On December 20, 2024, a D.C. Circuit Court of Appeals ruled that the Confidential Business Information (CBI) Rule “is unlawful insofar as it requires entities reporting by non-confidential accession numbers and without knowledge of the underlying chemical identity to assert CBI claims for the underlying chemical identity in order to maintain the chemical identity’s confidentiality.”

 

In the case, Environmental Defense Fund (EDF) v. EPA, the EDF challenged key aspects of new regulations under the Toxic Substances Control Act (TSCA).  EDF’s brief asked the court to consider:

• The new regulations’ narrow definitions of key terms in the law, which invites companies to withhold information relevant to evaluating chemicals’ potential risks.
• The fact that the regulations limit public access to a chemical’s identity (which describes the structure and composition of the chemical) whenever a company claims that identity as confidential in the health and safety documents it submits with its application to make or import a new chemical in the U.S.
• The fact that TSCA is clear on the agency’s obligations to deny improper confidentiality claims and disclose non-protected information.  The new regulations replace mandatory language with discretionary provisions.

“More transparency around the chemicals we’re exposed to is essential to protect our health,” said Samantha Liskow, lead counsel for Healthy Communities at EDF, in the EDF press release.  “That is why EDF has long advocated to maximize public access to information about chemicals.  Congress wanted the public to play an important role in the evaluation and regulation of toxic chemicals.  To do so, robust information about chemical risks must be accessible.  We encourage EPA to carry out its responsibility under the law to ensure the public's right to know about toxic chemicals is protected.”

TSCA background

In 1976, Congress enacted the TSCA to prevent unreasonable risks of injury to health and the environment from the manufacture, processing, distribution in commerce, use and disposal of chemical substances and mixtures.  The 2016 amendments authorize the EPA to require reporting, record-keeping, and testing, and to impose restrictions relating to chemical substances and mixtures.

The rules require anyone who intends to manufacture a new chemical substance to submit a notice of intent (NOI) to the EPA at least 90 days before manufacturing begins.  New chemical substances are defined as those that are not already listed on the TSCA Chemical Substance Inventory.  To protect confidential information, the EPA maintains the Inventory by dividing it into two sections:

• non-confidential chemical substances identified in part by their specific chemical identities
• public identifiers, such as accession numbers, for chemical substances whose identities are claimed as confidential.  An accession number is a random six-digit non-confidential number by which the chemical substance can later be referenced.  The confidential portion of the Inventory, which is not available to the public, includes the specific chemical identities of chemical substances claimed as confidential.

Current ruling

Although the justices ruled that the current amendments to the regulation allow the unlawful disclosure of trade secrets, they rejected an EDF challenge that claimed the rule is too narrow and withholds information about chemicals that the public has a right to know.

"We are very disappointed that the court today upheld regulations that allow industry to withhold information about dangerous chemicals in our communities," Samantha Liskow, a lawyer with the EDF, said in a statement, as reported by Reuters.

The American Chemistry Council joined the EDF suit as an intervenor, claiming the rule does not account for downstream chemical manufacturers, including importers.

“For example, in the case of an American company manufacturing a confidential chemical substance that is then sold to a foreign manufacturer, which processes the substance for a third company, which in turn imports it into the United States, the foreign firm and importer may not know the underlying ‘secret ingredient’ of the chemical, the industry groups' lawyers said,” Reuters reports.  “Yet under the EPA's rule, if the importer did not assert a claim for it to be protected as confidential information, the EPA would be able to make information about the chemical substance public, the industry groups argued.

“Senior U.S. Circuit Judge Harry Edwards, writing for the court, said that under the EPA's rule, a company's lack of knowledge about the composition of a chemical was not a defense to the EPA's confidentially requirements.

"This regulatory scheme cannot be squared with the commands of the statute," Edwards wrote, as reported by Reuters.

Entities reporting under TSCA that fail to assert and substantiate a CBI claim for a specific chemical identity due to its lack of knowledge of that identity is not a statutory ground for disclosure, states the Court’s ruling.

“Indeed, it is not clear how a downstream customer who lacks knowledge can verify that the specific chemical identity is not readily discoverable through reverse engineering, as required for CBI claim assertion,” the ruling states.  “The CBI Rule, as applied to these entities, allows for the inadvertent waiver of confidentiality to occur, thereby jeopardizing the confidentiality protections established by upstream entities.”

Additionally, downstream companies are not likely to be concerned with protecting the trade secrets of other companies and may even want to ensure the release of other companies’ trade secrets.  As the rule is currently written, it allows downstream entities without knowledge to inadvertently or intentionally waive a competitor’s CBI claim.

The EPA acknowledges this concern but argued that this issue would be better addressed in subsequent amendments to the rule.

“This argument is unpersuasive because the CBI Rule, as it currently stands, allows for unauthorized disclosures of confidential information, making it contrary to law.  EPA cannot wait to address this unlawfulness at a later point in time,” states the Court ruling.

The EPA also argued that it is a long-standing practice to require reporting entities utilizing only accession numbers to assert and substantiate CBI claims.  However, just because something has been done in practice over time, does not make it lawful, states Judge Edwards’ opinion.

“To conclude, the CBI Rule is unlawful to the extent it allows a downstream entity reporting on a chemical substance by accession number and without knowledge of the underlying specific chemical identity to waive confidentiality for that specific chemical identity,” the Court’s ruling states.  “Because we address ACC’s petition on statutory grounds, we decline to reach ACC’s alternative arguments that the EPA’s approach to the knowledge issue is arbitrary and capricious.

“For the reasons set forth above, we grant ACC’s petition for review and deny EDF’s petition for review.  As indicated in the foregoing opinion, the CBI Rule fails review in only one respect: The Rule is unlawful insofar as it requires entities reporting by non-confidential accession numbers and without knowledge of the underlying chemical identity to assert CBI claims for the underlying chemical identity in order to maintain the chemical identity’s confidentiality.  Neither the TSCA nor good reason justifies these terms of the CBI Rule.  We hereby vacate these requirements under the CBI Rule.”