KIRKLAND & ELLIS LLP. EPA s New Agenda. Presentation to Retail Industry Leaders Association

Transcription

1 KIRKLAND & ELLIS LLP EPA s New Agenda Presentation to Retail Industry Leaders Association April 8, 2010

2 I. EPA s New Team / New Enforcement Stance II. Retailers - The New Front Line III. Imports / CPSC 2

3 New EPA Focus New EPA Team There s a new sheriff in town. Enforcement If all problems look like a nail, you always use a hammer. Rulemaking corollary Sometimes you need more hammers. Retailers / Imports Most imports are from outside of the country. Retailers are easier to enforce against 3

4 New EPA Team Lisa Jackson Administrator former EPA Region 2 (New York City) employee former head of NJ DEP Cynthia Giles - Assistant Administrator Office of Enforcement and Compliance Assurance (OECA) former EPA Region 3 (Philadelphia) employee former Conservation Law Foundation (RI) attorney 4

5 Enforcement The Hammer If hitting it with a hammer doesn t work, you need a bigger hammer. We know there are violators out there, we just haven t caught them yet. It s about time law enforcement got as organized as organized crime. Rudolf Giuliani,

6 Pressure for Enforcement High Expectations Bigger EPA budget (> 35% increase FY10, flat for FY11) Comparisons to prior administration/annual reporting Negative enforcement press EPA Enforcement-Related Penalties Plummeted in Fiscal 2009 NY Times, January 5, 2010 ( U.S. EPA during the first year of the Obama administration saw deep declines in the amount of penalties assessed against polluters and pounds of pollution slashed through enforcement activities compared with the previous year... Result»»» need to show commitment to enforcement 6

7 EPA Enforcement Continued (?) Increases $ (Billions) Injunctive Relief ($)

8 Enforcement - EPA View Many paths toward compliance Compliance Assistance Administrative Enforcement Civil/Judicial Enforcement Criminal Enforcement Goal is the environmental result 8

9 Criminal Enforcement - Resources Concentrating on larger cases major defendants (BP, CITGO, Honeywell,... ) high impact cases (loss of life or major environmental impact) they are looking at retailers Criminal-civil coordination improved review of all major matters for criminal prosecution considered High success rate > 2/3 of EPA search warrants result in an indictment ~ 95 percent of indictments result in a conviction (before W.R. Grace acquittal) 9

10 Enforcement Trend - Implications Increased EPA enforcement budget ($600 million) + More inspections (20,000/yr), Internet tips (>6000/yr) + Economic distress/recession More enforcement actions (>3000/yr) + More criminal enforcement (300 to 400 cases per year) 10

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12 Retailers - The New Front Line Retailers are viewed by EPA as a critical choke point where large numbers of potentially noncompliant products can be found Large variety of products are EPA-regulated Large sales volumes means larger environmental impact and more efficient enforcement EPA enforcement after product sale is difficult 12

13 Clean Air Act The Retail Connection Ozone Depleting Substances (ODS) Refrigeration systems required refrigerant capture and recycling (both retail facility systems and service business) Automobile air conditioning servicing Confetti String ( party string ) with illegal refrigerant Off-road engines Lawn and garden power equipment Generators Recreational vehicles (All Terrain Vehicles (ATVs), off-road motorcycles, snowmobiles, utility vehicles) 13

14 Example: Small Off-road Engines An EPA spokeswoman says that the agency will enforce against any party -- manufacturer, importer or retailer -- that is endangering public health by selling, manufacturing or importing engines that do not comply with agency regulations, especially the companies that sell large quantities of engines. InsideEPA, August 11, 2009 For example, in certain circumstances EPA believes that a retailer may be responsible for causing the importation of engines or equipment not covered by a valid certificate of conformity or otherwise in violation of our regulations, such as the emission labeling requirements. 73 Fed. Reg , (October 8, 2008). 14

15 Resource Conservation and Recovery Act (RCRA) Many consumer products become hazardous waste when discarded Automotive products (example: chemicals and batteries) Personal care products Landscaping supplies (e.g., pesticides under FIFRA) Hazardous wastes are subject to RCRA Strict requirements for handling, transporting and disposal Mislabeling, repackaging, reselling generally prohibited Disposal strictly controlled EPA reviewing retail practices in handling discarded products 15

16 Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Pesticides Strict requirements for labeling, and disposal Mislabeling, repackaging, reselling generally prohibited Disposal strictly controlled New Pesticide Container Repair Interim Policy (minor damage to pesticide containers may be repaired Regulations not obvious for retail employees inadvertent violations common EPA concerned about improper disposal Supplier compliance issues can cause disruption in sales 16

17 EPA Audit Policy EPA Audit Policy allows for penalty mitigation major reduction in penalty self-disclosure required prompt correction of violation required Audit/self-disclosure process revitalized EPA more receptive to penalty reduction Agency striving for greater self-disclosure Audit policy recently liberalized for new acquisitions Retail industry has been a leader in taking advantage of audit policy 17

18 Imports (primarily from China) Toxic substances a key issue for EPA widespread (not just pet food, drugs, toothpaste, milk products, candy, seafood, toys, pesticides...) Presidential task force - increased cooperation between federal agencies more enforcement by all Agencies, including EPA Supply-chain issue for domestic companies high risk profile product liability, warranty, environmental footprint 18

19 Consumer Product Safety Commission (CPSC) Enforcement Will Increase Imports at the border Investigations and penalty cases Continue to present challenges 19

20 2009: Increased Enforcement At the Border Numerous lead-in-paint violations Outreach efforts with foreign governments GAO Report: CPSC has the authority but needs to strengthen its oversight of imported products, including: Better target shipments of unsafe products Develop a long-term strategy for ensuring the safety of consumer products entering the U.S. Recent Developments: Import Surveillance Staff now 18 employees Import Examination Database Member of Commercial Targeting Analysis Center (CTAC) Working with ITC on Harmonized Tariff Schedule Focus on in-land ports 20

21 Increased Investigations and Penalty Cases New maximum civil penalties effective August 2009: $100,000/$15 million CPSC under pressure to do more - NHTSA / Toyota Chairman Tenenbaum message at ICPHSO conference Committed to making this the Year of the Consumer I will continue the transformation of CPSC into the world s leading lion of consumer protection Field blitzes at retailer and other locations Violations uncovered at companies that know better 21

22 Challenges Border compliance determinations for issues other than lead Risk Mitigation: More QC, more stringent vendor selection, verification CPSC resources Importer Self-Assessment-Product Safety Pilot (ISA-PS) RILA uniform testing and certification program Importer of record or middle-man? 22

23 Granta ( Grant ) Nakayama granta.nakayama@kirkland.com CHICAGO SAN FRANCISCO PALO ALTO LOS ANGELES LONDON Joseph ( Joe ) MUNICH Eisert NEW YORK joseph.eisert@kirkland.com WASHINGTON, D.C HONG KONG Chicago Kirkland & Ellis LLP 300 North LaSalle Chicago, IL United States +1 (312) (312) fax Hong Kong Kirkland & Ellis International LLP 26th Floor, Gloucester Tower The Landmark 15 Queen's Road Central Hong Kong fax London Kirkland & Ellis International LLP 30 St Mary Axe London EC3A 8AF United Kingdom fax Los Angeles Kirkland & Ellis LLP 777 South Figueroa Street Los Angeles, CA United States +1 (213) (213) fax Munich Kirkland & Ellis International LLP Maximilianstrasse Munich Germany fax New York Kirkland & Ellis LLP 153 East 53rd Street New York, NY United States +1 (212) (212) fax Palo Alto Kirkland & Ellis LLP 950 Page Mill Road Palo Alto, CA United States +1 (650) (650) fax Mailing Address: P.O. Box Palo Alto, CA United States San Francisco Kirkland & Ellis LLP 555 California Street San Francisco, CA United States +1 (415) (415) fax Washington, D.C. Kirkland & Ellis LLP 655 Fifteenth Street, N.W. Washington, D.C United States +1 (202) (202) fax 23

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