small volumes. Thus thefinal costs of industry will not besignificantly affected by theseregulations.

Under section 605 of the RegulatoryFlexibility Act, 5 U.S.C. 605, 1 certify thatthe regulation promulgated in thisdocument will not have a significantimpact on a substantial number of smallentities.

C. Paperwork Reduction Act

As required by § 35.04 of thePaperwork Reduction Act, 44 U.D.C.3501 et seq., EPA submitted an

information collection request to theOffice of Management and Budget forreview. The recordkeeping and reportingrequirements contained in thisrulemaking were approved by the Officeof Management and Budget undercontrol number 2060-0170.

Industry reporting burden for thiscollection is estimated in the followingtable. It includes the time needed tocomply with EPA's reporting andcompliance monitoring requirements aswell as that used for the completion ofvoluntary reports and requests underthis rule.

Respondent burden per occurrenceRespondent activities Producer requency im e Frequency Eo Frequency Transformer

Frequency hours ous F o reouencyehour hours

Co nduct transfer transactions .......................................... 1 8 1 8 4 8 0 0Obtain additional allowances through exports ............... 0 0 0 0 4 21 0 0Convert potential allowances through exports ............... 0 0 0 0 1 42 0 0Convert potential allowances by receiving allowances

from Party countries ....................................................... 1 82 0 0 0 0 0 0Receive additional allowances for transforming ............ 0 0 0 0 0 12 42Comply with reporting and compliance monitoring

requirements ................................................................... 4 88 4 60 4 60 4 32

Send comments regarding this burdenestimate or any other aspect of thiscollection of information, includingsuggestions for reducing the burden, toChief, Information Policy Branch, PM-223y, U.S. Environmental-ProtectionAgency, 401 M St., SW., Washington, DC20460; and to Paperwork ReductionProject, Office of Information andRegulatory Affairs, Office ofManagement and Budget, Washington,DC 20503.List of Subjects In 40 CFR Part 82

Administrative practice andprocedure, Air pollution, Chemicals,Chlorofluorocarbons, Clean Air ActAmendments of 1990, Exports, Imports,Recordkeeping and reportingrequirements, Stratospheric ozone layer.

Dated: July 17,1992.William K. Reilly,Administrator.

Title 40, Code of Federal Regulations,part 8Z is amended as follows:

PART 82-PROTECTION OFSTRATOSPHERIC OZONE

1. The authority citation for part 82continues to read as follows:

Authority: 42 U.S.C. 7414, 7601, 7671-7671q.

2. Sections 82.14 and 82.20 areremoved. Sections 82.1 through 82.13 aredesignated as subpart A and revised.Appendices A through C and E to part

82 are redesignated as appendices Athrough C and E to subpart A andrevised, and appendix D to part 82which is currently reserved isredesignated as appendix D to subpartA and reserved. The revised text is setforth below.

Subpart A-Production and ConsumptionControls

Sec.82.1 Purpose and scope.82.2 Effective date.82.3 Definitions.82.4 Prohibitions.82.5 Apportionment of baseline production

allowances.82.6 Apportionment of baseline

consumption allowances.82.7 Grant and phased reduction of baseline

production and consumption allowancesfor class I controlled substances.

82.8 Grant and freeze of baseline productionand consumption allowances for class I1controlled substances. [Reserved]

82.9 Availability of production allowancesin addition to baseline productionallowances.

82.10 Availability of consumptionallow/ances in addition to baselineconsumption allowances.

82.11 Exports to Article 5 Parties.82.12 Transfers.82.13 Record-keeping and reporting

requirements.

Sec.Appendix A to subpart A-Class I ControlledSubstances

Appendix B to subpart A-Class II ControlledSubstances

Appendix C to subpart A-Parties to theMontreal Protocol

Appendix D to subpart A-NationsComplying with, but not Party to, the ProtocolIReserved]

Appendix E to subpart A-Article 5 PartiesSubpart A-Production and

Consumption Controls

§ 82.1 Purpose and scope.

(a) The purpose of these regulations isto implement the Montreal Protocol onSubstances that Deplete the OzoneLayer and sections 603, 604, 605, 607 and616 of the Clean Air Act as amended bythe Clean Air Act Amendments of 1990,Public Law 101-549. The Protocol andsection 604 impose limits on theproduction and consumption (defined asproduction plus imports minus exports)of certain ozone depleting chemicals,according to specified schedules. TheProtocol also requires each nation thatbecomes a Party to the agreement toimpose certain restrictions on trade inozone depleting substances with non-Parties.

(b) This rule applies to any individual,corporate, or governmental entity that

33787


produces, transforms, imports, orexports controlled substances.

§ 82.2 Effective date.(a) The regulations under this subpart

take effect January 1, 1992.(b) The regulations under this part

that were effective prior to January 1,1992 are saved for purposes of enforcingthe provisions that were applicable priorto January 1, 1992.

§ 82.3 Definltons.As used in this subpart, the term:(a) Administrator means the

Administrator of the EnvironmentalProtection Agency or his authorizedrepresentative.

(b) Baseline consumption allowancesmeans the consumption allowancesapportioned under 1 82.6 of this subpart.

(c) Baseline production allowancesmeans the production allowancesapportioned under § 82.5 of this subpart.

(d) Calculated level means theweighted amount of a controlledsubstance determined by multiplying theamount (in kilograms) of the controlledsubstance by that substance's ozonedepletion weight listed in appendix A orappendix B to this subpart.

(e) Class I refers to the controlledsubstances listed in appendix A to thissubpart.

(f) Class II refers to the controlledsubstances listed in appendix B to thissubpart.

(g) Consumption allowances meansthe privileges granted by this subpart toproduce and import class I controlledsubstances; however, consumptionallowances may be used to produceclass I controlled substances only inconjunction with production allowances.A person's consumption allowances arethe total of the allowances he obtainsunder § 82.7 of this subpart (baselineallowances for class I controlledsubstances) and § 82.10 of this subpart(additional consumption allowances), asmay be modified under § 82.12 of thissubpart (transfer of allowances).

(h) Control period means the periodfrom January 1, 1992 through December31, 1992. and each twelve-month periodfrom January I through December 31,thereafter.

(i) Controlled substance means anysubstance listed in appendix A orappendix B to this subpart, whetherexisting alone or in a mixture, butexcluding any such substance or mixturethat is in a manufactured product otherthan a container used for thetransportation or storage of thesubstance or mixture. Any amount of alisted substance which is not part of ause syatem containing the substance is acontrolled substance. If a listed

substance or mixture must first betransferred from a bulk container toanother container, vessel, or piece ofequipment in order to realize itsintended use, the listed substance ormixture is a controlled substance.Controlled substances are divided intotwo classes, class I and class II. Class Isubstances are further divided into fivegroups, Group I. Group II, Group III,Group IV and Group V, as set forth inappendix A to this subpart.

(j) CUBP means a coincidentalunavoidable byproduct of amanufacturing process that isimmediately contained and destroyedby the producer using MACT. Asubstance is CUBP if-

(1) The quantity of the substancegenerated by the manufacturing processcannot be varied independently of theintended product, varies proportionatelywith the production of the intendedproduct, and ceases when the intendedproduct's production is stopped; and

(2) It is not manufactured forcommercial purposes, including for saleor .use in place of substances thatotherwise would be purchased.

(k) Export means the transport ofvirgin, used, or recycled controlledsubstances from inside the United Statesor its territories to persons outside theUnited States or its territories, excludingUnited States military bases and shipsfor on-board use.

1) Exporter means the person whocontracts to sell controlled substancesfor export or transfers controlledsubstances to his affiliate in anothercountry.

(in) Facility means any processequipment (e.g., reactor, distillationcolumn) used to convert raw materialsor feedstock chemicals into controlledsubstances or consume controlledsubstances in the production of otherchemicals.

(n) Import means to land on, bringinto, or introduce into, or attempt to landon, bring into, or introduce into anyplace subject to the jurisdiction of theUnited States whether or not suchlanding, bringing, or introductionconstitutes an importation within themeaning of the customs laws of theUnited States, with the followingexemptions:. (1) Off-loading used or excess

controlled substances from a ship duringservicing and

(2) Bringing controlled substances intothe U.S. from Mexico where thecontrolled substance had been admittedinto Mexico in bond and was of U.S.origin.

(o) Importer means the importer ofrecord listed on U.S. Customs Service

forms for imported controlledsubstances.

(p) MACT means, with respect to the'destruction of CUBP, maximumavailable'control technology having adestruction efficiency of no less than99.99%.

(q) Montreal Protocol means theMontreal Protocol on Substances thatDeplete the Ozone Layer, a protocol tothe Vienna Convention for theProtection of the Ozone Layer, includingadjustments adopted by the Partiesthereto and amendments that haveentered into force.

(r) Nations complying with, but notjoining, the Protocol means any nationlisted in appendix D to this subpart.(s) Party means any nation that is a

Party to the Montreal Protocol and listedin appendix C to this subpart.

(t) Person means any individual orlegal entity, including an individual,corporation, partnership, association,State, municipality, political subdivisionof a State, Indian tribe; any agency,department, or instrumentality of theUnited States; and any officer, agent, oremployee thereof.

(u) Plant means one or more facilitiesat the same location owned by or undercommon control of the same person.

(v) Potential production allowancesmeans the production allowancesobtained under § 82.9(a) of this subpart.

(w) Production means themanufacture of a substance from anyraw material or feedstock chemical, butdoes not include:

(1) The manufacture of a substancethat is used and entirely consumed(except for trace quantities) in themanufacture of other chemicals or

(2) The reuse or recycling of asubstance.

Production includes spilled or ventedcontrolled substances equal to or inexcess of one hundred pounds per event.

(x) Production allowances means theprivileges granted by this subpart toproduce controlled substances;however, production allowances may beused to produce controlled substancesonly in conjunction with consumptionallowances. A person's productionallowances are the total of theallowances he obtains under § 82.7 ofthis subpart (baseline allowances forclass I controlled substances) and§ 82.9(a), (b), and (c) of this subpart(additional production allowances) asmay be modified under 1 82.12 of thissubpart (transfer of allowances).

(y) Transform means to use andentirely consume (except for tracequantities) a controlled substance in themanufacture of other chemicals forcommercial purposes.


(z) Unexpended consumptionallowances means consumptionallowances that have not been used. Atacy time in any control period aperson's unexpended consumptionaflowances are the total of the level ofconsumption allowances he hasauthorization under this subpart to holdat that time for that control period,mi.nus the level of controlled substancesthat the person has produced orimported in that control period until thatti e.

(aa) Unexpended productionallowances means productionallowances that have not been used. Ataty time in any control period aperson's unexpended productionallowances are the total of the level ofproduction allowances he hasauthorization under this subpart to holdat that time for that control period,a.ius the level of controlled substancestJvat the person has produced in thatcontrol period until that time.

1932.4 Prohib~tions.(a) No person may produce, at any

time in any control period, any class IcOatrolled substance (except for

(t) Group IV controlled substancesthat are transformed by the end of thefirst quarter of the following controlperiod, as determined in accordance"ith paragraph (f of this section. or

(2) Group IV and V controlledsubstances for which the person hasobtained an exemption in accordancewith paragraph (e) of this section) inexcess of the amount of unexpendedproduction allowances for thatsubstance held by that person under theauthority of this subpart at that time forftat control period. In no event may anyperson produce in the period from July 1,1891 through December 31, 1992 a totalcalculated level of Group I controlledsubstances in excess of 150 percent ofthat person's baseline productionallowances for Group I substances plusany additional production allowancesCor Group I controlled substances thatthe person obtained under § § 82.9 and82.12 of this subpart during this sameperiod. Every kilogram of excessproduction constitutes a separateviolItion of this regulation.

(b) No person may produce or import,-at any time in any control period, anyctass I controlled substance (except for

(11 Group IV controlled substancesthat are transformed by the end of thefirst quarter of the following controlperiod as determined in accordancewith paragraph (f) of this section, or

(2) Group IV and Group V controlledsubstances for which the person hasobtained an exemption in accordanceoith paragraph (e) of this section) in

excess of the amount of unexpendedconsumption allowances held by thatperson under the authority of thissubpart at that time for that controlperiod. In no event may any personproduce or import in the period fromJuly 1. 1991 through December 31, 1992 acalculated level of Group I controlledsubstances in excess of 150 percent ofthat person's baseline consumptionallowances plus any consumptionallowances for Group I controlledsubstances that the person obtainedunder J § 82.10 and 82.12 of this subpartduring this same period. Every kilogramof excess production or importationconstitutes a separate violation of thisregulation.

(c) A person may not use productionallowances to produce a quantity ofclass I controlled substances (with theexceptions set forth in paragraph (a) ofthis section) unless he or she holdsunder the authority of this subpart at thesame time consumption allowancessufficient to cover that quantity of classI controlled substances nor may aperson use consumption allowances toproduce a quantity of class I controlledsubstances (with the same exceptionsnoted above) unless the person holdsunder authority of this subpart at thesame time production allowancessufficient to cover that quantity of classI controlled substances. However, onlyconsumption allowances are required toimport class I controlled substances(except for Group IV controlledsubstances that are transformed by theend of the first quarter of the controlperiod following that in which thesubstance was imported).

(d) No person may Import anyquantity of Group I or Group IIcontrolled substances from any nationnot listed in Appendix C to this subpart(Parties to the Montreal Protocol) unlessthat nation is listed in appendix D tothis subpart (Nations Complying with.But Not Party to, the Protocol). Everykilogram of controlled substancesimported in contravention of thisregulation constitutes a separateviolation of this regulation.

(e) Any person may obtain, inaccordance with the provisions of thisparagraph, an exemption from theprohibitions set forth in paragraphs (a)and (b) of this section for CUBP GroupIV and Group V controlled substances.

(1) A person must submit within 45days after the beginning of each controlperiod (or by September 14, 1992, for the1992 control period) during which theperson will produce CUBP Group IV andGroup V a petition that includes thefollowing:

(i) The identity and address of theperson;

(it) The name and telephone numberof a contact person;

(iii) A description of the process ofwhich the class I controlled substance isa by-product and the name of the CUBPproduced;

(iv) The name of the primary chemicalproduced in the process;

(v) A description of the destructiontechnology to be used, includingdocumentation showing that it has adestruction efficiency of at least 99.99percent;

(vi) An estimate of the annual amountof production and subsequentdestruction of the CUBP controlledsubstance;

(vii) A description of the handling ofthe material and a showing that allprocedures are consistent withregulations under RCRA or otherapplicable rules; and

(viii) A statement of whether theprocess and destruction methods werebeing used in the baseline year andwhether the amounts manufacturedwere included as "production" inreports submitted for use in thecalculation of baseline allowances.

(2) The Administrator will review theinformation and documentationsubmitted under paragraph (e)(1) ofthissection and will issue the person anotice granting the exemption for thatamount or portion of Group IV or GroupV substance that the Administratordetermines is CUBP, provided therequest satisfactorily demonstrates thatthe person's destruction technology isMACT and that the CUBP is handled ina manner consistent withotherapplicable law and regulations.

(3) If the Administrator determinesthat the request does not establish thatthe substances are CUBP or that thedestruction technology is MACT and theCUBP is not handled in a mannerconsistent with other applicable law andregulations, the Administrator will issuea note disallowing the request for theexemption.

(4) The Administrator will adjust theperson's baseline allowances ifnecessary based on the informationsubmitted under paragraph (e)(1) of thissection.

(f0 Upon receipt of each person's firstquarterly-report as required under§ 82.13 of this subpart, the Administratorwill calculate the following quantitiesfor each person that produced Group IVcontrolled substances for feedstock inthe previous control period:

(1) The amount of the person'sproduction transformed in the previouscontrol period;

(2) The amount of the person'sproduction transformed in the first

33789


quarter of the previous control periodattributable to the person's productionin the control period previous to that;

(3) The amount of the person'sproduction transformed in the firstquarter of the current control period;and

(4) The amount that the personproduced for transformation in theprevious year.

If the Administrator finds that thequantity calculated in paragraph (f)(4) ofthis section is greater than the sum ofthe quantities calculated in paragraphs(f)(1) and (f)(3) of this section minus thequantity calculated in paragraph (f)(2) ofthis section, each kilogram by which thequantity calculated in paragraph (f)(4) ofthis section is greater, constitutes aseparate violation.

§ 82.5 Apportionment of baseflneproduction allowances.

Persons who produced controlledsubstances in Group I or Group II in1986 are apportioned baselineproduction allowances as set forth inparagraphs (a) and (b) of this section.Persons who produced controlledsubstances in Group III, IV, or V In 1989are apportioned baseline productionallowances as set forth in paragraphs(c), (d), and (e) of this section. Personswho produced class H controlledsubstances are apportioned baselineproduction allowances as set forth inparagraph (0 of this section.

(a) For Group I controlled substances:

Controlled Allowancessubstance (kg)

CFC- .. Alied-Signa. l . ........ 23,082,358FL DuPont do 33,830,000

Nemours & Co.Elf Atochem, N.A 21,821,500Laroche Chemicals .. 12,856.364

CFC-12 Al led-Signal, Inc. 35,699,776El. DuPont do 64,849,000

Nemours & Co.Elf Atochem, N.A.__ 31,089,807Laroche Chemicals... 15,330,909

CFC-1 13.-- Allied-Signak I ......... 21,788,896-E.I. DuPont do 58,553,000

Nemours & Co.CFC-114 . Allied-Signal. Inc .......... 1,488,569

E.L DuPont do 4.194,000Nemours & Co.

CFC-115 . FL Dupont de 4,176,000Nemours & Co.

(b) For Group II controlled substances:

Controlled person JAtwancessubtance k0

Great Lakesoemical Cop

ICI Americas c....Inc_E.I. DuPont de

Nemours & Co.Great Lakes

Chmia Corp.

826,487

2,135,4843,220,000

1,766,850

Controlled Person Allowancessubstance (kg)

Halon-2402 .............

(c) For Group 1Il controlledsubstances:


CFC-13 ....... Aed-Signal, I ........... 127,125E.L DuPont do 187,831Nemours & Co.

Elf Atochem, NA 3,992Great Lakes 56,381

Chemical Corp.Laroche Chemicals ...... 29,025

CFC-111 ............................. .......CFC-112 ... .........CFC-211. E.I Dupont de 11

Nemours & Co.CFC-212..... E.L Dupont do 11

Nemours & Co.CFC-213..... E.L Dupont de 11

Nemours & Co.CFC-214 .... E.I. DuPont de 11

Nemours & Co.CFC-215...... E.L DuPont do 611

Nemours & Co.Halocarbon Products 1,270

Corp.CFC-216 . E.L DuPont de 170,574

Nemours & Co.CFC-217 . E.I. Dupont de 511

Nemours & Co.

(d) For Group IV controlledsubstances:

Controlled Peron Allowancessubstance (kg)

CCI........... Akzo Chemicas. Inc 7,873,615Degussa Corporation_. 26,540Dow Chemical 18,987,747

Company, USA.E-l. DuPont do 9,099

Nemours & CO.Hanfln Chemicals- 219,616

WV. Inc.ICI Americas lnc....W . 853,714Occidental Chemical 1,059,358

CopVulcan Chemicals .... 21,931,987

(e) For Group V controlled substances:


Methyl Dow Chemical 168,030,117Chioro- Company. USA.form.

E.I. DuPont do 2Nemours & Co.

PPG Industrie Inc.... 57,450.710Vulcan Chemicals _I 89,689,064

(f) For class H controlled substances(Reserved)

§ 82.6 Apportionmwt of baseneconsumption allowances.

Persons who produced, imported, orproduced and imported controlled

substances in Group I or Group 1H in1986 are apportioned chemical-specificbaseline consumption allowances as setforth in paragraphs (a) and (b) of thissection. Persons who produced,imported, or produced and importedcontrolled substances in Group M,Group IV, or Group V in 1989 areapportioned chemical-specific baselineconsumption allowances as set forth inparagraphs (c), (d) and (e) of thissection. Persons who produced,imported, or produced and importedclass II chemicals are apportionedchemical-specific baseline consumptionallowances set forth in paragraph (f) ofthis section.

(a) For Group I controlled substances:

Controlled Person Allowaesubstance I(k)

CFC-1 1.

CFC-12.

CFC-1113.

CFC-114.

CFC-115.

E. DuPont doNemours & Co.

Elf Atochem, NA.Hoechst Celanese

coporNon.C Americas, Inc.......

Kall.ChermeCorporatio.

Laroche ChemicalsNational Refrigerants.

Inc.Refricentro, Inc...........Sumitomo

Corporation ofAmerica.

AMed-SIg , Inc.........E.I. Dupont do

Nemos & Co.Elf Achem NA...Hoect Colanese

Corporato,SAmericas. nc......

Kall-Chemle

Laroche ChemicalsNational Refterant

Inc.Refticentro, nc ........Al~led-Signal. .,El.. Dupont do

Neroos & Co.Elf Atochem, NA_Holchem......._...

SAmercas Inc ........

SumitomoCorporation ofAmerica.

A led-SO ,........E.l. Dupont do

Nemours & Co.Elf Atochem, NA .Ia Americas, Inc_E.I. DuPont doNemour & Co.

Elf Aochem, NA....Hoechst C41ana

IC Americas Ic....Laroche Cheicals.Refricentro, Inc ............

22,683,83332,054,283

21,740,1941&5,M9

1.673,43682500

12,695,726693,707

160,07S5,800

35,236,39761,096,726

32403,869138.865

1.264.980365,440

15.281A632,375,e4

242."218241,02840,6o2,866

244,908265.199

2,399,70037.36

280;163

1,429,5823,68%.103

22,8032930

2,764,109

633,0078,93

2,366361135,52027,337

(b) For Group H controlled substances:

Halon-1211...

Halon-1301...

Federal Regisies / Vol. 57. No. 147 /Thursday, July 30, 1992 / Rules and Regulatiow

Controfed lowancessubsPerson (kg)

Halon-1211....... EM Atochem N.A ...... 411.292Great Lakes 772.775

Chemical Corp.ICI Americas, Inc 2,116,641

Wali-Chemie 330,000Corporation.

Halon-l1 ..... E.. DuPont de 2.772,917Nemours & Co.

Olf Atochem. N.A .... 89.255Great Lakes 1,744,132

Chemical Corp..Kafi-Chemie 54,380

Corporation.Halon-2402e...... Ausimot ............... 34,400

Great Lake. 15,900Chemical orp.

(c) For Group 111 controlledsubstances-

Conlrolfed Pero [ Allowancessubstance PIr kg

CFC-..13.

CFC-1 11 ..........CFC-112 ....

CFC-21 .....

CFC-212 ............

Mie-Sign, In-_ ...ELL DuPont de

Nemours & Co.Elf Atochem, N.AGreat Lakes .

Chemical Corp.ICI Ameican, Inc ......Laroche Chemicals...National

Re*igerants, Inc.

SumitomoCorporation ofAmerica.

TG (USA)Co-tf

EIL. DuPont deNemours & Co,

E.I. DuPont deNemours & Co.

127,124158,508

3,99256,239

5.85529,02516,665

5,912

9,253

11

11

Controlled Atlwencessubstance Person Ike)

CFC-212 ............ E.I. DuPont de 1Nemours & Co.

CFC-214 ............ E.I. DuPont de 1Nemours & Co.

CFC-215 ........ E. DuPont do 511Nemeurs & Co.

Halocarbon 1.270Products Corp.

CFC-216 ............ E.I. DuPont de 170,574Nemours & Co.

CFC-217 ........... E. DupO* do 511Nemours & Co.

(d) For Group IV controlledsubstances:

Controlled Allowancessubstance Person (kg)

CC, .................. Crescent Chemical 56Co.

Degusee 12,466

Dow Chemical 8,170,561Company, USA.

El. DuPont de 26,537Nemours & Co.

Elf Atochem NA..... 41Hanin Cheotials- 103.133

WV, IncHoechst Celanese 3Corporation.

ICC Chemical Corp_ 1,173,723C Ameicas, ft ........ 865.466

Occidental Chemical 497.478Corp.

Sumitomo 9Corporation ofAmercA.

(e) For Group V controlled substances:

Controlled Allowancessubstance Person

Methyt 3W Chemial Corp 3,529Chforolon

Actax, Inc ............. 5,171Alochorn Norh 74,355

America.Dow Chemical 125,200,200

Com USA.E.L DuPot di 2

Nemours & Co.IBM ............................ 2,026ICI Americas, Inc 14,179,850Laidlaw ...................... 420,207PPG lndustrie.. ..... 45254,115Su"0oo ............. 954

TG (USA 7,073Corporation.

Untor Ships 14,746Service, Inc.

Vulcan Ch _b._ M0.76072

(f) For class U controlled subs tances:(Reserved)

§ 82.7 Grant and phased reduction ofbaseline production and consumptionallowances for class I controlledsubstances.

For each control period specified inthe following table, each person isgranted the specified percentage of thebaseline production and consumptionallowances apportioned to him under§ § 82.5 and 82.6 of this subpart

Other classDe*... P Group V Ip

11) %) subelances

1992 ................................................................................................................................................................................ ......................... 90 '100 " S01993 ............. .... .......................................................................................................... ...... ....... ... ................................ so go 75

.. . . . ..... ........... . . ..... ..... .. ............ ~ 70 as 6619 .... ..... . . . . 1. .041997............................... ................................. .......... ........... .. 5 so0s199.... ................. ........ ...... ........................................................... .............................. 1 ..................... 5 15 s 401997 ... ......... .. ... .... ................................ .......................... ....................................................... ...................................... 15 so 40

199 ..................................................................................................... ............................ ... 15 50 151998 ...... .. .. ........ ........................... ........ ................................................. .. .... .............. .. . ............................ ...... is5 50 15

2000 ..................................................... .... ... . . ...................................... 0 20 02001 .............. .................................................................................................................... .................... .............. ............ 0 20 02002 ........ eac year................ ............................................................................ ................................................................................ 0 2001 .n.ec. .a-hrefer.........-........................... - 20 0

2002 and ech year-tereafter.............................

§ 82.8 Grant and freeze of baseline .production and consumption alowancesfor class It controiled substances.[Reserved]

§ I" Availabilty ot productlinallowance IM additibo to boe#improduction aowances.

(a) Every person apportioned baselineproduction allowaaces for class Icontrolled substances under 1 82.5(s) ofthis subpart is also granted potentialproduction allowances equal to:

(1) 10 percent of his apportionmentunder § 82.5 of this subpart for eachcontrol period ending before January 1,2000; and

(2) 15 percent of his apportionmentunder § 82.5 of this subpart for eachcontrol period beginning after December31, 199 and ending before January 1,2011 (January 1, 2013 in the case ofmethyl chktofrm}.

A person may convert potentialproduction allowances, either granted

under this paragraph or obtained under§ 82.12 (transfer of allowaaces,) toproduction allowances only to theextent authorized by the Administat4under J 82.11 of tIis subpart (Exports toArticle 5 Parties). A person may obtainauthorizations to covest potentialproduction allowances to productionallowances by requesting issuance of anotice unMer § 8211 of this subpart ortycompleting a transfer of authorizationsunder § 82.12 of this sblpartL

33791


(b) A company may also increase ordecrease its production allowances bytrading with another Party to theProtocol. A nation listed in appendix Cto this subpart (Parties to the MontrealProtocol) must agree either to transfer tothe person some amount of productionthat the nation is permitted under theMontreal Protocol or to receive from theperson some amount of production thatthe person is permitted under thissubpart.

(1) For trades from a Party, the personmust obtain from the principaldiplomatic representative in thatnation's embassy in the United States asigned document stating that theappropriate authority within that nationhas established or revised productionlimits for the nation to equal the lesserof the maximum production that thenation is allowed under the Protocolminus the amount transferred, themaximum production that is allowedunder the nation's applicable domesticlaw minus the amount transferred, orthe average of the nation's actualnational production level for the threeyears prior to the transfer minus theproduction allowances transferred. Theperson must submit to the Administratora transfer request that includes a truecopy of this document and that setsforth the following:


(ii) The identity of the Party;(iii) The names and telephone

numbers of contact persons for theperson and for the Party;

(iv) The chemical type and level ofproduction being transferred; and

(v) The control period(s) to which thetransfer applies.

(2) For trades to a Party, a personmust submit a transfer request that setsforth the following:


(ii) The identity of the Party;(iii) The names and telephone

numbers of contact persons for theperson and for the Party;

(iv) The chemical type and level ofallowable production to be transferred;and

(v) The control period(s) to which thetransfer applies.

(3) After receiving a transfer requestthat meets the requirements ofparagraph (b)(2) of this section, theAdministrator may. at his discretion,consider the following factors indeciding whether to approve such atransfer:

(i} Possible creation of economichardship;

(ii) Possible effects on trade;

(iii) Potential environmentalimplications; and

(iv) The total amount of unexpendedproduction allowances held by UnitedStates entities.

(4) The Administrator will issue theperson a notice either granting ordeducting production allowances andspecifying the control periods to whichthe transfer applies, provided that therequest meets the requirement ofparagraph (b)(1) ofthis section fortrades from Parties and paragraphs(b)(2) of this section for trades toParties, unless the Administrator hasdecided to disapprove the trade underparagraph (b)[3) of this section fortrades to Parties. For a trade from aParty, the Administrator will issue anotice that revises the productionallowances held by the person to equalthe unexpended production allowancesheld by the person under this subpartplus the level of allowable productiontransferred from the Party. For a trade toa Party, the Administrator will issue anotice that revises the production limitfor the person to equal the lesser of:

(i) The unexpended productionallowances held by-the person underthis subpart minus the amounttransferred; or

(ii) The unexpended productionallowances held by the person underthis subpart minus the amount by whichthe United States average annualproduction of the controlled substancebeing traded for the three years prior tothe transfer is less than the totalallowable production allowable for thatsubstance under this subpart minus theamount transferred.

The change in production allowanceswill be effective on the date that thenotice is issued.

(5) If after one person obtainsapproval for a trade of allowableproduction of a controlled substance toa Party, one or more other personsobtain approval for trades involving thesame controlled substance and the samecontrol period, the Administrator willissue notices revising the productionlimits for each of the other personstrading that controlled substance in thatcontrol period to equal the lesser of:

(i) The unexpended productionallowances held by the person underthis subpart minus the amounttransferred; or

(ii) The unexpended productionallowances held by the person underthis subpart minus (the amount bywhich the United States average annualproduction of the controlled substancebeing traded for the three years prior tothe transfer is less than the totalallowable production for that substanceunder this subpart] multiplied by the

amount transferred divided by (the totalamount transferred by all the otherpersons trading the same controlledsubstance in the same control period)minus the amount transferred by thatperson.The Administrator will also issue anotice revising the production limit foreach person who previously obtainedapproval of a trade of that substance inthat control period to equal theunexpended production allowances heldby the person under this subpart plusthe amount by which the United Statesaverage annual production of thecontrolled substance being traded forthe three years prior to the transfer isless than the total allowable productionunder this subpart multiplied by theamount transferred by that persondivided by (the amount transferred byall of the persons that have traded thatcontrolled substance in that controlperiod]. The change in productionallowances will be effective on the datethat the notice is issued.

(c) A person who does not produce acontrolled substance in Group I, II, III orV may obtain production allowances forthat controlled substance equal to theamount of that controlled substanceproduced in the United States that theperson transforms in accordance withthe provisions of this paragraph. Arequest for production allowances underthis section will be considered a requestfor consumption allowances under§ 82.10(b) of this subpart.

(1) A person must submit a request forproduction allowances that includes thefollowing:


(ii) The name, quantity, and level ofclass I controlled substancetransformed;

(iii) A copy of the invoice or receiptdocumenting the sale of the class Icontrolled substance to the person;

(iv) The name of the person fromwhom the class I controlled substanceswere purchased; and

(v ) The name, quantity, andverification of the commercial use of theresulting chemical.

(2) The Administrator will review theinformation and documentationsubmitted under paragraph (c)(1) of thissection and will assess the quantity ofclass I controlled substance that thedocumentation and information verifieswas transformed. The Administratorwill issue the person productionallowances equivalent to the controlledsubstances that the Administratordetermined were transformed. The grantof allowances will be effective on thedate that the notice is issued.

Federal Register / Vol. 57, No. 147 / Thursday, July 30, 1992 I Rules and Regulatiows

(3) If the Adrainistrator determinesthat the request for proctionallowances does not satisfactorilysubstantiate that the person transformedcontrolled subetarices as claimed, theAdministrator will issue a noticedisallowing the request for additionalproduction allowances. Within tenworking days after receipt ofnotification. the Party may file a noticeof appeal, with supporting reasons, withthe Adninistratoc. The Administratormay affirm the disallowance or grant anallowance as he finds approspriate inlight of the available evidence.

§ 82.10 Avattabity ot consumptionallowances In add Won to baselineconsumption allowances.

(a) Any person may obtain, inaccordance with the provisions of thisparagraph. consumption allowancesequivalent to the level of class Icontrolled substances that the personhas exported from the United States andits territories to any nation listed inAppendix C to this subpart (Parties tothe Montreal Protocol). Theconsumption allowance granted underthis section will be valid only during thecontrol period in which the exportsdeparted the United States or itsterritories.

(1) The exporter of the class Icontrolled substances must submit tothe Administrator a request forconsumption allowances setting forththe foflowing-

(i) The identities and addresses of theexporter and the recipient of theexports;

(ii) The exporter's EmployerIdentification Number

(iii) The names and telephonenumbers of contact persons for theexporter and the recipient

(iv) The quantity and type ofcontrolled substances exported, andwhat percentage, if any, of thecontrolled substances are recycled orused;

(v) The source ot the controlledsubstance and the date purchased;

(vi) The date on which and the portfrom which the controlled substanceswere exported from the United States orits territories;

(vii) The county to which thecontrolled substances were exported;

(viii) The bill of lading and the invoiceindicating the net quantity of controlledsubstances shipped and documetingthe sale of the controlled substances tothe purdmaser and

(ix) The comwdity code of thecontrolled sulsetace exported.

(2) The Adminittrator will review theinformation and doumetatiosubmitted uder paragraph (a)(1) of this

section. and will assess the quantity ofcontrolled substances that thedocumentation verifies was exported.The Administrator will issue theexporter consumption allowancesequivalent to the level of controlledsubstances that the Administratordetermined was exported. The grant ofthe consumption allowances will beeffective on the date the notice is issued.

(b) A person who does not produce aclass I controlled substance in Group I.II, III or V may obtain consumptionallowances for that controlled substanceequal to the level of a controlledsubstance either produced in orimported into the United States that theperson transformed in accordance withthe provisions of this paragraph.

(1) A person must submit a request forconsumption allowances that includesthe following:

(i) The kdetity and address of theperson;

(ii) The name and quantity ofcontrolled substance used and entirelyconsumed in the manufacture of anotherchemical;

(iii) A copy of the invoice or receiptdocumenting the sale of the controlledsubstance to the person; and

(iv) The name, quantity, andverification of the couunercWa use of theresulting chemical.

(2) The Administrator will review theinformation and documentationsubmitted umer paragraph (b)l) of thissection and will assess the quantity ofcontrolled substance that thedocumentation and information verifieswas transformed. The Administratorwill issue to the person consumptionallowances equivalent to the level ofcontrolled substances that theAdministrator determined wastransformed. The grant of allowanceswill be effective on the date that thenotice is issued.

(3) If the Administrator determinesthat the request for consumptionallowances does not satisfactorilysubstantiate that the person transformedcontrolled substances as claimed, theAdministrator will issue a noticedisallowing the request for additiosalconsumption alowances. Within tenworking days after receipt of,notification, the Party may file a noticeof appeal, with supporting reasons, withthe Director, Office of Atmospheric andIndoor Air Progra"s Office of Air andRadiation. The Director may affirm orvacate the disallowance. If no appeal istaken by the tenth day after notification.the disallowance wil be final n thatday.(c) On the first day of each control

period the Ageny will gantconsumption alowances to any person

that produced and exported a Group IVcontrolled substance in the baselinayear and that was not granted baseineconsumption allowances ruder I eZ5 ofthis subpart.

(1) The nwmber of consumptionallowances any mch person will begranted for each control period will beequal to the number of productionallowances granted to that person under§ 82.7 for that control period.

(2) Any person granted allowancesunder thfis paragraph must hold thesame number of unexpendedconsumption allowances for the controlperiod for which the allowances weregranted by Februy 15 of the followingcontrol period. Every kilogram by whichthe person's unexpended consumptionallowances fall short of the amount theperson was granted under thisparagraph constitutes a separateviolation.

§82.11 Exp to ,Artice5 hatis.In accordance with te provisions of

this section, any person may obtainauthorizatios to convert potetialproduction allowances to productionallowances by exporting cias Icontroled substances to natos listedin appendix E to this subpert (Article 5Parties). Authorizations obtained underthis section will be valid only daring thecontrol period in which the controlledsubstance departed the United States orits territories. A request forauthorizations under this section will beconsidered a request for consumptionallowances under § 82.10 of this subpartas well.

(a) The exporter must submit to theAdministrator a request for authority toconvert potential production allowanceto production aUowance a.That requestmust set forth the following

(1) The identities and addresses of theexporter and the recipient of theexports,

(1) The exporter's EmployeeIdentification Number;

(3) The names and telephoe numbersof contact persons for the exporter andfor the recipient;

(4) The quantity and the type ofcontrolled substances exported, itssource and date purchased, and whatpercentage, if any, of the controlledsubstances are recycled or used;,

(5) The date on which and the portfrom which the controlled substanceswere exported from the United States orits territories;

(6) The country to which thecontrolled substances were expoted

(7) A copy of the bill of ladia andinvoice indicating t" net quatity

l33


shipped and documenting the sale of thecontrolled substances to the recipient;

(8) The commodity code of thecontrolled substance exported; and

(9) A copy of the contract covering thesale of the controlled substances to therecipient that contains provisionsforbidding the reexport of the controlledsubstance in bulk form and subjectingthe recipient or any transferee of therecipient to liquidated damages equal tothe resale price of the controlledsubstances if they are reexported inbulk form.

(b) The Administrator will review theinformation and documentationsubmitted under paragraph (a) of thissection, and assess the quantity ofcontrolled substances that thedocumentation verifies were exported toan Article 5 Party. Based on thatassessment, the Administrator will issuethe exporter a notice authorizing theconversion of a specified quantity ofpotential production allowances toproduction allowances in a specifiedcontrol year, and granting consumptionallowances in the same amount for thesame control year. The authorizationsmay be used to convert potentialproduction allowances to productionallowances as soon as the date onwhich the notice is issued.

§ 82.12 Transfers.(a) Inter-company transfers. Any

person ("transferor") may transfer toany other person ("transferee") anyamount of the transferor's consumptionallowances, production allowances,potential production allowances, orauthorizations to convert potentialproduction allowances to productionallowances, as follows:

(1) The transferor must submit to theAdministrator a transfer claim settingforth the following:

(i) The identities and addresses of thetransferor and the transferee;

(ii) The name and telephone numbersof contact persons for the transferor andthe transferee;

(iii) The type of allowances orauthorizations being transferred,including the names of the controlledsubstances for which allowances are tobe transferred;

(iv) The group of controlledsubstances to which the allowances orauthorizations being transferredpertains;

(v) The amount of allowances orauthorizations being transferred;

(vi) The control period(s) for whichthe allowances or authorizations arebeing transferred;

(vii) The amount of unexpendedallowances or authorizations of the typeand for the control period.being

transferred that the transferor holdsunder authority of this subpart as of thedate the claim is submitted to EPA; and

(viii) A statement of whether the tradeis for the purpose of reimbursing aproducer or importer for allowancesexpended in the production or import oftransformed controlled substances; and

(ix) The amount of the one-percentoffset applied to the unweighted amounttraded that will be deducted from thetransferor's allowance balance (exceptfor trades of potential productionallowances, authorizations to convert, ortrades from transformers to producers orimporters for the purpose of allowancereimbursement).

(2) The Administrator will determinewhether the records maintained by EPA,taking into account any previoustransfers and any production, imports orexports of controlled substancesreported by the transferor, indicate thatthe transferor possesses, as of the datethe transfer claim is processed,unexpended allowances orauthorizations sufficient to cover thetransfer claim (i.e., the amount to betransferred plus, in the case oftransferors of production orconsumption allowances, one percentof that amount). Within three workingdays of receiving a complete transferclaim, the Administrator will take actionto notify the transferor and transferee asfollows:

(i) If EPA's records show that thetransferor has sufficient unexpendedallowances or authorizations to coverthe transfer claim or if review ofavailable information is insufficient tomake a determination, theAdministrator will issue a noticeindicating that EPA does not object tothe transfer and will reduce thetransferor's balance of unexpendedallowances or authorizations by theamount to be transferred plus, in thecase of transfers of production orconsumption allowances, one percent ofthat amount. When EPA issues a noobjection notice, the transferor and thetransferee may proceed with thetransfer. However, if EPA ultimatelyfinds that the transferor did not havesufficient unexpended allowances orauthorizations to cover the claim, thetransferor and transferee will be heldliable for any violations of theregulations of this subpart that occur asa result of, or in conjunction with, theimproper transfer.

(ii) If EPA's records show that thetransferor has insufficient unexpendedallowances or authorizations to coverthe transfer claim, or that the transferorhas failed to respond to one or moreAgency requests to supply informationneeded to make a determination, the

Administrator will issue a noticedisallowing the transfer. Within 10working days after receipt ofnotification, either party may file anotice of appeal, with supportingreasons, with the Administrator. TheAdministrator may affirm or vacate thedisallowance. If no appeal is taken bythe tenth working day after notification,the disallowance shall be final on thatday.

(3) In the event that the Administratordoes not respond to a transfer claimwithin the three working days specifiedin paragraph (b)(2) of this section, thetransferor and transferee may proceedwith the transfer. EPA will reduce thetransferor's balance of unexpendedallowances or authorizations by theamount to be transferred plus, in thecase of transfers of production orconsumption allowances, one percent ofthat amount. However, if EPA ultimatelyfinds that the transferor did not havesufficient unexpended allowances orauthorizations to cover the claim, thetransferor and transferee will be heldliable for any violations of theregulations of this subpart that occur asa result of, or in conjunction with, theimproper transfer.

(b) Inter-pollutant conversions. Anyperson ("convertor") may convertconsumption allowances, productionallowances, potential productionallowances, or authorizations to convertpotential production allowances toproduction allowances for one class icontrolled substance to the same type ofallowance for another class I controlledsubstance within the group of controlledsubstances as the first as follows:

(1) The convertor must submit to theAdministrator a conversion claimsetting forth the following:

(i) The identity and address of theconvertor;

(ii) The name and telephone numberof a contact person for the convertor;

(iii) The type of allowances orauthorizations being converted,including the names of the controlledsubstances for-which allowances are tobe converted;

(iv) The group of controlledsubstances to which the allowances orauthorizations being converted pertains;

(v) The amount and type ofallowances to be converted;

(vi) The amount of allowances to besubtracted from the convertor'sunexpended allowances for the firstcontrolled substance, to be equal to 101percent of the amount of allowancesconverted (except for conversions ofauthorizations to convert potentialproduction allowances and conversionsof potential production allowances):


(vii) The amount of allowances orauthorizations to be added to theconvertor's unexpended allowances orauthorizations for the second controlledsubstance, to be equal to the amount ofallowances for the first controlledsubstance being converted multiplied bythe quotient of the ozone depletionfactor of the first controlled substancedivided by the ozone depletion factor ofthe second controlled substance, aslisted in appendix A to this subpart.

(viii) The control period(s) for whichthe allowances or authorizations arebeing converted; and

(ix) The amount of unexpendedallowances or authorizations of the typeand for the control period beingconverted that the convertor holdsunder authority of this subpart as of thedate the claim is submitted to EPA.

(2) The Administrator will determinewhether the records maintained by EPA,taking into account any previousconversions, any transfers, and anyproduction, imports, or exports ofcontrolled substances reported by theconvertor, indicate that the convertorpossesses, as of the date the conversionclaim is processed, unexpendedallowances or authorizations sufficientto cover the conversion claim (i.e., theamount to be converted plus, in the caseof conversions of production orconsumption allowances, one percent ofthat amount). Within three working daysof receiving a complete conversionclaim, the Administrator will take actionto notify the convertor as follows:

(i) If EPA's records show that theconvertor has sufficient unexpendedallowances or authorizations to coverthe conversion claim or if review ofavailable information is insufficient tomake a determination, theAdministrator will issue a noticeindicating that EPA does not object tothe conversion and will reduce theconvertor's balance of unexpendedallowances or authorizations by theamount to be converted plus, in the caseof conversions of production orconsumption allowances, one percent ofthat amount. When EPA Issues a noobjection notice, the convertor mayproceed with the conversion. However,if EPA ultimately finds that theconvertor did not have sufficientunexpended allowances orauthorizations to cover the claim, theconvertor will be held liable for anyviolations of the regulations of thissubpart that occur as a result of, or inconjunction with, the improperconversion.

(ii) If EPA's records show that theconvertor has insufficient unexpendedallowances or authorizations to coverthe conversion claim, or that the

convertor has failed to respond to one ormore Agency requests to supplyinformation needed to make adetermination, the Administrator willissue a notice disallowing theconversion. Within 10 working daysafter receipt of notification, theconvertor may file a notice of appeal,with supporting reasons, with theAdministrator. The Administrator mayaffirm or vacate the disallowance. If noappeal is taken by the tenth workingday after notification, the disallowanceshall be final on that day.

(3) In the event that the Administratordoes not respond to a conversion claimwithin the three working days specifiedin paragraph (b)(2) of this section, theconvertor may proceed with theconversion. EPA will reduce theconvertor's balance of unexpendedallowances by the amount to beconverted plus, in the case ofconversions of production orconsumption allowances, one percent ofthat amount. However, if EPA ultimatelyfinds that the convertor did not havesufficient unexpended allowances orauthorizations to cover the claims, theconvertor will be held liable for anyviolations of the regulations of thissubpart that occur as a result of, or inconjunction with, the improperconversion.

(c) Inter-company transfers and Inter-pollutant conversions. If a personrequests an inter-company transfer andan inter-pollutant conversionsimultaneously, the amount subtractedfrom the convertor-transferor'sunexpended allowances for the firstcontrolled substance will be equal to 101percent of the amount of allowancesconverted and transferred in the case oftransfer-conversions of production orconsumption a!towances.

§ 82.13 Record-keeping and reportingrequirements.

(a) Unless otherwise specified, therecord-keeping and reportingrequirements set forth in this sectiontake effect on January 1, 1992.

(b) Reports and records required bythis section may be used for purposes ofcompliance determinations. Theserequirements are not intended as alimitation on the use of other evidenceadmissible under the Federal Rules ofEvidence.

(c) Unless otherwise specified, reportsrequired by this section must be mailedto the Administrator within 45 days ofthe end of the applicable reportingperiod.

(d) Records and copies of reportsrequired by this section must beretained for three years.

(e) In reports required by this section,quantities of controlled substances mustbe stated in terms of kilograms.

(f) Every person ("producer") who willproduce class I controlled substancesduring a control period must complywith the following record-keeping andreporting requirements:

(1) Within 120 days of July 30, 1992, orwithin 120 days of the date the producerfirst produces a class I controlledsubstance, whichever is later, everyproducer that has not already done somust submit to the Administrator areport describing:

(i) The method by which the producerin practice measures daily quantities ofclass I controlled substances produced:

(ii) Conversion factors by which thedaily records as currently maintainedcan be converted into kilograms ofcontrolled substances produced,including any constants or assumptionsused in making those calculations (e.g..tank specifications, ambienttemperature or pressure, density of thecontrolleff substance);

(iii) Internal accounting procedures fordetermining plant-wide production;

(iv) The quantity of any fugitive lossesaccounted for in the production figures;and

(v) The estimated percent efficiency ofthe production process for the controlledsubstance.Within 60 days of any change in themeasurement procedures or theinformation specified in the abovereport, the producer must submit areport specifying the revised data orprocedures to the Administrator.

(2) Every person that produced class Icontrolled substances as by-productsand did not destroy them with MACT in1989 but did not report this production inresponse to previous informationrequest must supply EPA with theinformation previously requested on orbefore September 14, 1992.

(3) Every producer must maintain thefollowing:

(i) Dated records of the quantity ofeach of the class I controlled substancesproduced at each facility;

(ii) Dated records of the quantity ofGroup IV class I controlled substancesproduced for feedstock use at eachfacility;

(iii) Dated records of the quantity ofclass I controlled substances used asfeedstocks in the manufacture ofcontrolled substances and in themanufacture of non-controlledsubstances and any class I controlledsubstance introduced into the.production process of the samecontrolled substance at each facility;

33795


(iv) Dated records identifying thequantity of each chemical not acontrolled substance produced withineach facility also producing one or moreclass I controlled substances;

(v) Dated records of the quantity ofraw materials and feedstock chemicalsused at each facility for the productionof controlled substances;

(vi) Dated records of the shipments ofclass I controlled substances producedat each plant;

(vii) The quantity of class I controlledsubstances, the date received, andnames and addresses of the source ofrecyclable or recoverable materialscontaining class I controlled substanceswhich are recovered at each plant;

(viii) Records of the date, the class Icontrolled substance, and the estimatedquantity of any spill or release of a classI controlled substance that equals orexceeds 100 pounds; and

(ix) Dated records documenting thesale of Group IV controlled substancesfor feedstock.

(4) For each quarter, each prooucermust provide the Administrator with areport containing the followinginformation:

(i) The production by plant in thatquarter of each class I controlledsubstance, specifying the quantity ofany class I controlled substance used forfeedstock purposes for controlled andnoncontrolled substances for each plantand totaled by class I controlledsubstance for all plants owned by theproducer,

(ii) The amount-of production forfeedstock of Group IV controlledsubstances, by plant;

(iii) The levels of production(expended allowances) for all class Icontrolled substances for each plant andtotaled for all plants for that quarter andtotaled for the control period to date;

(iv) From each plant, the totalshipments of each class I controlledsubstance produced at that plant in thequarter;

(v) The producer's total of expendedand unexpended consumptionallowances, potential productionallowances, production allowances, andauthorizations to convert potentialproduction allowances to productionallowances, as of the end of thatquarter,

(vi) The quantity, the date received,and names and addresses of the sourceof recyclable or recoverable materialscontaining the class I controlledsubstance which are recovered at eachplant;

(vii) The amount of Group IVcontrolled substances sold to eachperson for feedstock during the quarterand

(viii) Internal Revenue ServiceCertificates showing that the purchaserof Group IV controlled substances forfeedstock use intends to transform theGroup IV controlled substances.

(5) For any person who fails tomaintain the records required by thisparagraph, or to submit the reportrequired by this paragraph, theAdministrator may assume that theperson has produced at full capacityduring the period for which recordswere not kept, for purposes ofdetermining whether the person hasviolated the prohibitions at § 82.4 of thissubpart.

(g) Importers of class I controlledsubstances during a control period mustcomply with the following record-keeping and reporting requirements:

(1) Any importer must maintain thefollowing records:

(i) The quantity of each class Icontrolled substance imported, eitheralone or in mixtures, including thepercentage of the mixture whichconsists of class I controlled substances;

(ii) The date on which the controlledsubstances were imported;

(iii) The port of entry through whichthe controlled substances passed;

(iv) The country from which theimported controlled substances wereimported;

(v) The port of exit;(vi) The commodity code for the

controlled substances shipped;(vii) The importer number for the

shipment;(viii) A copy of the bill of lading for

the import;(ix) The invoice for the import;(x) The U.S. Customs Entry Summary

Form; and(xi) Dated records documenting the

sale of Group IV controlled substancesfor feedstock.. (2) For each quarter, every importer

must submit to the Administrator areport containing the followinginformation:

(i) Summaries of the records requiredin paragraphs (g)(1) (i) through (vii) ofthis section for the previous quarter;

(ii) The total quantity imported inkilograms of each class I controlledsubstance for that quarter;

(iii) The levels of import (expendedconsumption allowances) of class Icontrolled substances for that quarterand totaled by chemical for the control-period-to-date; and

(iv) The importer's total sum ofexpended and unexpended consumptionallowances. by chemical as of the end ofthat quarter,

(v) The amount of Group IV controlledsubstances imported for feedstockduring the quarter,

(vi) The amount of Group IVcontrolled substances sold to eachperson for feedstock during the quarter,and

(vii) Internal Revenue ServiceCertificates showing that the purchaserof Group IV controlled substances forfeedstock use intends to transform theGroup IV controlled substances.

(h) For any exports of class Icontrolled substances not reportedunder § 82.10 of this subpart (additionalconsumption allowances) or § 82.11 ofthis subpart (Exports to Parties), theexporter who exported the class Icontrolled substances must submit tothe Administrator the followinginformation within 45 days after the endof the control period in which theunreported exports left the UnitedStates:

(1) The names and addresses of theexporter and the recipient of theexports;

(2) The exporter's EmployeeIdentification Number;

(3) The type and quantity of class Icontrolled substances exported andwhat percentage, if any, of thecontrolled substances are recycled orused;

(4) The date on which and the portfrom which the controlled substanceswere exported from the United States orits territories;

(5) The country to which thecontrolled substances were exported;and

(6) The commodity code of thecontrolled substance shipped.

(i) Every person who has requestedadditional production allowances under§ 82.9(c) of this subpart or consumptionallowances under § 82.10(c) of thissubpart or who transforms Group IVcontrolled substances not produced byhim or her must maintain the following:

(1) Dated records of the quantity andlevel of controlled substance used andentirely consumed in the manufacture ofanother chemical;

(2) Copies of the invoices or receiptsdocumenting the sale of the controlledsubstance to the person;

(3) Dated records of the names,commercial use, and quantities of theresulting chemical(s);

(4) Dated records of shipments topurchasers of the resulting chemical(s);

(5) For transformers of Group IVcontrolled substances, dated records ofall shipments of Group IV controlledsubstances received and the identity ofthe producer or importer of the Group IVcontrolled substances; and

(6) For transformers of Group IVcontrolled substances, dated recordsinventories of Group IV controlled


substances at each plant on the first dayof each quarter.

(j) For every quarter, within 45 daysafter the end of the quarter, everyperson who transforms Group IVchemicals not produced by him or hermust report the following:

(1) The name and address of theperson and the name and telephonenumber of a contact person;

(2) The names and addresses of thepersons that produced or imported theGroup IV controlled substances that heor she has purchased and transformedand the name and telephone number ofa contact person;

(3) The address of the facility at whichthe transformation took place:

(4) The name of the chemicalproduced as a result of thetransformation and the verification of itscommercial use: and

(5) By source in paragraph (j)(2) of thisBection, the amounts of Group IVcontrolled substances transformed bythe person.

(k) For every control period, everyperson receiving an exemption for CUBPcontrolled substances in Groups IV andV must maintain the followinginformation on site:

(1) Dated records of the quantity ofthe CUBP carbon tetrachloride andmethyl chloroform produced at thefacility; and

(2) Dated records of the quantity ofthe CUBP controlled substancedestroyed at the facility or shipped fromthere to an off-site destruction facility.

(l) Every person who produces.imports, or exports class II chemicalsmust report its annual level ofproduction, imports, and exports ofthese chemicals within 45 days of theend of each control period.Appendix A to Subpart A-Class I ControlledSubstances

OzoneControlled substance deple-

tionweight

A. Group ICFC1-Tichlorofluoromethane (CFC- 1) ... 1.0CC1F-Oichlorodifluoromethane (CFC-12).. 1.0CCI.F-OCIF.-Trichlorotfluoroethane

(GFC-11 13) .................................................... 0.8CF.Cl-Cclf,-Dichlorotetrafluoroethane

(CFC- 114) .................................................... 1.0ClF2-CF-(Mono) chloropentafluoroeth-

ane (CFG -115) ............................................ 0.6Al isomers of the above chemicals

e. Group IICFBrC-Bromochlorodifluoromethane

(halon 1211) ............................ ......... 3.0CFBr-Bromotfluoromethane (haon

1301) .................. 10.0C2FBr-Oibromotetrafluoroethane (halon

OAAOI An

Controlled substance

Ozonedeple-

tionweight

All isomers of the above chemicals

C. Group IIICF3CI--Chlorotrifluoromethane (CFC-13) .... 1.0O-FCI ( FC-111) ............................................ 1.0C2F,C 4 --(CFC-1 12) .................... 1.0CFCI,--(CFC-211) ........................................... '1.0C3FCI--(CFC-212) ................... 1.0CSF3Cl5-(CFC-213) ........................................ 1.0C3FCI4-(CFC-214) ................... 1.0C3 sCP, -(CFC-215) ......... ......... 1.0CFCl-(CFC-216) ......................................... 1.0G3F,Cl-(CFC-217) ........................................... 1.0All isomers of the above chemicals

D. Group IVCCI,-Carbon Tetrachloride ............. . 1.1

E. Group VC2 H30 3-1,1.1-Tdchloroethane (Methyl

chloroform ) ................................................... . .1All isomers of the above chemical, except

for 1,1.2-trichloroethane.

Appendix B to Subpart A--Class I1Controlled Substances

CHFC6-Dichlorofluoromethane(HCFC-21) ........................................... .... )

CHFCI-Chlorodifluoromethane(HCFC- -22) ..................................................... 0.05

CH2FCI-Chlorofluoromethane(HC FC-31) ...................................................... (1)

C2HFC,-(HC FC-121) ................................................... (1)

C2HFC13(HCFC-122) ................................................... (1)

C2HF3CI2-(HCFC-123) .................................................... 0.02

C2HFC1-(HCFC-124) .............................. .... 0.02

C2HFC13-(HCFC-131) ................................................... (')

C2HFC12-(HCFC-132b) ........... . ...... (')

C2H2FCI-(HCFC-133a) .......... 0 ...................... ()

C2H1FC 2-(HCFC-141b) ............... ................ 0.12

C2H3FCI-(HCFC-142b) ..................................... 0.......... 0.0

CsHFClg-

(HCFC-221) ................................................... (1)C3HFCI6-

(HCFC-222) ................................................... (')C3HFC 4-

(HCFC-223) .............. . ... ('C3HFC-

(HCFC -224) ................................................... (,)C3HFCI,-

(HGFC-225ca) ..................... .. : ......... '(HCFC-225cb) ................................................ (1)

C3HFCI-(HCFC-226) .................................................. (']

C H2FCI4-

(HCFC-231) ...........................CI-2FCI,-

(HCFC-232) ....................................................CSH 2PCI-

(HCFC-233) .................................................... ('C3 H2FC -

(HCFC-234) .................................................... (C,2FsC-

(HCFC-235) ........................ (]CHFCI,-

(HCFC,-241) ................................................... (']CH 3 F2(33-

(HCFC-242) ........................... (1}

C3H3FsCI6-(HCFC-243) ......................................... (')

C3H3F4CI-(HCFC-244) ...................................... ()

C3H4FC,-(HCFC -251) .................................................. (1)

C3HFCI2 -(HCFC-252) ....................... ('

C3H F3CI-(HCFC-253) .................................................... (')

C3HsFC6 -(HCFC-261) ............................

CaH, 2CI-(HCFC-262) ....................... ('1

C31"oFCI-

(HCFC-271) .................................................. (1)All isomers of the above chemicals .................. (1)

Reserved.

Appendix C to Subpart A-Parties to theMontreal Protocol

Parties to the Montreal Protocol:Argentina, Australia, Austria, Bahrain.Bangladesh, Belgium, Botswana (3/3/92), Brazil, Bulgaria, Burkina Faso,Byelorussian Soviet Socialist Republic,Cameroon, Canada, Chile, China, CostaRica, Cyprus (8/26/92), Czechoslovakia.Denmark, Ecuador, Egypt, EuropeanEconomic Community, Fiji, Finland.France, Gambia, Germany, Ghana,Greece, Guatemala, Guinea (9/23/92).Hungary, Iceland, India (9/17/92),Indonesia (9/24/92), Iran, Ireland, Israel(9/28/92), Italy, Japan, Jordan, Kenya,Libyan Arab Jamahiriya, Liechtenstein.Luxembourg, Malawi, Malaysia,Maldives, Malta, Mexico, Netherlands,New Zealand, Nigeria, Norway,Panama, Philippines, Poland, Portugal.Republic of Korea (5/27/92), RussianFederation, Singapore, South Africa,Spain, Sri Lanka, Sweden, Switzerland,Syrian Arab Republic, Thailand, Togo,.Trinidad and Tobago, Tunisia, Turkey.,Uganda, Ukrainian Soviet SocialistRepublic, United Arab Emirates, UnitedKingdom, United States of America.Uruguay, Venezuela, Yugoslavia.Zambia.

Appendix D to Subpart A-:-NationsComplying With, But Not Parties to, theProtocol [reserved]

Appendix E to Subpart A-Article 5Parties

Argentina, Bangladesh, Botswana (3/3/92), Brazil, Burkina Faso, Cameroon,Chile, China, Costa Rica, Cyprus (8/26/92), Ecuador, Egypt, Fiji, Gambia,Ghana, Guatemala, Guinea (9/23/92).India (9/23/92), Indonesia (9/24/92).Iran,, Jordan, Kenya, Libyan ArabJamahiriya, Malawi, Malaysia,Maldives, Mexico, Nigeria, Panama,Philippines, Republic of Korea (5/27/92),Sri Lanka, Syrian Arab Republic,Thailand, Togo, Trinidad and Tobago.

33797

33798 Federal Register / Vol. 57, No. 147 / Thursday, July 30, 1992 1 Rules and Regulations

Tunisia, Turkey, Uganda, Uruguay,Venezuela, Yugoslavia, Zambia.[FR Doc. 92-17661 Filed 7-29-92 8:45 am]BILUNG COO 6S60-U

(,1 2 1/,1( - us epa€¦ · ozone depletion is its "ozone depletion potential." b....

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