July/August 2000
Understanding the obligations required by the Superfund Recycling Equity Act is the first step toward protecting your business from liability. Understanding the obligations required by the Superfund Recycling Equity Act is the first step toward protecting your business from liability.
By Tracy Mattson
Tracy Mattson is Director of Environmental Compliance for ISRI.
It’s no secret that ReMA accomplished what many thought was an impossible task: Superfund reform. Despite the naysayers, ReMA members, volunteer leaders, and staff worked passionately to ensure that Congress understood and embraced a legislative fix to clarify that “arranging for recycling” wasn’t considered “arranging for disposal.” Everyone’s hard work paid off Nov. 29, 1999, when President Clinton signed into law the Superfund Recycling Equity Act.
Now that the victory celebration has subsided, recyclers must ensure that they protect their victory. While ReMA must remain vigilant to protect the law from those who would like to overturn or weaken it in Congress, EPA, or the courts, another adversary threatens the industry’s victory: ignorance.
Ignorance isn’t a glamorous or easily recognized foe, but it’s a powerful one nonetheless. The recycling industry can fight back, however, with one powerful weapon: awareness.
Recyclers must be aware that they have obligations under the new law and must not assume that they don’t have to meet any conditions to take advantage of the Superfund liability relief afforded by the new law.
Making the Compliance Grade
One prevalent myth is that the new law automatically exempts recyclers from Superfund liability.
The reality is that the law enables recyclers to demonstrate that they’re “arranging for recycling,” not “arranging for disposal,” and are therefore not responsible for Superfund liability at a site that they didn’t contaminate. Thus, to take advantage of the protection afforded by the new law, recyclers must demonstrate that they have met three conditions regarding a recycling transaction.
1. Does the material meet the definition of a “recyclable material”?
To be afforded relief from liability, a recycler must first be able to demonstrate that its material meets the definition of “recyclable material.” The new law provides liability relief for those who arrange for the recycling of a broad spectrum of materials that are recycled and used in place of virgin feedstocks. These materials include scrap paper, plastic, glass, textiles, rubber, metal, and spent lead-acid, nickel-cadmium, and other whole batteries.
The new law defines scrap metal using the same definition found in the Resource Conservation and Recovery Act (RCRA) regulations. Over the years, EPA has written numerous interpretive memos identifying specific situations where recyclable material met the definition of “scrap metal.” Examples as well as copies of relevant interpretive memos are included in ISRI’s Superfund Recycling Equity Act Guidance Manual. (For information, see “Superfund Compliance Resources” on page 79.)
Just as the law specifically includes certain materials in the definition of “recyclable materials,” it excludes certain materials, specifically whole tires, shipping containers containing hazardous substances, and PCB-contaminated materials (above 50 ppm).
2. Does the transaction meet the conditions for “arranging for recycling”?
To ensure that disposal transactions aren’t cloaked in the guise of recycling, the new law creates a test to determine which recycling transactions are afforded liability relief. For all transactions, a recycler must be able to demonstrate all of the following:
• the recyclable material met a commercial specification;
• a market existed for the recyclable material involved in the transaction.
• a substantial portion of the recyclable material was made available for use as a feedstock for the manufacture of a new salable product; and
• the recyclable material could have been a replacement or substitute for a
virgin material or for a product made, in whole or in part, from a virgin raw material.
Documenting that the material met a commercial specification can appear daunting at first, but it isn’t a difficult condition to meet. For example, a specification may be as precise as a term such as “Drove” (the ReMA specification term for copper-bearing scrap) or as broad as “radiators.” Moreover, one can reference the terms of the sales agreement as confirmation that the recyclable material meets a commercial specification.
Since the new law doesn’t automatically exempt recyclers from Superfund liability, recyclers may still be required to submit information to EPA regarding a Superfund site in order to demonstrate that their transactions are protected by the new law. For example, recent requests for information from EPA regarding current Superfund sites have requested transaction information from the 1970s and 1980s. Thus, recyclers should use this opportunity to evaluate their record-keeping practices. Recyclers may want to consider retaining the relevant paperwork, or representative samples thereof, for a longer, if not indefinite, period of time.
The other three provisions of step two that must be satisfied to demonstrate that the recycling transaction was “arranging for recycling” can be fulfilled by taking advantage of materials created by ISRI. Instead of having each member document the history of trade in certain recyclables, ReMA is creating reports that document historical information about certain commodities to help members demonstrate that trade in recyclable materials is “arranging for recycling.”
ISRI’s Superfund guidance manual contains the first in a series of historic market reports on specific types of scrap. The report found in the manual reviews the copper and brass scrap market. ReMA recently completed the second report for lead and whole batteries. This update has already been distributed to ReMA members. Future reports will cover paper and iron and steel.
It should be noted that transactions involving scrap metal or batteries must meet the above-mentioned conditions as well as additional conditions described by the law to be afforded relief from Superfund liability. These conditions are discussed in detail in the Superfund guidance manual.
3. For transactions after Feb. 27, 2000, did the recycler take reasonable care to determine the environmental compliance status, as it applies to the recyclable material, of the facility to which the recyclable material was sent?
The new law requires a recycler to “exercise reasonable care to determine that the facility where the recyclable material is handled, processed, reclaimed or otherwise managed by another person (referred to as a “consuming facility”) is in compliance with substantive provisions of any federal, state, or local environmental law or regulation, compliance order, or decree applicable to the direct handling, processing, reclamation, storage, or other management activities associated with the recyclable material.”
This provision only applies to transactions occurring after Feb. 27, 2000.
In determining whether a recycler exercised “reasonable care,” the criteria to be applied will be considered in the context of the time of the transaction and will be determined using the factors specified below, of which no single factor is determinant:
• price paid in the recycling transaction;
• ability of the recycler to detect the nature of the consuming facility’s operations concerning its handling, processing, reclamation, or other management activities associated with recyclable material; and
• results of inquiries made to the appropriate federal, state, or local environmental agencies regarding the consuming facility’s past and current compliance with substantive environmental requirements applicable to activities associated with the recyclable material.
According to the law’s legislative history, this provision only requires a recycler to make reasonable inquiries. Inquiries need only be made to those agencies having primary responsibilities over environmental matters related to the handling, processing, reclamation, and other management activities of the materials involved in the recycling transaction. Obviously, recyclers should consider documenting such inquiries to show they took reasonable care.
As noted above, the new law specifically states that in determining whether a recycler exercised “reasonable care,” the courts will look at a variety of criteria including, but not limited to, inquiries made to the appropriate regulatory authorities.
ReMA has developed a model checklist to help with this endeavor as well as to provide consumers with a simple method to respond to such inquiries. The model checklist was developed only as a tool and, as such, it can be modified to reflect specific situations or used simply as guidance in preparing a response.
This checklist, along with additional guidance on the “reasonable care” provisions of the law, can be found in the Superfund guidance manual as well as on ISRI’s Web page, from which the checklist can be downloaded and modified. (For directions on where to find the checklist and other compliance tools, see “Superfund Compliance Resources” above.)
ISRI and SMA Outreach
To help clarify why recyclers were requesting information from consuming facilities, ReMA and the Steel Manufacturers Association (SMA) (Washington, D.C.) distributed a joint letter providing suggestions on how consumers may want to handle such requests.
The letter, issued March 30, 2000, states that while it’s the recycler’s responsibility to demonstrate that it took reasonable care to evaluate its consumer’s environmental compliance status, and while a consumer isn’t required by the law to respond to such requests for information, it may be advantageous for a consumer to do so.
Following is an excerpt from this correspondence: “In particular, responding to such inquiries can provide the consumer with an opportunity to clarify any ‘red flags’ or historic violations that may surface when a recycler makes its inquiries to the regulatory authority. … Furthermore, to build upon the relationships a consumer has developed with scrap suppliers, a response to ‘reasonable care’ inquiries can be viewed as a marketing opportunity to keep quality suppliers of scrap and attract prospective suppliers. By taking a proactive approach to the scrap recycler’s request, a consumer also has the opportunity to demonstrate that it is an environmentally responsible facility.”
Inquiring to Regulatory Authorities
The information a recycler receives from its consumers (for example, letters, checklists, certifications, and so on) is extremely valuable in demonstrating “reasonable care.” However, if the recycler doesn’t make inquiries to the relevant regulatory authorities, it probably hasn’t met the conditions of the law and its transactions might not be protected from Superfund liability.
To satisfy the requirements of the new law, recyclers might want to consider sending a letter to the appropriate federal, state, or local environmental regulatory agency requesting information on the consumer’s compliance record. A sample letter to regulatory agencies was recently distributed to members with the latest Superfund guidance manual update and can also be found on ISRI’s Web site (www.isri.org).
In addition, to help members find the relevant state contacts, ReMA created a link on its Web site to a site that contains names, addresses, and phone numbers for each state’s environmental regulatory programs. Recyclers can also go directly to this resource by visiting www.lgean.org (click on Regulatory Information, then State Information).
What’s a Consuming Facility?
For the purposes of the new law, a consuming facility is defined as the facility that handles, processes, reclaims, or otherwise manages the material that the recycler sent for recycling. While this can be the facility that the industry traditionally considers a consumer—such as a steel mill, foundry, paper mill, or smelter—it can also be another scrap recycling facility. If a scrap recycler buys specification material and processes or otherwise manages the scrap, this facility is a “consuming facility” under the law. Thus, the facility that sold the material would want to evaluate the environmental compliance status of the “consuming” scrap recycler, not necessarily the mill where the material was eventually reclaimed.
It’s uncertain whether the courts would view a broker that does not handle, process, and/or reclaim the recyclable material to be a consuming facility.
Thus, while a broker has to determine the compliance status of its consuming facility, provided it wants to protect its transactions from Superfund liability, the recycler that arranged for recycling through this broker may need to evaluate the consuming facility’s compliance record to also be afforded relief.
To increase the likelihood that transactions through a broker are protected from Superfund liability, a recycler should consider taking one of the following three steps: evaluate the consumer that receives the material on its own; ask the broker to provide the relevant documentation it has collected about the consumer (a recycler would then want to consider independently evaluating the information supplied by the broker); or, if it’s a blind transaction, make a risk-based determination as to whether the broker’s inquiries and information are adequate to meet the requirements of the new law.
For brokers, this represents an opportunity to build upon the relationships they have with their accounts. Providing this information as a service to scrap suppliers can be turned into a marketing opportunity to keep quality suppliers of scrap and attract prospective customers.
Losing Liability Relief
A recycler’s claim to an exemption from Superfund liability may be denied if the government or other party bringing an action against the recycler can demonstrate one of the following in accordance with the requirements of the law:
•the recycler knew that the material would not be recycled;
• the recycler knew that the recyclable material would be burned as fuel or for energy recovery;
• the recycler had reason to believe hazardous substances were added to the recyclable material in order to dispose or otherwise get rid of the substance; or
• the recycler failed to exercise reasonable care with respect to the management and handling of the recyclable material.
Even if a recycler can demonstrate that it met the three main steps, it can still be held responsible for liability at a specific Superfund site if the government can show that any of these exclusions occurred.
As a result, a recycler must ensure that the recyclable material is handled appropriately at its own facility. That means the recycler must be in compliance with environmental laws and regulations to ensure relief from liability.
To ensure that its practices and policies protect it from violating this provision, a recycler may want to consider using warranty statement on purchase contracts and other business forms such as scale tickets or receiving reports to document its environmental policies. A sample warranty statement can be found in the Superfund guidance manual. •
Note: This article is for informational purposes only and is not intended to constitute legal advice. Accordingly, scrap recyclers with legal questions regarding any aspect of this article should contact their legal counsel.
Recommendations contained in this article are not intended to be deemed as standards and may not be appropriate for all situations. Also, the recommendations contained herein are not exhaustive.
For further guidance regarding the intent of the law, recyclers may want to consult the legislative history of the law, found in the Superfund guidance manual or on ISRI’s Web site at www.isri.org.
Superfund Compliance Resources
ISRI has developed tools and guidance to help both scrap recyclers and consumers meet the conditions of the new law with little interruption to their respective business operations. These tools include the Superfund Recycling Equity Act Guidance Manual, which features a model consuming facility compliance checklist, a sample letter to regulatory agencies, and historic market information on recyclable materials. All active ReMA members received a copy of the manual in March 2000. ReMA members can purchase extra copies for $46.95. The nonmember price is $4,000. To order, call 202/737-1770.
ISRI’s Web site (www.isri.org) is also a great resource. The site’s Superfund pages are updated regularly, and members can download the sample checklist and letters. After entering your ReMA member password, look on the right side of the home page for the New @ ISRI.org section, then click on Members: Superfund Assistance Available. (Forget your ReMA member password? Contact Theresa Barsotti, 202/662-8507; or e-mail: theresabarsotti@isri.org.)
Most importantly, members have direct access to the ReMA staff, who can help answer questions about evaluating consumer compliance, making inquiries to the regulatory authorities, responding to information requests from the government, or developing similar legislation at the state level.
For compliance issues, call Tracy Mattson, director of environmental compliance, 202/662-8533 (e-mail: tracymattson@isri.org).
For legal issues, call Scott Horne, counsel/managing director of government relations, 202/662-8513 (e-mail: scotthorne@isri.org).
For state issues, call Tom Tyler, director of state and local programs/associate counsel, 202/662-8515 (e-mail: tomtyler@isri.org).
Understanding the obligations required by the Superfund Recycling Equity Act is the first step toward protecting your business from liability. Understanding the obligations required by the Superfund Recycling Equity Act is the first step toward protecting your business from liability.