Phasedown of Hydrofluorocarbons: Allowance Allocation Methodology for 2024 and Later Years rule (2023)
| What is a significant rule? Significant regulatory action is a term used to describe an agency rule that has had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. As part of its role in the regulatory review process, the Office of Information and Regulatory Affairs (OIRA) determines which rules meet this definition. |
| Administrative State |
|---|
|
| Five Pillars of the Administrative State |
| • Nondelegation • Judicial deference • Executive control • Procedural rights • Agency dynamics |
| Click here for more coverage of the administrative state on Ballotpedia.
|
| Click here to access Ballotpedia's administrative state legislation tracker. |
The Phasedown of Hydrofluorocarbons: Allowance Allocation Methodology for 2024 and Later Years is a significant rule issued by the Environmental Protection Agency (EPA), effective September 18, 2023, that amends regulations regarding allowance allocation methodology for hydrofluorocarbon production and consumption pursuant to the American Innovation and Manufacturing Act.[1]
Timeline
The following timeline details key rulemaking activity:
- September 18, 2023: The final rule became effective.[1]
- July 20, 2023: The Environmental Protection Agency (EPA) published the final rule.[1]
- December 19, 2022: The comment period ended.[1]
- November 3, 2022: The EPA published the proposed rule and opened the comment period.[1]
Background
The American Innovation and Manufacturing Act of 2020 (AIM Act) was enacted on December 27, 2020, to reduce hydrofluorocarbons (HFCs). Under the AIM Act, the EPA is required to calculate and establish HFC production and consumption.[1]
Summary of the rule
The following is a summary of the rule from the rule's entry in the Federal Register:[1]
| " | The U.S. Environmental Protection Agency (EPA) is amending existing regulations to implement certain provisions of the American Innovation and Manufacturing Act. This rule establishes the methodology for allocating hydrofluorocarbon production and consumption allowances for the calendar years of 2024 through 2028. EPA is also amending the consumption baseline to reflect updated data and to make other adjustments based on lessons learned from implementation of the hydrofluorocarbon phasedown program thus far, including to: codify the existing approach of how allowances must be expended for import of regulated substances, revise recordkeeping and reporting requirements, and implement other modifications to the existing regulations.[2] | ” |
Summary of provisions
The following is a summary of the provisions from the rule's entry in the Federal Register:[1]
| " | Allowance Allocation Methodology: In this rule EPA establishes the methodology for allocating production and consumption allowances for calendar years 2024 through 2028. The Agency is basing these general pool allocations on entities' market shares derived from the average of the three highest years of production and consumption, respectively, of regulated substances between 2011 and 2019. To be eligible to receive general pool allowances for 2024 through 2028 based on historic production and import activity, an entity must have produced or imported bulk regulated substances in 2021 or 2022. For participants in the new market entrant pool, EPA will determine for each former new market entrant a stand-in high three-year average based on the number of allowances allocated in 2023 and the percent reduction all general pool allowance holders experience in 2023 relative to the average of their three highest years of consumption. The Agency is also clarifying that entities may confer or transfer allowances at any point after they are allocated until the allowance expires at the end of the calendar year for which it was allocated.
Imports and Allowance Expenditures: EPA is revising existing language to require that allowances be expended at the time of ship berthing for vessel arrivals, border crossing for land arrivals such as trucks, rail, and autos, and first point of terminus in U.S. jurisdiction for arrivals via air. The Agency is also adding requirements that only the importer of record can expend allowances and that the importer of record be in possession of allowances in the amount that will need to be expended at the time of filing their advance report. Associated with these requirements, EPA is amending existing provisions to make it clear that any person who meets the definition of an importer in the 40 CFR part 84 regulations could be held liable for imports of regulated substances without necessary expenditure of allowances unless they can demonstrate that the importer of record possessed and expended the appropriate allowances. Furthermore, the Agency is making a revision to reflect and further clarify the existing requirement that allowances must be expended to import bulk regulated substances regardless of whether the import is of an HFC that is imported as a single component or as part of a multicomponent substance. Recordkeeping and Reporting: EPA is revising and adding requirements to a variety of recordkeeping and reporting provisions, including provisions to specify that the importer of record or their authorized agent must file the advance notification and quarterly reports; require the submission of both the net weight (or net product weight) and gross weight (net weight plus container weight), as well as unit of mass ( i.e., kilogram), for each container in the shipment in the advance notification report; shorten the advance notification reporting requirements to 5 days in advance for truck, rail, air, and other non-sea arrivals and 10 days in advance for sea arrivals; reiterate that the harmonized tariff schedule (HTS) Code for the regulated substance must be used for the import of any regulated substance; require that certain information must be submitted by any entity anticipating being the importer of record for a shipment of regulated substances by November 15 of the prior calendar year; require reporting of the name, quantity, and recipient facility for regulated substances produced at one facility for transformation, destruction, or use as a process agent at another facility owned by the same entity; and to add the Internal Transaction Numbers (ITN) and Electronic Export Information (EEI) documents as required data elements for Request for Additional Consumption Allowance (RACA) submissions. Sampling and Testing: EPA is amending requirements related to verifying composition and specifications of regulated substances offered for sale or distribution. These revisions establish additional verification requirements and codify procedures to be followed to meet the requirement to test a representative sample. The Agency is finalizing the following provisions to add that already required sampling and testing of regulated substances must follow a combination of methodologies to verify the label composition for all applications; require sampling and testing by exporters; add a requirement to sample and test under specified methodology to ensure compliance with the existing requirements concerning specifications; define the records required associated with testing and add recordkeeping requirements for fire suppression recyclers, repackagers, and exporters; add definitions of ‘batch’ and ‘representative sample’ and clarify the relationship between these terms; add a definition for “laboratory testing” such that laboratories must be certified or accredited; and add a requirement that certificates of analysis accompany all imports of regulated substances. Other Revisions: EPA is also finalizing additional regulatory changes based on lessons learned and current practices that have proved useful in implementing the HFC phasedown. Among these, the Agency is defining ‘expend’ to mean to subtract the number of allowances required for the production or import of regulated substances under 40 CFR part 84 from a person's unexpended allowances. EPA is also adding more detail and specificity concerning features on all labels or markings and specifying that no one other than the importer of record may repackage or relabel regulated substances which were initially unlabeled or mislabeled. The Agency is clarifying that allowances can be expended by parents, subsidiaries, sister, or commonly owned companies without a transfer.[2] |
” |
Significant impact
- See also: Significant regulatory action
Executive Order 12866, issued by President Bill Clinton (D) in 1993, directed the Office of Management and Budget (OMB) to determine which agency rules qualify as significant rules and thus are subject to OMB review.
Significant rules have had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. Executive Order 12866 further defined an economically significant rule as a significant rule with an associated economic impact of $100 million or more. Executive Order 14094, issued by President Joe Biden (D) on April 6, 2023, made changes to Executive Order 12866, including referring to economically significant rules as section 3(f)(1) significant rules and raising the monetary threshold for economic significance to $200 million or more.[1]
The text of the Phasedown of Hydrofluorocarbons: Allowance Allocation Methodology for 2024 and Later Years rule states that OMB deemed this rule significant, but not economically significant:
| " | This action is a “significant regulatory action” as defined under section 3(f)(1) of Executive Order 12866, as amended by Executive Order 14094. [2] | ” |
Text of the rule
The full text of the rule is available below:[1]
⧼embed_pdf_invalid_relative_domain⧽
See also
External links
Footnotes
| |||||||||||
